SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended 12/31/97 Commission file number 000-22775
NEWRIDERS, INC.
(Name of small business issuer in its charter)
Nevada 77-0390222
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
567 San Nicolas Drive, Suite 400 92660
Newport Beach, California (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (714) 718-4630
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - Par Value: $0.001 Per Share
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year: $2,932,708.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the average bid and asked prices
($2.855 per share) on March 24, 1998 was approximately $19,842,199.
As of March 19, 1998, the issuer had outstanding approximately 17,368,130
shares of its Common Stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
- -------
Newriders, Inc., a Nevada corporation, and Newriders Limited, a
California corporation, entered into a Plan of Reorganization on June 28,
1996, whereby Newriders, Inc. acquired 100% of the outstanding common stock of
Newriders Limited in exchange for issuing 13,250,000 shares of the common
stock of Newriders, Inc. to the former shareholders of Newriders Limited. A
total of 11,000,000 of these shares were newly issued and 2,250,000 shares
were concurrently reacquired from an existing stockholder and reissued as part
of the acquisition. Newriders, Inc. was incorporated in the State of Nevada
on July 13, 1995, under the name of American Furniture Wholesale, Inc. In
connection with the acquisition of Newriders Limited, American Furniture
Wholesale, Inc. amended its Articles of Incorporation effective July 1, 1996,
to change its name to Newriders, Inc. Throughout this document the terms
"Company" or "Newriders" shall mean the consolidated entities of Newriders,
Inc. and its subsidiary, Newriders Limited.
Newriders Limited owns an Easyriders Cafe Restaurant, an Easyriders
Apparel and Merchandise Store, and an Easyriders Motorcycle and Accessory Shop
in Fresno, California. Subsequent to December 31, 1997, the Fresno location
was closed for remodeling, which is presently in progress. Reopening of the
Fresno location is presently expected in June 1998. In May 1997, the Company
opened its second location in Myrtle Beach, South Carolina, which consists of
an approximately 8,900-square-foot cafe and apparel store. The Company has
developed and proposes to continue to develop restaurant, apparel and
accessory stores as "Units," which will generally include an Easyriders Cafe
Restaurant and an Easyriders Apparel and Merchandise store, and in some
instances may also include an Easyriders Motorcycle and Accessory Shop.
Newriders is a party to franchise agreements with Easyriders Franchising,
Inc., a California corporation affiliated with Paisano Publications, Inc. and
the publisher of "Easyriders Magazine," to operate Easyriders apparel,
motorcycle and accessory shops, restaurants and the right to use the name
Easyriders in connection with their operation. (See "DESCRIPTION OF BUSINESS
- - Proposed Acquisitions - Proposed Change in Primary Business.")
The Company's theme restaurants, Easyriders Cafe in Fresno, California
and in Myrtle Beach, South Carolina, are designed to provide a unique dining
and entertaining experience that emphasizes the appeal of Harley-Davidson and
other American-made motorcycles, and the "Freedom-of-the-Road" lifestyle. The
integrated retail apparel and merchandise stores offer a broad selection of
premium-quality merchandise displaying the Company's logos.
The Company's Units offer high-quality, popular cuisine, excellent
service and an atmosphere of excitement created by combining unique layouts
and decor with motorcycle and Easyriders memorabilia, and, in some Units, live
music entertainment. In late 1997, the Company decided to shift its menu
emphasis from a California-American cuisine to a Southwestern barbecue
cuisine.
The Company's objectives are to enhance and expand its existing
operations. Its primary strategy in pursuing these objectives is to increase
the number and geographic diversity of its Units to generate greater consumer
enthusiasm for its theme concept. The Company believes that there are
significant opportunities for additional Easyriders Cafe Units, particularly
in major tourist markets, both domestic and international. In addition, the
Company intends to seek joint ventures and licensing agreements that will
capitalize on the public awareness of its restaurants, apparel and merchandise
Units, motorcycle shops, and the brand name merchandise offered through its
Units, including a variety of items under the Easyriders brand, such as beer,
wine and condiments.
The Company's Restaurant - Merchandise Store Concept
- ----------------------------------------------------
The key elements of the Company's restaurant merchandise store concept
are as follows:
Broad-based theme. The Company focuses on a theme that it believes has
developed into universal appeal. The Harley-Davidson motorcycle and biker
lifestyle theme has grown to great acceptance over the last twenty five years.
Bikers are no longer considered the renegade outlaws of the past, but are more
commonly affluent middle and upper-class men and women who enjoy the freedom
and excitement of the sport.
Distinctive design features. The Company plans to characterize its Units
with dramatic physical design and layout, which typically will have striking
facades intended to attract attention. The Units also expect to gain
attention from the array of patron motorcycles typically parked outside of the
restaurants.
High-profile locations. The Company intends to select its Unit locations
based on a variety of considerations including real estate values, traffic
patterns, income and age demographics and tourism.
Extensive retail merchandising. Each Unit will include an integrated
retail store offering premium-quality merchandise displaying Easyriders'
distinctive brands and proprietary and licensed logo designs. Merchandising
provides additional off-site promotion of Easyriders' brands.
Quality food. Each Unit serves freshly prepared, high-quality, popular
barbecue cuisine, including a variety of smoked meats such as salmon, pork,
chicken and beef, designed to appeal to a variety of tastes and budgets, with
an emphasis on reasonably priced signature items and items of particular
appeal to the local market.
Quality and excellent service. In order to maintain its unique image,
the Company provides attentive and friendly service and invests heavily in the
training and supervision of its service personnel.
The cost of the first Unit in Fresno, California, which includes the
Easyriders Cafe Restaurant, the Apparel and Merchandise Store, and the
Motorcycle Shop, prior to extensive remodeling commenced in January 1998, was
approximately $1,200,000. The cost of the Myrtle Beach, South Carolina
Easyriders Cafe and apparel store was approximately $1,400,000. The Company
estimates that new Units of similar size will cost approximately $800,000 to
$1,200,000 each.
Layout and Design
- -----------------
The Company anticipates that its Units will generally range in size from
approximately 7,500 to 15,000 square feet and in seating capacity from 140 to
400 persons. Each Easyriders Cafe Restaurant Unit will feature authentic
motorcycle memorabilia, such as a replica of the motorcycle "Captain America"
from the 1969 movie "Easy Rider," which is displayed in the Fresno, California
Unit, and the actual motorcycle that holds the motorcycle land speed record,
which is on display in the Myrtle Beach, South Carolina Unit. Other props and
custom Harley-Davidson and other American made motorcycles are displayed in
the restaurants and will be displayed in future restaurants. The Units will
also display prints and original works of art that feature the Easyriders
lifestyle. The restaurants also have recorded music and live bands that
provide late-night entertainment, depending upon local ordinances. A dance
floor is available for those that wish to dance in the Myrtle Beach Unit, and
dance floors may be incorporated into some future Units.
Site Selection
- --------------
The Company intends to locate its Units at high-profile sites in highly
populated markets and key urban centers. The Company will evaluate markets
already established by other theme restaurants such as the "Hard Rock Cafe"
and "Planet Hollywood," for example. By locating Units in high-profile,
heavy-traffic areas, the Company hopes to be able to attract both destination
customers, as well as passers-by who would be drawn to the Units' unique
facades, the display of patrons' motorcycles typically parked outside and the
exciting environment. Proper site selection is essential to the success of a
Unit, and the Company devotes significant time and resources to analyzing each
prospective location. In addition to assessing demographic information for
each prospective site, management considers factors such as visibility;
traffic patterns; accessibility; proximity to entertainment centers and theme
parks, and other tourist attractions; the area's restaurant competition; and
average income levels for the area. Once a particular city has been approved
for a Unit, the Company may search for appropriate sites, either independently
or through regional and national developers.
Merchandising
- -------------
Each Unit's apparel store will offer premium-quality fashion merchandise
such as jackets, T-shirts, sweatshirts, hats, pants, leather jackets, vests,
gloves and other items. Each store will also offer Harley-Davidson and
Easyriders patches, pins, key chains, bandannas, glasses, watches, jewelry,
and a variety of other souvenir and everyday items. Many items not on display
at a store are available from the Easyriders Roadware Apparel Catalog that
lists hundreds of items, which is available to shoppers and diners at their
table. The merchandise can be purchased at the Units or at other Easyriders
Apparel Franchise Units that prominently display the Easyriders' colorful and
distinctive trademark and logo design and typically the name of the city in
which the Unit is located, which enhances the collectible nature of the items.
Each Unit's mix will vary to meet the demand of the particular market in which
the Unit is located. The Company's merchandise sales provide additional off-
site promotion for the Company.
Menu
- ----
The Company's Units offer generous portions of a wide variety of popular
foods with a Southwestern barbecue emphasis, including smoked meats such as
salmon, lamb, pork, chicken and beef, and salads and a variety of appetizers
and desserts. This represents a change in emphasis effective in early 1998
from the California-American cuisine previously offered by the Company's
Units. Menu items are chosen on the basis of sales popularity, ease of
preparation and profitability. The Company emphasizes high-quality food
prepared fresh daily according to recipes created by the Company. Menu items
will generally be the same at all Units, with certain specialties in each
market to accommodate local preferences. Prices typically range from $1.75 to
$6.95 for appetizers, $2.95 to $7.50 for salads, $5.75 to $21.95 for entrees
and $2.50 to $4.75 for desserts. A full bar service makes available specialty
alcoholic and nonalcoholic drinks and a variety of wines. The Company is also
marketing its own private-label beer, wine and certain condiments. The
Company expects that alcoholic beverage sales will generally represent
approximately 30% of a Unit's total food and beverage sales, depending on the
market.
Service
- -------
The Company emphasizes excellent customer service in order to make each
patron's visit an enjoyable, memorable experience. The Company is committed
to providing its customers with prompt, friendly, attentive service.
Accordingly, it attempts to maintain a high ratio of service personnel to
customers, and staffs each Unit with an experienced management team to ensure
that its high service standards are maintained. New employees are to be
trained by experienced employees who are familiar with the Company's policies,
and newly promoted or recently hired managers are required to complete a
training program prior to commencing their duties.
Unit Locations and Expansion
- ----------------------------
As of December 31, 1997, the Company operated two Units located in
Fresno, California and Myrtle Beach, South Carolina, respectively. The
Fresno, California Unit opened on May 1, 1996, and consists of an Easyriders
Cafe Restaurant, Easyriders Roadware Apparel Store, and an Easyriders
Motorcycle and Accessory Shop. The Company opened its second Easyriders Cafe
Unit at "Broadway at the Beach" in Myrtle Beach, South Carolina, in May 1997.
The Fresno, California Unit was closed in January 1998 for remodeling, and is
expected to reopen in June 1998. The Company has no plans to open additional
Units in 1998. The Company plans on opening as many as three Units in 1999.
Future cities being considered for Units include: Orange County, California;
Los Angeles, California; Orlando, Florida; and Las Vegas, Nevada.
There can be no assurance that the Company will meet its plans to open
three Units in 1999. The Company's growth will depend on such factors as its
profitability and its ability to raise additional capital and/or borrow
additional funds.
The Company anticipates that all Company-owned Units will be located on
leased sites. The Fresno Unit is leased for five years with renewal options.
The Myrtle Beach Unit is leased for ten years, also with renewal options.
Management generally will seek to operate future sites as Company-owned
Units as well as joint venture arrangements. The Company also expects to
pursue franchise and joint venture arrangements in international markets where
the local region presents certain political or economic risks, where an
association with local owners would be advantageous due to their market
expertise or connections with the local business and industry, or where
required by local laws.
Advertising and Promotion
- -------------------------
The Company believes it will attract new customers through word-of-mouth;
the visibility of its branded merchandise, radio and print advertising;
extensive coverage in "Easyriders" magazine; billboards; and the broad-based
media coverage typically associated with grand openings of new Units. In
connection with Unit openings, local public relations firms will be retained
to generate local interest, and industry magazines and television shows will
be alerted to the upcoming potential "photo opportunities" with any
celebrities who may be expected to attend. The Company also hosts and will
continue to host fund-raising events for local charities at its Units.
Franchise Agreement - Easyriders
- --------------------------------
The Company has entered into franchise agreements with Easyriders
Franchising, Inc., a California corporation ("Franchisor") which has developed
a business operational program or system that is identified by the mark
"EASYRIDERS." It consists of a business for the retail sale of motorcycle
apparel such as shirts, jackets, belts, boots and related clothing. It also
includes the retail sale of parts and related hard goods and services in the
repair and customization of motorcycles. It has further developed certain
operating and accounting systems for use by the Company as a franchisee.
Under the franchise agreements, the Company is granted the exclusive
territorial areas of Fresno, California and Myrtle Beach, South Carolina in
which to operate an Easyriders apparel and motorcycle accessories and
restaurant business (the "Franchised Business"), and the Franchisor agrees to
not enfranchise or operate another facility within those areas, but it retains
the right to do so in other areas. Franchisor also retains the right to sell
its clothing and hard goods in the territories in a variety of ways described
in the agreements, such as catalog sales and mobile retail showrooms at
various public events.
The Fresno franchise agreement, dated November 30, 1994 has an initial
term of five years. The Company has the option to renew the franchise
agreement under its then-current form for three additional periods of five
years each, subject to compliance with conditions which give the Franchisor
considerable leeway in agreeing to the renewal.
The Myrtle Beach franchise agreement dated January 4, 1996 has an initial
term of five years. The Company has the option to renew the franchise
agreement under its then current form for three additional five-year periods,
subject to restrictions similar to those in the Fresno, California franchise
agreement.
The franchise is limited to specific locations as approved by the
Franchisor. While the Company is responsible for the purchase or lease of the
site, the Franchisor has strict provisions concerning the design, decor,
equipment, and advertising of the site. It also requires the Company to
periodically make reasonable capital expenditures to remodel or redecorate
during the term of the agreement.
The Franchisor will provide training to the Company's manager(s) and
assistance in opening the business, at the cost of the Company. If the
Franchisor, in its sole discretion, determines that the Company cannot
complete the training program satisfactorily, the Franchisor can terminate the
franchise agreement.
The franchise agreements allow the Company to use the various service and
trademarks owned by the Franchisor and its affiliates, Paisano Publications,
subject to very specific rules concerning display of the marks.
All advertising of any nature must be submitted to the Franchisor for
approval. The Company is required to spend a specific percentage of its
revenues on local advertising. It also contributes an additional percentage
of specified revenues to an advertising fund utilized by the Franchisor to
promote the products in media that is not specific to the Company.
The Company has paid a franchise fee of $5,000 and is obligated to pay,
weekly, a Continuing Services and Royalty Fee based on the gross sales of the
Franchised Business, as defined in the franchise agreement. Failure to make
all payments due the Franchisor on a timely manner is grounds for termination
of the franchise agreement.
The Company is required to maintain accounting records as specified by
the Franchisor and to provide financial statements quarterly and annually to
the Franchisor. The Franchisor has a right to audit the records of the
Company and under certain circumstances the Company will be required to pay
for the audit.
The Company is obligated to sell only motorcycle apparel and
paraphernalia such as shirts, jackets, parts and related hard goods in the
apparel store and motorcycle shop. The Franchisor will provide a list of
approved manufacturers, suppliers, and distributors authorized for the Company
to purchase its inventory. If the Company desires to sell items not included
on the approved lists it must obtain the permission of the Franchisor.
The Franchisor has a right of first refusal if the Company should decide
to sell the Franchised Business to another party.
The Franchisor owns and operates three Easyriders locations, and other
franchisees own and operate approximately 28 other Easyriders locations.
However, none of the Franchisor or other franchisee-operated Easyriders
locations include restaurant or cafe facilities such as operated by the
Company.
Unit Operations and Management
- ------------------------------
The Company will strive to maintain quality and consistency in its Units
through careful training and supervision of personnel and the establishment of
standards relating to food and beverage preparation, maintenance of facilities
and conduct of personnel. The onsite management for all Company-owned Units
is intended to consist of a general manager, kitchen manager, merchandise
manager, and several floor managers, who collectively are responsible for
every aspect of the Unit's operation. Units that maintain a motorcycle shop
will also have a shop manager.
In an effort to ensure that its employees properly implement the
Company's commitment to consistent high-quality, popular food and friendly and
attentive service, the Company has developed manuals regarding its policies
and procedures for all aspects of Unit operations, including food handling and
preparation and dining room and beverage service operations. New employees
are to be trained by experienced employees who have demonstrated their
familiarity with the ability to consistently implement Company policies. The
Company requires continual evaluation and testing of employees on job-related
skills in order to provide the highest quality of customer service. In
addition, hourly employees who demonstrate a positive business attitude along
with leadership skills are encouraged to proceed into management training.
Purchasing and Distribution
- ---------------------------
The Company's management negotiates directly with suppliers of food and
beverage products to try to achieve uniform quality and freshness of food
products in its Units and to obtain competitive prices. New Units will
purchase a majority of its needs from a list of pre-approved local producers
and wholesalers. Management believes that its food and beverage products are
available from alternate sources and suppliers.
The Company's merchandise is procured from a variety of sources; however,
a majority of the items are provided from the "Easyriders Roadware Catalog"
and are subject to the Franchise Agreement. The items are chosen on the basis
of cost and reliability of both domestic and foreign suppliers.
Currently, merchandise is shipped directly to the Units in Myrtle Beach,
South Carolina and Fresno, California, where ample space is available for
storage.
Competition
- -----------
The restaurant and retail merchandising industries are affected by
changes in consumer tastes and by international, national, regional and local
economic conditions and demographic trends. Changes in discretionary spending
priorities; traffic patterns; tourist travel; weather conditions; employee
availability; and the type, number and location of competing restaurants also
directly affect the performance of an individual Unit. Changes in any of
these factors in the markets where the Company currently operates and will
operate Units could adversely affect the Company's results of operations.
Moreover, the theme restaurant industry is relatively young, is particularly
dependent on tourism and has seen the emergence of a number of new
competitors. Established competitors include the "Hard Rock Cafe," "Planet
Hollywood," "NASCAR Cafe" and "All Star Cafe."
The restaurant and retail merchandising industries are highly competitive
based on the type, quality and selection of the food or merchandise offered,
price, service, location and other factors. The Company believes its existing
Units and future Units will be distinguished from those of its competitors by
their exciting and high-energy environments, extensive displays of unique
memorabilia, high-quality popular barbecue cuisine and excellent service.
Nevertheless, many well-established restaurant companies with greater
financial, marketing and other resources than the Company compete with the
Company. It is anticipated they will compete with the Company in most markets
in which the Company proposes to operate. In addition, some competitors have
design and operating concepts similar to those of the Company and it is
expected that those competitors will locate their restaurants and stores in
close proximity to established competitors such as the "Hard Rock Cafe" and
"Planet Hollywood."
Employees
- ---------
As of March 15, 1998, the Company employed approximately 41 full-time
employees, 5 of whom were corporate management, 2 were restaurant and
merchandise management personnel, and the balance are restaurant employees.
The Company's employees are not covered by a collective bargaining agreement,
and the Company has never experienced an organized work stoppage, strike or
labor dispute. The Company considers relations with its employees to be
excellent.
Governmental Regulation
- -----------------------
Alcoholic Beverage Regulation. The Company's existing Units and future
Units are subject to licensing and regulation by a number of governmental
authorities. The Company is required to operate its Units in strict
compliance with federal licensing requirements imposed by the Bureau of
Alcohol, Tobacco and Firearms of the United States Department of Treasury, as
well as the licensing requirements of the states and municipalities where its
Units are located. Alcoholic beverage control regulations will require each
of the Company's Units to apply to a state authority and, in certain
locations, county and municipal authorities for a license and permit to sell
alcoholic beverages on the premises. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily
operations of the current Units and future Units, including minimum age of
patrons and employees, hours of operation, advertising, wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.
The Company has obtained all regulatory permits and licenses necessary to
operate its two Units that are currently open, and intends to do the same for
all future Units. Failure on the part of the Company to comply with federal,
state, or local regulations could cause the Company's licenses to be revoked
and force it to terminate the sale of alcoholic beverages at the Units
affected. To reduce this risk, the Company plans that each Company Unit will
be operated in accordance with procedures intended to ensure compliance with
applicable laws and regulations. The failure to receive or retain, or any
delay in obtaining, a liquor license in a particular location could adversely
affect the Company's ability to obtain such a license elsewhere.
The Company will be subject to "dram-shop" laws that exist in many
states. These laws generally provide a person injured by an intoxicated
person with the right to recover damages from an establishment that wrongfully
served alcoholic beverages to such person. While the Company carries liquor
liability coverage as part of its existing comprehensive general liability
insurance, there can be no assurance that it will not be subject to a judgment
in excess of such insurance coverage or that it will be able to obtain or
continue to maintain such insurance coverage at reasonable costs, or at all.
The imposition of a judgment substantially in excess of the Company's
insurance coverage, or the failure or inability of the Company to obtain and
maintain insurance coverage, could materially and adversely affect the
Company.
Other Regulations. The Company's current Units and future Units will be
subject to regulation by federal and foreign agencies and to licensing and
regulation by foreign, state and local health, sanitation, building, zoning,
safety, fire and other departments relating to the development and operation
of restaurants and retail establishments. These regulations include matters
relating to environmental, building construction, zoning requirements and the
preparation and sale of food and beverages. Various federal, foreign and
state labor laws govern the Company's relationship with its employees,
including minimum wage requirements, overtime, working conditions and
citizenship requirements. Significant additional government-imposed increases
in minimum wages, paid leaves of absence and mandated health benefits, or
increased tax reporting and tax payment requirements for employees who receive
gratuities could have an adverse effect on the Company. Delays or failure in
obtaining the required construction and operating licenses, permits or
approvals could delay or prevent the opening of new Units.
The Federal Americans With Disabilities Act ("ADA") prohibits
discrimination on the basis of disability in public accommodations and
employment. The Company's current Units are designed to be accessible to the
disabled. The Company intends to continue to comply in future Units with the
ADA and future regulations relating to accommodating the needs of the
disabled, and the Company does not anticipate that such compliance will have a
material effect on its operations.
Future Units which may be established in countries other than the United
States will be subject to governmental regulations in the jurisdictions in
which they are established, principally in respect to sales of liquor,
construction of premises and working conditions of employees. The Company
does not believe that such regulations will materially adversely affect its
business.
Trademarks
- ----------
The Company, at this time, does not have a registered trademark with the
United States Patent and Trademark Office. The Company regards its name,
"Newriders," and logo as having significant value and as being an important
factor in the marketing of the Company's products, and has applied for a
trademark registration under its design logo. The "Easyriders" trademark is
registered with the United States Patent and Trademark Office and is the
property of Paisano Publications, Inc. The Company has the right to use the
"Easyriders" trademark pursuant to the Franchise Agreements.
Insurance
- ---------
The Company maintains general liability and property insurance. The
costs of insurance coverage vary generally and the availability of certain
coverage has fluctuated in recent years. While the Company believes that its
present insurance coverage is adequate for its current operations, there can
be no assurance that the coverage is sufficient for all future claims or will
continue to be available in adequate amounts or at reasonable rates.
Proposed Acquisitions - Proposed Change in Primary Business
- -----------------------------------------------------------
On January 13, 1998, the Company entered into a revised Letter Agreement
("Letter Agreement") to acquire all of the stock (the "Paisano Acquisition")
of specialty magazine publisher Paisano Publications, Inc. and certain of its
affiliates (collectively the "Paisano Companies"). The Paisano affiliates
include Easyriders of Columbus, Inc., an Ohio corporation, Easyriders
Franchising, Inc., a California corporation, Teresi, Inc., a California
corporation, Bros. Club, Inc., a California corporation, and Associated Rodeo
Riders on Wheels, a California corporation. The Letter Agreement provides
that the Paisano Acquisition consideration will consist of $23 million in
cash, the assumption of a $7 million note payable, a $10 million subordinated
Seller Note (the "Seller Note") and the issuance of approximately 9,900,000
shares of Newriders, Inc. common stock.
Concurrent with the closing of the Paisano Acquisition, the Company
expects to acquire all of the ownership interests of M & B Restaurants, LLC, a
Texas limited liability company ("M & B Restaurants") which is doing business
as El Paso Barbecue Company. M & B Restaurants is the owner of four El Paso
Barbecue restaurants located in the southwest. The Company is proposing to
acquire M & B Restaurants (the "El Paso Acquisition") in exchange for
approximately 2,970,000 shares of the Company's common stock and the
assumption of approximately $2.6 million in debt. The Company and M & B
Restaurants entered into a Letter of Intent ("Letter of Intent") covering the
El Paso Acquisition on October 7, 1997.
In connection with the Acquisitions, the Company proposes to merge with a
wholly owned subsidiary of a wholly owned subsidiary (the "Subsidiary") of the
Company to be formed (the "Merger") with the result that a subsidiary of the
Company will essentially replace the Company, and the shareholders of the
Company will become shareholders of the Subsidiary. References to the Company
which relate to the prospective period following completion of the
Acquisitions and the Merger should be deemed to be references to the
Subsidiary, assuming completion of the Acquisitions and the Merger.
The Paisano Acquisition and the El Paso Acquisition (collectively, the
"Acquisitions") are subject to certain conditions and contingencies stated in
the Letter Agreement and Letter of Intent. The Company is currently seeking
debt financing of approximately $40 million (the "Senior Credit Facility") to
fund the cash portion of the Paisano Acquisition and to repay certain other
indebtedness of the Company. The Acquisitions are subject to, among other
standard closing conditions, the consummation of the Senior Credit Facility,
satisfactory completion of due diligence, execution of definitive acquisition
agreements, audits of the companies to be acquired, and shareholder approval.
Failure to satisfy any of the conditions may result in the Acquisitions not
being consummated, or in substantial changes to the terms of either or both of
the Acquisitions, including, without limitation, the consideration to be paid
by the Company. The Company anticipates filing a registration statement
and/or proxy statement with the Securities and Exchange Commission in
connection with soliciting shareholder approval for and consummating the
Acquisitions.
The Company is currently negotiating definitive acquisition agreements
with respect to each proposed Acquisition. However, as of the date of this
report, definitive acquisition agreements have not yet been signed by the
parties.
The El Paso Acquisition involves a related party transaction. William E.
Prather, who (together with his wife) is currently a 51% owner and manager of
M & B Restaurants, LLC, has served as the Company's President and Chief
Executive Officer since October, 1997. John E. Martin, the Company's Chairman
of the Board of Directors, purchased the remaining 49% ownership interest of M
& B Restaurants, LLC from the other owner in March 1998 for $1,500,000 in
cash.
Upon the closing of the Acquisitions, the Company's Board of Directors is
proposed to be increased to nine members, of which Joe Teresi, owner of the
Paisano Companies, will select three. John E. Martin and Joe Teresi have
agreed that as long as any amount is owing to Mr. Teresi under the Seller
Note, that they will vote their shares of the Company's common stock in favor
of electing three director nominees selected by Mr. Teresi.
Mr. Teresi will remain Chairman of Paisano Publishing, Inc. under an
employment agreement for a period of time to be agreed to prior to completion
of the Paisano Acquisition, for a salary equal to that paid to Mr. Martin by
the Company during the agreed-upon period. The Letter of Intent relating to
the El Paso Acquisition provides that William Prather will be employed as the
Company's Chief Executive Officer for a period of five years at an annual
salary of $200,000.
Upon the closing of the Paisano Acquisition, the primary business of the
Paisano Companies shall become the primary business of the Company. The
Paisano Companies serve the motorcycle and tattoo markets. The Paisano
Companies' core business includes the publication of 11 special interest
magazines including Easyriders, the leading motorcycle magazine in the world.
Based on industry audits, the Paisano Companies' seven motorcycle titles
(including the trade publications, Eagle's Eye) have collective annual
circulation of 4.1 million copies representing an estimated 70% share of the
U.S. motorcycle magazine market. Additionally, the Paisano Companies' three
tattoo titles collectively represent over 80% of the U.S. tattoo magazine
market. In addition, the Paisano Companies have focused on several lines of
business that exploit the Easyriders name including (i) a line of apparel and
other products for the Harley Davidson and tattoo lifestyle customers; and
(ii) three Company-owned Easyriders stores and 28 franchises which sell
Easyriders apparel, customized new and pre-owned American-made motorcycles and
motorcycle accessories; and (iii) promotional events such as motorcycle shows,
motorcycle rodeos and charity rides.
Following completion of the Acquisitions, the Company plans on becoming
an international media, entertainment and products company serving an
international demographic group that enjoys the "freedom-of-the-road"
lifestyle surrounding the American-made cruiser motorcycle. To increase sales
of products and services to the motorcycle market and to improve the existing
operations of the Paisano Companies, the Company intends to focus on several
important strategies including: (i) increasing the quantity, quality and
distribution of the Company's retail products such as motorcycles, parts,
accessories and apparel; (ii) increasing its post-acquisition revenue by
increasing magazine advertising sales; (iii) restructuring and expanding the
Paisano Companies' franchise system; (iv) building additional restaurants
incorporating the "Easyriders" theme; and (v) expanding the Paisano Companies'
international offerings for motorcycle and tattoo lifestyle products and
services.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company presently occupies two retail properties in Fresno,
California, one retail property in Myrtle Beach, South Carolina and corporate
office space at one location in Newport Beach, California, described as
follows:
1. Fresno Retail Sites: The Company leases two retail locations in
Fresno, California. They are housed in two buildings, separated by a common
parking lot. Both are located within one-half block from the intersection of
the two main thoroughfares in the City of Fresno and are passed by
approximately 60,000 vehicles per day on average. The Cafe and Roadware
Apparel store have been closed for remodeling since January 1998, and are
expected to reopen in June 1998. The remodeled cafe will seat approximately
175 persons.
The Fresno motorcycle and accessory shop is located in a 4,000-square-
foot area adjacent to the Cafe. It features a modern showroom in which up to
15 new, customized and used motorcycles can be displayed and offered for sale.
A full line of after-market motorcycle parts is offered. In addition, a
complete motorcycle customizing and repair shop is included, in which
motorcycles can be repaired, customized or built from the frame up. The
Fresno motorcycle and accessory shop has also been closed since January 1998
while the cafe is being remodeled.
Fresno Leases: The Fresno cafe and apparel store lease became effective
on August 1, 1995. It is a triple net lease with the following rent
structure:
Commencement to 5/31/00 $ 84,000 annually
6/1/00 to 5/31/05 102,000 annually
6/1/05 to 5/31/10 117,120 annually
6/1/10 to 5/31/15 133,740 annually
The Company also pays annual property taxes of approximately $8,000 pursuant
to the lease.
The motorcycle and accessory shop space begins at $48,000 annually with
incremental increases on a percentage basis reflecting the rent increases in
the cafe lease.
2. Myrtle Beach Site: The Company occupies one retail location in
Myrtle Beach, South Carolina. The property has been leased at Broadway at the
Beach, adjacent to the main entrance and next to an existing Hard Rock Cafe.
The site consists of 8,900 square feet and an 800-square-foot patio and will
seat 240. It features a clean, modern motif with three full bars, a display
kitchen and entertainment stage. An air dam allows an entire sliding glass
wall of the Cafe to be opened during business hours to include the patio
within the restaurant. Approximately 250 square feet is dedicated to the
roadware apparel store.
Myrtle Beach Lease: The Myrtle Beach cafe and apparel store lease was
executed on January 24, 1997. Rent became payable in accordance with the
following schedule on April 1, 1997 in accordance with the following schedule:
Commencement to 3/31/98 $ 12,044 monthly
4/1/98 to 3/31/99 13,248 monthly
4/1/99 to 3/31/02 17,482 monthly
4/1/02 to 3/31/07 20,992 monthly
In addition the lease requires payment of percentage rent at the natural
break point in the amount of 7.5% until April 1, 2002 and 6% thereafter. The
tenant is also assessed common area maintenance charges.
The Company originally planned to operate a motorcycle and accessory shop
in Myrtle Beach, South Carolina. A lease for the Myrtle Beach motorcycle shop
was executed by the Company on June 6, 1997 for a term of twenty years. Rent
is payable at the rate of $2,200.00 per month with cost of living adjustments
at the end of each five-year period. Effective March 1, 1998, the lease was
assigned to Leon Hatcher, an officer and director of the Company, who intends
to operate the motorcycle and accessory shop. (See "ITEM 12. CERTAIN
RELATIONS AND RELATED TRANSACTIONS.")
3. Corporate Offices: The Company utilizes corporate office space
located in Newport Beach, California. The Company pays an office services fee
of $7,000 per month to John Martin, the Company's Chairman of the Board of
Directors, which includes use of certain equipment and support services. (See
"ITEM 12. CERTAIN RELATIONS AND RELATED TRANSACTIONS.")
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings.
The Company's property is not subject to any material pending legal
proceedings. To the best of the Company's knowledge, no governmental
authority or other party has threatened or is contemplating the filing of any
material legal proceedings against the Company. To the best of the Company's
knowledge, no director, officer, affiliate of the Company or any owner of
record or beneficially of more than 5% of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any material legal proceeding. However, the Company anticipates that it
may become a defendant from time to time in routine lawsuits incidental to its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no meetings of the Company's shareholders held during the
fourth quarter of the year ended December 31, 1997. No matters were submitted
to a vote of security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
- ------------------
The Common Stock of the Company is traded in the over-the-counter market
and quoted on the NASD Bulletin Board under the symbol "NWRD". The shares
were first quoted on the Bulletin Board in April 1996. The following table
sets forth, for the respective periods indicated, the prices of the Company's
Common Stock in the over-the-counter market, based on inter-dealer bid prices,
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions. The quotations have been provided by market
makers in the Company's Common Stock and/or the National Quotation Bureau.
Quarter Ended High Bid Low Bid
- ------------------------- ----------------- -----------------
June 30, 1996 $5.25 $5.25
September 30, 1996 $5.75 $1.00
December 31, 1996 $2.50 $1.00
March 31, 1997 $8.563 $1.00
June 30, 1997 $4.125 $1.8125
September 30, 1997 $4.125 $1.8125
December 31, 1997 $4.875 $2.4375
Number of Stockholders of Record
- --------------------------------
As of March 19, 1998 there were approximately 311 stockholders of record.
Dividend Information
- --------------------
The Company has not paid any dividends in the past. The Company
currently intends to retain all earnings to finance the development and
expansion of its operations and does not anticipate paying cash dividends or
making any other distributions on its shares of Common Stock in the
foreseeable future. The Company's future dividend policy will be determined
by its Board of Directors on the basis of various factors, including the
Company's results of operations, financial condition, business opportunities
and capital requirements.
Under Nevada state corporate law, no dividends may be paid if, after
giving effect to the dividends: (a) the Company would not be able to pay its
debts as they become due in the usual course of business; or (b) except as
otherwise specifically allowed by the Company's Articles of Incorporation, the
Company's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the Company were to be dissolved at
the time of distribution, to satisfy the preferential rights, upon
dissolution, of stockholders whose preferential rights are superior to those
receiving the dividend.
Recent Sales of Unregistered Securities
- ---------------------------------------
During the year ended December 31, 1997, the only equity securities of
the Company sold by the Company that were not registered under the Securities
Act of 1933 (other than unregistered sales made in reliance on Regulation S)
are described below:
Number of Shares
Date of Common Stock Total Consideration
- ---- --------------------- -------------------
1/17/97 80,000 $ 80,000 of payroll
5/13/97 192,300 $250,000
5/14/97 192,300 $250,000
5/29/97 50,000 Services
Note 1 293,825 $600,000
Note 1: On May 29, 1997, the Company issued $600,000.00 face value of its
convertible notes, which were subsequently converted on various dates
commencing June 11, 1997 and ending October 13, 1997 to a total of
293,825 shares of the Company's common stock.
In addition to the stock issuances described above, the Company granted
the following options and/or warrants, in 1997, to purchase shares of the
Company's common stock which, if exercised, will result in shares of the
Company's common stock being issued that will not be registered under the
Securities Act of 1933 (and will not represent unregistered sales made in
reliance on Regulation S):
(a) Warrant granted April 21, 1997 to purchase up to 250,000 shares
of common stock, exercisable at $4.00 per share, which expires on April 21,
1999.
(b) Warrant granted April 21, 1997 to purchase up to 250,000 shares
of common stock, exercisable at $4.00 per share, which expires on April 21,
1999.
(c) Option granted July 8, 1997 to purchase up to 500,000 shares,
exercisable at $2.50 per share, which is exercisable with respect to 50% of
the shares immediately, 25% of the shares on July 8, 1998 and 25% of the
shares on July 8, 1999, subject to the holder's continued service as a
director through said dates. This option expires 10 years after each
increment becomes exercisable.
(d) Option granted July 8, 1997 to purchase up to 1,500,000 shares
of the Company's common stock, exercisable at $2.50 per share. The option
becomes exercisable 50% beginning July 8, 1998 and 50% beginning July 8, 1999,
subject to the holder's continued service as a director. The option expires
10 years after each increment vests.
(e) Option granted August 22, 1997 to purchase up to 500,000 shares
of the Company's common stock, exercisable at $2.50 per share. The option
becomes exercisable 50% beginning July 8, 1998 and 50% beginning July 8, 1999,
subject to the holder's continued service as a director. The option expires
ten years after each increment vests.
(f) Option granted July 16, 1997 to purchase up to 50,000 shares of
the Company's common stock, exercisable at $2.50 per share. The option is
exercisable with respect to 50% of the shares immediately, 25% after one year
of service as a director and 25% after two years of service as a director.
The option expires 10 years after each increment vests.
(g) Option granted July 16, 1997 to purchase up to 50,000 shares of
the Company's common stock, exercisable at $2.50 per share. The option is
exercisable with respect to 50% of the shares immediately, 25% after one year
of service as a director and 25% after two years of service as a director.
The option expires 10 years after each increment vests.
(h) Option granted February 14, 1997 to purchase up to 250,000
shares of the Company's common stock, exercisable at $2.50 per share. The
option expires February 14, 2002.
(i) Option granted February 14, 1997 to purchase up to 100,000
shares of the Company's common stock, exercisable at $2.50 per share. The
option expires February 14, 2002.
(j) Warrant granted May 28, 1997 to purchase up to 6,173 shares of
the Company's common stock, exercisable at $4.05 per share, which expires five
years after grant.
(k) Warrant granted May 28, 1997 to purchase up to 8,974 shares of
the Company's common stock, exercisable at $3.90 per share, which expires five
years after grant.
(l) Option granted October 7, 1997 to purchase up to 750,000 shares
of the Company's common stock, exercisable at $2.50 per share, which vests 50%
after one year of service and 50% after two years of service. The option is
exercisable for ten years after vesting.
With respect to the stock issuances described above and the warrants and
option grants described above, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended, in all instances, except for the issuance
of 293,825 shares issued as a result of the conversion of the Company's
convertible notes, as to which the Company relied on Rule 504 of Regulation D.
No advertising or general solicitation were employed in offering the shares.
The securities were offered to persons who received disclosure information
concerning the Company and who had access to information concerning the
Company by virtue of their relationship with the Company, or who were given
the opportunity to make investigation and inquiry directly or through their
purchaser representative where applicable. Except for the securities issued
in reliance on Rule 504 of Regulation D, the securities were offered for
investment purposes only and not for the purpose of resale or distribution,
and the transfer thereof was appropriately restricted by the Registrant.
No underwriters were involved in any of the sales described above, and no
underwriting discounts or commissions were paid by the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has restated its financial statements for the year ended
December 31, 1996. References herein to financial information for that period
are based on the financial statements for that period as restated.
Plan of Operation
- -----------------
The Company's plan of operation for the next twelve months is to focus on
the following:
1. Complete the Paisano Acquisition and the El Paso Acquisition.
2. Complete the remodeling of the Fresno Unit, and reopen the Fresno Unit
in June 1998.
3. Refine and continue to improve the performance of the Fresno and
Myrtle Beach Units.
4. Research, identify and secure up to three additional sites for
expansion in 1999.
The Company's independent accountant's report contains an opinion,
expressing concern over the Company's ability to continue in business as a
"going concern." Note 2 of the Company's financial statements for the year
ended and as of December 31, 1997 discloses that the Company has incurred
losses from its inception through December 31, 1997, at which time it had an
accumulated deficit of $5,849,016. Note 2 then states: "The Company does not
have an established source of revenues sufficient to cover its operating
costs, which raises substantial doubt about its ability to continue as a going
concern."
The Company's present cash resources may not be adequate to sustain
operations through 1998. If the two Acquisitions the Company is pursuing are
completed, the Company will have adequate cash resources to sustain operations
for the foreseeable future. If the Acquisitions are not completed during
1998, the Company will be required to raise additional capital through
borrowing or additional sale of equity. Further, revenues from the Company's
two operating restaurants would not be adequate to support the present
headquarters executive staff, and the Company would be required to
substantially reduce its corporate overhead. If the Acquisitions are
completed, the combined entities will have approximately 500 employees,
compared to approximately 41 full-time employees without the Acquisitions.
If the Acquisitions are not completed, the Company estimates that it will
require approximately $2,000,000 to fund its planned operations for the next
twelve months.
The Company is engaged constantly in market research, menu development,
entertainment choices, and thematic presentation, all of which result in a
continual refinement and upgrading of the Company's products and services.
As described in PART I, Item 1 of this report, the Company is proposing
to close on the Paisano Acquisition and the El Paso Acquisition in the near
future. If these acquisitions both close, the Company will acquire
significant additional assets and a significant number of additional
employees.
Management's Discussion and Analysis of Financial
Condition and Results of Operations.
- -------------------------------------------------
The Company's operating subsidiary, Newriders Limited, was formed in late
1994. From inception until April 1996, Newriders Limited was in the process
of developing its operational plan, building the motorcycle shop and building
the restaurant and apparel store located in Fresno, California, and evaluating
additional sites for future Units.
- -Liquidity and Capital Needs
- ----------------------------
Cash and cash equivalents increased $1,242,586 to $1,262,633 at December
31, 1997 from $20,047 at December 31, 1996, due to net cash of $3,646,711,
provided by the issuance of common stock, debt and convertible debentures,
partially offset by cash used in operations of $1,165,387 and capital
expenditures of $1,338,738 for the construction of the Company's Myrtle Beach
facility. Cash used in operating activities of $1,165,387 included a net loss
of $4,776,874, offset by $1,494,000 of non-cash compensation expenses,
$223,169 depreciation and amortization, $310,877 of non-cash interest expense
and $628,129 related to the write-off of tenant improvements for the
refurbishment of the Company's Fresno Cafe facility. The remaining difference
relates to a net increase in operating assets and liabilities of $1,055,312.
The primary component of the 1997 net increase in cash and cash
equivalents were equity capital raised through the Company's officers and
directors and equity and debt capital raised through the sale of common stock
and incurring straight debt and debt convertible to common stock. In April,
1997, two persons, who subsequently became officers and directors, invested a
total of $500,000 in exchange for restricted common stock and warrants. In
May, 1997, the Company raised $600,000 in gross proceeds from the sale of
convertible notes subsequently converted to common stock. Additional gross
proceeds of approximately $1,000,000 was received by the Company through a
private placement of convertible notes during December 1997. (See Note 8 to
Consolidated Financial Statements of Newriders, Inc. and Subsidiary for the
year ended December 31, 1997.) In 1997, the Company also borrowed $1,050,000
from Franchise Mortgage Acceptance Company, LLC through three loans, which
loans were guaranteed by certain directors of the Company. See "Item 12.
CERTAIN RELATIONS AND RELATED TRANSACTIONS."
The Company opened its Myrtle Beach, South Carolina location in May,
1997. Substantial expenditures are incurred whenever a new location is opened.
This requires substantial cash commitments by the Company. The cash
commitments needed to open a third location exceed the Company's available
liquid resources. In order to open additional locations, the Company
anticipates that the majority of necessary funds will come from equity capital
raising transactions or loans. The Company can presently offer no assurance
that it will be successful in its capital raising plans. Additionally, the
closure and refurbishment of the Company's Fresno cafe facility in January
1998 will negatively impact operating cash flows until operations commence
after refurbishment.
The Acquisitions as presently contemplated would have numerous
significant impacts on the liquidity of the Company. The significant
contribution to the cash of the Company represented by the Acquisitions will
be offset to some extent by the Company's need to make payments as required to
service the indebtedness incurred to effect the Acquisitions. The net effect
of the Acquisitions on the liquidity of the Company is expected to be
positive, but will depend upon the terms of the financing which the Company
obtains and the future operating results of the Paisano Companies and M & B
Restaurants.
- -Results of Operations
- ----------------------
The Company's sales for the year ended December 31, 1997 were $2,932,708
in contrast to sales of $1,161,520 for the year ended December 31, 1996.
Total cost of sales for the year ended December 31, 1997 was $1,670,146 or
56.9% of Sales. The Company's sales were not reflective of any direct
marketing or advertising conducted by the Company.
Total cost of sales for the year December 31, 1996 was $532,487 or
approximately 45.8% of Sales. Restaurant and store operating expenses were
$2,661,424 in the year ended December 31, 1997, and approximately $1,013,888
in the year ended December 31, 1996. Selling, general and administrative
expenses were $1,067,464 in the year ended December 31, 1997, and
approximately $507,383 in the year ended December 31, 1996. The increases in
sales and expenses are primarily attributable to the addition of the Myrtle
Beach Unit from May, 1997. Selling, general and administrative expenses
increased due primarily to the expansion of corporate staff and increased
activities in furtherance of contemplated corporate expansion. The Company to
date has spent only limited funds on advertising or marketing of its
restaurants and motorcycle shop. The Company anticipates budgeting
approximately $60,000 for future annual advertising of each Unit.
Of 1997 sales, $1,398,823 represent sales for the Myrtle Beach Unit,
while $1,533,885 represent sales from the Fresno Unit. Myrtle Beach costs of
sales for 1997 were $530,646, while Fresno costs of sales were $1,139,000.
1997 restaurant and store operating expenses were $1,105,403 for the Myrtle
Beach Unit and $1,445,021 for the Fresno Unit. While the Fresno Unit remains
closed, it will, of course, generate no revenues. But while operating
expenses will be reduced, some operating expenses will continue to accrue, and
capital expenditures for remodeling will be incurred. Fresno Unit revenues
will likely be much lower for 1998 than 1997 while operating expenses for
Fresno are also expected to be lower for 1998 than for 1997. However, the
decrease in operating expenses will not likely be in proportion to the
decrease in revenue.
The Company incurred compensation expense of $1,244,000 from stock and
option issuances in 1997, and wrote off leasehold improvements of $628,129 in
1997 as a result of the Company's decision to substantially rebuild its
restaurant in Fresno, California in December 1997. Net loss for year ended
December 31, 1997 was $4,776,874 or $0.29 per share in contrast to a net loss
of $1,036,240 or $0.07 per share for the year ended December 31, 1996. The
Company attributes its losses largely to development of its restaurant,
apparel and motorcycle shop concept and the initial implementation of this
concept, and corporate staff increases incurred to facilitate the Company's
planned acquisitions and expansion.
The level of public acceptance for the Company's restaurant, apparel and
motorcycle shops remains undetermined, and the Company anticipates making
further adjustments in its menu, designs, products and marketing approach from
time to time to better achieve public acceptance, to hopefully improve
revenues, and adjust to changing market conditions. Such adjustments may
result in higher expense levels than would otherwise be incurred by a more
established enterprise.
The Company's business is somewhat seasonal, given its marketing to the
motorcycle riding public, although this may vary from location to location.
The Fresno Unit does not appear to be affected significantly by seasonal
business fluctuations, while the Myrtle Beach Unit does appear to be subject
to some seasonal business fluctuation. Other Units which may be developed in
the future may be affected by seasonal fluctuations, and it is anticipated
that this factor will be considered in selecting sites for additional Units.
The Company believes that the timing of its opening of the Myrtle Beach
store in May 1997, was particularly beneficial to the Company's initial
success of that location. Not only is May the traditional beginning of the
summer tourist season, it is the month in which Myrtle Beach hosts the longest
running continuous annual motorcycle rally in the United States. An estimated
50,000 motorcycle riders converge on the community over a one-week period.
The Company's theme and products are precisely targeted to this lucrative
customer base.
While the Spring through Fall tourist seasons in Myrtle Beach receive the
most traffic, the Winter, featuring a temperate climate, also lends itself to
the conditions conducive to enjoyment of motorcycle touring. The Company has
also begun an extensive campaign to position itself as a popular place for
"locals". Further, the Company has embarked upon a promotional campaign to
attract many of the thousands of golfers who descend upon Myrtle Beach's more
than 100 golf courses during the winter season.
Year 2000 Compliance
- --------------------
What is commonly referred to as the "Year 2000 Issue" is the result of
computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's computer programs that have time-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.
In 1998, the Company will initiate a conversion for existing PC based
accounting software to programs that are year 2000 compliant. Management has
determined that the year 2000 issue will not pose significant operational
problems for its computer systems. As a result, all costs associated with
this conversion will be expensed as incurred. The Company will also initiate
communications with all of its significant suppliers to determine the extent
to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse affect on the
Company's systems.
The Company will utilize both internal and external resources to
reprogram, or replace, and test software for Year 2000 modifications. The
Company anticipates completing its Year 2000 remediation efforts within one
year but not later than October 31, 1999, which is prior to any anticipated
impact on its operating systems. The total cost of the Company's Year 2000
remediation efforts is not expected to have material effect on the Company's
results of operations.
Forward-Looking Statements
- --------------------------
This document includes various forward-looking statements with respect to
future operations of the Company that are subject to risks and uncertainties.
Forward-looking statements include the information concerning expectations of
future results of operations and such statements preceded by, followed by or
that otherwise include the words "believes," "expects," "anticipates,"
"intends," "estimates" or similar expressions. For those statements, the
Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Litigation Reform Act of 1995.
ITEM 7. FINANCIAL STATEMENTS.
The Company's audited balance sheet as of December 31, 1997 and the
Company's audited statements of operations, stockholders' equity, and cash
flows for the year ended December 31, 1997 are attached hereto as Appendix
"A." The Company's restated audited statements of operations, stockholders'
equity, and cash flows for the year ended December 31, 1996 are attached
hereto as Appendix "B." At the time the audit for the year ended December 31,
1996 was conducted, Jones, Jensen & Company was not licensed to practice in
the State of California.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective January 29, 1998, the Company dismissed Jones, Jensen & Company
as the independent accountants previously engaged by the Company to audit the
financial statements of the Company. This was previously reported by the
Company on a Form 8-K Current Report filed with the Securities and Exchange
Commission on February 4, 1998.
Jones, Jensen & Company previously audited the consolidated balance sheet
of the Registrant and its subsidiary as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years ended December 31, 1996 and 1995. Jones, Jensen & Company has
not issued an adverse opinion or a disclaimer of opinion, nor has any report
during the past two years been qualified or modified as to uncertainty, audit
scope, or accounting principles, other than the inclusion of a going-concern
paragraph in the June 3, 1997 audit report.
During each of the Company's two most recent fiscal years, and any
subsequent interim period preceding the dismissal of Jones, Jensen & Company,
there were no disagreements with Jones, Jensen & Company on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
During the Company's two most recent fiscal years and any subsequent
interim period preceding this change in certified accountants,
(A) Jones, Jensen & Company did not advise the Company that the
internal controls necessary for the Registrant to develop reliable financial
statements do not exist;
(B) Jones, Jensen & Company did not advise the Company that
information had come to the accountants' attention that led it to no longer be
able to rely on management's representations, or that made it unwilling to be
associated with the financial statements prepared by management;
(C) Jones, Jensen & Company did not advise the Company of the
need to expand significantly the scope of its audit, or that information had
come to the accountants' attention during said time period that if further
investigated, may: (i) materially impact the fairness or reliability of
either: a previously issued audit report or the underlying financial
statements, or the financial statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the most recent financial
statements covered by an audit report (including information that may prevent
it from rendering an unqualified audit report on those financial statements),
or (ii) cause it to be unwilling to rely on management's representations or be
associated with the Company's financial statements; or
(D) Jones, Jensen & Company did not advise the Company that
information had come to the accountants' attention that it had concluded
materially impacted the fairness or reliability of either (i) a previously
issued audit report or the underlying financial statements, or (ii) the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report (including information that, unless resolved to the accountants'
satisfaction, would prevent it from rendering an unqualified audit report on
those financial statements).
The decision to change accountants was recommended and approved by the
audit committee of the Board of Directors.
On January 29, 1998, the Company engaged Deloitte & Touche LLP as the new
independent accountants engaged as the principal accountants to audit the
Company's financial statements. During the Company's two most recent fiscal
years, and any subsequent interim period prior to engaging Deloitte & Touche
LLP, neither the Company nor someone on its behalf consulted Deloitte & Touche
LLP regarding (i) either: the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial statements; or (ii)
any matter which was either the subject of a disagreement (there were no
disagreements as stated above) or a reportable event (as described in Item
304(a)(1)(V) of Regulation S-K).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names and ages of all directors and executive officers and all
persons nominated or chosen to become such appear in the table below:
Name Age Position with Company
- --------------------- --- ---------------------------------
John E. Martin 52 Chairman of the Board of Directors
William E. Prather 50 President, Chief Executive Officer and
Director
Joseph Teresi 56 Chairman of the Paisano Companies and
nominee to become a Director of the Company
William R. Nordstrom 56 Executive Vice President of Finance and
Administration and Director
Brian Wood 50 President and Executive Director of Paisano
Publications and nominee to become a Director
of the Company
Michael T. Purcell 60 Vice President and Director
Leon Hatcher 46 Vice President and Director
Hal H. Bolen II 47 Secretary
C.W. Doyle 63 Director
Wayne L. Knyal 51 Director
Daniel Gallery 43 Director
Mr. John E. Martin has been the Chairman of the Company since July 1997.
He served as Chief Executive Officer of the Company from July 1997 until
October, 1997. Mr. Martin served as President and Chief Executive Officer of
Taco Bell Corp. from August 1983 until 1995. In 1995, Mr. Martin became
Chairman and continued as Chief Executive Officer of Taco Bell Corp. until
October 1996, and he also assumed responsibility for PepsiCo's casual dining
concepts. From October 1996 until June 1997, Mr. Martin was Chairman and
Chief Executive Officer of PepsiCo Casual Dining International, a division of
PepsiCo. In 1996, Mr. Martin was named the third most successful restaurant
executive in the nation in the Spenser Stuart/Cornell study. He received the
first Innovator Award from the Multi-Unit Foodservice Operators Association in
1994 and the Silver Plate Award from the International Foodservice
Manufacturers Association in 1993 for his innovative leadership in the quick-
service industry. The National Association of Corporate Real Estate
Executives named him as the 1992 CEO of the Year. Restaurants and
Institutions Magazine named him Executive of the Year in 1991. Mr. Martin is
a member of the Educational Foundation of the National Restaurant
Association's Board of Trustees, and is a founding member of the Chief
Executive Round Table at the University of California, Irvine. Mr. Martin is
a director of The Good Guys, Inc., Williams-Sonoma, Inc., Franchise Mortgage
Acceptance Company, LLC and Chevy's Mexican Restaurants, Inc.
Mr. William E. Prather has been the President and Chief Executive Officer
of the Company since October 1997. Mr. Prather has 25 years of experience in
the restaurant and hospitality industries. He began his career at Burger
King, where, over a fourteen-year period, he was manager of several regions,
head of all European operations and was eventually promoted to Executive Vice
President of worldwide operations, the number two position at the company.
Mr. Prather has more recently served as Chief Executive Officer of Hardee's
and the Chief Executive Officer of Furr's/Bishop's. Mr. Prather is the
founder and President of M & B Restaurants, LLC, a holding company for four El
Paso Barbecue Company restaurants.
Mr. Joseph Teresi founded Paisano Publications, Inc. in 1970 and since
1986 has been the sole shareholder. He has served as Chairman of the Board of
Directors of Paisano Publications, Inc. and its affiliated companies for more
than the past five years. Upon consummation of the Paisano Acquisition by the
Company, Mr. Teresi will serve as Chairman and Publisher of Paisano
Publications and as a Director of the Company. Mr. Teresi is considered the
preeminent publisher of motorcycle magazines in the world and has grown his
company's share of the motorcycle magazine market to over 70%. Mr. Teresi's
vision and understanding of the lifestyle surrounding the American-made
motorcycle has been responsible for creating the substantial brand recognition
of the Easyriders name and the growth of Paisano into an integrated
entertainment and lifestyle company. From 1968 to 1978, Mr. Teresi was
involved with the manufacturing, distribution and retailing of motorcycle
parts and accessories. His motorcycle set the current Land Speed Record for
motorcycles in 1990 at the Bonneville Salt Flats with a speed of 322.15 mph.
Mr. Nordstrom has served as Executive Vice President of Finance and
Administration and as a director of the Company since July 1997. Mr.
Nordstrom is an experienced and successful businessman and entrepreneur with
an extensive background in management consulting, sales training, organization
development and business start-ups. He has hands-on experience in building
and managing a business, including capital formation, marketing and sales,
operations, MIS, human resources, business planning, strategic planning,
engineering, research and development and corporate finance. He was formerly
Chairman and CEO of National Investors Council, a financial publishing and
communications firm, which he founded in 1987. Prior to establishing National
Investors Council, Mr. Nordstrom was a consultant to a number of
organizations, including Integrated Barter International, Inc. (a publicly
held corporate barter and excess inventory re-marketing specialist), Jallow
International, Inc. (an international economic consulting firm established by
Dr. Raymond Jallow, former chief economist for First Interstate Bank), and
Corporate Capital Resources, Inc. (a publicly held "Business Development
Company" specializing in the financing and "incubation" of start-up
businesses). Mr. Nordstrom serves as a director of Leading Edge Earth
Products, Inc., a publicly held building panel manufacturing company.
Mr. Brian Wood has served as President and Executive Director of Paisano
Publications, Inc. since January 1995. He joined Paisano in a consulting
capacity starting in 1987. Mr. Wood has also served as Executive Vice
President and Chief Operating Officer of Paisano Publications. Mr. Wood
serves as President of Easyriders Franchising. Prior to joining Paisano, Mr.
Wood was President of Publisher Services International from 1984 to 1987 and
President/Publisher of Entrepreneur Magazine from 1980 to 1984. Upon
consummation of the Paisano Acquisition by the Company, Mr. Wood will become a
Director of the Company.
Mr. Michael T. Purcell is a co-founder of Newriders Limited and has
acted in several executive positions since its inception on November 8, 1994.
Mr. Purcell served as Chief Operating Officer, Chief Financial Officer and
Chief Executive Officer of the Company from July 1996 until July 1997. He has
served as Vice President since July 1997 and as a Director since July 1996.
He has served as President of the Company from August 1996 until July 1997.
He served as President and Chief Executive Officer of Purcell Appling
Associates, an advertising agency and marketing consulting firm, from 1987
until 1991. Since July, 1991, Mr. Purcell has been the sole proprietor of
Purcell Advertising, a successor firm to Purcell Appling Associates. Mr.
Purcell served as Director of Sales Development for NBC Radio in New York City
and Partner in the Transtar Radio Network from 1981 to 1985. He has served as
the Producer and Promotor of Harley Davidson-oriented events such as the
Harley Challenge and Valley Thunder Biker Bash and Blues Festival in Central
California since 1992. Mr. Purcell has also served as the Coordinator and
Director of the Chili Cookoff held in Central California since 1984.
Mr. Leon Hatcher is a co-founder of Newriders Limited and has served as a
Director since inception on November 8, 1994. Mr. Hatcher served as Chairman
of the Board of Directors of the Company from inception until July 1997 and as
President from inception until August 1996. He has served as Vice President
since July 1997. He has served as a director of the Company since July 1996.
He has also served in various capacities with Easyriders Rodeos, Custom Bike,
Tatoo, Show, and Apparel Outlets since 1980.
Mr. Hal H. Bolen II has served as the Secretary of the Company since
November 1996. Mr. Bolen is an attorney and has been a partner in the Fresno,
California law firm of Bolen, Fransen & Boostrom LLP for more than the last 10
years. Mr. Bolen has served as Secretary and as a director in Silver Oak Land
Company, a California corporation which develops senior citizen housing
projects, for more than the last 5 years. He has also served as a director of
Lawyers Mutual Insurance Company, a company specializing in liability
insurance for lawyers, since approximately September 1993.
Mr. C.W. "Bill" Doyle has served as a Director of the Company since
August 1996. Mr. Doyle is a retired attorney and airline pilot. Mr. Doyle
served as a check pilot in the TWA Flight School Operations. As a Captain he
piloted 747's on international routes. While with TWA, Mr. Doyle obtained a
law degree from Seton Hall University and is a member of the New York and New
Jersey Bars. Mr. Doyle was associated with the Roy Cohen Law Firm in New York
City.
Wayne L. Knyal has served as a Director of the Company since August 1997.
Mr. Knyal has been the President, Chief Executive Officer and a Director of
Franchise Mortgage Acceptance Company, LLC since its inception in June 1995.
Prior to founding Franchise Mortgage Acceptance Company LLC's predecessor in
1991, Mr. Knyal founded and owned CBI Insurance Services, Inc. and
concurrently served as President of CBI Mortgage Company, a residential
mortgage banker. From 1968 to 1980, Mr. Knyal was an Executive Vice President
of Krupp/Taylor Advertising and served clients in the fast food industry.
Daniel J. Gallery has served as a Director of the Company since August
1997. Mr. Gallery is a co-founder of Carts of Colorado, Inc., an industry
leader in the creation of the mobile and modular merchandising concept and the
utilization of non-traditional locations for food service operations. Carts
of Colorado has been instrumental in the development and implementation of the
"express concepts" seen today in most airports, stadiums and arenas,
convenience stores, on golf courses, as well as thousands of other venues
around the world. Mr. Gallery has worked extensively with PepsiCo on its
Express concepts, with 4,000 units worldwide and over $1 billion in sales. He
has helped develop an exclusive worldwide partnership with E-Z-Go Golf Cars to
design and build food, beverage and merchandising units. In addition to
PepsiCo, he has developed concepts for Coca-Cola, Burger King, Arby's, Subway,
Sara Lee, and Dannon. He is also Co-founder and director of Cohabaco Cigar
Company, a new venture designed to take advantage of the resurgence of
interest in fine-quality cigars. He is a member of the Board of Directors of
Monterey Pasta Company and the National Association of Concessionaires.
Except as hereinafter stated otherwise, the Company shall indemnify all
of its officers and directors, past, present and future, against any and all
expenses incurred by them, and each of them including but not limited to legal
fees, judgments and penalties which may be incurred, rendered or levied in any
legal action brought against any or all of them for or on account of any act
or omission alleged to have been committed while acting within the scope of
their duties as officers or directors of this Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file certain reports
regarding ownership of, and transactions in, the Company's securities with the
Securities and Exchange Commission. Such officers, directors, and 10%
shareholders are also required to furnish the Company with copies of all
Section 16(a) forms that they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to the year ended
December 31, 1997, and any written representations referred to in Item
405(b)(2)(i) of Regulation S-K stating that no Forms 5 were required, the
Company believes that, during the year ended December 31, 1997, all Section
16(a) filing requirements applicable to the Company's officers and directors
were complied with, except for the following:
1. Initial Statements of Beneficial Ownership of Securities on Form 3
should have been filed on or before August 29, 1997 (the effective date of the
Company's registration statement on Form 10-SB) by all persons then serving as
executive officers and/or directors of the Company. However, the Company's
securities legal counsel did not advise the executive officers and directors
of the Company of this filing requirement until September 1997. As a result,
initial Form 3 reports were filed late by the persons named below on the dates
indicated: John E. Martin - October 2, 1997; William R. Nordstrom - October
2, 1997; C.W. Doyle - October 2, 1997; Daniel Gallery - October 2, 1997;
Michael T. Purcell - October 7, 1997; Leon Hatcher - October 7, 1997; Wayne L.
Knyal - October 7, 1997; and Hal H. Bolen II - October 14, 1997.
2. William E. Prather, who became an executive officer and director of
the Company on October 20, 1997, has not yet filed his Form 3 Initial
Statement of Beneficial Ownership of Securities. That report was due to be
filed within 10 days following his appointment as an officer and director. It
is anticipated that the report will be filed during the second week of April
1998.
3. Leon Hatcher filed three Form 4 reports late, each describing one
transaction that was not reported on a timely basis. A Form 4 report for
October 1997 due to be filed on or before February 17, 1998 was filed February
26, 1998. An amended Form 4 report for November 1997 due to be filed on or
before December 10, 1997, was filed February 26, 1998. A Form 4 report for
December 1997 due to be filed on or before January 12, 1998 was filed February
26, 1998.
4. Daniel Gallery purchased 5,500 shares of the Company's common stock
in December, 1997. A Form 4 report reporting this transaction should have
been filed on or before January 10, 1998. It is anticipated that the Form 4
report will be filed during the second week of April 1998.
5. A principal shareholder of the Company, Rick L. Pierce, who is not an
executive officer or director of the Company, has not provided the Company
with copies of any Form 3, Form 4 or Form 5 reports filed by him. The Company
is not aware whether Mr. Pierce has filed any such reports in a timely manner.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information concerning compensation paid
to the Company's Chief Executive Officer, as well as annual compensation
(salary and any bonus) of $100,000 or more paid to any executive officer of
the Company ("Named Executive Officers") for services rendered in all
capacities to the Company for the years ended December 31, 1995, 1996 and
1997.
Securities All
Name and Year Ended Underlying Other
Principal Position December 31, Salary Bonus Options Compensation
- ------------------ ------------ ------- ----- ---------- ------------
John E. Martin 1997 $114,583(1) -0- 2,000,000 $75,000(4)
Chairman of the 1996 $ -0- -0- -0- -0-
Board of Directors 1995 $ -0- -0- -0- -0-
William E. Prather 1997 $ 41,667(2) -0- -0- -0-
President and Chief 1996 $ -0- -0- -0- -0-
Executive Officer 1995 $ -0- -0- -0- -0-
Michael T. Purcell 1997 $100,000(3) -0- -0- -0-
Vice President and 1996 $ -0- -0- -0- -0-
Director 1995 $ -0- -0- -0- -0-
(1) In July, 1997, Mr. Martin became Chairman of the Board of Directors
of the Company and the interim Chief Executive Officer (a position he held
until October 1997) at an annual base salary of $250,000. Mr. Martin's salary
for 1997 accrued during the year, and was paid in January 1998.
(2) In October, 1997, Mr. Prather became the President and Chief
Executive Officer of the Company at an annual base salary of $200,000. Mr.
Prather's salary for 1997 accrued during the year, and was paid in January
1998.
(3) Mr. Purcell served as the Company's Chief Executive Officer until
July 1997. During 1997, the Company accrued a salary obligation to Mr.
Purcell in the amount of $100,000 for compensation accrued and earned in 1997,
but not yet paid.
(4) Fair market value of 50,000 shares of the Company's Common Stock at
the time of issuance.
Employment Agreements and Termination of Employment and Change-in-Control
Arrangements
- -----------------------------------------------------------------------
The Company presently has an employment agreement with Mr. Martin. The
Company presently has no other employment agreements with any of its Named
Executive Officers who are employed on an "at-will" basis. The employment
agreement with Mr. Martin provides that Mr. Martin be paid a base salary of
$250,000 annually while Mr. Martin serves as either or both Chief Executive
Officer and Chairman of the Board of Directors. Mr. Martin has served as
Chairman of the Board of Directors since July 1997. The salary was to accrue
and its payment was to be deferred until Mr. Martin determined, in his
judgment, that the Company had sufficient cash flow to begin to pay Mr.
Martin's salary and all other executive salaries being deferred, on a pro rata
basis. The accrual of Mr. Martin's 1997 salary was paid in January 1998. Mr.
Martin is entitled to an office reimbursement expense allowance of $84,000 per
year in addition to reimbursement of specific business expenses reasonably
incurred on behalf of the Company. Mr. Martin received options to purchase up
to 1,500,000 shares of the Company's common stock at $2.50 per share. The
options vest 50% on July 8, 1998 and 50% on July 8, 1999. The options are
exercisable for a period of ten years following vesting, subject to Mr. Martin
serving as Chairman of the Board of Directors for a minimum of three years
(unless Mr. Martin earlier terminates his position for good cause as defined
in his employment agreement).
In addition to the compensation provided to Mr. Martin by the employment
agreement, the Company agreed to compensate Mr. Martin separately for his
agreement to serve as a director of the Company as follows: (a) issuing
50,000 shares of the Company's common stock to him and registering those
shares on a Form S-8 registration statement; and (b) granting an option to
acquire up to 500,000 additional shares of the Company's common stock
exercisable at $2.50 per share. The option immediately vests with respect to
the right to purchase up to 250,000 shares. The right to purchase up to an
additional 125,000 shares vests after completing one year as a director, and
the right to purchase up to an additional 125,000 shares vests after
completing two years as a director.
There currently are no compensatory plans or arrangements including
payments to be received from the Company, with respect to a Named Executive
Officer, which plan or arrangement results or will result from the
resignation, retirement or any other termination of such Named Executive
Officer's employment with the Company and its subsidiaries or from a change-
in-control of the Company or a change in the Named Executive Officer's
responsibilities following a change in control.
Option Grants in Year Ended December 31, 1997
- ----------------------------------------------
The following table provides information with respect to options granted
in the year ended December 31, 1997 to the Named Executive Officers.
Individual Grants
Shares of Percent of
Common Stock Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (1) Fiscal Year(2) ($/Sh) Date
- ------- ------------- ----------------- -------- --------
John E. Martin 2,000,000(3) 67.3% (3) (3)
William E. Prather - - - 0
Michael T. Purcell - - - -
(1) All options described were granted at an exercise price equal to or
greater than the fair market value of a share of the Company's common
stock on the date of grant.
(2) Based on 2,971,000 shares of common stock underlying options and/or
warrants granted to employees during the year ended December 31, 1997.
(3) Includes: (a) an option to purchase up to 500,000 shares of the
Company's common stock exercisable at $2.50 per share which vested 50%
on July 8, 1997, and will vest 25% on July 8, 1998 and 25% on July 8,
1999, subject to continued service as a director through such dates;
and (b) an option to purchase up to 1,500,000 shares of the Company's
common stock at $2.50 per share which vests 50% on July 8, 1998 and 50%
on July 8, 1999, subject to continued service as a director through
such dates. The options expire 10 years after vesting.
Aggregate Option Exercises in Year Ended December 31, 1997 and Fiscal Year
Ended Option Values
<TABLE>
<CAPTION>
Underlying Value of Unexercised In-the-
Unexercised Options at Money Options at Fiscal Year
Acquired Fiscal Year Ended 12/31/97 Ended 12/31/97(1)
On Value --------------------------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Martin - - 250,000 1,750,000 $125,000 $ 875,000
William E. Prather - - - - - -
Michael T. Purcell - - - - - -
</TABLE>
(1) The value of an "in-the-money" stock option represents the difference
between the aggregate estimated fair market value of the underlying
securities, based on the closing price of $3.00 per share of the
Company's common stock on December 31, 1997 and the aggregate exercise
price of the subject stock option.
Compensation Committee Interlocks and Inside Participation
- ----------------------------------------------------------
The Compensation Committee of the Board of Directors was formed in
November 1997. Currently the Compensation Committee consists of Wayne L.
Knyal, Daniel Gallery and William R. Nordstrom. Mr. Nordstrom is an executive
officer and member of the Board of Directors. No other executive officer or
member of the Board of Directors serves on the Compensation Committee.
Audit Committee
- ---------------
The Company's audit committee consists of Wayne L. Knyal, Daniel Gallery
and William R. Nordstrom.
1997 Stock Plan
- ---------------
On November 20, 1997, the Company's Board of Directors adopted the
Company's 1997 Executive Incentive Compensation Plan ("1997 Stock Plan"),
subject to approval of the Company's shareholders at the Company's 1998
meeting of shareholders.
Retirement Plan
- ---------------
The Company has not adopted any retirement plan at this time. However,
the Company is investigating a variety of plans and may establish a retirement
plan in the near future.
Long-Term Incentive Plan "LTIP" Awards
- --------------------------------------
The Company made no awards to a Named Executive Officer in the year ended
December 31, 1997 under any long-term incentive plan.
Compensation of Directors
- ---------------------------------
Employees of the Company are not compensated for serving on the Board of
Directors or on committees. All directors, except Wayne L. Knyal and Daniel
E. Gallery, receive compensation as officers and employees, but they receive
no separate compensation for the services they provide to the Company as
directors. They receive no additional compensation for any committee
participation or special assignments.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by: (a) each person known
by the Company to beneficially own more than 5% of the Common Stock, (b) each
Named Officer or Director who will beneficially own any shares, and (c) all
Directors and Executive Officers of the Company, as a group.
Amount and Nature Percentage of Common Stock
of Beneficial Ownership (If all stock sold) (6)
----------------------- -------------------------
John E. Martin (1)(10) 842,300 4.71%
William E. Prather (2) 0 0.00%
William R. Nordstrom (3)(10) 442,300 2.55%
Michael T. Purcell (4) 2,987,821 17.20%
Leon Hatcher (5) 3,371,918 19.41%
C.W. Doyle (6) 1,887,809 10.87%
Wayne L. Knyal (7)(10) 25,000 0.14%
Daniel Gallery (7)(10) 30,500 0.18%
Hal H. Bolen II (8)(10) 50,000 0.29%
Rick L. Pierce (9) 1,706,000 9.82%
All Officers and Directors(10) 9,637,648 52.33%
(9 persons)
- -----------------------------
(1) Share total for Mr. Martin includes: (a) warrants to purchase up to
250,000 shares at $4.00 per share anytime on or before April 21, 1999;
and (b) a stock option to purchase up to 250,000 shares at $2.50 per
share anytime on or before July 8, 2007. The share total does not
include: (a) other options held by Mr. Martin not exercisable within
the next 60 days; and (b) 1,360,000 shares issuable to Mr. Martin from
the Company upon a successful closing of the El Paso Acquisition.
(2) Share total does not include: (a) 1,610,000 shares to be issued to Mr.
Prather (and Mr. Prather's spouse) upon a successful closing of the El
Paso Acquisition; or (b) option to purchase up to 750,000 shares
exercisable at $2.50 per share which vests 50% after one year of
service and 50% after two years of service.
(3) Share total for Mr. Nordstrom includes warrants to purchase up to
250,000 shares at $4.00 per share anytime on or before April 21, 1999.
Mr. Nordstrom has options to purchase additional shares which have not
been included since they are not exercisable within the next 60 days.
(4) Address is 415 43rd Ave. North, Myrtle Beach, South Carolina 29577.
(5) Address is 8117 North Fowler, Clovis, California 93611.
(6) Address is 21 Valley View, P.O. Box 1775, West Dover, Vermont 05356.
(7) Mr. Knyal and Mr. Gallery each hold an option to purchase up to 50,000
shares of common stock exercisable at $2.50 per share. The options are
exercisable to the extent of 50% of the shares immediately, 25% after
one year of service as a director, and 25% after two years of service
as a director. The options expire ten years after each increment vests.
(8) The Company issued 40,000 shares of its common stock to Mr. Bolen's law
firm, Bolen, Fransen & Boostrom LLP in the exchange for $60,000 of
legal services provided by the law firm. Mr. Bolen beneficially owns
20,000 of the shares issued to his law firm, and he disclaims ownership
of the remaining 20,000 shares which are beneficially owned by another
law partner. Mr. Bolen also owns 10,000 shares in his self-directed
account in the Bolen, Fransen & Boostrom Pension Plan.
(9) Address is P.O. Box 379, Cambria, California 93428.
(10) The Company has treated as issued and outstanding 500,000 shares
covered by warrants and/or options granted to Mr. Martin that are
currently exercisable, 500,000 shares covered by warrants and/or
options issued to Mr. Nordstrom that are currently exercisable, and
25,000 shares each covered by the options issued to Messrs. Knyal and
Gallery which are currently exercisable.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In addition to the granting of certain options to acquire the Company's
common stock to certain officers and/or directors of the Company as described
in Item 10. "EXECUTIVE COMPENSATION" and Item 11. "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" herein, since January 1, 1996, the
Company has entered into the following significant related party transactions:
1. Purcell Advertising acted as the Company's advertising agency
until approximately August 30, 1997, for which Purcell Advertising received a
standard 15% commission paid by advertising vendors with which the Company
advertises. Michael Purcell is the owner and sole proprietor of Purcell
Advertising. Commissions earned in 1996 were approximately $6,000 and in 1997
were approximately $41,133.
2. Bolen, Fransen & Boostrom LLP provides legal services for the
Company and charges its standard rates for such services. In 1996, the
Company paid $5,000 for legal services provided by Bolen, Fransen & Boostrom
LLP. In 1997, the Company paid approximately $44,315 for legal services
provided by Bolen, Fransen & Boostrom LLP. In addition, in 1997, the Company
issued 40,000 shares of its common stock to Bolen, Fransen & Boostrom LLP for
$60,000 of legal services provided to the Company by that firm. Hal H. Bolen
II is a partner in Bolen, Fransen & Boostrom LLP. As of December 31, 1997 the
Company owed Bolen, Fransen & Boostrom LLP approximately $44,143 for services
rendered in 1997.
3. Pursuant to the Company's employment agreement with John E.
Martin, the Company agreed to pay $7,000 per month to Mr. Martin for office
expenses. As a result, the Company utilizes certain corporate office space in
Newport Beach, California which is being leased by Mr. Martin. The Company
also uses certain equipment and support services under this arrangement.
4. During 1997, the Company borrowed $305,000 from certain of its
officers, directors, principal shareholders and one other individual. This
amount included a $107,000 loan from John Martin, a $25,000 loan from William
R. Nordstrom, a $35,000 loan from Leon Hatcher, and a $50,000 loan from Joe
Teresi. The loans bore interest at 10% per annum and were unsecured. The
loans were fully repaid, together with interest totaling approximately $7,500
in January 1998.
5. Officer salaries totaling $222,465 were accrued to John E. Martin,
William E. Prather and William R. Nordstrom during 1997. These salary
accruals were paid in January 1998.
6. On February 9, 1998, Leon Hatcher, a Vice President and director
of the Company, received an assignment of the Company's obligation under an
operating lease agreement effective March 1, 1998. The lease had been entered
into by the Company for the purpose of operating a motorcycle retail sales and
repair facility in Myrtle Beach, South Carolina. Under the terms of the lease
and assignment, Mr. Hatcher assumed monthly lease payments of $2,200 through
the end of the lease term in May, 2017.
7. During April 1997, prior to John E. Martin and William R.
Nordstrom becoming officers and directors of the Company, Mr. Martin and Mr.
Nordstrom each purchased from the Company 192,300 shares of the Company's
common stock and a warrant to purchase up to an additional 250,000 shares of
the Company's common stock exercisable at $4.00 per share, at any time prior
to April 21, 1999. Mr. Martin and Mr. Nordstrom each paid $250,000 to the
Company for the shares and warrants.
8. On October 7, 1997, the Company entered into a letter of intent to
acquire all of the ownership interest of M & B Restaurants, LLC ("M & B
Restaurants"), a Texas limited liability company, which operates four El Paso
Barbecue Restaurants. William E. Prather, who became President and Chief
Executive Officer of the Company on October 20, 1997, owns 51% of M & B
Restaurants. On March 18, 1998, John E. Martin, the Company's Chairman,
purchased the remaining 49% of the M & B Restaurants for $1,500,000 cash.
Under the letter of intent, the Company originally agreed to purchase M & B
Restaurants for $3,000,000 cash, 1,000,000 shares of the Company's common
stock and the assumption of up to $2,500,000 debt. After Mr. Martin's
purchase of 49% of M & B Restaurants, the parties verbally modified the
purchase terms, pursuant to which the Company will issue 2,970,000 shares of
the Company's common stock to the present owners of M & B Restaurants, and the
Company will assume approximately $2,600,000 debt of M & B Restaurants in the
transaction. No cash will be paid to the owners of M & B Restaurants in the
purchase. The letter of intent provides that Mr. Prather is to receive an
employment agreement to serve as the Company's President and Chief Executive
Officer at a salary of $200,000 per year for a period of five years. It also
provides that Mr. Prather is to receive an option to purchase up to 750,000
shares of the Company's common stock exercisable at $2.50 per share for a
period of ten years. The option vests 50% after one year of service and 50%
after two years of service.
9. On October 21, 1997, the Company borrowed a total of $1,050,000
from Franchise Mortgage Acceptance Company, LLC ("FMAC") by entering into
three secured installment promissory notes for $475,000, $475,000 and
$100,000, respectively. Wayne L. Knyal serves as Chief Executive Officer and
President of FMAC. John E. Martin serves as a director of FMAC. The
promissory notes provide for repayment of the principal together with interest
at 13.5% per annum through monthly installments over a five year period. One
of the $475,000 promissory notes is secured by all furniture, fixtures and
equipment now or hereafter owned, acquired, held or used by the Company in its
operation of the Fresno, California Easyriders Cafe restaurant, all additions,
attachments, accessions thereto, substitutions for, and all replacements of,
any of the foregoing, cash and non-cash, and proceeds of the foregoing
collateral, including general intangibles. The other two promissory notes are
secured by similar collateral located at the Myrtle Beach, South Carolina
Easyriders Cafe. Payment of all three promissory notes has been personally
guaranteed by all of the Company's directors (except Wayne L. Knyal) and some
of their spouses.
10. Leon Hatcher, Michael Purcell, C.W. Doyle, and Rick Pierce have
agreed to return to the Company as treasury shares, a total of approximately
6,156,480 shares of the Company's common stock held by them conditional upon
the closing of the Paisano Acquisition. These shareholders will receive no
consideration from the Company for the return of the shares.
MANAGEMENT'S OPINION
- --------------------
Each of the above described transactions when entered into, were, in the
opinion of management, as favorable to the Company as could have been obtained
from independent third parties.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit Exhibit
Number Description Location
- ------- --------------------------------------------- ---------------
2.1.1 Articles of Incorporation - Incorporated Incorporated by
by reference from the Company's Registration Reference
Statement on Form 10-SB filed June 30, 1997
2.1.2 Amendment to Articles of Incorporation dated Incorporated by
June 28, 1996 - Incorporated by reference Reference
from the Company's Registration Statement on
Form 10-SB filed June 30, 1997
2.1.3 By-Laws - Incorporated by reference from the Incorporated by
Company's Registration Statement on Form Reference
10-SB filed June 30, 1997
10.1.1 Franchise Agreement with Easyriders Franchising, Included
Inc. - Fresno, CA herewith
10.1.2 Franchise Agreement with Easyriders Franchising, Included
Inc. - Myrtle Beach, SC herewith
10.2.1 Restaurant Lease Agreement Commencing August 1, Included
1995 - Fresno, CA herewith
10.2.2 Motorcycle Shop Lease Agreement Commencing Included
August 1, 1995 - Fresno, CA herewith
10.2.3 Restaurant Lease Agreement Commencing April 1, Included
1997 - Myrtle Beach, SC herewith
10.2.4 Motorcycle Shop Lease Agreement Commencing June Included
1, 1997 - Myrtle Beach, SC herewith
10.2.5 Assignment of Motorcycle Shop Lease Agreement - Included
Myrtle Beach, SC to Leon Hatcher herewith
10.3.1 Dealership Agreement with Paisano Publications, Included
Inc. - Fresno, CA herewith
10.3.2 License Agreement with Paisano Publications, Included
Inc. - U.S.A. herewith
10.4.1 Employment Letter Agreement with John Martin - Incorporated
Incorporated by reference from the By Reference
the Company's Registration Statement on
Form S-8 filed November 24, 1997
10.4.2 Employment Letter Agreement with William R. Included
Nordstrom dated August 22, 1997 herewith
10.4.3 Stock Purchase Agreement for Restricted Shares Included
and Warrants between the Company and John E. herewith
Martin dated April 21, 1997
10.4.4 Stock Purchase Agreement for Restricted Shares Included
and Warrants between the Company and William R. herewith
Nordstrom dated April 21, 1997
10.5.1 Letter of Intent dated October 7, 1997 - Included
M & B Restaurants, LLC herewith
10.5.2 Letter Agreement dated January 13, 1998 - Included
Paisano Companies herewith
10.6.1 Secured Installment Promissory Note between Included
the Company as Maker and Franchise Mortgage herewith
Acceptance Company, LLC as Lender dated
October 21, 1997 for $475,000 (Loan # 11441-
102) (See Note 1)
10.6.2 Security Agreement between the Company and Included
Franchise Mortgage Acceptance Company, LLC herewith
dated October 21, 1997 (Loan # 11441-102)
(See Note 1)
10.6.3 Guaranty dated October 21, 1997 signed by Included
Leon Hatcher and Sandra Hatcher (See Note 2) herewith
23.1.1 Consent of Deloitte & Touche, LLP Included
herewith
23.1.2 Consent of Jones, Jensen & Company Included
herewith
27.1.1 Financial Data Schedule Included
herewith
Note 1: The Company also executed an identical Secured Promissory Note for
$475,000 and an identical Security Agreement as of the same date, relating to
Loan # 11441-100, with the exception that the Security Agreement involves
similar collateral located at the Myrtle Beach, SC Easyriders Cafe. Also on
the same date the Company executed an identical Secured Promissory Note and an
identical Security Agreement as of the same date, relating to Loan # 11441-
101, with the exception that the Secured Promissory Note is for a $100,000
principal amount with a proportionately smaller monthly payment, and the
Security Agreement involves similar collateral located in the Myrtle Beach, SC
Easyriders Cafe.
Note 2: Identical Guaranty documents were executed by John E. Martin,
William R. Nordstrom and Sherry Nordstrom, William Prather and Marna Prather,
Daniel Gallery and Dixie Gallery, C.W. Doyle and Georgette Doyle, and Michael
Purcell.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
December 31, 1997.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NEWRIDERS, INC.
Date: April 9, 1998 By /s/ William E. Prather
-------------------------------------
William E. Prather, Chief Executive
Officer, President and Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ John E. Martin
Date: April 9, 1998 -------------------------------------------
John E. Martin, Chairman of the Board of
Directors
/s/ William R. Nordstrom
Date: April 8, 1998 -------------------------------------------
William R. Nordstrom
Executive Vice President, Principal
Financial Officer, Chief Accounting Officer
and Director
/s/ Michael T. Purcell
Date: April 9, 1998 --------------------------------------------
Michael T. Purcell
Director
/s/ Leon Hatcher
Date: April 8, 1998 ------------------------------------------
Leon Hatcher
Director
/s/ C. W. Doyle
Date: April 8, 1998 --------------------------------------------
C.W. Doyle
Director
Date: April __, 1998 ------------------------------------------
Wayne L. Knyal
Director
Date: April __, 1998 -------------------------------------------
Daniel Gallery
Director
ADDENDUM A
NEWRIDERS, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
INDEPENDENT AUDITORS' REPORT
Letterhead of Deloitte & Touche LLP
Suite 1200 695 Town Center Drive
Costa Mesa, California 92626-1924
Telephone: (714) 436-7100
Facsimile: (714) 436-7200>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and
Board of Directors
Newriders, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Newriders, Inc.
and subsidiary as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Newriders, Inc. and subsidiary as
of December 31, 1997, and the results of their operations and their cash flows
for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has incurred losses from
its inception and does not have an established source of revenues sufficient
to cover its operating costs which raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Deloitte & Touche LLP
March 17, 1998
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
- ----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,262,633
Inventories (Note 4) 285,622
Prepaid expenses 15,738
---------
Total current assets 1,563,993
PROPERTY AND EQUIPMENT, net (Note 3) 1,487,598
ORGANIZATION COSTS, net 142,158
DEPOSITS AND OTHER ASSETS 107,503
DEFERRED FINANCING COSTS, net (Note 8) 161,103
----------
$3,462,355
===========
See independent auditors' report and
notes to consolidated financial statements. 2
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31,1997 (Continued)
- ---------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 517,904
Accrued expenses 54,567
Accrued compensation and benefits (Note 7) 340,940
Advances from stockholders (Note 7) 201,350
Other advances (Note 7) 50,000
Current obligation under capital lease (Note 6) 21,184
Current portion of long-term debt (Note 9) 157,694
-----------
Total current liabilities 1,343,639
DEFERRED RENT 128,003
OBLIGATION UNDER CAPITAL LEASE, less current obligation (Note 6) 10,382
CONVERTIBLE DEBENTURES, net of discount of $214,817 (Note 8) 785,183
LONG-TERM DEBT (Note 9) 892,306
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Notes 7, 8, 10 and 11):
Common stock; 50,000,000 shares authorized of $0.001
par value; 17,181,425 shares issued and outstanding 17,181
Additional paid-in capital 6,884,677
Common stock subscription receivable (Note 10) (750,000)
Accumulated deficit (5,849,016)
-------------
Total stockholders' equity 302,842
-------------
$ 3,462,355
=============
See independent auditors' report and
notes to consolidated financial statements. 3
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,1997
- ----------------------------------------------------------------------------
SALES $ 2,932,708
COST OF SALES 1,670,146
------------
GROSS MARGIN 1,262,562
EXPENSES:
Restaurant and store operating expenses 2,661,424
Selling, general and administrative 1,167,464
Compensation expense from stock and option issuances(Note 11) 1,244,000
Write-off of leasehold improvements (Note 12) 628,129
-------------
Total expenses 5,701,017
-------------
LOSS FROM OPERATIONS (4,438,455)
OTHER EXPENSE:
Interest expense (27,542)
Interest expense - noncash (Note 8) (310,877)
-------------
Total other expense (338,419)
-------------
NET LOSS $ (4,776,874)
=============
NET LOSS PER SHARE - BASIC AND DILUTED $ (.29)
=============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 16,635,065
=============
See independent auditors' report and
notes to consolidated financial statements. 4
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31,1997
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common
Additional stock
paid-in subscription Accumulated
Shares Amount capital receivable deficit
---------- --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 16,168,000 $ 16,168 $ 3,570,992 $ (1,000,000) $(1,072,142)
Common stock issued in
conjunction with convertible
debentures (Note 8) 293,825 294 610,523
Discount on convertible debentures
issuance (Note 8) 481,667
Warrants issued in connection
with convertible debentures
(Note 8) 105,130
Sale of common stock (Note 7) 384,600 384 499,616
Common stock issued for
services (Notes 8 and 11) 335,000 335 572,165
Services rendered in satisfaction
of common stock receivable
(Note 10) 250,000
Compensatory options issued to
nonemployees (Note 11) 671,500
Capital contributed by
stockholders 373,084
Net loss (4,776,874)
---------- -------- ----------- ------------- ------------
BALANCE, December 31, 1997 17,181,425 $ 17,181 $ 6,884,677 $ (750,000) $(5,849,016)
========== ======== =========== ============= ============
</TABLE>
See independent auditors' report and
notes to Consolidated financial statements. 5
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1997
- ----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,776,874)
Adjustments to reconcile net loss to net cash used in
operating activities:
Common stock issued for services 572,500
Compensatory options issued to nonemployees 671,500
Services rendered in satisfaction of common stock receivable 250,000
Depreciation and amortization 223,169
Write-off of leasehold improvements 628,129
Noncash interest expense 310,877
Changes in operating assets and liabilities:
Decrease in inventories 299,268
Increase in prepaid expenses (13,703)
Increase in deposits and other assets (69,700)
Increase in organization costs (32,799)
Increase in accounts payable and accrued expenses 744,243
Increase in deferred rent 128,003
--------------
Net cash used in operating activities (1,065,387)
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of fixed assets (1,338,738)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation (27,723)
Issuance of convertible debentures 1,600,000
Issuance of long-term debt 1,150,000
Payment of long-term debt (100,000)
Cash contributions to capital 373,084
Common stock issued for cash 500,000
Deferred financing costs (100,000)
Issuance of notes payable to stockholders 339,350
Payment of notes payable to stockholders (88,000)
-------------
Net cash provided by financing activities 3,646,711
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,242,586
CASH AND CASH EQUIVALENTS, beginning of year 20,047
-------------
CASH AND CASH EQUIVALENTS, end of year $ 1,262,633
=============
See independent auditors' report and
notes to consolidated financial statements. 6
NEWRIDERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1997 (Continued)
- ----------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid for interest $ 21,482
==============
NONCASH FINANCING ACTIVITIES:
Common stock issued in settlement of debt (Note 8) $ 610,817
==============
Convertible debentures issued with conversion discount $ 481,667
==============
Issuance of warrants in connection with debenture issuance $ 105,130
==============
See independent auditors' report and
notes to consolidated financial statements. 7
NEWRIDERS, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Newriders, Inc. (the Company) was incorporated under the laws of the State of
Nevada on July 15, 1995. On June 28, 1996, the Company acquired all of the
outstanding common stock of Newriders Limited (the Subsidiary) for 13,250,000
shares of the Company's common stock. Of the common shares issued, 11,000,000
were new issues and 2,250,000 were concurrently reacquired from an existing
shareholder and reissued as part of the acquisition. The acquisition of the
Subsidiary was recorded as a recapitalization of the Subsidiary, whereby the
acquired company is treated as the surviving entity for accounting purposes.
As of December 31, 1997, the Company operates an Easyriders Cafe Restaurant
and an Easyrider Apparel and Merchandise Store in Myrtle Beach, South
Carolina.
The Company is a party to franchise agreements with Easyriders Franchising,
Inc., a California corporation, and an affiliate of Paisano Publications, the
publisher of "Easyriders Magazine", to operate Easyriders apparel, motorcycle
and accessory shops and the right to use the name Easyriders in connection
with their operation (Note 12).
Consolidation - The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. Material intercompany accounts
and transactions have been eliminated in consolidation.
Revenue Recognition - Revenue is recognized at the point of sale to the
customer.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less when purchased
to be cash equivalents.
Inventories - Inventories consist of retail merchandise, food, beverages and
other restaurant supplies and are valued at the lower of cost (first-in,
first-out method) or market.
Property and Equipment - Depreciation on property and equipment is computed on
the straight-line method for financial reporting purposes, based on the
shorter of the estimated useful lives or the term of the underlying leases of
the related assets, which range from three to 20 years.
Pre-Opening Costs - Cost incurred prior to commencement of a restaurant's
operations are expensed as incurred.
Organization Costs - Organization costs are being amortized over five years.
Deferred Financing Costs - Costs incurred in obtaining financing are deferred
and amortized over the term of the related debt.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ---------------------------------------------------------------------------
Long-Lived Assets - The Company accounts for the impairment and disposition of
long-lived assets in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. In accordance with SFAS No. 121,
long-lived assets to be held are reviewed for events or changes in
circumstances which indicate that their carrying value may not be recoverable.
As of December 31, 1997, no impairment has been indicated.
Deferred Rent - Lease expenses are recognized on the straight-line basis.
Differences between cash lease payments and accrued lease expenses are
recognized as either an increase or decrease to deferred rent.
Income Taxes - The Company accounts for income taxes using SFAS No. 109,
Accounting for Income Taxes, which requires that the Company recognize
deferred tax assets and liabilities based on the differences between the
financial statement carrying amounts and the tax bases of assets and
liabilities, using enacted tax rates in effect in the years in which the
differences are expected to reverse. A valuation allowance related to
deferred tax assets is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
Stock-Based Compensation - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB)Opinion No. 25, Accounting for Stock Issued to
Employees. Additionally, the Company accounts for stock-based compensation to
nonemployees in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation (Note 11).
Earnings Per Share - The Company computes earnings per share in accordance
with SFAS No. 128, Earnings Per Share. Earnings per share is computed using
the weighted average number of common shares outstanding during the reporting
period. Earnings per share assuming dilution is computed using the weighted
average number of common shares outstanding and dilutive effect of potential
common shares outstanding. Diluted earnings per share is not presented at
December 31, 1997 due to the antidilutive effect on earnings per share.
New Accounting Pronouncements - In 1997, SFAS No. 130, Reporting Comprehensive
Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information, were issued and are effective for fiscal years beginning
after December 15, 1997. The Company is reviewing the impact of these
statements on its financial statements.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- -----------------------------------------------------------------------------
2. GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred losses from its inception
through December 31, 1997 and has an accumulated deficit of $5,849,016. The
Company does not have an established source of revenues sufficient to cover
its operating costs which raises substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. It is the intent of the Company to seek additional financing
through offerings of its common stock and other debt and equity financing in
order to expand its operations (Notes 8 and 13).
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Leasehold improvements $ 1,085,240
Store and office equipment 471,386
Assets under capital lease 74,264
-----------
Less accumulated depreciation 1,630,890
(143,292)
------------
Property and equipment, Net $ 1,487,598
============
4. INVENTORIES
Inventories consist of the following:
Food $ 48,586
Motorcycles 137,055
Apparel 99,981
----------
$ 285,622
===========
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ----------------------------------------------------------------------------
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets as
of December 31, 1997 are primarily composed of net operating loss
carryforwards, accrued compensation and basis difference in assets. Such
deferred tax assets are offset in full by valuation allowances at December 31,
1997.
The Company has net operating loss carryforwards of approximately $5,538,000
available to reduce future income subject to income taxes. These
carryforwards will expire in 2010 thorough 2012 and usage may be limited due
to a change in ownership of the Company (Note 13).
6. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases its facilities and certain equipment under both
capital and triple net operating lease agreements. Under the terms of the
operating leases, the Company is required to pay certain costs of the leased
properties including taxes, insurance and utilities. Rent expense for the
year ended December 31, 1997 was $433,188, of which $42,000 was paid to a
director of the Company.
Minimum annual payments under these agreements as of December 31, 1997 are as
follows:
Capital Operating
Leases Leases
Year ending December 31
1998 $ 24,255 $ 316,762
1999 10,780 360,513
2000 386,186
2001 396,143
2002 430,024
Thereafter 3,118,486
--------- ------------
Total minimum lease payments 35,035 $ 5,008,114
============
Amount representing interest (3,469)
---------
Present value of future minimum lease payments 31,566
Current portion (21,184)
---------
Long-term portion $ 10,382
=========
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ----------------------------------------------------------------------------
Royalty Agreement - The Company has entered into agreements with Easyrider
Franchising, Inc. which requires the Company to pay royalties of 5% of sales
to Easyrider Franchising, Inc. (Note 12). Included in restaurant and store
operating expenses are $213,391 of amounts paid or payable to Easyrider
Franchising, Inc. for royalties and merchandise purchases. The Franchisor has
the right of first refusal if the shareholders of the Company should decide to
sell the Company, or the business and its assets to another party.
Employment Agreements - The Company has entered into employment agreements
with two officers of the Company. The agreement with the Company's chairman,
entered into July 8, 1997, requires annual compensation of $250,000 for a
minimum of three years and reimbursement of remote office expenses of $85,000
per year.
The agreement for the Company's chief executive officer, entered into on
October 10, 1997, requires annual compensation of $200,000 for a five-year
period.
Litigation - The Company is currently involved in litigation incidental to its
business. In the opinion of management, the ultimate resolution of such
litigation will not have a significant effect on the accompanying financial
statements.
7. RELATED-PARTY TRANSACTIONS
Remote Office Expenses - Pursuant to the chairman's annual employment
agreement (Note 6), payments for remote office expenses of $42,000 were made.
Advances From Stockholders and Other Advances - During 1997, advances
aggregating $339,350 were received from stockholders of the Company and a
stockholder of Paisano Publications, Inc. (See Note 13). The advances bear
interest at 10% and were fully repaid by the Company in January 1998.
Accrued Compensation - As provided for in the Officers' employment agreement,
direct compensation of $222,465 has been deferred until payment is reasonably
justified based on the Company's cash flows.
Lease Assignment - On February 9, 1998, a shareholder and director assumed the
Company's obligation under an operating lease agreement effective March 1,
1998. Under the terms of the lease, monthly lease payments of $2,200 have
been assumed through the end of the lease term in May 2017.
Stock Issuances - During 1997, the Company issued 384,600 shares of common
stock to certain officers for $500,000. Shares were issued at their fair
value at the date of sale. In connection with stock issuance, the Company
issued warrants to purchase 500,000 shares of common stock at $4.00 per share.
The warrants issued are immediately exercisable and expire on April 21, 1999.
Legal Expenses - During 1997, the Company made cash payments of $44,315 and
issued 40,000 shares of common stock with a fair value of $60,000 to a
stockholder and director of the Company for legal services.
Advertising Expenses - During 1997, the Company made payments of $41,133 to a
stockholder and director of the Company for advertising services.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ----------------------------------------------------------------------------
8. CONVERTIBLE DEBENTURES
During the year ended December 31, 1997, the Company issued two tranches of
convertible debentures (the Debentures) with face values of $600,000 and
$1,000,000 in private placements to institutional investors. The Debentures
accrue interest at rates of 10% and 8% per year, respectively, payable semi-
annually. The Debentures are convertible at the option of the holder into
shares of the Company's common stock based upon the following terms:
Tranche A - The Debentures in Tranche A were converted into common stock at
72.5% of the five-day average closing bid price on the conversion date and
were converted into common shares during 1997. The Company issued a total
293,825 shares of its common stock in connection with the conversion of the
$600,000 of the original principal amount of the Debentures, plus interest
accrued through the conversion date of $10,523.
Tranche B Due December 12, 2000 - Convertible into common shares at the lesser
of the five-day average closing bid price on the closing date or 80% of the
five-day average closing bid price on the conversion date, as defined. The
Debentures in Tranche B are convertible at the holder's option:
one-third after January 26, 1998; one-third after February 25, 1998 and one-
third after March 27, 1998. The Debentures are convertible at the option of
the issuer at any time after December 12, 1998.
The conversion of the Debentures at discount of the Company's common stock
results in the Debentures being issued at a discount (the conversion
discount). The conversion discount, which aggregated $481,667 at the dates of
issuance, is being recognized by the Company as noncash interest expense over
the shortest expected term to anticipated conversion of the Debentures with a
corresponding increase to the original principal amount of the Debentures.
Upon conversion of the Debentures, any portion of the conversion discount not
previously recognized is recorded as interest expense on the conversion date.
During the year ended December 31, 1997, a total of $277,990 of noncash
interest expense was recorded relating to the Debentures.
In conjunction with the issuance of the Convertible Debentures, the Company
issued an aggregate 50,000 shares to a financial advisor as compensation for
arranging the Convertible Debenture issuances. The fair value of the shares
has been recorded as debt issuance costs and was amortized through the
conversion date of the Convertible Debentures.
Additionally, in conjunction with the issuance of the Convertible Debentures,
the Company issued five-year broker warrants for 41,529 shares of common stock
with exercise prices from $3.83 to $4.05. The fair value of the warrants has
been recorded as debt issuance costs and is being amortized over the term of
the Convertible Debentures.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- --------------------------------------------------------------------------
9. LONG-TERM DEBT
On December 1, 1997, the Company borrowed $1,050,000 under a secured
installment promissory note agreement with a commercial lender. Borrowings
under the notes agreement bear interest at 13.5% per annum and require monthly
payments of principal and interest of $24,160 through December 2002. This
note is collateralized by all of the assets of the Company. Principal
payments of $157,694, $180,350, $206,264, $235,899 and $269,793 are required
for each of the five years ended December 31, 2002, respectively.
10. COMMON STOCK SUBSCRIPTION
In November 1996, the Company entered into an agreement with a barter service
to issue 400,000 shares of common stock in exchange for $1,000,000 of barter
advertising and other services and merchandise. As of December 31, 1997, the
Company had utilized services in satisfaction of $250,000 of the subscription
receivable. The remaining $750,000 subscription receivable has been reflected
as a reduction of stockholders' equity in the accompanying consolidated
financial statements.
11. STOCKHOLDERS' EQUITY
Common Stock Issued for Services - During 1997, the Company issued 335,000
shares (including 50,000 issued to a financial advisor (Note 8) for consulting
and other services. Shares were issued at their fair value at the date of
issuance and ranged from $1.50 to $2.10 per share.
Stock Option Plan - In November 1997, the Company adopted its 1997 Executive
Incentive Compensation plan (the Plan), which provides for the grant of stock
options and other awards to certain officers, key employees, consultants or
other persons affiliated with the Company. The maximum number of shares of
common stock that may be issued pursuant to the Plan is 5,000,000. Following
the adoption of such plan, the Company granted options to purchase an
aggregate of 2,721,000 shares of the Company's common stock at prices ranging
from $2.50 to $3.00 per share, which the Company's Board of Directors deemed
to be equal to, or in excess of, fair market value of the common stock at the
dates of grants, to employees of the Company. Additionally, options were
granted for the purchase of up to 395,000 common shares at $2.50 per share to
certain nonemployees of the Company. The Company recorded compensation
expense equivalent to the fair value of the options granted to nonemployees,
totaling approximately $671,500. These options vested upon grant.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ----------------------------------------------------------------------------
The following table summarizes the activity under the Plan along with common
stock warrant activity for the period indicated:
<TABLE>
<CAPTION>
Weighted Price Weighted
Price of average range of average
Options option exercise warrant exercise
outstanding grants price Warrants grants price
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING,
January 1, 1997 - $ - $ - - $ - $ -
1997 grants 3,116,000 $2.50-3.00 $ 2.50 541,291 $ 3.83-4.05 $ 3.99
----------- ---------
OUTSTANDING,
December 31, 1997 3,116,000 541,291
========== ========
</TABLE>
At December 31, 1997, 299,208 options and 541,291 warrants to purchase shares
were exercisable. The weighted average exercise price of the exercisable
options and warrants is $2.50 and $3.99, respectively.
SFAS No. 123, Accounting for Stock-Based Compensation, encourages but does not
require companies to record compensation cost for employee stock option
grants. The Company has chosen to continue to account for employee option
grants using APB Opinion No. 25. No compensation expense has been recognized
for employee stock option grants. Had compensation expense for the employee
stock option grants been determined based on the fair value at the grant dates
consistent with SFAS No. 123, the Company's net loss and net loss per share
for the year ended December 31, 1997 would have been reduced to the pro forma
amounts indicated below:
Net loss applicable to common stock:
As reported $ (4,776,874)
Pro forma $ (6,107,953)
Net loss per common share
As reported $(0.29)
Pro forma $(0.37)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: zero dividend yield, expected volatility
of 109%, risk-free interest rate of 5.9% and expected lives of three years.
NEWRIDERS AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 (Continued)
- ----------------------------------------------------------------------------
12. WRITE-OFF OF LEASEHOLD IMPROVEMENTS
In December 1997, the Company initiated plans to substantially rebuild its
restaurant located in Fresno, California. As a result, the Company recorded a
write-down of $628,129 with respect to leasehold improvements and store
fixtures at the Fresno location.
13. ACQUISITION OF BUSINESSES
On October 7, 1997, the Company signed a binding letter of intent to acquire
the stock of M&B Restaurants, L.C. (M&B) for a combination of stock and the
issuance of notes payable. M&B is the owner of four restaurants located in
Ahwatukee, Glendale and Scottsdale, Arizona and Tulsa, Oklahoma. The
acquisition of M&B requires approval by the Company's shareholders. An
officer and director of the Company has an ownership interest in M&B.
Additionally, a member of M&B became chief executive officer of the Company.
On October 30, 1997, the Company signed a binding letter of intent to acquire
the stock of Paisano Publications, Inc., Easyriders Franchising, Inc. and
other affiliated companies for a combination of stock, cash and notes payable.
Paisano is the publisher of Easyriders Magazine and several other motorcycle
lifestyle magazines, and is the franchiser for motorcycle shops, apparel
stores and cafes using the Easyriders name. The acquisition of these
companies requires approval by the Company's shareholders and obtaining
sufficient financing for the transaction.
<PAGE>
ADDENDUM B
NEWRIDERS, INC. AND SUBSIDIARY
RESTATED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
<Letterhead of Jones, Jensen & Company appears here>
INDEPENDENT AUDITORS' REPORT
-------------------------------
To the Board of Directors
Newriders, Inc. and Subsidiary
Fresno, California
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Newriders, Inc. and Subsidiary for the
year ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated statements of
operations, stockholders' equity and cash flows are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated statements of
operations, stockholders' equity and cash flows. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated
statements of operations, stockholders' equity and cash flows. We believe
that our audit of the consolidated statements of operations, stockholders'
equity and cash flows provides a reasonable basis for our opinion.
In our opinion, the consolidated statements of operations, stockholders'
equity and cash flows referred to above present fairly, in all material
respects, the consolidated results of the operations and the cash flows of
Newriders, Inc. and Subsidiary for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 7 to the consolidated financial statements, certain
errors resulting in overstatement of previously reported amounts in Property
and Equipment, Deferred Charges, Common Stock and Additional Paid-in Capital
as of December 31, 1996, were discovered by management of the Company during
the current year. Accordingly, an adjustment has been made to the above
mentioned accounts as of December 31, 1996 to correct the errors. These
errors have no effect on net loss for the year ended December 31, 1996.
The accompanying consolidated statements of operations, stockholders' equity
and cash flows have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 3 to the consolidated financial
statements, the Company has incurred losses from its inception and does not
have an established source of revenues sufficient to cover its operating costs
which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
June 3, 1997
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statement of Operations
For the
Year Ended
December 31,
1996
------------
SALES $ 1,161,520
COST OF SALES 532,487
-------------
GROSS MARGIN 629,033
-------------
EXPENSES
Selling, general and administrative 1,520,271
Depreciation and amortization 129,277
-------------
Total Expenses 1,649,548
-------------
Loss from Operations (1,020,515)
-------------
OTHER INCOME (EXPENSE)
Interest income 36
Other income 3,613
Interest expense (18,365)
Bad debt expense (1,009)
-------------
Total Other Income (Expense) (15,725)
-------------
NET LOSS $ (1,036,240)
=============
NET LOSS PER SHARE $ (0.07)
=============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 15,770,351
=============
The accompanying notes are an integral part of these
consolidated financial statements.
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31,
1995 11,000,000 $ 11,000 $ 755,756 $ - $ (35,902)
Issuance of
common stock
to acquire New
Riders Limited
(Note 1) 4,581,000 4,581 58,110 - -
Common stock
issued through
private placement
at $2.50 per share 87,000 87 217,413 - -
Capital
contributed
through debt
relief 158,000 158 214,749 - -
Common stock
subscription
for future goods
and services 400,000 400 999,600 (1,000,000) -
Common stock
issued for
services 100,000 100 249,900 - -
Capital
contributed by
shareholders - - 1,496,080 - -
Net loss for
the period
ended December
31, 1996 - - - - (1,036,240)
----------- ----------- ------------ ------------ ------------
Balance,
December
31, 1996
(Previously
reported) 16,326,000 16,326 3,991,608 (1,000,000) (1,072,142)
Correction of
errors (Note 7) (158,000) (158) (420,616) - -
------------ ----------- ------------ ------------ ------------
Restated balance,
December 31,
1996 16,168,000 $ 16,168 $ 3,570,992 $(1,000,000) $(1,072,142)
============ =========== ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For the
Year Ended
December 31,
1996
------------
(as restated
see note 7)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,036,240)
Adjustments to reconcile net loss to net cash
used by operating activities:
Common stock issued for services 250,000
Depreciation and amortization 129,277
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 1,009
(Increase) decrease in inventory (258,822)
(Increase) decrease in deferred charges (139,810)
(Increase) decrease in prepaid expenses (2,035)
(Increase) decrease in deposits 3,214
Increase (decrease) in accounts
payable and accrued expenses 177,428
------------
Net Cash Used by Operating Activities (875,979)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (567,585)
------------
Net Cash Used by Investing Activities (567,585)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital lease obligation 74,264
Cash contributions to capital 1,116,429
Common stock issued for cash 217,500
------------
Net Cash Provided by Financing Activities
1,408,193
------------
NET INCREASE (DECREASE) IN CASH (35,371)
CASH AT BEGINNING OF YEAR 55,418
------------
CASH AT END OF YEAR $ 20,047
============
The accompanying notes are an integral part of these
consolidated financial statements.
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows (Continued)
For the
Year Ended
December 31,
1996
------------
(as restated
see note 7)
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 18,365
Income taxes $ -
NON CASH FINANCING ACTIVITIES:
Capital contributions through debt relief $ 214,907
Common stock issued for services $ 250,000
Capital contributions of fixed assets $ 21,568
The accompanying notes are an integral part of these
consolidated financial statements.
NEWRIDERS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Newriders, Inc. (the Company) was incorporated under the laws of the
State of Nevada on July 15, 1995 as American Furniture Wholesale, Inc. The
Company was originally organized to engage in activities in the furniture
business. On June 28, 1996 the Company changed its name to Newriders, Inc.
On June 28, 1996 the Company acquired all of the outstanding common stock
of New Riders Limited (the Subsidiary) for 13,250,000 shares of the Company's
common stock. Of the common shares issued, 11,000,000 were new issues and
2,250,000 were concurrently reacquired from an existing shareholder and
reissued as part of the acquisition. The acquisition of the Subsidiary was
recorded as a recapitalization of the Subsidiary, whereby the acquired company
is treated as the surviving entity for accounting purposes. The Subsidiary
was formed on November 8, 1994 in the State of California and is engaged in
the restaurant and retail motorcycle business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's consolidated financial statements are prepared using the
accrual method of accounting. The Company has elected a December 31 year end.
b. Net Loss Per Share
The computation of net loss per share of common stock is based on the
weighted average number of common shares outstanding during each period
presented.
c. Provision for Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (FAS 109). Under FAS 109 the asset and liability
method is used in calculating deferred income taxes.
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $1,072,000 that may be offset against future taxable income
through 2011. No tax benefit has been reported in the consolidated financial
statements. Because of the Company's history of operating losses, the Company
believes there is a 50% or greater likelihood the carryforwards will expire
unused. Accordingly, the potential tax benefits of the loss carryforwards
have been offset by a valuation allowance of the same amount. Utilization of
the carryforwards may be subject to a substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation may result in the expiration
of loss carryforwards before utilization.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Principles of Consolidation
The consolidated financial statements include those of Newriders, Inc.
and New Riders Limited. All significant intercompany accounts and
transactions have been eliminated.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred losses from its inception
through December 31, 1996. The Company does not have an established source of
revenues sufficient to cover its operating costs which raises substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty. It is the intent of the Company to seek
additional financing through offerings of its common stock and other debt and
equity financing in order to expand its operations.
NOTE 4 - LEASE COMMITMENTS
Shop Lease - The Company leases its motorcycle shop facility under an
operating lease. The lease agreement expires July 31, 2005, with two five
year options to renew. Lease expense for the year ended December 31, 1996 was
$4,019 per month, and will continue as such until August 1, 1997 when the rent
shall increase 4% per year. An additional $659 per month is due to the lessor
for common area maintenance charges. These charges are redetermined every
year, and include real estate taxes and liability insurance.
Cafe Lease - The Company leases its cafe facility under an operating
lease. The lease agreement expires July 31, 2015. Lease expense is $7,000
per month for the period ended December 31, 1996. This lease calls for the
payment of real estate taxes, common area maintenance and liability insurance
in addition to monthly rent charges. Monthly rent will increase to $8,550 on
June 1, 2000, $9,760 on June 1, 2005 and $11,145 on June 1, 2010.
Total rent expense for the year ended December 31, 1996 was $89,682.
NOTE 4 - LEASE COMMITMENTS (Continued)
Employee Lease - The Company has entered into two agreements by which it
leases its employees from a human resources company. The lease agreements
have been renewed and will expire on November 1, 1997. One lease calls for
the payment of a monthly administrative fee of $1,920 in addition to all
wages, medical and workers' compensation coverage, 401K plan, applicable
payroll taxes and other administration costs. A second agreement calls for a
monthly fee of $160 in addition to those other costs previously listed.
Capital Lease Obligation - In January, 1996, the Company entered into an
agreement to lease computer hardware and software having a cost of $74,264 to
be used in its Fresno, California cafe. The term of the lease is 36 months
and calls for monthly payments of $2,695. This is a capital lease with the
cost of the assets capitalized as property and equipment (see Note 3) and the
related liability reflected as an obligation under capital lease in the
accompanying consolidated financial statements. Maturities of the obligation
under capital lease are as follows: 1997 $27,723, 1998 $28,911, 1999 $2,655.
NOTE 5 - COMMON STOCK SUBSCRIPTION
In November 1996, the Company entered into an agreement with a barter
service to issue 400,000 shares of common stock in exchange for $1,000,000 of
barter advertising and other services and merchandise. As of December 31,
1996, the Company had not utilized any of the barter services or merchandise.
This amount has been reflected as a reduction of stockholders' equity in the
accompanying consolidated financial statements.
NOTE 6 - SUBSEQUENT EVENTS
In May 1997, the Company opened a new cafe location in Myrtle Beach,
South Carolina with the intention of opening a motorcycle retail and repair
facility at the same location in the near future. The Company has entered
into a ten year lease agreement in conjunction with those new facilities and
has also acquired and leased certain operating equipment used at this new
location. The Company has invested approximately $1,000,000 in this operation
financed primarily by additional shareholder capital contributions including
$500,000 advanced from unrelated parties which will be converted to debt or
equity financing as yet to be determined.
NOTE 7 - CORRECTION OF ERRORS
Certain errors, resulting in an overstatement of previously reported
assets and equity, were discovered during the current year. Correction of
these errors had no effect on previously reported net loss for the year ended
December 31, 1996.
The following schedule details the nature and amount of each error:
Overstatement of fixed assets $ (350,774)
Overstatement of deferred charges (70,000)
Overstatement of common stock 158
Overstatement of additional paid-in capital 420,616
Net Change $ -
=============
ANNUAL REPORT ON FORM 10-KSB
NEWRIDERS, INC.
SEC FILE NO. 000-22775
Exhibit Exhibit
Number Description Location
- ------- --------------------------------------------- ---------------
2.1.1 Articles of Incorporation - Incorporated Incorporated by
by reference from the Company's Registration Reference
Statement on Form 10-SB filed June 30, 1997
2.1.2 Amendment to Articles of Incorporation dated Incorporated by
June 28, 1996 - Incorporated by reference Reference
from the Company's Registration Statement on
Form 10-SB filed June 30, 1997
2.1.3 By-Laws - Incorporated by reference from the Incorporated by
Company's Registration Statement on Form Reference
10-SB filed June 30, 1997
10.1.1 Franchise Agreement with Easyriders Franchising, Included
Inc. - Fresno, CA herewith
10.1.2 Franchise Agreement with Easyriders Franchising, Included
Inc. - Myrtle Beach, SC herewith
10.2.1 Restaurant Lease Agreement Commencing August 1, Included
1995 - Fresno, CA herewith
10.2.2 Motorcycle Shop Lease Agreement Commencing Included
August 1, 1995 - Fresno, CA herewith
10.2.3 Restaurant Lease Agreement Commencing April 1, Included
1997 - Myrtle Beach, SC herewith
10.2.4 Motorcycle Shop Lease Agreement Commencing June Included
1, 1997 - Myrtle Beach, SC herewith
10.2.5 Assignment of Motorcycle Shop Lease Agreement - Included
Myrtle Beach, SC to Leon Hatcher herewith
10.3.1 Dealership Agreement with Paisano Publications, Included
Inc. - Fresno, CA herewith
10.3.2 License Agreement with Paisano Publications, Included
Inc. - U.S.A. herewith
10.4.1 Employment Letter Agreement with John Martin - Incorporated by
Incorporated by Reference from the Reference
Company's Registration Statement on
Form S-8 filed November 24, 1997
10.4.2 Employment Letter Agreement with William R. Included
Nordstrom dated August 22, 1997 herewith
10.4.3 Stock Purchase Agreement for Restricted Shares Included
and Warrants between the Company and John E. herewith
Martin dated April 21, 1997
10.4.4 Stock Purchase Agreement for Restricted Shares Included
and Warrants between the Company and William R. herewith
Nordstrom dated April 21, 1997
10.5.1 Letter of Intent dated October 7, 1997 - Included
M & B Restaurants, LLC herewith
10.5.2 Letter Agreement dated January 13, 1998 - Included
Paisano Companies herewith
10.6.1 Secured Installment Promissory Note between Included
the Company as Maker and Franchise Mortgage herewith
Acceptance Company, LLC as Lender dated
October 21, 1997 for $475,000 (Loan # 11441-
102) (See Note 1)
10.6.2 Security Agreement between the Company and Included
Franchise Mortgage Acceptance Company, LLC herewith
dated October 21, 1997 (Loan # 11441-102)
(See Note 1)
10.6.3 Guaranty dated October 21, 1997 signed by Included
Leon Hatcher and Sandra Hatcher (See Note 2) herewith
23.1.1 Consent of Deloitte & Touche, LLP Included
herewith
23.1.2 Consent of Jones, Jensen & Company Included
herewith
27.1 Financial Data Schedule Included
herewith
Note 1: The Company also executed an identical Secured Promissory Note for
$475,000 and an identical Security Agreement as of the same date, relating to
Loan # 11441-100, with the exception that the Security Agreement involves
similar collateral located at the Myrtle Beach, SC Easyriders Cafe. Also on
the same date the Company executed an identical Secured Promissory Note and an
identical Security Agreement as of the same date, relating to Loan # 11441-
101, with the exception that the Secured Promissory Note is for a $100,000
principal amount with a proportionately smaller monthly payment, and the
Security Agreement involves similar collateral located in the Myrtle Beach, SC
Easyriders Cafe.
Note 2: Identical Guaranty documents were executed by John E. Martin,
William R. Nordstrom and Sherry Nordstrom, William Prather and Marna Prather,
Daniel Gallery and Dixie Gallery, C.W. Doyle and Georgette Doyle, and Michael
Purcell.
Exhibit 10.1.1
EASYRIDERS FRANCHISING, INC.
FRANCHISE AGREEMENT
Exhibit B to the Offering Circular
<PAGE>
TABLE OF CONTENTS
Paragraph Page
- ---------- -----
I. Appointment and Franchise Fee..............2
II. Term and Renewal...........................4
III. Business Location..........................5
IV. Training and Assistance....................8
V. Proprietary Marks..........................9
VI. Confidential Operations Manual............10
VII. Confidential Information..................11
VIII. Modification of the System................12
IX. Advertising...............................12
X. Continuing Services and Royalty Fee.......15
XI. Accounting and Records....................16
XII. Standards of Quality and Performance......17
XIII. Franchisor's Operations Assistance........20
XIV. Insurance.................................22
XV. Covenants.................................24
XVI. Default and Termination...................26
XVII. Rights and Duties of Parties Upon
Expiration or Termination..............28
XVIII. Transferability of Interest...............30
XIX. Death or Incapacity of Franchisee.........34
XX. Right of First Refusal....................35
XXI. Operation in the Event of Absence,
Disability or Death....................35
XXII. Independent Contractor And
Indemnification........................36
XXIII. Non-Waiver................................36
XXIV. Notice....................................37
XXV. Cost of Enforcement or Defense............37
XXVI. Entire Agreement..........................38
XXVII. Severability and Construction.............38
XXVIII. Applicable Law............................39
XXIX. Arbitration...............................39
XXX. "Franchisee" Defined and Guaranty.........40
XXXI. Force Majeure.............................40
XXXII. Caveat....................................40
XXXIII. Acknowledgments...........................41
Exhibits
- --------
A. Guaranty and Assumption of Obligations
B. Refunds and Cancellation
C. Map of Designated Area
D. Conversion Franchise Agreement
EASYRIDERS FRANCHISING, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("this Agreement"), made by and between
EASYRIDERS FRANCHISING, INC., a corporation formed and operating under the
laws of California and having its principal place of business at 5055 Chesebro
Road, Agoura Hills, California, 91301 ("Franchisor"), and Leon Hatcher dba
Easyriders of Fresno, 805 W. Dakota St. #108 Clovis, CA 93612 (Franchisee").
WITNESSETH
WHEREAS, Franchisor, and its affiliates, over a period of time and as the
result of the expenditure of time, skill, effort and money, (a) has developed
and owns a unique system ("System"), identified by the mark "EASYRIDERS",
relating to the establishment, development and operation of businesses for the
retail sale of motorcycle paraphernalia such as shirts, jackets, belts,
posters and related items and the sale of parts and related hard goods and
related services; (b) and has developed a line of motorcycle related goods and
other merchandise and products bearing the Marks ("Trademarked Product
Lines"), all of which may be changed from time to time; and (c) has developed
certain specifications and standards, marketing and advertising techniques for
such products and merchandise, all of which may be changed, improved or
further developed by Franchisor from time to time; and
WHEREAS, the distinguishing characteristics of the System include,
without limitation, exterior and interior design, decor, and layout standards,
exclusively designed signage, furnishings and materials; specialized retail
business operating procedures and methods; unique techniques and methods for
merchandising activities; the EASYRIDERS Confidential Operations Manual;
procedures and techniques relating to the marketing of the Trademarked Product
Lines the Proprietary Software Package (if developed); distinct procedures for
purchasing inventory and merchandise; other confidential operations
procedures; and methods and techniques for inventory and cost controls, record
keeping and reporting, personnel management, purchasing, sales promotion,
marketing and advertising; all of which may be changed, improved and further
developed by Franchisor from time to time; and
WHEREAS, Franchisor's affiliate, Paisano Publications, Inc., is the owner
of the right, title and interest together with all the goodwill connected
thereto in and to the trade name, trademarks and service marks "EASYRIDERS",
"EASYRIDERS, plus the design", associated logos and commercial symbols and
such other trade names, trademarks and service marks as are now designated
(and may hereinafter be designated by Franchisor) as an integral part of the
System ("Mark(s)") and has licensed to Franchisor the rights to use the Marks
and sublicense the Marks to franchisees;
WHEREAS, Franchisor grants to qualified persons franchises to own and
operate EASYRIDERS business selling and distributing motorcycle paraphernalia
and hard goods, some of which will bear the Marks, and related merchandise and
products and providing services authorized and approved by Franchisor and
utilizing the System and Marks. Franchisee desires to operate a EASYRIDERS
business under the System and using the Marks and has applied for a franchise
and such application has been approved by Franchisor in reliance upon all of
the representations made therein; and
WHEREAS, Franchisee understands and acknowledges the importance of
Franchisor's high and uniform standards of quality, operations, and service
and the necessity of operating the EASYRIDERS retail business in strict
conformity with Franchisor's standards and specifications; and
WHEREAS, Franchisor expressly disclaims the making of and Franchisee
acknowledges that it has not received nor relied upon any warranty or
guaranty, express or implied, as to the revenues, profits or success of the
business venture contemplated by this Agreement. Franchisee acknowledges that
it has read this Agreement and Franchisor's Uniform Franchise offering
Circular and that it has no knowledge of any representations by Franchisor, or
its officers, directors, shareholders, employees or agents that are contrary
to the statements made in Franchisor's Uniform Franchise Offering Circular or
to the terms herein.
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other set forth in this Agreement hereby
agree as follows:
I. APPOINTMENT AND FRANCHISE FEE
A. Franchisor hereby grants to Franchisee, upon the terms and
conditions herein contained, the right, license and privilege to use the
Marks, and Franchisee undertakes the obligation to operate a EASYRIDERS retail
business for the sale and distribution of a wide assortment of motorcycle
paraphernalia and hard goods, some of which will bear the Marks, and related
merchandise and products ("Franchised Business") and to use safely in
connection therewith the System, as it may be changed, improved and further
developed from time to time, at one location only, such location to be:
1) Leon Hatcher dba Easyriders of Fresno 805 W. Dakota St. #108
Clovis, CA 93612 ____________________________________________________________
_______________________________________________________________________ or;
2) At a location to be designated, as provided in Paragraph III
hereof within the following area: N/A ____________________________________
_____________________________________________________________________________
Provided, however, that when a location has been designated and approved by
the parties, said location shall become Paragraph I.A.1., as if originally
incorporated therein. Franchisee shall not relocate the Franchised Business
without the prior written approval of Franchisor.
B. Franchisee receives an exclusive territory and such territories
will vary in size and dimensions. Franchisor shall not grant to itself or
another person a EASYRIDERS franchise within such exclusive territory. The
determination of the exclusive territory shall be made and agreed upon between
Franchisor and Franchisee. The exclusive territory so selected is described in
writing below and in a map attached hereto as Exhibit C and hereby made a part
of this Agreement. Franchisee may relocate its business within the same
general vicinity, while remaining in the aforesaid territory, only with the
prior written approval of Franchisor and subject to the rights of other
franchisees.
C. Franchisor will not, so long as this Agreement is in force and
effect and Franchisee is not in material default under any of the terms
hereof, enfranchise or operate any other EASYRIDERS business within the
following area: Fresno County, CA ___________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
("Designated Area").
D. Franchisor has the right, in its sole discretion, to grant such
other franchises outside of the Designated Area as Franchisor, in its sole and
exclusive discretion, deems appropriate. Further, both within and outside of
the Designated Area, Franchisee acknowledges that Franchisor may hereafter and
that Franchisor's affiliates have and will continue to hereafter advertise,
promote, offer and sell at wholesale or retail and authorize others the right
to offer and sell (in various ways including mail order catalog sales,
magazine and other media advertising and promotions through company owned
stores, licensed Full-line Dealers, mobile retail showrooms at various public
events, and through other motorcycle-related vendors or any other species of
wholesale or retail vendor whatsoever), the products which may comprise or may
in the future comprise a part of the System. Those products and services which
comprise a part of the EASYRIDERS System are delineated and set forth in
detail in the EASYRIDERS Confidential Operations Manual ("Confidential
Operations Manual"), which Confidential Operations Manual may be amended from
time to time to reflect additions to, deletions from and modifications to the
specifications of those services and products which comprise a part of the
System.
E. In consideration of the franchise granted herein, Franchisee shall
pay to Franchisor an initial franchise fee ("Franchise Fee") of FIVE THOUSAND
Dollars ($5,000.00). The initial franchise fee is waived for "Full-line
Dealer" licensees of Franchisor or its affiliate who elect to become a
Franchised Business by executing a Franchise Agreement within thirty (30) days
of the applicable effective date. Said fee shall be deemed fully earned and
non-refundable upon execution of this Agreement as consideration for expenses
incurred by Franchisor in furnishing assistance and services to Franchisee and
for Franchisor's lost or deferred opportunity to franchise others, except as
may be specifically provided in this Agreement, Exhibit B, or any other
Exhibit attached hereto.
F. Franchisee acknowledges that because complete and detailed
uniformity under many varying conditions may not be possible or practical,
Franchisor specifically reserves the right and privilege, at its sole
discretion and as it may deem in the best interests of all concerned in any
specific instance, to vary standards for any System franchisee based upon the
peculiarities of the particular site or circumstance, density of population,
business potential, population of trade area, existing business practices or
any other condition which Franchisor deems to be of importance to the
successful operation of such franchisee's business. Franchisee shall not be
entitled to require Franchisor to disclose or grant to franchisee a like or
similar variation hereunder.
II. TERM AND RENEWAL
A. This Agreement shall be effective and binding from the date of its
execution for an initial term equal to five (5) years commencing on the date
of execution of this Agreement.
B. Franchisee shall have the right to renew this franchise before the
expiration of the initial term of the Franchise for three (3) additional
successive terms of five (5) years each, providing all of the conditions
hereinafter set forth have been fulfilled:
1. Franchisee has, during the entire term of this Agreement,
complied with all its provisions;
2. Franchisee maintains possession of the premises of the
Franchised Business ("Franchised Premises") and by the expiration date of this
Agreement has brought the Franchised Business into full compliance with the
specifications and standards then applicable for new or renewing EASYRIDERS
businesses and presents evidence satisfactory to Franchisor that it has the
right to remain in possession of the Franchised Premises for the duration of
any renewal term; or, in the event Franchisee is unable to maintain possession
of the premises, or if in the judgment of Franchisor, the Franchised Business
should be relocated, Franchisee secures substitute premises approved by
Franchisor and has furnished, stocked and equipped such premises to bring the
Franchised Business at its substitute premises into full compliance with the
then-current specifications and standards by the expiration date of this
Agreement;
3. Franchisee has given notice of renewal to Franchisor as
provided below;
4. Franchisee has satisfied all monetary obligations owed by
Franchisee to Franchisee's suppliers, Franchisor and its affiliates, if any,
and has timely met these obligations throughout the term of this Agreement;
5. Franchisee has executed upon renewal Franchisor's
then-current form of Franchise Agreement (with appropriate modifications to
reflect the fact that the agreement relates to the grant of a renewal
Franchise), which agreement shall supersede in all respects this Agreement,
and the terms of which may differ from the terms of this Agreement, including,
without limitation, a different percentage Continuing Services and Royalty
Fee, advertising contribution and/or a different territory; provided, however,
Franchisee shall not be required to pay the then-current initial franchise fee
or its equivalent;
6. Franchisee has complied with Franchisor's then-current
qualification and training requirements; and
7. Franchisee has executed a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and its
affiliates, and their respective officers, directors, agents and employees.
C. f Franchisee desires to renew this franchise at the expiration of
this Agreement or any renewal period, Franchisee shall give Franchisor written
notice of its desire to renew at least twelve (12) months, but not more than
eighteen (18) months, prior to the expiration of the initial term of this
Agreement. Within sixty (6O) days after its receipt of such timely notice,
Franchisor shall furnish Franchisee with written notice of: (i) reasons which
could cause Franchisor not to grant a renewal to Franchisee, including any
deficiencies which require correction and a schedule for correction thereof by
Franchisee; and (ii) Franchisor's then-current requirements relating to the
image, appearance, decoration, furnishing, equipping and stocking of
EASYRIDERS businesses, and a schedule for effecting such upgrading or
modifications in order to bring the Franchised Business in compliance
therewith, as a condition of renewal. Renewal of the franchise shall be
conditioned upon Franchisee's compliance with such requirements and continued
compliance with all the terms and conditions of this Agreement up to the date
of termination of the initial term, provided, however, that in the event
Franchisee is curing any deficiencies as required by Franchisor, the term of
this Agreement shall be extended for a period of time equal to the number of
days required to cure such deficiency.
D. Franchisor shall give Franchisee written notice of its election to
renew or not renew the franchise six (6) months prior to the expiration of the
initial term of this Agreement.
III. BUSINESS LOCATION
A. Franchisee may operate the Franchised Business only at the
location specified in Paragraph I hereof. If the lease for the site of the
Franchised Business expires or terminates without fault of Franchisee, or if
the site is destroyed, condemned or otherwise rendered unusable, as otherwise
may be agreed upon in writing by Franchisor and Franchisee, Franchisor will
grant permission for relocation of the Franchised Business at a location and
site acceptable to Franchisor. Any such relocation shall be at Franchisee's
sole expense and Franchisor shall have the right to charge Franchisee for any
costs incurred by Franchisor, and a reasonable fee for its services, in
connection with any such relocation of the Franchised Business.
B. Franchisee will be responsible for purchasing or leasing a
suitable site for the Franchised Business. Prior to the acquisition by lease
or purchase of any site for the Franchised Premises, Franchisee shall submit a
description of the proposed site to Franchisor, together with a letter of
intent or other evidence satisfactory to Franchisor which confirms
Franchisee's favorable prospects for obtaining the proposed site. Franchisor
shall provide Franchisee written notice of approval or disapproval of the
proposed site within thirty (30) days after receiving Franchisee's written
proposal.
C. After receiving Franchisor's written approval of the location of
the Franchised Business as provided in Paragraph III.B. hereof, Franchisee
shall execute a lease (if the premises are to be leased) or a binding
agreement to purchase the site, the terms of which have been previously
approved by Franchisor. Franchisor's approval of the lease shall be
conditioned upon inclusion in the lease of terms acceptable to Franchisor and,
at Franchisor's option, the lease shall contain such provisions as Franchisor
may reasonably require, including, but not limited to:
1. A provision reserving to Franchisor the right, at
Franchisor's election, to receive an assignment of the leasehold interest upon
termination or expiration of the franchise grant;
2. A provision which expressly permits the lessor of the
premises to provide Franchisor all sales and other information it may have
related to the operation of the Franchised Business, as Franchisor may
request;
3. A provision which requires the lessor concurrently to
provide Franchisor with a copy of any written notice of deficiency under the
lease sent to Franchisee and which grants to Franchisor, in its sole
discretion and sole option, the right (but not the obligation) to cure any
deficiency under the lease should Franchisee fail to do so within fifteen (15)
days after the expiration of the period in which Franchisee may cure the
default;
4. A provision which evidences the right of Franchisee to
display the Marks in accordance with the specifications required by the
Confidential Operations Manual, subject only to the provisions of applicable
law;
5. A provision that the premises shall be used only for the
operation of the Franchised Business;
6. A provision which expressly states that any default under
the lease shall constitute a default under this Agreement; and
7. A provision which states that upon default of this Agreement
and in accordance with this Agreement, Franchisor may, in its sole discretion,
take possession of the Franchised Premises and operate the Franchised
Business.
D. If the location is not designated above, Franchisor shall use
reasonable efforts to help analyze Franchisee's market area, to help determine
site feasibility, and to assist in the designation of the location, which must
be approved by Franchisor; provided however, that Franchisor will not conduct
site selection activities on Franchisee's behalf. While Franchisor shall
utilize its experience and expertise in a designation of location, nothing
contained herein shall be interpreted as a guarantee of success for said
location nor shall any site recommendation or approval made by Franchisor be
deemed a representation that any particular site is available for use as a
EASYRIDERS business. It shall be the sole responsibility of Franchisee to
undertake site selection activities and otherwise secure premises for
Franchisee's Franchised Business.
E. In the event no acceptable site is found and approved by the
parties within ninety (90) days from the date of this Agreement, then and in
that event, upon written application from either party, this contract shall be
terminated and deposits received by Franchisor shall be resumed to Franchisee.
Provided, however, that in the event Franchisor has within the aforesaid time
submitted in writing to Franchisee two (2) or more sites which are acceptable
to Franchisor, and Franchisee has refused to accept same, then Franchisee,
upon termination, shall forfeit to Franchisor the sum of TWO THOUSAND FIVE
HUNDRED Dollars ($2,500.00) as liquidated damages in payment for Franchisor's
expenses in its site evaluation and selection activities. Franchisee and
Franchisor agree that the amount set forth to wit, TWO THOUSAND FIVE HUNDRED
Dollars ($2,500.00) as liquidated damages is a reasonable amount and that due
to the nature of the subject matter, it will be impossible to ascertain the
exact amount of damages sustained by the recipient therefore.
F. Franchisor shall require Franchisee to provide all of the
following to Franchisor, promptly upon obtaining possession of the site for
the Franchised Business: (i) cause to be prepared and submit for approval by
Franchisor a site survey and any modifications to Franchisor's basic
architectural requirements and specifications (not for construction) for a
EASYRIDERS business (including requirements for dimensions, exterior design,
materials, and work area design and layout, equipment, fixtures, furniture,
signs and decorating) required for the development of a EASYRIDERS business at
the site leased or purchased therefor, provided that Franchisee may modify
Franchisor's basic plans and specifications only to the extent required to
comply with all applicable ordinances, building codes and permit requirements
and with prior notification to and approval by Franchisor; (ii) obtain all
required zoning changes; all required building, utility, health, sanitation,
and sign permits and licenses and any other required permits and licenses;
(iii) purchase or lease equipment, fixtures, furniture and signs as provided
herein; (iv) complete the construction and/or remodeling, equipment, fixture,
furniture and sign installation and decorating of the Franchised Business in
full and strict compliance with plans and specifications therefor approved by
Franchisor and all applicable ordinances, building codes and permit
requirements; (v) obtain all customary contractors' sworn statements and
partial and final waivers of lien for construction, remodeling, decorating and
installation services; and (vi) otherwise complete development of and have the
Franchised Business ready to open and commence the conduct of its business in
accordance with Paragraph XII. hereof.
G. Franchisee shall be required to periodically make reasonable
capital expenditures to remodel, modernize and redecorate the Franchised
Premises so that the Franchised Business will reflect the then-image intended
to be portrayed by EASYRIDERS business. All remodeling, modernization, or
redecoration of the Franchised Business and its premises must be done in
accordance with the standards and specifications as prescribed by Franchisor
from time to time and with the prior written approval of Franchisor. All
replacements must conform to Franchisor's then-current quality standards and
specifications and must be approved by Franchisor in writing. Franchisee shall
not be required to remodel, modernize and redecorate the Franchised Business
and its premises more than once during the initial term of this Agreement
requiring expenditures in excess of TWELVE THOUSAND FIVE HUNDRED Dollars
($12,500.00); however, maintenance of the Franchised Premises may exceed this
amount, and maintenance costs may not be credited to remodeling,
modernization, or redecoration expenditures. If the lease for the Franchised
Premises requires expenditures for remodeling, modernization and redecoration,
such an amount shall be credited to amounts required by Franchisor.
IV. TRAINING AND ASSISTANCE
Franchisor shall make training available to Franchisee or its designated
manager and Franchisee or its designated manager must successfully complete
the following training programs.
A. Prior to opening for business, Franchisor will provide to
Franchisee and Franchisee's designated manager a training and familiarization
course of approximately one (1) to two (2) weeks in duration to be conducted
at an operating EASYRIDERS retail store or at such other place as Franchisor
shall designate. Said training program shall cover various aspects of the
operation of a EASYRIDERS franchise.
B. Franchisor will provide a second phase of training to Franchisee
and Franchisee's designated manager at Franchisor designated business
location. This hands on training program will be provided prior to
Franchisee's commencement of operations.
C. Around the commencement of operations of the Franchised Business,
additional assistance in opening the Franchised Business will be made
available to Franchisee through a third party at cost and at Franchisee's
expense. Franchisor, in its discretion, may require such third party
assistance if Franchisor feels it is necessary and appropriate, based on
Franchisee's performance in training.
D. If Franchisor determines, in its sole discretion, that Franchisee
is unable to satisfactorily complete the training programs, Franchisor shall
have the right to terminate this Agreement in the manner herein provided. If
this Agreement is terminated pursuant to this Paragraph, Franchisor shall
return to Franchisee the franchise fee paid by Franchisee less an amount, not
to exceed ONE THOUSAND Dollars ($1,000.00) to compensate Franchisor for work
performed and expenses incurred in connection with said training. Upon return
of said amount, Franchisor shall be fully and forever released from any claims
or causes of action Franchisee may have under or pursuant to this Agreement
and Franchisee shall have no further right, title or interest in the Marks and
the System and any such rights shall automatically revert to Franchisor.
E. If Franchisee designates new or additional managers after the
initial training program, Franchisor shall provide training to such managers
to the extent that Franchisor can reasonably accommodate such managers in
Franchisor's regularly scheduled training courses. Franchisor shall provide
such training to up to two managers a year for no tuition, additional managers
will be trained at the then-current published rates. Franchisee shall be
responsible for any travel, accommodation or salary expense associated with
training. In no event will Franchisor be under any obligation to provide
individual training to Franchisee's managers.
F. Franchisor from time to time may provide and may require that
previously-trained and experienced franchisees or their managers or employees
attend and successfully complete refresher training programs or seminars to be
conducted within Franchisor's Metropolitan Statistical Area ("MSA") as that
term is defined by the United States Census Bureau, at such location as may be
designated by Franchisor. Attendance at such refresher training programs or
seminars shall be at Franchisee's sole expense; provided, however, that
attendance will not be required at more than one (1) such program in any
calendar year and shall not exceed five (5) business days in duration.
G. All expenses incurred by Franchisee and its employees in attending
training programs, including, without limitation, travel costs, room and board
expenses, and employees salaries shall be the sole responsibility of
Franchisee.
V. PROPRIETARY MARKS
A. Franchisee acknowledges that Franchisor's affiliate is the owner
of all right, title and interest together with all the goodwill of the Marks
and that Franchisee's right to use the Marks is derived solely from this
Agreement and is limited to the conduct of business by Franchisee pursuant to
and in compliance with this Agreement and all applicable standards,
specifications, and operating procedures prescribed by Franchisor from time to
time during the term of the franchise. Any unauthorized use of the Marks by
Franchisee is a breach of this Agreement and an infringement of the rights of
Franchisor and its affiliate in and to the Marks. Franchisee acknowledges that
all usage of the Marks by Franchisee and any goodwill established by
Franchisee's use of the Marks shall inure to the exclusive benefit of
Franchisor and its affiliate and that this Agreement does not confer any
goodwill or other interests in the Marks upon Franchisee and its affiliate.
Franchisee shall not, at any time during the term of this Agreement or after
its termination or expiration, contest the validity or ownership of any of the
Marks or assist any other person in contesting the validity or ownership of
any of the Marks. All provisions of this Agreement applicable to the Marks
apply to any additional trademarks, service marks, and commercial symbols
authorized for use by and licensed to Franchisee by Franchisor after the date
of this Agreement.
B. Franchisee shall not use any Mark or portion of any of the Marks
as part of any corporate or trade name, or with any prefix, suffix, or other
modifying words, terms, designs, or symbols, or in any modified form.
Franchisee shall not use any Marks in connection with the sale of any
unauthorized product or service or in any other manner not expressly
authorized in writing by Franchisor. Franchisee shall properly attribute
ownership of the Marks to Franchisor's affiliate and shall give such notices
of trademark and service mark registrations as Franchisor specifies and obtain
such fictitious or assumed name registrations as may be required under
applicable law.
C. Franchisee shall promptly notify Franchisor of any potential or
actual claim, demand, or cause of action known by Franchisee or which
Franchisee reasonably suspects or believes may exist, based upon or arising
from any attempt by any other person, firm or corporation to use the Marks or
any colorable imitation thereof. Franchisee shall also notify Franchisor of
any action, claim or demand against Franchisee relating to the Marks within
ten (10) days after Franchisee receives notice of said action, claim or
demand. Upon receipt of timely notice of an action, claim or demand against
Franchisee relating to the Marks, Franchisor and/or its affiliate shall have
the sole right to determine all matters and issues relating to the defense of
said action. Franchisor and/or its affiliate shall have the exclusive right to
challenge, oppose, contest or bring legal action against any third party
regarding the third party's use of any of the Marks and shall exercise such
right in its sole discretion. In any defense or prosecution of any litigation
relating to the Marks or components of the System undertaken by Franchisor
and/or its affiliate, Franchisee shall cooperate with Franchisor and/or its
affiliate and execute any and all documents and take all actions as may be
desirable or necessary in the opinion of Franchisor's and/or its affiliate's
counsel, to protect the Marks and to defend or prosecute any litigation
relating to the Marks or components of the System. Both parties will make
every effort consistent with the foregoing to protect, maintain, and promote
the Marks as identifying the System and only the System. FRANCHISOR MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE, EXCLUSIVE
OWNERSHIP, VALIDITY OR ENFORCEABILITY OF THE MARKS.
D. If it becomes advisable at any time in Franchisor's sole
discretion, for Franchisor and/or Franchisee to modify or discontinue use of
any of the Marks, and/or use one (1) or more additional or substitute trade
names, trademarks, service marks, or other commercial symbols, Franchisee
shall comply with Franchisor's directions within a reasonable time after
notice to Franchisee by Franchisor, and Franchisor shall have no liability or
obligation whatsoever with respect to Franchisee's modification or
discontinuance of any Mark.
E. In order to preserve the validity and integrity of the Marks and
copyrighted materials franchised herein and to assure that Franchisee is
properly employing the same in the operation of its Franchised Business,
Franchisor or its agents shall have the right to enter and inspect
Franchisee's premises (with or without prior notice) during normal business
hours and, additionally, shall have the right to observe the manner in which
Franchisee is conducting its operations, to confer with Franchisee's employees
and customers, and to select and inspect Franchisee's merchandise to make
certain that such merchandise is satisfactory and meets the quality control
provisions and performance standards established by Franchisor.
VI. CONFIDENTIAL OPERATIONS MANUAL
A. Franchisor will loan to Franchisee during the term of the
franchise one (1) or more copies of a Confidential Operations Manual
containing reasonable, mandatory and suggested specifications, standards,
operating procedures and rules prescribed from time to time by Franchisor for
EASYRIDERS businesses and information relative to other obligations of
Franchisee hereunder and the operation of its Franchised Business. Franchisor
shall have the right to add to and otherwise modify the Confidential
Operations Manual from time to time to reflect changes in the specifications,
standards, operating procedures and rules by Franchisor for EASYRIDERS
businesses, provided that no such addition or modification shall alter
Franchisee's fundamental status and rights under this Agreement.
B. The Confidential Operations Manual shall at all times remain the
sole property of Franchisor and shall promptly be returned upon the expiration
or other termination of this Agreement. Franchisee shall not to make any
disclosure, duplication or other unauthorized use of any portion of the
Confidential Operations Manual.
C. The Confidential Operations Manual contains proprietary
information of Franchisor and shall be kept confidential by Franchisee both
during the term of the franchise and subsequent to the expiration or
termination of the franchise. Franchisee shall at all times insure that its
copy of the Confidential Operations Manual is available at the Franchised
Business premises in a current and up-to-date manner. At all times that the
Confidential Operations Manual is not in use by authorized personnel,
Franchisee shall maintain the Confidential Operations Manual in a locked
receptacle at the Franchised Premises, and shall only grant authorized
personnel, as defined in the Confidential Operations Manual, access to the key
or lock combination of such receptacle. In the event of any dispute as to the
contents of the Confidential Operations Manual, the terms of the master copy
of the Confidential Operations Manual maintained by Franchisor at Franchisor's
home office shall be controlling.
VII. CONFIDENTIAL INFORMATION
A. Franchisee acknowledges that its entire knowledge of the operation
of a EASYRIDERS business including the knowledge or know-how regarding the
specifications, standards and operating procedures of a EASYRIDERS business,
is derived from information disclosed to Franchisee by Franchisor which
information is proprietary, confidential and a trade secret of Franchisor. All
information, standards and specifications with respect to the sale of
motorcycle paraphernalia and/or which identifies or assists in the
identification of actual or potential customers of the Franchised Business are
the trade secrets and the proprietary information of Franchisor. Franchisee
shall maintain the absolute confidentiality of all such information during and
after the term of the franchise and shall not use any such information in any
other business or in any manner not specifically authorized or approved in
writing by Franchisor.
B. Franchisee shall divulge trade secret information only to such of
its employees and only to the extent that such access is necessary for them to
operate the Franchised Business. Any and all information, knowledge and
know-how, including, without limitation, designs, drawings, materials,
equipment, retail business systems and methods, merchandising techniques and
procedures and other data, which Franchisor designates as confidential or
proprietary or a trade secret shall be deemed to be a trade secret for
purposes of this Agreement, excepting only such information as Franchisee can
demonstrate lawfully came to its attention prior to disclosure thereof by
Franchisor; or which, at the time of disclosure by Franchisor to Franchisee,
had lawfully become a part of the public domain, through publication or
communication by others; or which, after disclosure to Franchisee by
Franchisor, lawfully becomes a part of the public domain, through publication
or communication by others.
C. Due to the special and unique nature of the confidential
information, Marks, and Confidential Operations Manual of Franchisor,
Franchisee acknowledges that Franchisor shall be entitled to immediate
equitable remedies, including but not limited to, restraining orders and
injunctive relief in order to safeguard such trade secrets, and proprietary,
confidential, unique, and special information of Franchisor and that money
damages alone would be an insufficient remedy with which to compensate
Franchisor for any breach of the terms of Paragraphs V., VI., and VII. of this
Agreement. Furthermore, all employees of Franchisee having access to the
confidential and proprietary information of Franchisor shall be required to
execute confidential information agreements in a form acceptable to
Franchisor.
VIII. MODIFICATION OF THE SYSTEM
Franchisee recognizes that from time to time hereafter Franchisor may
change or modify the System presently identified by the Marks including,
without limitation, the adoption and use of new or modified trade names,
trademarks, service marks or copyrighted materials, new computer programs and
systems, new types or brands of merchandise and products, new inventory
requirements, new equipment or new techniques and that Franchisee will accept,
use and display for the purpose of this Agreement any such changes in the
System, as if they were part of this Agreement at the time of execution
hereof. Franchisee will make such expenditures as such changes or
modifications in the System may reasonably require. Franchisee shall not
change, modify or alter in any way the System.
IX. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the furtherance of the
goodwill and the public image of EASYRIDERS businesses, Franchisee agrees as
follows:
A. Franchisee will submit to Franchisor or its designated agency, for
its prior approval, all promotional materials and advertising to be used by
Franchisee, including, but not limited to, newspapers, radio and television
advertising, specialty and novelty items, signs, containers, and Yellow Page
advertising. In the event written disapproval of said advertising and
promotional material is not given by Franchisor to Franchisee within thirty
(30) days from the date such material is received by Franchisor, said
materials shall be deemed approved. Failure by Franchisee to conform with the
provisions herein and subsequent nonaction by Franchisor to require Franchisee
to cure or remedy this failure and default shall not be deemed a waiver of
future or additional failures and defaults of any other provision of this
Agreement. The submission of advertising to Franchisor for approval shall not
affect Franchisee's right to determine the prices at which Franchisee sells
its products or services.
B. Within the initial six (6) months of operation of the Franchised
Business, Franchisee shall expend a minimum of TWO THOUSAND Dollars
($2,000.00) as designated by Franchisor for catalog, newspaper, direct mail,
advertising or promotional items as grand opening advertising and promotion to
generate initial consumer awareness and patronage ("Grand Opening
Advertising"); provided, however, Franchisor may collect and spend a portion
of the sums designated for Grand Opening Advertising for promotions which
feature the EASYRIDERS land speed record setting motorcycle commonly known as
the "Streamliner". Franchisor shall prepare an accounting of expenditures by
Franchisor which shall be made available to Franchisee and shall refund to
Franchisee any monies which are not spent in accordance with the
above-mentioned Grand Opening Advertising procedures. Full-line Dealers who
convert to the System shall not be required to make expenditures for or
conduct any Grand Opening Advertising.
C. Franchisee shall contribute to the EASYRIDERS Advertising and
Development Fund ("Fund") an amount equal to two percent (2%) of Franchisee's
Gross Sales, as defined in Paragraph X. Franchisee's required payments to the
Fund shall be made at the same time and in the same manner as, and in addition
to, the Continuing Services and Royalty Fee provided in Paragraph X herein.
Such payment shall be made in addition to and exclusive of any sums that
Franchisee may be required to spend on local advertising and promotion.
Full-line Dealers who convert to the System shall not be required to
contribute to the Fund until the earlier of the expiration of such licensee's
current License Agreement or two (2) years from the date of execution of this
Agreement ("Waiver Period"). The fund shall be maintained and administered by
Franchisor or its designee, as follows:
1. Franchisor shall supervise all advertising programs with
sole discretion over the creative concepts, materials and media used in such
programs and the placement and allocation thereof. Advertising programs may be
primarily concentrated in Franchisor's affiliates' publications and catalog
promotion. Franchisor or its designee shall make expenditures for advertising
or promotion in Franchisee's Area of Dominant Influence. However, Franchisor
cannot and does not ensure any particular franchisee benefits directly pro
rata from the placement of advertising.
2. The funds may also be used to meet any and all costs of
maintaining, administering, directing and preparing advertising (including,
without limitation, the cost of conducting public relations activities,
conducting advertising; and producing promotional brochures, and other
marketing materials to franchisees in the System). All sums paid by Franchisee
to the Fund shall be maintained in a separate account from the other funds of
Franchisor and shall not be used to defray any of Franchisor's general
operating expenses, except for such reasonable administrative costs and
overhead, if any, as Franchisor may incur in activities reasonably related to
the administration or direction of the Fund and advertising programs
including, without limitation, conducting market research, preparing marketing
and advertising materials, and collecting and accounting for assessments for
the Fund.
3. It is anticipated that all contributions to the Fund shall
be expended for advertising and promotional purposes during Franchisor's
fiscal year within which contributions are made. If, however, excess amounts
remain in the Fund at the end of such fiscal year, all expenditures in the
following fiscal year(s) shall be made first out of any current interest or
other earnings of the Fund, next out of any accumulated earnings, and finally
from principal.
4. Although Franchisor intends the Fund to be of perpetual
duration, Franchisor maintains the right to terminate the Fund. The Fund shall
not be terminated, however, until all monies in the Fund have been expended
for advertising and promotional purposes.
5. An accounting of the operation of the Fund shall be prepared
annually and shall be made available to Franchisee upon request. Franchisor
reserves the right, at its option, to require that such annual accounting
include an audit of the operation of the Fund prepared by an independent
certified public accountant selected by Franchisor and prepared at the expense
of the Fund.
D. Franchisee shall spend a minimum of one percent (1%) of
Franchisee's Gross Sales per month on local advertising in the manner directed
by Franchisor in its sole discretion. Franchisee shall submit to Franchisor an
accounting of Franchisee's expenditures on local advertising required pursuant
to this Paragraph IX. D. in the form and manner specified in the Confidential
Operations Manual. Full-line Dealers who convert to the System shall not be
required to make such local advertising expenditures during the Waiver Period.
E. From time to time, Franchisor may designate a local or regional
advertising coverage area in which Franchisee's business and at least one (1)
other EASYRIDERS business is located for purposes of developing a cooperative
local or regional advertising or promotional program. If directed by
Franchisor, Franchisee agrees to participate in and contribute to such
cooperative advertising and promotional programs in Franchisee's Advertising
Coverage Areas in addition to such contributions and expenditures as required
pursuant to Paragraphs IX.B. and IX.C. The cost of the program shall be
allocated among locations in such area and each franchisee's share shall be in
proportion to its sales during the preceding twelve (12) month period, or
portion of said period. Said contributions to cooperative advertising
promotional programs will be credited toward the local advertising and
promotional expenditure required in Paragraph IX.D. above. At the time a
program is submitted, Franchisor shall submit a list to Franchisee of all
operating businesses within the advertising coverage area. Full-line Dealers
who convert to the System shall not be required to participate in such
cooperative advertising programs during the Waiver Period.
F. Franchisee shall maintain a business phone and advertise
continuously in the classified or Yellow Pages of the local telephone
directory under the listings "Motorcycles", "Motorcycles - Supplies, Parts
and Accessories", or such other listings as deemed appropriate by Franchisor
using mats of the type and size approved in advance by Franchisor. When more
than one (1) EASYRIDERS business serves a metropolitan area, classified
advertisements shall 1ist all EASYRIDERS businesses operating within the
distribution area of such classified directories, and Franchisee shall
contribute its equal share of the cost of such advertisement. The expenditures
for such advertising shall not be credited toward other advertising
requirements pursuant to this Agreement. Full-line Dealers who convert to the
System shall not be required to advertise in the Yellow Pages directory during
the Waiver Period.
G. Franchisor may, from time to time, develop and market special
catalogs, brochures and other promotional items which will be made available
to Franchisee at Franchisor's cost plus a reasonable mark up and Franchisee
shall maintain a representative inventory of such promotional items to meet
public demand. Franchisee shall have the right to purchase alternative
promotional items provided that such alternative goods conform to the
specifications and quality standards established by Franchisor from time to
time.
H. Franchisee shall not advertise or use in advertising or any other
form of promotion, the copyrighted materials, trademarks, service marks, logos
or commercial symbols designated by Franchisor without an appropriate c
[copyright symbol appears here] or R [registration mark symbol appears here]
registration marks or the designation TM or SM where applicable.
X. CONTINUING SERVICES AND ROYALTY FEE
A. Franchisee shall pay without offset, credit or deduction of any
nature, to Franchisor, so long as this Agreement shall be in effect, a weekly
Continuing Services and Royalty Fee equal to three percent (3%) of the Gross
Sales derived from the Franchised Business. Said Continuing Services and
Royalty Fee shall be paid weekly in the manner specified below or as otherwise
prescribed in the Confidential Operations Manual. For current full-line dealer
licensees of Franchisor or its affiliate who convert to the franchised System
within thirty (30) days of the applicable effective date, the Continuing
Services and Royalty fees are waived until the earlier of the expiration of
such licensee's current license agreement or two (2) years from the date of
execution of this Agreement.
1. On or before each Wednesday, Franchisee will submit to
Franchisor on a form approved by Franchisor, a correct statement, signed by
Franchisee, of Franchisee's Gross Sales for the preceding week ending
Saturday. Franchisee will make available to Franchisor for reasonable
inspection during normal business hours and with or without prior notice by
Franchisor, all original books and records that Franchisee may deem necessary
to ascertain Franchisee's Gross Sales
2. The term "Gross Sales", as used herein and throughout this
Agreement, shall mean and include the total of all sales of all Trademarked
Product Lines, merchandise, products or services to customers of Franchisee,
(including interim deposits) whether or not sold or performed at or from the
EASYRIDERS Franchised Business, and whether received in cash, in services in
kind, from barter and/or exchange, on credit (whether or not payment is
received therefor) or otherwise. There will be deducted from Gross Sales for
purposes of said computation (but only to the extent they have been included)
the amount of all sales tax receipts or similar tax receipts which, by law,
are chargeable to customers, if such taxes are separately stated when the
customer is charged and if such taxes are paid to the appropriate taxing
authority. There will be further deducted from Gross Sales the amount of any
documented refunds, chargebacks, credits and allowances given in good faith to
customers by Franchisee. All barter and/or exchange transactions pursuant to
which Franchisee furnishes services and/or products in exchange for goods or
services to be provided to Franchisee by a vendor, supplier or customer will,
for the purpose of determining Gross Sales, be valued at the full retail value
of the goods and/or services to provided to Franchisee.
B. All Continuing Services and Royalty Fees, advertising
contributions, amounts due for purchases by Franchisee from Franchisor or its
affiliates shall bear interest after due date at the highest applicable legal
rate for open account business credit. Franchisee acknowledges that this
Paragraph shall not constitute agreement by Franchisor or its affiliates to
accept such payments after same are due or a commitment by Franchisor to
extend credit to, or otherwise finance Franchisee's operation of, the
Franchised Business. Further, Franchisee acknowledges that its failure to pay
all amounts when due shall constitute grounds for termination of this
Agreement, as provided in Paragraph XVI. hereof, notwithstanding the
provisions of this Paragraph.
C. Notwithstanding any designation by Franchisee, Franchisor shall
have the sole discretion to apply any payments by Franchisee to any past due
indebtedness of Franchisee for Continuing Services and Royalty Fees,
advertising contributions, purchases from Franchisor or its affiliate,
interest or any other indebtedness.
XI. ACCOUNTING AND RECORDS
A. Franchisee shall establish and maintain a bookkeeping, accounting
and record keeping system conforming to the requirements prescribed by
Franchisor, including without limitation the use and retention of sales
tickets, purchase orders, invoices, payroll records, check stubs, sales tax
records and returns, cash receipts and disbursements, journals and general
ledgers. Franchisee shall preserve for a period of not less than three (3)
years, during the term of this Agreement and for not less than three (3) years
following the term of this Agreement, all accounting records and supporting
documentation relating to the Franchised Business.
B. Franchisee will supply to Franchisor on or before the fifteenth
(15th) day after the term of each calendar quarter, in the form approved by
Franchisor, a profit and loss statement and balance sheet for the last
preceding calendar quarter. Additionally, Franchisee shall, at its expense,
submit to Franchisor within ninety (90) days of the end of each fiscal year
during the term of this Agreement, a profit and loss statement for such fiscal
year and a balance sheet for the last date of such year. Such annual
statements shall be prepared and reviewed by an independent certified public
accountant, in accordance with generally accepted accounting principles
applied on a consistent basis. Franchisor reserves the right to require
Franchisee to submit audited financial statements.
C. Franchisee shall submit to Franchisor such other periodic reports,
forms and records as specified, and in the manner and at the time as specified
in the Confidential Operations Manual or otherwise in writing.
D. Franchisor or its designated agents shall have the right, during
normal business hours and with or without prior notice, to examine and copy,
at its expense, the books, records, and tax returns of Franchisee. Franchisor
shall also have the right at any time, to have an independent audit made of
the books of Franchisee. If an inspection should reveal that any payments to
Franchisor have been understated in any report to Franchisor, then Franchisee
shall immediately pay to Franchisor the amount understated upon demand, in
addition to interest from the date such amount was due until paid, at the
maximum rate permitted by law. If an inspection discloses an understatement in
any report of two percent (2%) or more, Franchisee shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection (including, without limitation, reasonable accounting and
attorneys' fees). The foregoing remedies shall be in addition to any other
remedies Franchisor may have.
E. Franchisee acknowledges that nothing contained herein constitutes
Franchisor's agreement to accept any payments after same are due or a
commitment by Franchisor to extend credit to or otherwise finance Franchisee's
operation of the Franchised Business. Further, Franchisee acknowledges that
its failure to pay all amounts when due shall constitute grounds for
termination of this Agreement, as herein provided.
XII. STANDARDS OF QUALITY AND PERFORMANCE
A. Franchisee shall comply with all requirements set forth in this
Agreement, the Confidential Operations Manual and other written policies
supplied to Franchisee by Franchisor. Mandatory specifications, standards,
operating procedures and rules prescribed from time to time by Franchisor in
the Confidential Operations Manual or otherwise communicated to Franchisee in
writing, shall constitute provisions of this Agreement as if fully set forth
herein and shall be reasonably and uniformly applied to all franchisees. All
references herein to this Agreement shall include all such mandatory
specifications, standards and operating procedures and rules. Franchisee shall
comply with the entire System including, but not limited to, the requirements
of this Paragraph XII.
B. Franchisee shall commence operation of the Franchised Business not
later than six (6) months after the execution of this Agreement or as
otherwise required in Franchisee's lease and approved by Franchisor. Prior to
such opening, Franchisee shall have compiled with all Franchisor's pre-opening
standards and specifications. If Franchisee for any reason fails to commence
operation as herein provided, such failure shall be considered a default and
Franchisor may terminate this Agreement as herein provided.
C. Franchisee shall maintain the condition and appearance of the
Franchised Premises consistent with Franchisor's standards. Franchisee shall
maintain the Franchised Premises as is from time to time required to maintain
or improve the appearance and efficient operation of the Franchised Business,
including, but not limited to, replacement of worn out or obsolete fixtures
and signs, and repair of the exterior and interior of the Franchised Business.
If at any time in Franchisor's judgment the general state of repair or the
appearance of the Franchised Premises or its equipment, fixtures, signs or
decor does not meet Franchisor's standards therefor, Franchisor shall so
notify Franchisee, specifying the action to be taken by Franchisee to correct
such deficiency. If Franchisee fails or refuses to initiate within thirty (30)
days after receipt of such notice, and thereafter continue, a bona fide
program to complete any required maintenance, Franchisor shall have the right,
in addition to all other remedies, to enter upon the Franchised Premises and
effect such maintenance on behalf of Franchisee and Franchisee shall pay the
entire costs thereof on demand.
D. Franchisee shall make no material alterations to the Franchised
Premises nor shall Franchisee make material replacements of or alterations to
the equipment, fixtures or signs of the Franchised Business without the prior
written approval by Franchisor.
E. Franchisee shall offer for sale and sell at the Franchised
Business various types of motorcycle paraphernalia such as shirts, jackets,
belts, posters, and related items and parts and related hard goods, and will
not offer for sale or sell or provide at the Franchised Business or the
premises which it occupies any other category of merchandise or products or
use such premises for any purpose other than the operation of a Franchised
Business in full compliance with this Agreement.
F. From time to time, Franchisor shall provide to Franchisee a list
of approved manufacturers, suppliers, and distributors authorized for the
Franchised Business ("Approved Suppliers List") and a 1ist of approved
inventory products, fixtures, furniture, equipment, signs, stationery,
supplies, and other items or services necessary to operate the Franchised
Business ("Approved Supplies List"). Franchisor may revise the Approved
Supplies List and Approved Suppliers List from time to time in its sole
discretion. If Franchisee proposes to offer for sale or use at the Franchised
Business any brand of product, or other material or supply which is not on the
Approved Supplies List or to purchase any product from a supplier that is not
on the Approved Suppliers List, Franchisee shall first notify Franchisor and
shall upon request by Franchisor submit samples and such other information as
Franchisor requires for examination and/or testing or to otherwise determine
whether such product, material or supply, or such proposed supplier meets its
specifications and quality standards. A charge not to exceed the reasonable
cost of the inspection and evaluation and the actual cost of the test may be
imposed by Franchisor and shall be paid by Franchisee or the supplier.
Franchisor reserves the right to re-inspect the businesses and products of any
supplier of an approved item and to revoke its approval of any item or
supplier which fails to continue to meet any of Franchisor's criteria.
G. All inventory, products and materials, and other items and
supplies used in the operation of the Franchised Business which are not
specifically required to be purchased in accordance with Franchisor's Approved
Supplies List and Approved Suppliers List shall conform to the specifications
and quality standards established by Franchisor from time to time.
H. Franchisor's affiliate has developed a proprietary line of
motorcycle-related goods bearing the Marks. Franchisee acknowledges that
Franchisee shall carry an adequate supply and maintain a representative
inventory of such Trademarked Product Lines as required by the Confidential
Operations Manual. Franchisee shall maintain, carry and promote such
Trademarked Product Lines for use in servicing the general public in order to
meet customer demand as designated by Franchisor. Franchisee shall, throughout
the term of this Agreement, purchase Trademarked Product Lines from
Franchisor, Franchisor's affiliate or other designated sources which
manufacture the Trademarked Product Lines to Franchisor's precise
specifications and carry an adequate inventory of the Trademarked Product
Lines.
I. Franchisor may, in the future, develop and custom design a
software package for conducting accounting, inventory control, point-of-sale
functions and related activities ("Proprietary Software Package"). If
developed, the software shall be proprietary to Franchisor and confidential
information of Franchisor. Franchisor may not be able to practically alter the
Proprietary Software Package to accommodate each and every franchisee of the
System; therefore, Franchisee shall utilize the Proprietary Software Package
in the operation of the Franchised Business and comply with all specifications
and standards prescribed by Franchisor regarding the Proprietary Software
Package, as will be provided from time to time in the Confidential Operations
Manual. This unique software will be in an ongoing development and testing
stage and upgrades may be implemented into the System at Franchisor's
discretion. If developed, Franchisor or its designee shall provide ongoing
service and support to Franchisee regarding the Proprietary Software Package,
and Franchisor shall lease such software to Franchisee at the then-current
rates published by Franchisor.
J. Franchisee shall secure and maintain in force all required
licenses, permits and certificates relating to the operation of the Franchised
Business and shall operate the Franchised Business in full compliance with all
applicable laws, ordinances and regulations, including without limitation,
those relating to occupational hazards and health, consumer protection, trade
regulation, equal employment opportunity, prevention and elimination of
unlawful discrimination and harassment, worker's compensation, unemployment
insurance, withholding and payment of Federal and State income taxes, social
security taxes and sales, use and property taxes. Franchisee shall refrain
from any merchandising, advertising or promotional practice which is
unethical, which infringes upon the trade marks or copyrights of others which
constitutes unfair competition, or which otherwise is or may be injurious to
the business of Franchisor and/or other franchised businesses or to the
goodwill associated with the Marks.
K. Franchises shall in the operation of the Franchised Business use
only displays, labels, forms and other products and documentation imprinted
with the Marks and colors as prescribed from time to time by Franchisor.
L. Prior to commencement of operation of the Franchised Business,
Franchisee shall adequately supply the Franchised Business with a
representative inventory as prescribed by Franchisor of motorcycle
paraphernalia and hard goods and related items of the type, quantity and
quality as specified by Franchisor. Franchisee shall maintain levels of
inventory that will permit operation of the Franchised Business at maximum
capacity.
M. The Franchised Business shall at all times be under the direct,
on-premises supervision of Franchisee or a trained and competent employee
acting as full-time manager. Franchisee shall keep Franchisor informed at all
times of the identity of any employee(s) acting as manager(s) of the
Franchised Business. Franchisee shall, at all limes, faithfully, honestly and
diligently perform its obligations hereunder and shall not engage in any
business or other activities that will conflict with its obligations
hereunder.
N. Franchisee shall not install or maintain the Franchised Premises
any telephone booths, newspaper racks, video games, juke boxes, gum machines,
games, rides, vending machines or other similar devices without the written
approval of Franchisor.
O. Franchisee shall participate actively in a EASYRIDERS Regional
Advisory Franchisee Council ("Council") and participate in all Council
programs approved by Franchisor for Franchisee's particular Council. The
purposes of the Council(s) include, but are not limited to, exchanging ideas
and problem solving methods, advising Franchisor on expenditures for regional
advertising, providing backup support and staffing for political influence,
and coordinating System franchisee efforts. Franchisee shall pay all Council
assessments levied by the Council, and Franchisor has the right to enforce
this obligation. Assessments and expenditures may very from time to time and
due to variations in Council participation and costs as determined by a
particular Council and as approved by Franchisor. Although Franchisee shall
pay such Council assessments, such assessments shall in no way diminish
Franchisee's rights and the benefit of the bargain under this Agreement. Such
Council(s) may be formed by Franchisor at such time that more than one (1)
franchisee conducts a EASYRIDERS Franchised Business in any given region, the
boundaries of such region to be determined in the sole and unfettered
discretion of Franchisor.
P. Franchisee shall notify Franchisor in writing within five (5) days
of the commencement of any action, suit, or proceeding, and of the issuance of
any order, writ, injunction, award, or decree of any court, agency, or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Business.
XIII. FRANCHISOR'S OPERATIONS ASSISTANCE
A. Franchisor may from time to time advise or offer guidance to
Franchisee relative to prices for the merchandise and services, if any,
offered for sale by the Franchised Business that in Franchisor's judgment
constitute good business practice. Such guidance will be based on the
experience of Franchisor and is franchisees in operating franchised businesses
and an analysis of the costs of such services, activities, merchandise,
supplies, coordinating accessory items and products and prices charged for
competitive inventory and products. Franchisee shall not be obligated to
accept any such advice or guidance and shall have the sole right to determine
the prices to be charged from time to lime by the Franchised Business and no
such advice or guidance shall be deemed or construed to impose upon Franchisee
any obligation to charge any fixed, minimum or maximum prices for any product
or service offered for sale by the Franchised Business.
B. Upon commencement and during operation of the Franchised Business,
and during the term of this Agreement and any renewal period thereof,
Franchisor shall do the following:
1. Provide to Franchisee a comprehensive list of established
sources of motorcycle-related merchandise and hard goods and related
merchandise, products and services associated with the retail motorcycle
business and other merchandise and products, equipment, fixtures and supplies
necessary for the operation of the Franchised Business and provide
specifications for such products. However, Franchisor makes no representation
or warranty that any particular approved supplier will be willing or able to
sell to all franchisees;
2. Administer the Fund;
3. As Franchisor deems necessary, negotiate supply contracts and
pass on purchasing economics to maximize cost savings;
4. As Franchisor deems necessary, attempt to coordinate
equipment, product and supplies distribution for local, regional and national
suppliers;
5. Regulate quality standards and products in conformance with
the System specifications throughout the network of franchised business;
6. Provide use of a mailing list of "EASYRIDERS" subscribers in
the Designated Area;
7. Provide Franchisee participation in a customer referral 800
number;
8. Conduct product testing;
9. Make available the EASYRIDERS merchandising and display
program;
10. Make available mail order catalogs from which to provide
products not currently in stock; and
11. Offer a centralized buying program for EASYRIDERS products.
C. Franchisor shall advise Franchisee of problems arising out of the
operation of the Franchised Business as disclosed by reports submitted to
Franchisor by Franchisee or by inspections conducted by Franchisor of the
Franchised Business. Franchisor may furnish Franchisee with such assistance in
connection with the operation of the Franchised Business as is reasonably
determined to be necessary by Franchisor from time to time. Operations
assistance may consist of advice and guidance with respect to:
1. Proper utilization of procedures developed for a EASYRIDERS
business with respect to products and related business services as approved by
Franchisor;
2. Additional equipment, merchandise, products and services
authorized for EASYRIDERS businesses;
3. The institution of proper administrative, bookkeeping,
accounting, inventory control, supervisory and general operating procedures
for the effective operation of a EASYRIDERS business;
4. Ongoing research and development of new improvements, new
products and services and other modifications to the System;
5. Advertising, displays and other promotional programs; and
6. Refresher training courses.
D. Franchisor or Franchisor's representative shall make periodic
visits to the Franchised Business for the purposes of consultation,
assistance, and guidance of Franchisee in all aspects of the operation and
management of the Franchised Business. Franchisor, and Franchisor's
representatives, who attend at the Franchised Business will prepare, for the
benefit of both Franchisor and Franchisee, written reports in respect to such
visits outlining any suggested changes or improvements in the operations of
the Franchised Business and detailing any defaults in such operations which
become evident as a result of any such visit, and a copy of each such written
report shall be provided to both Franchisor and Franchisee. Franchisor shall
advise Franchisee of problems arising out of the operation of the Franchised
Business as disclosed by reports submitted to Franchisor by Franchisee or by
inspections conducted by Franchisor of the Franchised Business.
E. All of the specifications, Approved Suppliers Lists, Approved
Supplies Lists, training and operations manuals to be provided by Franchisor
to Franchisee pursuant to this Agreement shall be delivered upon completion of
training.
XIV. INSURANCE
A. Franchisee shall procure at its expense and maintain in full force
and effect during the term of this Agreement, an insurance policy or policies
protecting Franchisee and Franchisor, and their officers, directors, partners
and employees, from claims, demands, defense costs, attorneys fees, expenses,
liability, loss and damage, including personal injury, death, or property
damage or expense of whatsoever kind or nature arising out of or occurring
upon or in connection with the Franchised Business, as Franchisor may
reasonably require for its own and Franchisee's protection. Franchisor shall
be named an additional insured in such policy or policies. Such insurance is
limited to its "conditions, provisions and exclusions" and does not
necessarily include any expense whatsoever arising or occurring upon or in
connection with the Franchised Business.
B. Such policy or policies shall be written by an insurance company
licensed in the state in which Franchisee operates and having at least an "A"
Rating Classification as indicated in Best's Key Rating Guide in accordance
with standards and specifications set forth in the Confidential Operations
Manual or otherwise in writing, and shall include, at a minimum (except as
additional coverages and higher policy limits may reasonably be specified for
all franchisees from time to time by Franchisor in the Confidential Operations
Manual or otherwise in writing) the following:
1. All risks coverage insurance on the EASYRIDERS business and
all fixtures, equipment, supplies and inventory and other property used in the
operation of the EASYRIDERS business (which coverage may include flood and/or
earthquake coverage where applicable, and theft insurance) for full repair and
replacement value of the machinery, equipment, improvements and betterments,
without any applicable co-insurance clause except that an appropriate
deductible clause shall be permitted.
2. Worker's compensation and employer's liability insurance as
well as such other insurance as may be required by statute or rule of the
state in which the Franchised Business is located and operated.
3. Comprehensive general liability insurance and product
liability insurance including a per premises aggregate with the following
coverages: broad form contractual liability, personal injury,
products/completed operation; and fire legal; insuring Franchisor and
Franchisee against all claims, suits, obligations, liabilities and damages,
including attorneys' fees, based upon or arising out of actual or alleged
personal injuries or property damage resulting from, or occurring in the
course of, or on or about or otherwise relating to the Franchised Business
including General Aggregate coverage in the following limits:
Recommended Coverage Minimum Limits of Coverage
- -------------------- --------------------------
General Aggregate............................. $1,000,000.00
Products/Completed Operations Aggregate....... $1,000,000.00
Personal and Advertising Injury............... $1,000,000.00
Each Occurrence............................... $1,000,000.00
Fire Damage (any one fire)....................... $50,000.00
Medical Expense (any one person).................. $5,000.00
4. Business interruption insurance for actual losses sustained.
5. Automobile liability insurance, including owned, hired and
non-owned vehicle coverage, with a combined single limit of at least ONE
MILLION DOLLARS ($1,000,000.00)
6. Such additional insurance and types of coverage as may be
required by the terms of any lease for the Franchised Business, or as may be
required from time to time by Franchisor.
7. Franchisees which service motorcycles at the Franchised
Business shall obtain and maintain (i) legal liability insurance with minimum
limits of TEN THOUSAND Dollars ($10,000.00) per vehicle and ONE HUNDRED
THOUSAND Dollars ($100,000.00) per aggregate loss, and (ii) liability
insurance with a minimum coverage limit of ONE MILLION Dollars
($1,000,000.00).
C. The insurance afforded by the policy or policies respecting
liability shall not be limited in any way by reason of any insurance which may
be maintained by Franchisor. Within four (4) months of the signing of this
Agreement, but in no event later than the date on which Franchisee acquires an
interest in the real property on which it will develop and operate the
Franchised Business, a Certificate of Insurance showing compliance with the
foregoing requirements shall be furnished by Franchisee to Franchisor for
approval. Such certificate shall state that said policy or policies will not
be canceled or altered without at least thirty (30) days prior written notice
to Franchisor and shall reflect proof of payment of premiums. Maintenance of
such insurance and the performance by Franchisee of the obligations under this
Paragraph shall not relieve Franchisee of liability under the indemnity
provision set forth in this Agreement. Minimum limits as required above may
be modified from time to time, as conditions require, by written notice to
Franchisee.
D. Should Franchisee, for any reason, not procure and maintain such
insurance coverage as required by this Agreement, Franchisor shall have the
right and authority (without, however, any obligation to do so) immediately to
procure such insurance coverage and to charge to Franchisee the cost of same
together with a reasonable fee for expenses incurred by Franchisor in
connection with such procurement, shall be payable by Franchisee immediately
upon notice.
XV. COVENANTS
A. Unless otherwise specified, the term "Franchisee" as used in this
Paragraph XV. shall include, collectively and individually, all officers,
directors, and holders of a beneficial interest of five percent (5%) or more
of the securities of Franchisee, and of any corporation directly or indirectly
controlling Franchisee, if Franchisee is a corporation; and the general
partners and any limited partner (including any corporation and the officers,
directors, and holders of a beneficial interest of five percent (5%) or more
of securities, of a corporation which controls, directly or indirectly, any
general or limited partner) if Franchisee is a partnership.
B. Franchisee covenants that during the term of this Agreement and
any renewals thereof, except as otherwise approved in writing by Franchisor,
Franchisee (if Franchisee is an individual), a shareholder of a beneficial
interest of ten percent (10%) or more of the securities of Franchisee (if
Franchisee is a corporation), a general partner of Franchisee (if Franchisee
is a partnership), or Franchisee's full-time manager (approved by Franchisor)
shall devote full time, energy, and best efforts, to the management and
operation of the Franchised Business.
C. Franchisee covenants that during the term of this Agreement and
any renewal thereof, unless an exception is specifically approved by
Franchisor in writing, Franchisee shall not, either directly or indirectly,
for himself, for himself, or through, on behalf of, or in conjunction with any
person, persons, partnership, or corporation:
1. Divert or attempt to divert any business or customer of the
Franchised Business to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious
or prejudicial to the goodwill associated with the Marks and the System.
2. Employ or seek to employ any person who is at that time
employed by Franchisor or by any other Franchisee of Franchisor, or otherwise
directly or indirectly induce or seek to induce such person to leave his or
her employment thereat.
3. Own, maintain, engage in, or have any interest in any
business (including any business operated by Franchisee prior to entry into
this Agreement) specializing, in whole or in part, in the wholesale or retail
sale or distribution of motorcycle-related paraphernalia and related hard
goods and related merchandise and products, or offering, selling or providing
merchandise or services the same as or similar to that offered, sold or
provided through the System.
D. Franchisee specifically acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable training and confidential
information, including, without limitation, information regarding the
promotional, operational, sales, and marketing methods and techniques of
Franchisor and the System. Accordingly, Franchisee covenants that, except as
otherwise approved in writing by Franchisor, Franchisee shall not, for a
period of two (2) years after the expiration or termination of this Agreement,
regardless of the cause of the termination, either directly or indirectly, for
himself, or through, on behalf of, or in conjunction with any person, persons,
partnership, or corporation, own, maintain, engage in, or have any interest in
any business specializing, in whole or in part, in the wholesale or retail
sale or distribution of motorcycle-related paraphernalia and related hard
goods, or offering or providing any related services or selling any
merchandise or product the same as or similar to those provided or sold
through the EASYRIDERS System:
1. Within the MSA in which the Franchised Business is located; or
2. Within a radius of ten (10) miles of the Franchised Business;
or
3. Within a radius of ten (10) miles of the location of any other
business using the System, whether franchised or owned by Franchisor.
E. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
The parties have reviewed and acknowledged that the foregoing covenants are
reasonable including but not limited to geographical and time limitations. If
all or any portion of a covenant in this Paragraph XV. is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which Franchisor is a party, Franchisee shall be bound by
any lesser covenant subsumed within the terms of such covenant that imposes
the maximum duty permitted by law, as if the resulting covenant were stated in
and made a part of this Paragraph XV.
F. Franchisee understands and acknowledges that Franchisor shall have
the right, in its sole discretion, to reduce the scope of any covenant set
forth in Paragraphs XV.C. and XV.D. in this Agreement, or any portion thereof,
without Franchisee's consent, effective immediately upon receipt by Franchisee
of written notice thereof, without Franchisee's consent, effective immediately
upon receipt by Franchisee of written notice thereof, and Franchisee shall
comply forthwith with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Paragraph XXVI.
G. Franchisor shall have the right to require all of Franchisee's
personnel performing managerial or supervisory functions and all personnel
receiving special training from Franchisor to execute similar covenants in a
form satisfactory to Franchisor.
XVI. DEFAULT AND TERMINATION
A. If Franchisee is in substantial compliance with this Agreement and
Franchisor materially breaches this Agreement and fails to cure such breach
within a reasonable time after written notice thereof is delivered to
Franchisor, Franchisee may terminate this Agreement. Such termination shall
be effective thirty (30) days after delivery to Franchisor of notice that such
breach has not been cured and Franchisee elects to terminate this Agreement.
A termination of this Agreement by Franchisee for any reason other than breach
of this Agreement by Franchisor and Franchisor's failure to cure such breach
within a reasonable time after receipt of written notice thereof shall be
deemed a termination by Franchisee without cause.
B. This Agreement shall terminate automatically upon delivery of
notice of termination to Franchisee, if Franchisee or its owner(s),
officer(s), or manager(s):
1. Fails to satisfactorily complete the training program as
provided in Paragraph IV of this Agreement;
2. Has made any material misrepresentation or omission in its
application for the franchise;
3. Is convicted of or pleads no contest to a felony or other
crime or offense that is likely to adversely affect the reputation of
Franchisee or the EASYRIDERS Franchised Business;
4. Makes any unauthorized use, disclosure or duplication of any
portion of the Confidential Operations Manual or duplicates or discloses or
makes any unauthorized use of any trade secret or confidential information
provided to Franchisee by Franchisor;
5. Abandons or fails or refuses to actively operate the
Franchised Business for two (2) business days in any twelve (12) month period,
unless the Franchised Business has been closed for a purpose approved by
Franchisor, or fails to relocate to an approved premises within an approved
period of time following expiration or termination of the lease for the
premises of the Franchised Business;
6. Surrenders or transfers control of the operation of the
EASYRIDERS Franchised Business, makes an unauthorized direct or indirect
assignment of the franchise or an ownership interest in Franchisee or fails or
refuses to assign the franchise or the interest in Franchisee of a deceased or
disabled controlling owner thereof as herein required;
7. Submits to Franchisor on three (3) or more separate occasions
at any time during the term of the franchise any reports or other data,
information or supporting records which understate by more than three percent
(3%) the Continuing Services and Royalty Fees owed to Franchisor for any
period of, or periods aggregating, three (3) or more weeks, and Franchisee is
unable to demonstrate that such understatements resulted from inadvertent
error;
8. If Franchisee shall become insolvent or make a general
assignment for the benefit of creditors, or if a petition in bankruptcy is
filed by Franchisee or such a petition is filed against and consented to by
Franchisee, or if Franchisee is adjudicated a bankrupt, or if a bill in equity
or other proceeding for the appointment of a receiver of Franchisee or other
custodian is filed by Franchisee, or if a receiver or other custodian
(permanent or temporary) of Franchisee's assets or property, or any part
thereof, is appointed by any court of competent jurisdiction, or if
proceedings for a composition with creditors under any state or federal law
should be instituted by or against Franchisee, or if a final judgement remains
unsatisfied or of record for thirty (30) days or longer (unless supersedeas
bond is filed), or if execution is levied against Franchisee's Franchised
Business or property, or suit to foreclose any lien or mortgage against the
premises or equipment is instituted against Franchisee and not dismissed
within thirty (30) days, or if the real or personal property of Franchisee's
Franchised Business shall be sold after levy thereupon by any sheriff,
marshall, or constable;
9. Materially misuses or makes an unauthorized use of the Marks
or commits any act which can reasonably be expected to materially impair the
goodwill associated with the Marks;
10. Materially misuses or makes an unauthorized use of the
Proprietary Software Package (if developed); or
11. Fails on two (2) or more separate occasions within any
period of twelve (12) consecutive months to submit when due reports or other
information or supporting records, to pay when due the Continuing Services and
Royalty Fees, advertising contributions, amounts due for purchases from
Franchisor or its affiliates or other payments due to Franchisor or its
affiliates, or otherwise fails to comply with this Agreement, whether or not
such failures to comply are corrected after notice thereof is delivered to
Franchisee.
C. This Agreement shall terminate without further action or notice to
Franchisee if Franchisee's owner:
1. Fails or refuses to make payments of any amounts due
Franchisor for Continuing Services and Royalty Fees, advertising
contributions, purchases from Franchisor or its affiliates or any other
amounts due to Franchisor or its affiliates, and does not correct such failure
or refusal within ten (10) days after written notice of such failure is
delivered to Franchisee;
2. Fails or refuses to comply with any other provision of this
Agreement, or any other agreement to which Franchisor and Franchisee are
parties or any mandatory specification, standard or operating procedure
prescribed in the Confidential Operations Manual or otherwise in writing, and
does not correct such failure within thirty (30) days (or provide proof
acceptable to Franchisor that it has made all reasonable efforts to correct
such failure and will continue to make all reasonable efforts to cure until a
cure is effected, if such failure cannot reasonably be corrected within thirty
(30) days) after written notice of such failure to comply is delivered to
Franchisee.
D. To the extent that the provisions of this Agreement provide for
periods of notice less than those required by applicable law, or provide for
termination, cancellation, non-renewal or the like other than in accordance
with applicable law, such provisions shall, to the extent such are not in
accordance with applicable law, not be effective, and Franchisor shall comply
with applicable law in connection with each of these matters.
E. In addition to Franchisor's right to terminate this Agreement, and
not in lieu of such right or any other rights against Franchisee, Franchisor,
in the event that Franchisee shall not have cured a default under this
Agreement within the twenty (20) days after receipt of the written "Notice to
Cure" from Franchisor, may, at its option, enter upon the premises of the
EASYRIDERS Franchised Business and exercise complete authority with respect to
the operation of said business until such time as Franchisor determines that
the default of Franchisee has been cured and that there is compliance with the
requirements of this Agreement. Franchisee acknowledges that a designated
representative of Franchisor may take over, control, and operate said
business, and that Franchisee shall pay Franchisor a service fee of not less
than FIVE HUNDRED Dollars ($500.00) per day plus all travel expenses, room and
board and other expenses reasonably incurred by such representative so long as
it shall be required by the representative to enforce compliance herewith.
XVII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION
Upon termination or expiration, this Agreement and all rights granted
hereunder to Franchisee shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised
Business under this Agreement, and shall not thereafter, directly or
indirectly, represent to the public or hold itself out as a present or former
Franchisee of Franchisor.
B. Franchisee shall assign to Franchisor upon its demand Franchisee's
interest in any lease then in effect for the Franchised Business premises, and
Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor
of compliance with this obligation within thirty (30) days after termination
or expiration of this Agreement.
C. Franchisee shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any confidential methods, the
Proprietary Software Package (if developed), procedures and techniques
associated with the System; the Marks; and any distinctive form, slogans,
signs, symbols, logos or devices associated with the System. In particular,
Franchisee shall cease to use, without limitation, all signs, advertising
materials, stationery, forms, and any other articles which display the Marks
associated with the System.
D. Franchisee shall take such action as may be necessary to cancel or
assign to Franchisor or Franchisor's designee, at Franchisor's option, any
assumed name or equivalent registration which contains the name "EASYRIDERS"
or any Marks associated with the System, and Franchisee shall furnish
Franchisor with evidence satisfactory to Franchisor of compliance with this
obligation within thirty (30) days after termination or expiration of this
Agreement.
E. Franchisee shall, in the event it continues to operate or
subsequently begins to operate any other business, not use any reproduction,
counterfeit, copy or colorable imitation of the Marks either in connection
with such other business or the promotion thereof, which is likely to cause
confusion, mistake or deception, or which is likely to dilute Franchisor's
exclusive rights in and to the Marks. Franchisee shall not utilize any
designation of origin or description or representation which falsely suggests
or represents an association or connection with Franchisor so as to constitute
unfair competition. Franchisee shall make such modifications or alterations
to the Franchised Business (including, without limitation, the changing of the
telephone number) immediately upon termination or expiration of this Agreement
as may be necessary to prevent any association between Franchisor or the
System and any business thereon subsequently operated by Franchisee or others,
and shall make such specific additional changes thereto as Franchisor may
reasonably request for that purpose, including, without limitation, removal of
all distinctive physical and structural features identify the System. In the
event Franchisee fails or refuses to comply with the requirements of this
Paragraph XVII., Franchisor shall have the right to enter upon the premises
where Franchisee's Franchised Business was conducted, without being guilty of
trespass or any other tort, for the purpose of making or causing to be make
such changes as may be required at the expense of Franchisee, which expense
Franchisee shall pay upon demand.
F. Franchisee shall promptly pay all sums owing to Franchisor and its
affiliates. In the event of termination for any default of Franchisee, such
sums shall include all damages, costs, and expenses, including reasonable
attorneys' fees, incurred by Franchisor as a result of the default.
G. Franchisee shall pay to Franchisor all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Franchisor
subsequent to the termination or expiration of the franchise herein granted in
obtaining injunctive or other relief for the enforcement of any provisions of
this Paragraph XVII or Paragraph XV.
H. Franchisee shall immediately turn over to Franchisor all manuals,
including the Confidential Operations Manual, customer lists, records, files,
instructions, brochures, agreements, disclosure statements, and any and all
other materials provided by Franchisor to Franchisee relating to the operation
of the Franchised Business (all of which are acknowledged to be Franchisor's
property).
I. Franchisor shall acquire right, title and interest to any sign or
sign faces bearing the Marks. Franchisee hereby acknowledges Franchisor's
right to access the Franchised Premises should Franchisor elect to take
possession of any said sign or sign faces bearing the Marks.
J. Franchisor shall have the right (but not the duty), to be
exercised by notice of intent to do so within thirty (30) days after
termination or expiration, to purchase for cash, except as provided in
Paragraph XVII.I, any or all equipment, supplies, and other inventory,
advertising materials, and all items bearing the Marks, at Franchisee's cost
or fair market value, whichever is less. If the parties cannot agree on fair
market value within a reasonable time, the determination of fair market value
shall be submitted to arbitration in accordance with Paragraph XXIX. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set off all amounts due from Franchisee under this Agreement
against any payment therefor.
K. Franchisee hereby acknowledges that all telephone numbers used in
the operation of the franchised businesses constitute assets of the Franchised
Business; and upon termination of expiration of this Agreement Franchisee
shall assign to Franchisor or its designee, all Franchisee's right, title, and
interest in and to Franchisee's telephone numbers and shall notify the
telephone company and all listing agencies of the termination or expiration of
Franchisee's right to use any telephone number and any regular, classified or
other telephone directory listing associated with the Marks and to authorize a
transfer of same to or at the direction of Franchisor.
L. Franchisee shall comply with the covenants contained in Paragraph
XV. of this Agreement.
M. All obligations of Franchisor and Franchisee which expressly or by
their nature survive the expiration or termination of this Agreement shall
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied or by their nature
expire.
XVIII. TRANSFERABILITY OF INTEREST
A. This Agreement and all rights hereunder can be assigned and
transferred by Franchisor and, if so, shall be binding upon and inure to the
benefit of Franchisor's successors and assigns; provided, however, that with
respect to any assignment resulting in the subsequent performance by the
assignee of the functions of Franchisor, the assignee shall;
1. At the time of such assignment, be financially responsible
and economically capable of performing the obligations of Franchisor
hereunder; and
2. Expressly assume and agree to perform such obligations.
Specifically, and without limitation to the foregoing, Franchisee expressly
agrees that Franchisor may sell its assets, Marks or System outright to a
third party; may make a public offering of securities; may engage in a private
placement of some or all of its securities; may merge, acquire other
corporations or entities, or be acquired by another corporation or other
entity; may undertake a refinancing, recapitalization, leveraged buy out or
other economic or financial restructuring; and, with regard to any or all of
the above sales, assignments and dispositions, Franchisee expressly and
specifically waives any claims, demands or damages arising from or related to
the loss of said Marks (or any variation thereof) and/or the loss of
association with or identification of EASYRIDERS FRANCHISING, INC., as
Franchisor hereunder. Nothing contained in this Agreement shall require
Franchisor to remain in the business in the event that Franchisor exercises
its right hereunder to assign its rights in this Agreement.
B. This Agreement and all rights hereunder may be assigned and
transferred by Franchisee and, if so, shall be binding upon and inure to the
benefit of Franchisee's successors and assigns, subject to the following
conditions and requirements, and Franchisor's right of first refusal as set
forth herein:
1. No Franchisee, partner of Franchisee, (if Franchisee is a
partnership), or shareholder of Franchisee (if Franchisee is a corporation),
without Franchisor's prior written consent, by operation of law or otherwise
shall sell, assign, transfer, convey, give away, or encumber to any person,
firm, or corporation, all or any part of its interest in this Agreement or its
interest in the franchise granted hereby or its interest in any
proprietorship, partnership or corporation which owns any interest in the
franchise, nor offer, permit, or suffer the same to be sold, assigned,
transferred, conveyed, given away, or encumbered in any way to any person,
firm, or corporation. Franchisee may not, without the prior written consent
of Franchisor, fractionalize any of the rights of Franchisee granted pursuant
to this Agreement. Any purported assignment of any of Franchisee's rights
herein not having the aforesaid consent shall be null and void and shall
constitute a material default hereunder.
2. Franchisor shall not unreasonably withhold its consent to any
transfer referenced in Paragraphs XVII.B.1 of this Agreement when requested;
provided, however, that the following conditions and requirements shall first
be met to the full satisfaction of Franchisor.
a. If Franchisee is an individual or partnership and
desires to assign and transfer its rights to a corporation:
(1) Said transferee corporation shall be newly
organized and its charter shall provide that its activities are confined
exclusively to acting as a EASYRIDERS Franchisee as franchised under this
Agreement;
(2) Franchisee shall be and shall remain the owner of
the majority stock interest of the transferee corporation;
(3) The individual Franchisee (or, if Franchisee is a
partnership, one of the partners) shall be and shall remain the principal
executive officer of the corporation;
(4) The transferee corporation shall enter into a
written assignment (in a form satisfactory to Franchisor), in which the
transferee corporation assumes all of Franchisee's obligations hereunder;
(5) All shareholders of the transferee corporation
shall enter into a written agreement, in a form satisfactory to Franchisor,
jointly and severally guaranteeing the full payment and performance of the
transferee corporation's obligations to Franchisor under this Agreement;
(6) Each stock certificate of the transferee
corporation shall have conspicuously endorsed upon it a statement that it is
held subject to, and that further assignment or transfer thereof is subject
to, all restrictions imposed upon assignments by this Agreement;
(7) No new shares of common or preferred voting stock
in the transferee corporation shall be issued to any person, partnership,
trust, foundation, or corporation without obtaining Franchisor's prior written
consent and then only upon disclosure of the terms and conditions contained
herein being made to the prospective new holders of the stock;
(8) All accrued money obligations of Franchisee to
Franchisee's suppliers, Franchisor, its affiliates or assignees, shall be
satisfied prior to assignment or transfer.
b. If the transfer, other than such transfer as is
authorized under Paragraph XVIII.B.2.a. of this Agreement, if consummated
alone or together with other related previous, simultaneous, or proposed
transfers, would have the effect of transferring control of the franchise
licensed herein to someone other than an original signatory of this Agreement;
(1) The transferee(s) shall be of good moral character
and reputation and shall have a good credit rating and competent business
qualifications reasonably acceptable to Franchisor. Franchisee shall provide
Franchisor with such information as Franchisor may require to make such
determination concerning each such proposed transferee(s).
(2) The transferee(s) or such other individual(s) as
shall be the actual manager of the franchise shall have successfully completed
and passed the training course then in effect for franchisees, or otherwise
demonstrated to Franchisor's satisfaction, sufficient ability to operate the
unit being transferred.
(3) The transferee(s), including all shareholders,
officers, directors and partners of the transferee(s), shall jointly and
severally execute any or all of the following, at Franchisor's sole discretion
and as Franchisor shall direct:
aa. A Franchise Agreement and other standard
ancillary agreements with Franchisor on the current standard forms being used
by Franchisor, except that an additional franchise fee shall not be charged;
and/or
bb. A written assignment from Franchisee in a
form satisfactory to Franchisor, wherein transferee shall assume all of
Franchisee's obligations hereunder.
(4) Approval by Franchisor of any transfer by
Franchisee of the franchise herein granted or any of Franchisee's rights under
this Agreement shall in no way be deemed a release by Franchisor of
Franchisee's obligations pursuant to this Agreement . Consent by Franchisor to
a transfer of the franchise shall not constitute or be interpreted as consent
for any future transfer thereof.
(5) The term of said agreements required pursuant to
Paragraph XVII.B.2.(3) shall be for the unexpired term of this Agreement and
for any extensions or renewals as provided herein.
(6) If transferee is a corporation:
aa. Each stock certificate of the transferee
corporation shall have conspicuously endorsed upon it a statement that it is
held subject to, and that further assignment or transfer thereof is subject
to, all restrictions imposed upon assignments by this Agreement; and
bb. No new shares of common or preferred voting
stock in the transferee corporation shall be issued to any person,
partnership, trust, foundation, or corporation without obtaining Franchisor's
prior written consent, and then only upon disclosure of the terms and
conditions contained herein being made to the prospective new holders of the
stock; and
cc. All shareholders of the transferee
corporation shall enter into a written agreement, in a form satisfactory to
Franchisor, jointly and severally guaranteeing full payment and the
performance of the transferee corporation of all obligations under this
Agreement.
(7) All accrued money obligations of Franchisee to
Franchisee's suppliers, Franchisor, its affiliates or assignees, shall be
satisfied prior to assignment or transfer, and Franchisee shall not be in
default under the terms of this Agreement.
(8) Franchisee, prior to the transfer, shall execute a
general release, in a form prescribed by Franchisor, of any and all existing
claims against Franchisor and its affiliates, if any, and their respective
officers, directors, agents and employees, except such claims as are not
permitted to be waived under applicable law.
3. Franchisee shall have fully paid and satisfied all of
Franchisee's obligations to Franchisor, and the transferee or Franchisee shall
have fully paid to Franchisor a non-refundable transfer fee equal to one-half
(1/2) the then-current initial franchise fee charged by Franchisor, for start-
up franchises, at the time of the transfer, for the training, supervision,
administrative costs, overhead, counsel fees, accounting and other expenses
incurred by Franchisor in connection with the transfer. This transfer fee
does not apply to an assignment of interest to a corporation under Paragraph
XVIII.B.2.a of this Agreement.
4. No sale, assignment, transfer, conveyance, encumbrance, or
gift of any interest in this Agreement or in the franchise granted thereby,
shall relieve Franchisee and the shareholders or partners participating in any
transfer, of the obligations of the covenants contained in Paragraph XV.,
except where Franchisor shall expressly authorize in writing.
C. Franchisee must give Franchisor ninety (90) days written notice
prior to any sale or assignment by Franchisee. The purpose of this Paragraph
is to enable Franchisor to comply with any applicable state or federal
franchise disclosure laws.
D. Franchisee must promptly ("promptly" herein defined as within
fifteen (15) days of receipt of an offer to buy) give Franchisor written
notice whenever Franchisee has received an offer to buy Franchisee's
franchise. Franchisee must also give Franchisor written notice simultaneously
with any offer to sell the franchise made by, for, or on behalf of Franchisee.
The purpose of this Paragraph is to enable Franchisor to comply with any
applicable state or federal franchise disclosure laws or rules.
E. Franchisee shall not, without prior written consent of Franchisor,
place in, on or upon the location of the Franchised Business, or in any
communication media, any form of advertising relating to the sale of the
Franchised Business or the rights granted hereunder.
XIX. DEATH OR INCAPACITY OF FRANCHISEE
A. In the event of the death or incapacity of an individual
Franchisee, or any partner of a Franchisee which is a partnership or any
shareholder owning fifty percent (50%) of more of the capital stock of a
Franchisee which is a corporation, the heirs, beneficiaries, devisees, or
legal representatives of said individual, partner or shareholders shall,
within one hundred eighty (180) days of such event:
1. Apply to Franchisor for the right to continue to operate the
franchise for the duration of the term of this Agreement and any renewals
hereof, which right shall be granted upon the fulfillment of all of the
conditions set forth in Paragraph XVII.B.2.b of this Agreement (except that no
transfer fee shall be required); or
2. Sell, assign, transfer, or convey Franchisee's interest in
compliance with the provisions of Paragraphs XVIII.B. and XX. of this
Agreement; provided, however, in the event a proper and timely application for
the right to continue to operate has been made and rejected, the one hundred
eighty (180) days to sell, assign, transfer or convey shall be computed from
the date of said rejection. For purposes of this Paragraph, Franchisor's
silence on an application through the one hundred and eighty (180) days
following the event of death or incapacity shall be deemed a rejection made on
the last day of such period.
B. In the event of the death or incapacity of an individual
Franchisee, or any partner or shareholder of a Franchisee which is a
partnership or corporation, where the aforesaid provisions of Paragraph XVIII
have not been fulfilled within the time provided, all rights franchised to
Franchisee under this Agreement shall, at the option of Franchisor, terminate
forthwith and Franchisor shall have the option to purchase the assets of
Franchised Business in accordance with Paragraph XVII.J. of this Agreement.
XX. RIGHT OF FIRST REFUSAL
If Franchisee or its owners propose to sell the Franchised Business (or
its assets) or part or all of the ownership of Franchisee, Franchisee or its
owners shall obtain and deliver a bona fide, executed written offer to
purchase same to Franchisor, which shall, for a period of fifteen (15) days
from the date of delivery of such offer, have the right, exercisable by
written notice to Franchisee or its owners, to purchase the Franchised
Business (or its assets) or such ownership for the price and on the terms and
conditions contained in such offer, provided that Franchisor may substitute
cash for any form of payment proposed in such offer. If Franchisor does not
exercise this right of first refusal, the offer may be accepted by Franchisee
or its owners, subject to the prior written approval of Franchisor, as
provided in Paragraph XVIII hereof, provided that if such offer is not so
accepted within six (6) months of the date thereof, Franchisor shall again
have the right of first refusal herein described. Should a transfer
Franchisee assume the rights and obligations under this Agreement, such
transferee Franchisee shall likewise by subject to Franchisor's right of first
refusal under terms and conditions as set forth herein.
XXI. OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH
In order to prevent any interruption of the Franchised Business which
would cause harm to said business and thereby depreciate the value thereof,
Franchisee authorizes Franchisor, in the event that Franchisee is absent or
incapacitated by reason of illness or death and is not, therefore, in the sole
judgement of Franchisor, able to operate the Franchised Business, to operate
said business for so long as Franchisor deems necessary and practical, and
without waiver of any other rights or remedies Franchisor may have under this
Agreement. Nothing contained herein shall create an obligation on the part of
Franchisor, nor shall Franchisor's operation of the Franchised Business create
an obligation on the part of Franchisor to so operate the Franchised Business.
All monies from the operation of the business during such period of operation
by Franchisor shall be kept in a separate account and the expenses of the
business, including reasonable compensation and expenses for Franchisor's
representative, shall be charged to said account.
XXII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. This Agreement does not create a fiduciary relationship between
the parties, nor does it constitute Franchisee as an agent, legal
representative, joint venturer, partner, employee, or servant of Franchisor
for any purpose whatsoever; and it is understood between the parties hereto
that Franchisee shall be an independent contractor and is in no way authorized
to make any contract, agreement, warranty or representation on behalf of
Franchisor, or to create any obligation, express or implied, on behalf of
Franchisor.
B. During the term of this Agreement and any extension hereof,
Franchisee shall hold itself out to the public as an independent contractor
operating the business pursuant to a franchise from Franchisor. Franchisee
shall take such affirmative action as may be necessary to do so, including,
without limitation, exhibiting a notice of that fact in a conspicuous place on
the Franchised Premises, the content of which Franchisor reserves the right to
specify.
C. Franchisee shall defend at his own cost and indemnify and hold
harmless Franchisor, its affiliates, shareholders, directors, officers,
employees and agents, from and against any and all claims demands, losses,
costs, legal actions, judgements, awards, expenses (including, without
limitation, reasonable accountants', attorneys', and expert witness fees,
costs of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses), damages and liabilities, however,
caused, resulting directly or indirectly from or pertaining to the use,
condition, or construction, equipping, decorating, maintenance or operation of
the Franchised Business, including the sale of any products, service or
merchandise sold from the Franchised Business. Such loss, claims, costs,
expenses, damages and liabilities shall include, without limitation, those
arising from latent or other defects in the Franchised Business, whether or
not discoverable by Franchisor, and those arising from the death or injury to
any person or arising from damage to the property of Franchisee or Franchisor,
their agents or employees, or any third person, firm or corporation, whether
or not such losses, claims, costs, expenses, damages, or liabilities were
actually or allegedly caused wholly or in part through the active or passive
negligence of Franchisor or any of its agents or employees or resulted from
any strict liability imposed on Franchisor or any of its agents or employees.
All such indemnification shall survive the termination of this Agreement.
D. Franchisor shall not, by virtue of any approvals, advice or
services provided to Franchisee, assume responsibility or liability to
Franchisee or any third parties to which Franchisor would not otherwise be
subject.
XXIII. NON-WAIVER
No failure of Franchisor to exercise any power reserved to it hereunder,
or to insist upon strict compliance by Franchisee with any obligation or
condition hereunder, and no custom or practice of the parties in variance with
the terms hereof, shall constitute a waiver of Franchisor's right to demand
exact compliance with the terms hereof. Waiver by Franchisor of any
particular default by Franchisee shall not be binding unless in writing and
executed by the party sought to be charged and shall not affect or impair
Franchisor's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, waiver, forbearance, or omission of
Franchisor to exercise any power or rights arising out of any breach or
default by Franchisee of any of the terms, provisions, or covenants hereof,
affect or impair Franchisor's rights nor shall such constitute a waiver by
Franchisor of any right hereunder of the right to declare any subsequent
breach or default. Subsequent acceptance by Franchisor of any payment(s) due
to it hereunder shall not be deemed to be a waiver by Franchisor of any
preceding breach by Franchisee of any terms, covenants or conditions of this
Agreement.
XXV. NOTICE
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed by certified mail,
return receipt requested, to the respective parties at the following addresses
unless and until a different address has been designated by written notice to
the other party:
Notices to Franchisor: EASYRIDERS FRANCHISING, INC.
5055 Chesebro Road
Agoura Hill, California 91301
Copy to:
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Notices to Franchisee: Leon Hatcher dba Easyriders of Fresno
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805 W. Dakota St. #108
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Clovis, CA 93612
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Copies to:
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Any notice by certified mail shall be deemed to have been given at the date
and time of mailing.
XXV. COST OF ENFORCEMENT OR DEFENSE
In the event that either party to this Agreement is required to employ
legal counsel or to incur other expenses to enforce any obligation of the
second party hereunder, or to defend against any claim, demand, action, or
proceeding by reason of the second party's failure to perform any obligation
imposed upon the second party by this Agreement, and provided that legal
action is filed and such action or the settlement thereof establishes the
second party's default hereunder, then the first party shall be entitled to
recover from the second party the amount of all reasonable attorney's fees of
such counsel and all other expenses incurred in enforcing such obligation or
in defending against such claim, demand, action or proceeding, whether
incurred prior to, or in preparation for, or in contemplation of the filing of
such action or thereafter. Nothing contained in this Paragraph shall relate
to arbitration proceedings pursuant to this Agreement.
XXVI. ENTIRE AGREEMENT
This Agreement, and Exhibit attached hereto, and the documents referred
to herein, shall be construed together and constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof, and supersede all prior agreements. No other representation
has induced Franchisee to execute this Agreement, and there are no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein, which are of any force or effect with
reference to this Agreement or otherwise. No amendment, change or variance
from this Agreement shall be binding on either party unless executed in
writing by both parties.
XXVII. SEVERABILITY AND CONSTRUCTION
A. Each Paragraph, part, term and/or provision of this Agreement
shall be considered severable, and if, for any reason, any Paragraph, part,
term and/or provision herein is determined to be invalid and contrary to, or
in conflict with, any existing or future law or regulation, such shall not
impair the operation of or affect the remaining portions, sections, parts,
terms and/or provisions of this Agreement, and the latter will continue to be
given full force and effect and bind the parties hereto; and said invalid
sections, parts, terms and/or provisions shall be deemed not part of this
Agreement.
B. Anything to the contrary herein notwithstanding, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Franchisor or Franchisee and such of their respective
successors and assigns as may be contemplated by this Agreement, any rights or
remedies under or by reason of this Agreement.
C. Franchisee shall be bound by an promise or covenant imposing the
maximum duty permitted by law which is contained within the terms of any
provision hereof, as though it were separately stated in and made a part of
this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court may hold to be unreasonable and
unenforceable in a final decision to which Franchisor is a party, or from
reducing the scope of any promise or covenant to the extent required to comply
with such a court order.
D. All captions herein are intended solely for the convenience of the
parties, and none shall be deemed to affect the meaning or construction of any
provision hereof.
E. This Agreement may be executed in triplicate, and each copy so
executed shall be deemed an original.
F. The recitals set forth in this Agreement are specifically
incorporated into the terms of this Agreement and hereby constitute a part
thereof.
XXVIII. APPLICABLE LAW
A. THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY
FRANCHISOR IN CALIFORNIA; AND SHALL BE INTERPRETED AND CONSTRUED UNDER THE
LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY CONFLICT OF LAW,
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15, U.S.C. SECTIONS 1051 ET SEQ), THE UNITED STATES COPYRIGHT ACT
OF 1976, AS AMENDED, AND THE UNITED STATES PATENT ACT OF 1952, AS AMENDED.
B. FRANCHISEE ACKNOWLEDGES THAT THIS AGREEMENT IS ENTERED INTO IN LOS
ANGELES COUNTY, CALIFORNIA AND THAT ANY ACTION SOUGHT TO BE BROUGHT BY EITHER
PARTY, EXCEPT THOSE CLAIMS REQUIRED TO BE SUBMITTED TO ARBITRATION SHALL BE
BROUGHT IN THE APPROPRIATE STATE OR FEDERAL COURT IN CALIFORNIA WITH
JURISDICTION OVER THE MATTER, AND THE PARTIES DO HEREBY WAIVE ALL QUESTIONS OF
PERSONAL JURISDICTION OR VENUE FOR THE PURPOSES OF CARRYING OUT THIS
PROVISION.
C. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED TO FRANCHISOR OR
FRANCHISEE BY THIS AGREEMENT IS INTENDED TO BE, NOR SHALL BE DEEMED, EXCLUSIVE
OF ANY OTHER RIGHT OR REMEDY HEREIN OR BY LAW OR EQUITY PROVIDED OR PERMITTED,
BUT EACH SHALL BE CUMULATIVE OF EVERY OTHER RIGHT OR REMEDY.
D. NOTHING HEREIN CONTAINED SHALL BAR FRANCHISOR'S RIGHT TO OBTAIN
INJUNCTIVE RELIEF AGAINST THREATENED CONDUCT THAT WILL CAUSE IT LOSS OR
DAMAGES, UNDER THE USUAL EQUITY RULES, INCLUDING THE APPLICABLE RULES FOR
OBTAINING RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS.
XXIX. ARBITRATION
A. Any monetary claim arising out of or relating to this Agreement,
or any breach thereof, and any controversy regarding the establishment of the
fair market value of leasehold improvements and other Franchised Business
assets pursuant to Paragraph XVII.J. hereof, shall be submitted to arbitration
in Los Angeles County, California, in accordance with the rules of the
American Arbitration Association and judgement upon the award may be entered
in any court having jurisdiction thereof. Nothing contained herein shall,
however, be construed to limit or to preclude Franchisor from bringing any
action in any court of competent jurisdiction for injunctive or other
provisional relief as Franchisor deems to be necessary or appropriate to
compel Franchisee to comply with his obligations hereunder or to protect the
Marks or other property rights of Franchisor. In addition, nothing contained
herein shall be construed to limit or to preclude Franchisor from joining with
any action for injunctive or provisional relief all monetary claims that
Franchisor may have against Franchisee which arise out of the acts or
omissions to act giving rise to the action for injunctive or provisional
relief. This arbitration provision shall be deemed to be self-executing and
in the event that Franchisee fails to appear any properly noticed arbitration
proceeding, award may be entered against Franchisee notwithstanding his
failure to appear.
B. Nothing herein contained shall bar the right of either party to
seek and obtain temporary injunctive relief from a court of competent
jurisdiction in accordance with applicable law against threatened conduct that
will cause loss or damage, pending completion of the arbitration.
C. It is the intent of the parties that any arbitration between
Franchisor and Franchisee shall be of Franchisee's individual claim and that
the claim subject to arbitration shall not be arbitrated on a classwide basis.
XXX. "FRANCHISEE" DEFINED AND GUARANTY
As used in this Agreement, the term "Franchisee" shall include all
persons who succeed to the interest of the original Franchisee by permitted
transfer or operation of law and shall be deemed to include not only the
individual or entity defined as "Franchisee" in the introductory paragraph of
this Agreement but shall also include all partners of the entity that executes
this Agreement, in the event said entity is a partnership, and all
shareholders, officers and directors of the entity that executes this
Agreement, in the event said entity is a corporation. By the signatures
hereto, all partners, shareholders, officers and directors of the entity that
signs this Agreement as Franchisee acknowledges and accepts the duties and
obligations imposed upon each of them, individually, by the terms of this
Agreement. All partners of the entity that executes this Agreement, in the
event said entity is a partnership and all shareholders, officers and
directors of the entity that executed this Agreement, in the event said entity
is a corporation, shall execute the Guaranty and Assumption of Obligations
attached hereto as Exhibit A and made a part hereof.
XXXI. FORCE MAJEURE
Whenever a period of time is provided in this Agreement for either party
to do or perform any act or thing, except the payment of monies, neither party
shall be liable or responsible for any delays due to strikes, lockouts,
casualties, acts of God, war, governmental regulation or control or other
causes beyond the reasonable control of the parties, and in any event said
time period for the performance of an obligation hereunder shall be extended
for the amount of time of the delay. This clause shall not apply or not
result in an extension of the term of this Agreement.
XXXII. CAVEAT
The success of the business venture contemplated to be undertaken by
Franchisee by virtue of this Agreement is speculative and depends, to a large
extent, upon the ability of Franchisee as an independent businessman, and his
active participation in the daily affairs of the business as well as other
factors. Franchisor does not make any representation or warranty express or
implied as to the potential success of the business venture contemplated
hereby.
XXXIII. ACKNOWLEDGMENTS
A. Franchisee represents and acknowledges that it has received, read
and understood this Agreement and Franchisor's Uniform Franchise Offering
Circular; and that Franchisor has fully and adequately explained the
provisions of each to Franchisee's satisfaction; and that Franchisor has
accorded Franchisee ample time and opportunity to consult with advisors of its
own choosing about the potential benefits and risks of entering into this
Agreement.
B. Franchisee acknowledges that it has received a copy of this
Agreement and the attachments thereto, at least five (5) business days prior
to the date on which this Agreement was executed. Franchisee further
acknowledges that Franchisee has received the disclosure document required by
the Trade Regulation Rule of the Federal Trade Commission entitled Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures, at least (10) business days prior to the date on which this
Agreement was executed.
C. Franchisee has been advised to consult with its own advisors with
respect to the legal, financial and other aspect of this Agreement, the
business franchised hereby, and the prospects for that business. Franchisee
has either consulted with such advisors or has deliberately declined to do so.
D. The covenants not to compete set forth in this Agreement are fair
and reasonable and will not impose any undue hardship on Franchisee, since
Franchisee has other considerable skills, experience and education which
afford Franchisee the opportunity to derive income from other endeavors.
E. Franchisee affirms that all information set forth in any and all
applications, financial statements and submissions to Franchisor is true,
complete and accurate in all respects, with Franchisee expressly acknowledging
that Franchisor is relying upon the truthfulness, completeness and accuracy of
such information.
F. Franchisee has conducted an independent investigation of the
business contemplated by this Agreement and recognizes that, like any other
business, an investment in a EASYRIDERS Franchised Business involves business
risks and that the success of the venture is primarily dependent upon the
business abilities and efforts of Franchisee.
G. Franchisee hereby consents and agrees that any disputes arising
between Franchisor and Franchisee be submitted to arbitration as provided in
Paragraph XXIX.A. of this Agreement.
H. FRANCHISEE UNDERSTANDS AND ACKNOWLEDGES THAT ALL REPRESENTATIONS
OF FACT CONTAINED HEREIN ARE MADE SOLELY BY FRANCHISOR. ALL DOCUMENTS,
INCLUDING FRANCHISOR'S FRANCHISE AGREEMENT AND UNIFORM FRANCHISE OFFERING
CIRCULAR AND ALL EXHIBITS THERETO, HAVE BEEN PREPARED SOLELY IN RELIANCE UPON
REPRESENTATIONS MADE AND INFORMATION PROVIDED BY FRANCHISOR, ITS OFFICERS AND
DIRECTORS. FRANCHISEE FURTHER AGREES TO INDEMNIFY AND HOLD HARMLESS THE
PREPARER OF ANY AND ALL SUCH FRANCHISE AGREEMENTS, OFFERING CIRCULARS AND
EXHIBITS THERETO FROM ANY AND ALL LOSS, COSTS, EXPENSES, (INCLUDING ATTORNEYS'
FEES), DAMAGES AND LIABILITIES RESULTING FROM ANY REPRESENTATIONS AND/OR
CLAIMS MADE BY FRANCHISOR IN SUCH DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed and delivered this Agreement in triplicate
the day and year first above written.
ATTEST: EASYRIDERS FRANCHISING, INC.
/s/ Signature illegible By: /s/Brian Wood
- ------------------------------ ---------------------------------
Witness
Title: President
-----------------------------
Date: 11-30-94
------------------------------
ATTEST: FRANCHISEE
/s/ Signature illegible By: /s/ Leon Hatcher
- ------------------------------- ---------------------------------
Witness
Title: Owner
------------------------------
Date: 11-30-94
- ------------------------------- -------------------------------
Witness
EXHIBIT A
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this 30 day of Nov.,
1994, by Leon Hatcher.
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement of even date herewith ("Agreement") by EASYRIDERS
FRANCHISING, INC. ("Franchisor"), each of the undersigned hereby personally
and unconditionally (1) guarantees to Franchisor, and its successors and
assigns, for the term of the Agreement and thereafter as provided in the
Agreement, that HE ("Franchisee") shall punctually pay and perform each and
every undertaking, agreement and covenant set forth in the Agreement; and (2)
shall be personally bound by, and personally liable for the breach of each and
every provision in the Agreement, both monetary obligations and obligations to
take or refrain from taking specific actions or to engage or refrain from
engaging in specific activities. Each of the undersigned waives: (1)
acceptance and notice of acceptance by Franchisor of the foregoing
undertakings; (2) notice of demand for payment of any indebtedness or non-
performance of any obligations hereby guaranteed; (3) protest and notice of
default to any party with respect to the indebtedness or non-performance of
any obligations hereby guaranteed; (4) any right he may have to require that
an action be brought against Franchisee or any other person as a condition of
liability; and (5) any and all other notices and legal or equitable defenses
to which he may be entitled.
Each of the undersigned consents and agrees that: (1) his direct and immediate
liability under this guaranty shall be joint and several; (2) he shall render
any payment or performance required under the Agreement upon demand if
Franchisee falls or refuses punctually to do so; (3) such liability shall not
be contingent or conditioned upon pursuit by Franchisor of any remedies
against Franchisee or any other person; and (4) such liability shall not be
diminished, relieved or otherwise affected by any extension of time, credit or
other indulgence which Franchisor may from time to time grant to Franchisee or
to any other person, including without limitation the acceptance of any
partial payment or performance, or the compromise or release of any claims,
none of which shall in any way modify or amend this guaranty, which shall be
continuing and Irrevocable during the term of the Agreement.
IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his signature
on the same day and year as the Agreement was executed.
GUARANTOR(S) PERCENTAGE OF OWNERSHIP IN FRANCHISEE
Leon Hatcher 100 %
_______________________ _____________________%
_______________________ _____________________%
_______________________ _____________________%
_______________________ _____________________%
EXHIBIT B
REFUNDS AND CANCELLATION
This entire contract is further conditioned upon Franchisor's evaluation
of the personal abilities, aptitudes and financial qualifications of
Franchisee, and Franchisee's manager, if applicable. In accordance therewith,
Franchisee, and, Franchisee's manager, if applicable, shall submit all data
requested and Franchisor shall have a reasonable time, not to exceed fifteen
(15) business days after submission of all data, to prepare its evaluations.
If, for any reason, Franchisor elects to cancel this Agreement after the
aforesaid evaluations, he shall notify Franchisee in writing of the
cancellation within fifteen (15) days of Franchisor's receipt of the above
data. Said notice shall be accompanied by a refund to Franchisee of monies
paid to Franchisor under the terms of this Agreement less the amount stated
below, and the notice and refund shall cause an automatic cancellation of this
Agreement without further notice.
In the event of a cancellation of this Agreement as set forth above,
Franchisor shall be entitled to a reasonable fee for its evaluation of
Franchisee and related preparatory work performed and expenses actually
incurred, but not to exceed the sum of FIVE HUNDRED Dollars ($500.00). If
Franchisee has paid franchise fees in excess of the amount owed to Franchisor
for Franchisor's evaluation, Franchisor shall return such excess amount to
Franchisee and Franchisor shall be fully and forever released from any claims
or causes of action the Franchisee may have under or pursuant to the Franchise
Agreement.
EASYRIDERS FRANCHISING, INC.
By: Brian Wood
ATTEST: /s/ <signature illegible> Title: President
------------------------- Date: 11-30-94
FRANCHISEE
By: Leon Hatcher
ATTEST: /s/ <signature illegible> Title: Owner
------------------------- Date: 11-30-94
Exhibit 10.1.2
EASYRIDERS FRANCHISING, INC.
FRANCHISE AGREEMENT
Exhibit B to Offering Circular
THIS CONTRACT IS SUBJECT TO ARBITRATION
---------------------------------------
<PAGE>
TABLE OF CONTENTS
Paragraph Page
- ---------- -----
I. Appointment and Franchise Fee..............2
II. Term and Renewal...........................4
III. Business Location..........................5
IV. Training and Assistance....................8
V. Proprietary Marks..........................9
VI. Confidential Operations Manual............10
VII. Confidential Information..................11
VIII. Modification of the System................12
IX. Advertising...............................12
X. Continuing Services and Royalty Fee.......15
XI. Accounting and Records....................16
XII. Standards of Quality and Performance......17
XIII. Franchisor's Operations Assistance........20
XIV. Insurance.................................22
XV. Covenants.................................24
XVI. Default and Termination...................26
XVII. Rights and Duties of Parties Upon
Expiration or Termination..............28
XVIII. Transferability of Interest...............30
XIX. Death or Incapacity of Franchisee.........34
XX. Right of First Refusal....................35
XXI. Operation in the Event of Absence,
Disability or Death....................35
XXII. Independent Contractor And
Indemnification........................36
XXIII. Non-Waiver................................36
XXIV. Notice....................................37
XXV. Cost of Enforcement or Defense............37
XXVI. Entire Agreement..........................38
XXVII. Severability and Construction.............38
XXVIII. Applicable Law............................39
XXIX. Arbitration...............................39
XXX. "Franchisee" Defined and Guaranty.........40
XXXI. Force Majeure.............................40
XXXII. Caveat....................................40
XXXIII. Acknowledgments...........................41
Exhibits
- --------
A. Guaranty and Assumption of Obligations
B. Refunds and Cancellation
C. Map of Designated Area
D. Conversion Franchise Agreement
EASYRIDERS FRANCHISING, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("this Agreement"), made by and between
EASYRIDERS FRANCHISING, INC., a corporation formed and operating under the
laws of California and having its principal place of business at 5055 Chesebro
Road, Agoura Hills, California, 91301 ("Franchisor"), and New Riders, Inc., a
California Corporation, 105 W. Dakota Street, Suite 108, Clovis, CA,93612
(Franchisee").
WITNESSETH
WHEREAS, Franchisor, and its affiliates, over a period of time and as the
result of the expenditure of time, skill, effort and money, (a) has developed
and owns a unique system ("System"), identified by the mark "EASYRIDERS",
relating to the establishment, development and operation of businesses for the
retail sale of motorcycle paraphernalia such as shirts, jackets, belts,
posters and related items and the sale of parts and related hard goods and
related services; (b) and has developed a line of motorcycle related goods and
other merchandise and products bearing the Marks ("Trademarked Product
Lines"), all of which may be changed from time to time; and (c) has developed
certain specifications and standards, marketing and advertising techniques for
such products and merchandise, all of which may be changed, improved or
further developed by Franchisor from time to time; and
WHEREAS, the distinguishing characteristics of the System include,
without limitation, exterior and interior design, decor, and layout standards,
exclusively designed signage, furnishings and materials; specialized retail
business operating procedures and methods; unique techniques and methods for
merchandising activities; the EASYRIDERS Confidential Operations Manual;
procedures and techniques relating to the marketing of the Trademarked Product
Lines the Proprietary Software Package (if developed); distinct procedures for
purchasing inventory and merchandise; other confidential operations
procedures; and methods and techniques for inventory and cost controls, record
keeping and reporting, personnel management, purchasing, sales promotion,
marketing and advertising; all of which may be changed, improved and further
developed by Franchisor from time to time; and
WHEREAS, Franchisor's affiliate, Paisano Publications, Inc., is the owner
of the right, title and interest together with all the goodwill connected
thereto in and to the trade name, trademarks and service marks "EASYRIDERS",
"EASYRIDERS, plus the design", associated logos and commercial symbols and
such other trade names, trademarks and service marks as are now designated
(and may hereinafter be designated by Franchisor) as an integral part of the
System ("Mark(s)") and has licensed to Franchisor the rights to use the Marks
and sublicense the Marks to franchisees;
WHEREAS, Franchisor grants to qualified persons franchises to own and
operate EASYRIDERS business selling and distributing motorcycle paraphernalia
and hard goods, some of which will bear the Marks, and related merchandise and
products and providing services authorized and approved by Franchisor and
utilizing the System and Marks. Franchisee desires to operate a EASYRIDERS
business under the System and using the Marks and has applied for a franchise
and such application has been approved by Franchisor in reliance upon all of
the representations made therein; and
WHEREAS, Franchisee understands and acknowledges the importance of
Franchisor's high and uniform standards of quality, operations, and service
and the necessity of operating the EASYRIDERS retail business in strict
conformity with Franchisor's standards and specifications; and
WHEREAS, Franchisor expressly disclaims the making of and Franchisee
acknowledges that it has not received nor relied upon any warranty or
guaranty, express or implied, as to the revenues, profits or success of the
business venture contemplated by this Agreement. Franchisee acknowledges that
it has read this Agreement and Franchisor's Uniform Franchise offering
Circular and that it has no knowledge of any representations by Franchisor, or
its officers, directors, shareholders, employees or agents that are contrary
to the statements made in Franchisor's Uniform Franchise Offering Circular or
to the terms herein.
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other set forth in this Agreement hereby
agree as follows:
I. APPOINTMENT AND FRANCHISE FEE
A. Franchisor hereby grants to Franchisee, upon the terms and
conditions herein contained, the right, license and privilege to use the
Marks, and Franchisee undertakes the obligation to operate a EASYRIDERS retail
business for the sale and distribution of a wide assortment of motorcycle
paraphernalia and hard goods, some of which will bear the Marks, and related
merchandise and products ("Franchised Business") and to use safely in
connection therewith the System, as it may be changed, improved and further
developed from time to time, at one location only, such location to be:
1) Horry County, South Carolina, street address to be determined
_________________________________________________________________________
_______________________________________________________________________ or;
2) At a location to be designated, as provided in Paragraph III
hereof within the following area: N/A ____________________________________
_____________________________________________________________________________
Provided, however, that when a location has been designated and approved by
the parties, said location shall become Paragraph I.A.1., as if originally
incorporated therein. Franchisee shall not relocate the Franchised Business
without the prior written approval of Franchisor.
B. Franchisee receives an exclusive territory and such territories
will vary in size and dimensions. Franchisor shall not grant to itself or
another person a EASYRIDERS franchise within such exclusive territory. The
determination of the exclusive territory shall be made and agreed upon between
Franchisor and Franchisee. The exclusive territory so selected is described in
writing below and in a map attached hereto as Exhibit C and hereby made a part
of this Agreement. Franchisee may relocate its business within the same
general vicinity, while remaining in the aforesaid territory, only with the
prior written approval of Franchisor and subject to the rights of other
franchisees.
C. Franchisor will not, so long as this Agreement is in force and
effect and Franchisee is not in material default under any of the terms
hereof, enfranchise or operate any other EASYRIDERS business within the
following area: Horry County, South Carolina _______________________________
_____________________________________________________________________________
___________________________________________________("Designated Area").
D. Franchisor has the right, in its sole discretion, to grant such
other franchises outside of the Designated Area as Franchisor, in its sole and
exclusive discretion, deems appropriate. Further, both within and outside of
the Designated Area, Franchisee acknowledges that Franchisor may hereafter and
that Franchisor's affiliates have and will continue to hereafter advertise,
promote, offer and sell at wholesale or retail and authorize others the right
to offer and sell (in various ways including mail order catalog sales,
magazine and other media advertising and promotions through company owned
stores, licensed Full-line Dealers, mobile retail showrooms at various public
events, and through other motorcycle-related vendors or any other species of
wholesale or retail vendor whatsoever), the products which may comprise or may
in the future comprise a part of the System. Those products and services which
comprise a part of the EASYRIDERS System are delineated and set forth in
detail in the EASYRIDERS Confidential Operations Manual ("Confidential
Operations Manual"), which Confidential Operations Manual may be amended from
time to time to reflect additions to, deletions from and modifications to the
specifications of those services and products which comprise a part of the
System.
E. In consideration of the franchise granted herein, Franchisee shall
pay to Franchisor an initial franchise fee ("Franchise Fee") of FIVE THOUSAND
Dollars ($5,000.00). The initial franchise fee is waived for "Full-line
Dealer" licensees of Franchisor or its affiliate who elect to become a
Franchised Business by executing a Franchise Agreement within thirty (30) days
of the applicable effective date. Said fee shall be deemed fully earned and
non-refundable upon execution of this Agreement as consideration for expenses
incurred by Franchisor in furnishing assistance and services to Franchisee and
for Franchisor's lost or deferred opportunity to franchise others, except as
may be specifically provided in this Agreement, Exhibit B, or any other
Exhibit attached hereto.
F. Franchisee acknowledges that because complete and detailed
uniformity under many varying conditions may not be possible or practical,
Franchisor specifically reserves the right and privilege, at its sole
discretion and as it may deem in the best interests of all concerned in any
specific instance, to vary standards for any System franchisee based upon the
peculiarities of the particular site or circumstance, density of population,
business potential, population of trade area, existing business practices or
any other condition which Franchisor deems to be of importance to the
successful operation of such franchisee's business. Franchisee shall not be
entitled to require Franchisor to disclose or grant to franchisee a like or
similar variation hereunder.
II. TERM AND RENEWAL
A. This Agreement shall be effective and binding from the date of its
execution for an initial term equal to five (5) years commencing on the date
of execution of this Agreement.
B. Franchisee shall have the right to renew this franchise before the
expiration of the initial term of the Franchise for three (3) additional
successive terms of five (5) years each, providing all of the conditions
hereinafter set forth have been fulfilled:
1. Franchisee has, during the entire term of this Agreement,
complied with all its provisions;
2. Franchisee maintains possession of the premises of the
Franchised Business ("Franchised Premises") and by the expiration date of this
Agreement has brought the Franchised Business into full compliance with the
specifications and standards then applicable for new or renewing EASYRIDERS
businesses and presents evidence satisfactory to Franchisor that it has the
right to remain in possession of the Franchised Premises for the duration of
any renewal term; or, in the event Franchisee is unable to maintain possession
of the premises, or if in the judgment of Franchisor, the Franchised Business
should be relocated, Franchisee secures substitute premises approved by
Franchisor and has furnished, stocked and equipped such premises to bring the
Franchised Business at its substitute premises into full compliance with the
then-current specifications and standards by the expiration date of this
Agreement;
3. Franchisee has given notice of renewal to Franchisor as
provided below;
4. Franchisee has satisfied all monetary obligations owed by
Franchisee to Franchisee's suppliers, Franchisor and its affiliates, if any,
and has timely met these obligations throughout the term of this Agreement;
5. Franchisee has executed upon renewal Franchisor's
then-current form of Franchise Agreement (with appropriate modifications to
reflect the fact that the agreement relates to the grant of a renewal
Franchise), which agreement shall supersede in all respects this Agreement,
and the terms of which may differ from the terms of this Agreement, including,
without limitation, a different percentage Continuing Services and Royalty
Fee, advertising contribution and/or a different territory; provided, however,
Franchisee shall not be required to pay the then-current initial franchise fee
or its equivalent;
6. Franchisee has complied with Franchisor's then-current
qualification and training requirements; and
7. Franchisee has executed a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and its
affiliates, and their respective officers, directors, agents and employees.
C. f Franchisee desires to renew this franchise at the expiration of
this Agreement or any renewal period, Franchisee shall give Franchisor written
notice of its desire to renew at least twelve (12) months, but not more than
eighteen (18) months, prior to the expiration of the initial term of this
Agreement. Within sixty (6O) days after its receipt of such timely notice,
Franchisor shall furnish Franchisee with written notice of: (i) reasons which
could cause Franchisor not to grant a renewal to Franchisee, including any
deficiencies which require correction and a schedule for correction thereof by
Franchisee; and (ii) Franchisor's then-current requirements relating to the
image, appearance, decoration, furnishing, equipping and stocking of
EASYRIDERS businesses, and a schedule for effecting such upgrading or
modifications in order to bring the Franchised Business in compliance
therewith, as a condition of renewal. Renewal of the franchise shall be
conditioned upon Franchisee's compliance with such requirements and continued
compliance with all the terms and conditions of this Agreement up to the date
of termination of the initial term, provided, however, that in the event
Franchisee is curing any deficiencies as required by Franchisor, the term of
this Agreement shall be extended for a period of time equal to the number of
days required to cure such deficiency.
D. Franchisor shall give Franchisee written notice of its election to
renew or not renew the franchise six (6) months prior to the expiration of the
initial term of this Agreement.
III. BUSINESS LOCATION
A. Franchisee may operate the Franchised Business only at the
location specified in Paragraph I hereof. If the lease for the site of the
Franchised Business expires or terminates without fault of Franchisee, or if
the site is destroyed, condemned or otherwise rendered unusable, as otherwise
may be agreed upon in writing by Franchisor and Franchisee, Franchisor will
grant permission for relocation of the Franchised Business at a location and
site acceptable to Franchisor. Any such relocation shall be at Franchisee's
sole expense and Franchisor shall have the right to charge Franchisee for any
costs incurred by Franchisor, and a reasonable fee for its services, in
connection with any such relocation of the Franchised Business.
B. Franchisee will be responsible for purchasing or leasing a
suitable site for the Franchised Business. Prior to the acquisition by lease
or purchase of any site for the Franchised Premises, Franchisee shall submit a
description of the proposed site to Franchisor, together with a letter of
intent or other evidence satisfactory to Franchisor which confirms
Franchisee's favorable prospects for obtaining the proposed site. Franchisor
shall provide Franchisee written notice of approval or disapproval of the
proposed site within thirty (30) days after receiving Franchisee's written
proposal.
C. After receiving Franchisor's written approval of the location of
the Franchised Business as provided in Paragraph III.B. hereof, Franchisee
shall execute a lease (if the premises are to be leased) or a binding
agreement to purchase the site, the terms of which have been previously
approved by Franchisor. Franchisor's approval of the lease shall be
conditioned upon inclusion in the lease of terms acceptable to Franchisor and,
at Franchisor's option, the lease shall contain such provisions as Franchisor
may reasonably require, including, but not limited to:
1. A provision reserving to Franchisor the right, at
Franchisor's election, to receive an assignment of the leasehold interest upon
termination or expiration of the franchise grant;
2. A provision which expressly permits the lessor of the
premises to provide Franchisor all sales and other information it may have
related to the operation of the Franchised Business, as Franchisor may
request;
3. A provision which requires the lessor concurrently to
provide Franchisor with a copy of any written notice of deficiency under the
lease sent to Franchisee and which grants to Franchisor, in its sole
discretion and sole option, the right (but not the obligation) to cure any
deficiency under the lease should Franchisee fail to do so within fifteen (15)
days after the expiration of the period in which Franchisee may cure the
default;
4. A provision which evidences the right of Franchisee to
display the Marks in accordance with the specifications required by the
Confidential Operations Manual, subject only to the provisions of applicable
law;
5. A provision that the premises shall be used only for the
operation of the Franchised Business;
6. A provision which expressly states that any default under
the lease shall constitute a default under this Agreement; and
7. A provision which states that upon default of this Agreement
and in accordance with this Agreement, Franchisor may, in its sole discretion,
take possession of the Franchised Premises and operate the Franchised
Business.
D. If the location is not designated above, Franchisor shall use
reasonable efforts to help analyze Franchisee's market area, to help determine
site feasibility, and to assist in the designation of the location, which must
be approved by Franchisor; provided however, that Franchisor will not conduct
site selection activities on Franchisee's behalf. While Franchisor shall
utilize its experience and expertise in a designation of location, nothing
contained herein shall be interpreted as a guarantee of success for said
location nor shall any site recommendation or approval made by Franchisor be
deemed a representation that any particular site is available for use as a
EASYRIDERS business. It shall be the sole responsibility of Franchisee to
undertake site selection activities and otherwise secure premises for
Franchisee's Franchised Business.
E. In the event no acceptable site is found and approved by the
parties within ninety (90) days from the date of this Agreement, then and in
that event, upon written application from either party, this contract shall be
terminated and deposits received by Franchisor shall be resumed to Franchisee.
Provided, however, that in the event Franchisor has within the aforesaid time
submitted in writing to Franchisee two (2) or more sites which are acceptable
to Franchisor, and Franchisee has refused to accept same, then Franchisee,
upon termination, shall forfeit to Franchisor the sum of FOUR THOUSAND Dollars
($4,000.00) as liquidated damages in payment for Franchisor's expenses in its
site evaluation and selection activities. Franchisee and Franchisor agree that
the amount set forth to wit, TWO THOUSAND FIVE HUNDRED Dollars ($2,500.00) as
liquidated damages is a reasonable amount and that due to the nature of the
subject matter, it will be impossible to ascertain the exact amount of damages
sustained by the recipient therefore.
F. Franchisor shall require Franchisee to provide all of the
following to Franchisor, promptly upon obtaining possession of the site for
the Franchised Business: (i) cause to be prepared and submit for approval by
Franchisor a site survey and any modifications to Franchisor's basic
architectural requirements and specifications (not for construction) for a
EASYRIDERS business (including requirements for dimensions, exterior design,
materials, and work area design and layout, equipment, fixtures, furniture,
signs and decorating) required for the development of a EASYRIDERS business at
the site leased or purchased therefor, provided that Franchisee may modify
Franchisor's basic plans and specifications only to the extent required to
comply with all applicable ordinances, building codes and permit requirements
and with prior notification to and approval by Franchisor; (ii) obtain all
required zoning changes; all required building, utility, health, sanitation,
and sign permits and licenses and any other required permits and licenses;
(iii) purchase or lease equipment, fixtures, furniture and signs as provided
herein; (iv) complete the construction and/or remodeling, equipment, fixture,
furniture and sign installation and decorating of the Franchised Business in
full and strict compliance with plans and specifications therefor approved by
Franchisor and all applicable ordinances, building codes and permit
requirements; (v) obtain all customary contractors' sworn statements and
partial and final waivers of lien for construction, remodeling, decorating and
installation services; and (vi) otherwise complete development of and have the
Franchised Business ready to open and commence the conduct of its business in
accordance with Paragraph XII. hereof.
G. Franchisee shall be required to periodically make reasonable
capital expenditures to remodel, modernize and redecorate the Franchised
Premises so that the Franchised Business will reflect the then-image intended
to be portrayed by EASYRIDERS business. All remodeling, modernization, or
redecoration of the Franchised Business and its premises must be done in
accordance with the standards and specifications as prescribed by Franchisor
from time to time and with the prior written approval of Franchisor. All
replacements must conform to Franchisor's then-current quality standards and
specifications and must be approved by Franchisor in writing. Franchisee shall
not be required to remodel, modernize and redecorate the Franchised Business
and its premises more than once during the initial term of this Agreement
requiring expenditures in excess of TWELVE THOUSAND FIVE HUNDRED Dollars
($12,500.00); however, maintenance of the Franchised Premises may exceed this
amount, and maintenance costs may not be credited to remodeling,
modernization, or redecoration expenditures. If the lease for the Franchised
Premises requires expenditures for remodeling, modernization and redecoration,
such an amount shall be credited to amounts required by Franchisor.
IV. TRAINING AND ASSISTANCE
Franchisor shall make training available to Franchisee or its designated
manager and Franchisee or its designated manager must successfully complete
the following training programs.
A. Prior to opening for business, Franchisor will provide to
Franchisee and Franchisee's designated manager a training and familiarization
course of approximately one (1) to two (2) weeks in duration to be conducted
at an operating EASYRIDERS retail store or at such other place as Franchisor
shall designate. Said training program shall cover various aspects of the
operation of a EASYRIDERS franchise.
B. Franchisor will provide a second phase of training to Franchisee
and Franchisee's designated manager at Franchisor designated business
location. This hands on training program will be provided prior to
Franchisee's commencement of operations.
C. Around the commencement of operations of the Franchised Business,
additional assistance in opening the Franchised Business will be made
available to Franchisee through a third party at cost and at Franchisee's
expense. Franchisor, in its discretion, may require such third party
assistance if Franchisor feels it is necessary and appropriate, based on
Franchisee's performance in training.
D. If Franchisor determines, in its sole discretion, that Franchisee
is unable to satisfactorily complete the training programs, Franchisor shall
have the right to terminate this Agreement in the manner herein provided. If
this Agreement is terminated pursuant to this Paragraph, Franchisor shall
return to Franchisee the franchise fee paid by Franchisee less an amount, not
to exceed THREE THOUSAND Dollars ($3,000.00) to compensate Franchisor for work
performed and expenses incurred in connection with said training. Upon return
of said amount, Franchisor shall be fully and forever released from any claims
or causes of action Franchisee may have under or pursuant to this Agreement
and Franchisee shall have no further right, title or interest in the Marks and
the System and any such rights shall automatically revert to Franchisor.
E. If Franchisee designates new or additional managers after the
initial training program, Franchisor shall provide training to such managers
to the extent that Franchisor can reasonably accommodate such managers in
Franchisor's regularly scheduled training courses. Franchisor shall provide
such training to up to two managers a year for no tuition, additional managers
will be trained at the then-current published rates. Franchisee shall be
responsible for any travel, accommodation or salary expense associated with
training. In no event will Franchisor be under any obligation to provide
individual training to Franchisee's managers.
F. Franchisor from time to time may provide and may require that
previously-trained and experienced franchisees or their managers or employees
attend and successfully complete refresher training programs or seminars to be
conducted within Franchisor's Metropolitan Statistical Area ("MSA") as that
term is defined by the United States Census Bureau, at such location as may be
designated by Franchisor. Attendance at such refresher training programs or
seminars shall be at Franchisee's sole expense; provided, however, that
attendance will not be required at more than one (1) such program in any
calendar year and shall not exceed five (5) business days in duration.
G. All expenses incurred by Franchisee and its employees in attending
training programs, including, without limitation, travel costs, room and board
expenses, and employees salaries shall be the sole responsibility of
Franchisee.
V. PROPRIETARY MARKS
A. Franchisee acknowledges that Franchisor's affiliate is the owner
of all right, title and interest together with all the goodwill of the Marks
and that Franchisee's right to use the Marks is derived solely from this
Agreement and is limited to the conduct of business by Franchisee pursuant to
and in compliance with this Agreement and all applicable standards,
specifications, and operating procedures prescribed by Franchisor from time to
time during the term of the franchise. Any unauthorized use of the Marks by
Franchisee is a breach of this Agreement and an infringement of the rights of
Franchisor and its affiliate in and to the Marks. Franchisee acknowledges that
all usage of the Marks by Franchisee and any goodwill established by
Franchisee's use of the Marks shall inure to the exclusive benefit of
Franchisor and its affiliate and that this Agreement does not confer any
goodwill or other interests in the Marks upon Franchisee and its affiliate.
Franchisee shall not, at any time during the term of this Agreement or after
its termination or expiration, contest the validity or ownership of any of the
Marks or assist any other person in contesting the validity or ownership of
any of the Marks. All provisions of this Agreement applicable to the Marks
apply to any additional trademarks, service marks, and commercial symbols
authorized for use by and licensed to Franchisee by Franchisor after the date
of this Agreement.
B. Franchisee shall not use any Mark or portion of any of the Marks
as part of any corporate or trade name, or with any prefix, suffix, or other
modifying words, terms, designs, or symbols, or in any modified form.
Franchisee shall not use any Marks in connection with the sale of any
unauthorized product or service or in any other manner not expressly
authorized in writing by Franchisor. Franchisee shall properly attribute
ownership of the Marks to Franchisor's affiliate and shall give such notices
of trademark and service mark registrations as Franchisor specifies and obtain
such fictitious or assumed name registrations as may be required under
applicable law.
C. Franchisee shall promptly notify Franchisor of any potential or
actual claim, demand, or cause of action known by Franchisee or which
Franchisee reasonably suspects or believes may exist, based upon or arising
from any attempt by any other person, firm or corporation to use the Marks or
any colorable imitation thereof. Franchisee shall also notify Franchisor of
any action, claim or demand against Franchisee relating to the Marks within
ten (10) days after Franchisee receives notice of said action, claim or
demand. Upon receipt of timely notice of an action, claim or demand against
Franchisee relating to the Marks, Franchisor and/or its affiliate shall have
the sole right to determine all matters and issues relating to the defense of
said action. Franchisor and/or its affiliate shall have the exclusive right to
challenge, oppose, contest or bring legal action against any third party
regarding the third party's use of any of the Marks and shall exercise such
right in its sole discretion. In any defense or prosecution of any litigation
relating to the Marks or components of the System undertaken by Franchisor
and/or its affiliate, Franchisee shall cooperate with Franchisor and/or its
affiliate and execute any and all documents and take all actions as may be
desirable or necessary in the opinion of Franchisor's and/or its affiliate's
counsel, to protect the Marks and to defend or prosecute any litigation
relating to the Marks or components of the System. Both parties will make
every effort consistent with the foregoing to protect, maintain, and promote
the Marks as identifying the System and only the System. FRANCHISOR MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE, EXCLUSIVE
OWNERSHIP, VALIDITY OR ENFORCEABILITY OF THE MARKS.
D. If it becomes advisable at any time in Franchisor's sole
discretion, for Franchisor and/or Franchisee to modify or discontinue use of
any of the Marks, and/or use one (1) or more additional or substitute trade
names, trademarks, service marks, or other commercial symbols, Franchisee
shall comply with Franchisor's directions within a reasonable time after
notice to Franchisee by Franchisor, and Franchisor shall have no liability or
obligation whatsoever with respect to Franchisee's modification or
discontinuance of any Mark.
E. In order to preserve the validity and integrity of the Marks and
copyrighted materials franchised herein and to assure that Franchisee is
properly employing the same in the operation of its Franchised Business,
Franchisor or its agents shall have the right to enter and inspect
Franchisee's premises (with or without prior notice) during normal business
hours and, additionally, shall have the right to observe the manner in which
Franchisee is conducting its operations, to confer with Franchisee's employees
and customers, and to select and inspect Franchisee's merchandise to make
certain that such merchandise is satisfactory and meets the quality control
provisions and performance standards established by Franchisor.
VI. CONFIDENTIAL OPERATIONS MANUAL
A. Franchisor will loan to Franchisee during the term of the
franchise one (1) or more copies of a Confidential Operations Manual
containing reasonable, mandatory and suggested specifications, standards,
operating procedures and rules prescribed from time to time by Franchisor for
EASYRIDERS businesses and information relative to other obligations of
Franchisee hereunder and the operation of its Franchised Business. Franchisor
shall have the right to add to and otherwise modify the Confidential
Operations Manual from time to time to reflect changes in the specifications,
standards, operating procedures and rules by Franchisor for EASYRIDERS
businesses, provided that no such addition or modification shall alter
Franchisee's fundamental status and rights under this Agreement.
B. The Confidential Operations Manual shall at all times remain the
sole property of Franchisor and shall promptly be returned upon the expiration
or other termination of this Agreement. Franchisee shall not to make any
disclosure, duplication or other unauthorized use of any portion of the
Confidential Operations Manual.
C. The Confidential Operations Manual contains proprietary
information of Franchisor and shall be kept confidential by Franchisee both
during the term of the franchise and subsequent to the expiration or
termination of the franchise. Franchisee shall at all times insure that its
copy of the Confidential Operations Manual is available at the Franchised
Business premises in a current and up-to-date manner. At all times that the
Confidential Operations Manual is not in use by authorized personnel,
Franchisee shall maintain the Confidential Operations Manual in a locked
receptacle at the Franchised Premises, and shall only grant authorized
personnel, as defined in the Confidential Operations Manual, access to the key
or lock combination of such receptacle. In the event of any dispute as to the
contents of the Confidential Operations Manual, the terms of the master copy
of the Confidential Operations Manual maintained by Franchisor at Franchisor's
home office shall be controlling.
VII. CONFIDENTIAL INFORMATION
A. Franchisee acknowledges that its entire knowledge of the operation
of a EASYRIDERS business including the knowledge or know-how regarding the
specifications, standards and operating procedures of a EASYRIDERS business,
is derived from information disclosed to Franchisee by Franchisor which
information is proprietary, confidential and a trade secret of Franchisor. All
information, standards and specifications with respect to the sale of
motorcycle paraphernalia and/or which identifies or assists in the
identification of actual or potential customers of the Franchised Business are
the trade secrets and the proprietary information of Franchisor. Franchisee
shall maintain the absolute confidentiality of all such information during and
after the term of the franchise and shall not use any such information in any
other business or in any manner not specifically authorized or approved in
writing by Franchisor.
B. Franchisee shall divulge trade secret information only to such of
its employees and only to the extent that such access is necessary for them to
operate the Franchised Business. Any and all information, knowledge and
know-how, including, without limitation, designs, drawings, materials,
equipment, retail business systems and methods, merchandising techniques and
procedures and other data, which Franchisor designates as confidential or
proprietary or a trade secret shall be deemed to be a trade secret for
purposes of this Agreement, excepting only such information as Franchisee can
demonstrate lawfully came to its attention prior to disclosure thereof by
Franchisor; or which, at the time of disclosure by Franchisor to Franchisee,
had lawfully become a part of the public domain, through publication or
communication by others; or which, after disclosure to Franchisee by
Franchisor, lawfully becomes a part of the public domain, through publication
or communication by others.
C. Due to the special and unique nature of the confidential
information, Marks, and Confidential Operations Manual of Franchisor,
Franchisee acknowledges that Franchisor shall be entitled to immediate
equitable remedies, including but not limited to, restraining orders and
injunctive relief in order to safeguard such trade secrets, and proprietary,
confidential, unique, and special information of Franchisor and that money
damages alone would be an insufficient remedy with which to compensate
Franchisor for any breach of the terms of Paragraphs V., VI., and VII. of this
Agreement. Furthermore, all employees of Franchisee having access to the
confidential and proprietary information of Franchisor shall be required to
execute confidential information agreements in a form acceptable to
Franchisor.
VIII. MODIFICATION OF THE SYSTEM
Franchisee recognizes that from time to time hereafter Franchisor may
change or modify the System presently identified by the Marks including,
without limitation, the adoption and use of new or modified trade names,
trademarks, service marks or copyrighted materials, new computer programs and
systems, new types or brands of merchandise and products, new inventory
requirements, new equipment or new techniques and that Franchisee will accept,
use and display for the purpose of this Agreement any such changes in the
System, as if they were part of this Agreement at the time of execution
hereof. Franchisee will make such expenditures as such changes or
modifications in the System may reasonably require. Franchisee shall not
change, modify or alter in any way the System.
IX. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the furtherance of the
goodwill and the public image of EASYRIDERS businesses, Franchisee agrees as
follows:
A. Franchisee will submit to Franchisor or its designated agency, for
its prior approval, all promotional materials and advertising to be used by
Franchisee, including, but not limited to, newspapers, radio and television
advertising, specialty and novelty items, signs, containers, and Yellow Page
advertising. In the event written disapproval of said advertising and
promotional material is not given by Franchisor to Franchisee within thirty
(30) days from the date such material is received by Franchisor, said
materials shall be deemed approved. Failure by Franchisee to conform with the
provisions herein and subsequent nonaction by Franchisor to require Franchisee
to cure or remedy this failure and default shall not be deemed a waiver of
future or additional failures and defaults of any other provision of this
Agreement. The submission of advertising to Franchisor for approval shall not
affect Franchisee's right to determine the prices at which Franchisee sells
its products or services.
B. Within the initial six (6) months of operation of the Franchised
Business, Franchisee shall expend a minimum of TWO THOUSAND Dollars
($2,000.00) as designated by Franchisor for catalog, newspaper, direct mail,
advertising or promotional items as grand opening advertising and promotion to
generate initial consumer awareness and patronage ("Grand Opening
Advertising"); provided, however, Franchisor may collect and spend a portion
of the sums designated for Grand Opening Advertising for promotions which
feature the EASYRIDERS land speed record setting motorcycle commonly known as
the "Streamliner". Franchisor shall prepare an accounting of expenditures by
Franchisor which shall be made available to Franchisee and shall refund to
Franchisee any monies which are not spent in accordance with the
above-mentioned Grand Opening Advertising procedures. Full-line Dealers who
convert to the System shall not be required to make expenditures for or
conduct any Grand Opening Advertising.
C. Franchisee shall contribute to the EASYRIDERS Advertising and
Development Fund ("Fund") an amount equal to two percent (2%) of Franchisee's
Gross Sales, as defined in Paragraph X. Franchisee's required payments to the
Fund shall be made at the same time and in the same manner as, and in addition
to, the Continuing Services and Royalty Fee provided in Paragraph X herein.
Such payment shall be made in addition to and exclusive of any sums that
Franchisee may be required to spend on local advertising and promotion.
Full-line Dealers who convert to the System shall not be required to
contribute to the Fund until the earlier of the expiration of such licensee's
current License Agreement or two (2) years from the date of execution of this
Agreement ("Waiver Period"). The fund shall be maintained and administered by
Franchisor or its designee, as follows:
1. Franchisor shall supervise all advertising programs with
sole discretion over the creative concepts, materials and media used in such
programs and the placement and allocation thereof. Advertising programs may be
primarily concentrated in Franchisor's affiliates' publications and catalog
promotion. Franchisor or its designee shall make expenditures for advertising
or promotion in Franchisee's Area of Dominant Influence. However, Franchisor
cannot and does not ensure any particular franchisee benefits directly pro
rata from the placement of advertising.
2. The funds may also be used to meet any and all costs of
maintaining, administering, directing and preparing advertising (including,
without limitation, the cost of conducting public relations activities,
conducting advertising; and producing promotional brochures, and other
marketing materials to franchisees in the System). All sums paid by Franchisee
to the Fund shall be maintained in a separate account from the other funds of
Franchisor and shall not be used to defray any of Franchisor's general
operating expenses, except for such reasonable administrative costs and
overhead, if any, as Franchisor may incur in activities reasonably related to
the administration or direction of the Fund and advertising programs
including, without limitation, conducting market research, preparing marketing
and advertising materials, and collecting and accounting for assessments for
the Fund.
3. It is anticipated that all contributions to the Fund shall
be expended for advertising and promotional purposes during Franchisor's
fiscal year within which contributions are made. If, however, excess amounts
remain in the Fund at the end of such fiscal year, all expenditures in the
following fiscal year(s) shall be made first out of any current interest or
other earnings of the Fund, next out of any accumulated earnings, and finally
from principal.
4. Although Franchisor intends the Fund to be of perpetual
duration, Franchisor maintains the right to terminate the Fund. The Fund shall
not be terminated, however, until all monies in the Fund have been expended
for advertising and promotional purposes.
5. An accounting of the operation of the Fund shall be prepared
annually and shall be made available to Franchisee upon request. Franchisor
reserves the right, at its option, to require that such annual accounting
include an audit of the operation of the Fund prepared by an independent
certified public accountant selected by Franchisor and prepared at the expense
of the Fund.
D. Franchisee shall spend a minimum of one percent (1%) of
Franchisee's Gross Sales per month on local advertising in the manner directed
by Franchisor in its sole discretion. Franchisee shall submit to Franchisor an
accounting of Franchisee's expenditures on local advertising required pursuant
to this Paragraph IX. D. in the form and manner specified in the Confidential
Operations Manual.
E. From time to time, Franchisor may designate a local or regional
advertising coverage area in which Franchisee's business and at least one (1)
other EASYRIDERS business is located for purposes of developing a cooperative
local or regional advertising or promotional program. If directed by
Franchisor, Franchisee agrees to participate in and contribute to such
cooperative advertising and promotional programs in Franchisee's Advertising
Coverage Areas in addition to such contributions and expenditures as required
pursuant to Paragraphs IX.B. and IX.C. The cost of the program shall be
allocated among locations in such area and each franchisee's share shall be in
proportion to its sales during the preceding twelve (12) month period, or
portion of said period. Said contributions to cooperative advertising
promotional programs will be credited toward the local advertising and
promotional expenditure required in Paragraph IX.D. above. At the time a
program is submitted, Franchisor shall submit a list to Franchisee of all
operating businesses within the advertising coverage area.
F. Franchisee shall maintain a business phone and advertise
continuously in the classified or Yellow Pages of the local telephone
directory under the listings "Motorcycles", "Motorcycles - Supplies, Parts
and Accessories", or such other listings as deemed appropriate by Franchisor
using mats of the type and size approved in advance by Franchisor. When more
than one (1) EASYRIDERS business serves a metropolitan area, classified
advertisements shall 1ist all EASYRIDERS businesses operating within the
distribution area of such classified directories, and Franchisee shall
contribute its equal share of the cost of such advertisement. The expenditures
for such advertising shall not be credited toward other advertising
requirements pursuant to this Agreement.
G. Franchisor may, from time to time, develop and market special
catalogs, brochures and other promotional items which will be made available
to Franchisee at Franchisor's cost plus a reasonable mark up and Franchisee
shall maintain a representative inventory of such promotional items to meet
public demand. Franchisee shall have the right to purchase alternative
promotional items provided that such alternative goods conform to the
specifications and quality standards established by Franchisor from time to
time.
H. Franchisee shall not advertise or use in advertising or any other
form of promotion, the copyrighted materials, trademarks, service marks, logos
or commercial symbols designated by Franchisor without an appropriate c
[copyright symbol appears here] or R [registration mark symbol appears here]
registration marks or the designation TM or SM where applicable.
X. CONTINUING SERVICES AND ROYALTY FEE
A. Franchisee shall pay without offset, credit or deduction of any
nature, to Franchisor, so long as this Agreement shall be in effect, a weekly
Continuing Services and Royalty Fee equal to three percent (3%) of the Gross
Sales derived from the Franchised Business. Said Continuing Services and
Royalty Fee shall be paid weekly in the manner specified below or as otherwise
prescribed in the Confidential Operations Manual.
1. On or before each Wednesday, Franchisee will submit to
Franchisor on a form approved by Franchisor, a correct statement, signed by
Franshisee, of Franchisee's Gross Sales for the preceding week ending
Saturday. Franchisee will make available to Franchisor for reasonable
inspection during normal business hours and with or without prior notice by
Franchisor, all original books and records that Franchisee may deem necessary
to ascertain Franchisee's Gross Sales
2. The term "Gross Sales", as used herein and throughout this
Agreement, shall mean and include the total of all sales of all Trademarked
Product Lines, merchandise, products or services to customers of Franchisee,
(including interim deposits) whether or not sold or performed at or from the
EASYRIDERS Franchised Business, and whether received in cash, in services in
kind, from barter and/or exchange, on credit (whether or not payment is
received therefor) or otherwise. There will be deducted from Gross Sales for
purposes of said computation (but only to the extent they have been included)
the amount of all sales tax receipts or similar tax receipts which, by law,
are chargeable to customers, if such taxes are separately stated when the
customer is charged and if such taxes are paid to the appropriate taxing
authority. There will be further deducted from Gross Sales the amount of any
documented refunds, chargebacks, credits and allowances given in good faith to
customers by Franchisee. All barter and/or exchange transactions pursuant to
which Franchisee furnishes services and/or products in exchange for goods or
services to be provided to Franchisee by a vendor, supplier or customer will,
for the purpose of determining Gross Sales, be valued at the full retail value
of the goods and/or services to provided to Franchisee.
B. All Continuing Services and Royalty Fees, advertising
contributions, amounts due for purchases by Franchisee from Franchisor or its
affiliates shall bear interest after due date at the highest applicable legal
rate for open account business credit. Franchisee acknowledges that this
Paragraph shall not constitute agreement by Franchisor or its affiliates to
accept such payments after same are due or a commitment by Franchisor to
extend credit to, or otherwise finance Franchisee's operation of, the
Franchised Business. Further, Franchisee acknowledges that its failure to pay
all amounts when due shall constitute grounds for termination of this
Agreement, as provided in Paragraph XVI. hereof, notwithstanding the
provisions of this Paragraph.
C. Notwithstanding any designation by Franchisee, Franchisor shall
have the sole discretion to apply any payments by Franchisee to any past due
indebtedness of Franchisee for Continuing Services and Royalty Fees,
advertising contributions, purchases from Franchisor or its affiliate,
interest or any other indebtedness.
XI. ACCOUNTING AND RECORDS
A. Franchisee shall establish and maintain a bookkeeping, accounting
and record keeping system conforming to the requirements prescribed by
Franchisor, including without limitation the use and retention of sales
tickets, purchase orders, invoices, payroll records, check stubs, sales tax
records and returns, cash receipts and disbursements, journals and general
ledgers. Franchisee shall preserve for a period of not less than three (3)
years, during the term of this Agreement and for not less than three (3) years
following the term of this Agreement, all accounting records and supporting
documentation relating to the Franchised Business.
B. Franchisee will supply to Franchisor on or before the fifteenth
(15th) day after the term of each calendar quarter, in the form approved by
Franchisor, a profit and loss statement and balance sheet for the last
preceding calendar quarter. Additionally, Franchisee shall, at its expense,
submit to Franchisor within ninety (90) days of the end of each fiscal year
during the term of this Agreement, a profit and loss statement for such fiscal
year and a balance sheet for the last date of such year. Such annual
statements shall be prepared and reviewed by an independent certified public
accountant, in accordance with generally accepted accounting principles
applied on a consistent basis. Franchisor reserves the right to require
Franchisee to submit audited financial statements.
C. Franchisee shall submit to Franchisor such other periodic reports,
forms and records as specified, and in the manner and at the time as specified
in the Confidential Operations Manual or otherwise in writing.
D. Franchisor or its designated agents shall have the right, during
normal business hours and with or without prior notice, to examine and copy,
at its expense, the books, records, and tax returns of Franchisee. Franchisor
shall also have the right at any time, to have an independent audit made of
the books of Franchisee. If an inspection should reveal that any payments to
Franchisor have been understated in any report to Franchisor, then Franchisee
shall immediately pay to Franchisor the amount understated upon demand, in
addition to interest from the date such amount was due until paid, at the
maximum rate permitted by law. If an inspection discloses an understatement in
any report of two percent (2%) or more, Franchisee shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection (including, without limitation, reasonable accounting and
attorneys' fees). The foregoing remedies shall be in addition to any other
remedies Franchisor may have.
E. Franchisee acknowledges that nothing contained herein constitutes
Franchisor's agreement to accept any payments after same are due or a
commitment by Franchisor to extend credit to or otherwise finance Franchisee's
operation of the Franchised Business. Further, Franchisee acknowledges that
its failure to pay all amounts when due shall constitute grounds for
termination of this Agreement, as herein provided.
XII. STANDARDS OF QUALITY AND PERFORMANCE
A. Franchisee shall comply with all requirements set forth in this
Agreement, the Confidential Operations Manual and other written policies
supplied to Franchisee by Franchisor. Mandatory specifications, standards,
operating procedures and rules prescribed from time to time by Franchisor in
the Confidential Operations Manual or otherwise communicated to Franchisee in
writing, shall constitute provisions of this Agreement as if fully set forth
herein and shall be reasonably and uniformly applied to all franchisees. All
references herein to this Agreement shall include all such mandatory
specifications, standards and operating procedures and rules. Franchisee shall
comply with the entire System including, but not limited to, the requirements
of this Paragraph XII.
B. Franchisee shall commence operation of the Franchised Business not
later than six (6) months after the execution of this Agreement or as
otherwise required in Franchisee's lease and approved by Franchisor. Prior to
such opening, Franchisee shall have compiled with all Franchisor's pre-opening
standards and specifications. If Franchisee for any reason fails to commence
operation as herein provided, such failure shall be considered a default and
Franchisor may terminate this Agreement as herein provided.
C. Franchisee shall maintain the condition and appearance of the
Franchised Premises consistent with Franchisor's standards. Franchisee shall
maintain the Franchised Premises as is from time to time required to maintain
or improve the appearance and efficient operation of the Franchised Business,
including, but not limited to, replacement of worn out or obsolete fixtures
and signs, and repair of the exterior and interior of the Franchised Business.
If at any time in Franchisor's judgment the general state of repair or the
appearance of the Franchised Premises or its equipment, fixtures, signs or
decor does not meet Franchisor's standards therefor, Franchisor shall so
notify Franchisee, specifying the action to be taken by Franchisee to correct
such deficiency. If Franchisee fails or refuses to initiate within thirty (30)
days after receipt of such notice, and thereafter continue, a bona fide
program to complete any required maintenance, Franchisor shall have the right,
in addition to all other remedies, to enter upon the Franchised Premises and
effect such maintenance on behalf of Franchisee and Franchisee shall pay the
entire costs thereof on demand.
D. Franchisee shall make no material alterations to the Franchised
Premises nor shall Franchisee make material replacements of or alterations to
the equipment, fixtures or signs of the Franchised Business without the prior
written approval by Franchisor.
E. Franchisee shall offer for sale and sell at the Franchised
Business various types of motorcycle paraphernalia such as shirts, jackets,
belts, posters, and related items and parts and related hard goods, and will
not offer for sale or sell or provide at the Franchised Business or the
premises which it occupies any other category of merchandise or products or
use such premises for any purpose other than the operation of a Franchised
Business in full compliance with this Agreement.
F. From time to time, Franchisor shall provide to Franchisee a list
of approved manufacturers, suppliers, and distributors authorized for the
Franchised Business ("Approved Suppliers List") and a 1ist of approved
inventory products, fixtures, furniture, equipment, signs, stationery,
supplies, and other items or services necessary to operate the Franchised
Business ("Approved Supplies List"). Franchisor may revise the Approved
Supplies List and Approved Suppliers List from time to time in its sole
discretion. If Franchisee proposes to offer for sale or use at the Franchised
Business any brand of product, or other material or supply which is not on the
Approved Supplies List or to purchase any product from a supplier that is not
on the Approved Suppliers List, Franchisee shall first notify Franchisor and
shall upon request by Franchisor submit samples and such other information as
Franchisor requires for examination and/or testing or to otherwise determine
whether such product, material or supply, or such proposed supplier meets its
specifications and quality standards. A charge not to exceed the reasonable
cost of the inspection and evaluation and the actual cost of the test may be
imposed by Franchisor and shall be paid by Franchisee or the supplier.
Franchisor reserves the right to re-inspect the businesses and products of any
supplier of an approved item and to revoke its approval of any item or
supplier which fails to continue to meet any of Franchisor's criteria.
G. All inventory, products and materials, and other items and
supplies used in the operation of the Franchised Business which are not
specifically required to be purchased in accordance with Franchisor's Approved
Supplies List and Approved Suppliers List shall conform to the specifications
and quality standards established by Franchisor from time to time.
H. Franchisor's affiliate has developed a proprietary line of
motorcycle-related goods bearing the Marks. Franchisee acknowledges that
Franchisee shall carry an adequate supply and maintain a representative
inventory of such Trademarked Product Lines as required by the Confidential
Operations Manual. Franchisee shall maintain, carry and promote such
Trademarked Product Lines for use in servicing the general public in order to
meet customer demand as designated by Franchisor. Franchisee shall, throughout
the term of this Agreement, purchase Trademarked Product Lines from
Franchisor, Franchisor's affiliate or other designated sources which
manufacture the Trademarked Product Lines to Franchisor's precise
specifications and carry an adequate inventory of the Trademarked Product
Lines.
I. Franchisor may, in the future, develop and custom design a
software package for conducting accounting, inventory control, point-of-sale
functions and related activities ("Proprietary Software Package"). If
developed, the software shall be proprietary to Franchisor and confidential
information of Franchisor. Franchisor may not be able to practically alter the
Proprietary Software Package to accommodate each and every franchisee of the
System; therefore, Franchisee shall utilize the Proprietary Software Package
in the operation of the Franchised Business and comply with all specifications
and standards prescribed by Franchisor regarding the Proprietary Software
Package, as will be provided from time to time in the Confidential Operations
Manual. This unique software will be in an ongoing development and testing
stage and upgrades may be implemented into the System at Franchisor's
discretion. If developed, Franchisor or its designee shall provide ongoing
service and support to Franchisee regarding the Proprietary Software Package,
and Franchisor shall lease such software to Franchisee at the then-current
rates published by Franchisor.
J. Franchisee shall secure and maintain in force all required
licenses, permits and certificates relating to the operation of the Franchised
Business and shall operate the Franchised Business in full compliance with all
applicable laws, ordinances and regulations, including without limitation,
those relating to occupational hazards and health, consumer protection, trade
regulation, equal employment opportunity, prevention and elimination of
unlawful discrimination and harassment, worker's compensation, unemployment
insurance, withholding and payment of Federal and State income taxes, social
security taxes and sales, use and property taxes. Franchisee shall refrain
from any merchandising, advertising or promotional practice which is
unethical, which infringes upon the trade marks or copyrights of others which
constitutes unfair competition, or which otherwise is or may be injurious to
the business of Franchisor and/or other franchised businesses or to the
goodwill associated with the Marks.
K. Franchises shall in the operation of the Franchised Business use
only displays, labels, forms and other products and documentation imprinted
with the Marks and colors as prescribed from time to time by Franchisor.
L. Prior to commencement of operation of the Franchised Business,
Franchisee shall adequately supply the Franchised Business with a
representative inventory as prescribed by Franchisor of motorcycle
paraphernalia and hard goods and related items of the type, quantity and
quality as specified by Franchisor. Franchisee shall maintain levels of
inventory that will permit operation of the Franchised Business at maximum
capacity.
M. The Franchised Business shall at all times be under the direct,
on-premises supervision of Franchisee or a trained and competent employee
acting as full-time manager. Franchisee shall keep Franchisor informed at all
times of the identity of any employee(s) acting as manager(s) of the
Franchised Business. Franchisee shall, at all limes, faithfully, honestly and
diligently perform its obligations hereunder and shall not engage in any
business or other activities that will conflict with its obligations
hereunder.
N. Franchisee shall not install or maintain the Franchised Premises
any telephone booths, newspaper racks, video games, juke boxes, gum machines,
games, rides, vending machines or other similar devices without the written
approval of Franchisor.
O. Franchisee shall participate actively in a EASYRIDERS Regional
Advisory Franchisee Council ("Council") and participate in all Council
programs approved by Franchisor for Franchisee's particular Council. The
purposes of the Council(s) include, but are not limited to, exchanging ideas
and problem solving methods, advising Franchisor on expenditures for regional
advertising, providing backup support and staffing for political influence,
and coordinating System franchisee efforts. Franchisee shall pay all Council
assessments levied by the Council, and Franchisor has the right to enforce
this obligation. Assessments and expenditures may very from time to time and
due to variations in Council participation and costs as determined by a
particular Council and as approved by Franchisor. Although Franchisee shall
pay such Council assessments, such assessments shall in no way diminish
Franchisee's rights and the benefit of the bargain under this Agreement. Such
Council(s) may be formed by Franchisor at such time that more than one (1)
franchisee conducts a EASYRIDERS Franchised Business in any given region, the
boundaries of such region to be determined in the sole and unfettered
discretion of Franchisor.
P. Franchisee shall notify Franchisor in writing within five (5) days
of the commencement of any action, suit, or proceeding, and of the issuance of
any order, writ, injunction, award, or decree of any court, agency, or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Business.
XIII. FRANCHISOR'S OPERATIONS ASSISTANCE
A. Franchisor may from time to time advise or offer guidance to
Franchisee relative to prices for the merchandise and services, if any,
offered for sale by the Franchised Business that in Franchisor's judgment
constitute good business practice. Such guidance will be based on the
experience of Franchisor and is franchisees in operating franchised businesses
and an analysis of the costs of such services, activities, merchandise,
supplies, coordinating accessory items and products and prices charged for
competitive inventory and products. Franchisee shall not be obligated to
accept any such advice or guidance and shall have the sole right to determine
the prices to be charged from time to lime by the Franchised Business and no
such advice or guidance shall be deemed or construed to impose upon Franchisee
any obligation to charge any fixed, minimum or maximum prices for any product
or service offered for sale by the Franchised Business.
B. Upon commencement and during operation of the Franchised Business,
and during the term of this Agreement and any renewal period thereof,
Franchisor shall do the following:
1. Provide to Franchisee a comprehensive list of established
sources of motorcycle-related merchandise and hard goods and related
merchandise, products and services associated with the retail motorcycle
business and other merchandise and products, equipment, fixtures and supplies
necessary for the operation of the Franchised Business and provide
specifications for such products. However, Franchisor makes no representation
or warranty that any particular approved supplier will be willing or able to
sell to all franchisees;
2. Administer the Fund;
3. As Franchisor deems necessary, negotiate supply contracts and
pass on purchasing economics to maximize cost savings;
4. As Franchisor deems necessary, attempt to coordinate
equipment, product and supplies distribution for local, regional and national
suppliers;
5. Regulate quality standards and products in conformance with
the System specifications throughout the network of franchised business;
6. Provide use of a mailing list of "EASYRIDERS" subscribers in
the Designated Area;
7. Provide Franchisee participation in a customer referral 800
number;
8. Conduct product testing;
9. Make available the EASYRIDERS merchandising and display
program;
10. Make available mail order catalogs from which to provide
products not currently in stock; and
11. Offer a centralized buying program for EASYRIDERS products.
C. Franchisor shall advise Franchisee of problems arising out of the
operation of the Franchised Business as disclosed by reports submitted to
Franchisor by Franchisee or by inspections conducted by Franchisor of the
Franchised Business. Franchisor may furnish Franchisee with such assistance in
connection with the operation of the Franchised Business as is reasonably
determined to be necessary by Franchisor from time to time. Operations
assistance may consist of advice and guidance with respect to:
1. Proper utilization of procedures developed for a EASYRIDERS
business with respect to products and related business services as approved by
Franchisor;
2. Additional equipment, merchandise, products and services
authorized for EASYRIDERS businesses;
3. The institution of proper administrative, bookkeeping,
accounting, inventory control, supervisory and general operating procedures
for the effective operation of a EASYRIDERS business;
4. Ongoing research and development of new improvements, new
products and services and other modifications to the System;
5. Advertising, displays and other promotional programs; and
6. Refresher training courses.
D. Franchisor or Franchisor's representative shall make periodic
visits to the Franchised Business for the purposes of consultation,
assistance, and guidance of Franchisee in all aspects of the operation and
management of the Franchised Business. Franchisor, and Franchisor's
representatives, who attend at the Franchised Business will prepare, for the
benefit of both Franchisor and Franchisee, written reports in respect to such
visits outlining any suggested changes or improvements in the operations of
the Franchised Business and detailing any defaults in such operations which
become evident as a result of any such visit, and a copy of each such written
report shall be provided to both Franchisor and Franchisee. Franchisor shall
advise Franchisee of problems arising out of the operation of the Franchised
Business as disclosed by reports submitted to Franchisor by Franchisee or by
inspections conducted by Franchisor of the Franchised Business.
E. All of the specifications, Approved Suppliers Lists, Approved
Supplies Lists, training and operations manuals to be provided by Franchisor
to Franchisee pursuant to this Agreement shall be delivered upon completion of
training.
XIV. INSURANCE
A. Franchisee shall procure at its expense and maintain in full force
and effect during the term of this Agreement, an insurance policy or policies
protecting Franchisee and Franchisor, and their officers, directors, partners
and employees, from claims, demands, defense costs, attorneys fees, expenses,
liability, loss and damage, including personal injury, death, or property
damage or expense of whatsoever kind or nature arising out of or occurring
upon or in connection with the Franchised Business, as Franchisor may
reasonably require for its own and Franchisee's protection. Franchisor shall
be named an additional insured in such policy or policies. Such insurance is
limited to its "conditions, provisions and exclusions" and does not
necessarily include any expense whatsoever arising or occurring upon or in
connection with the Franchised Business.
B. Such policy or policies shall be written by an insurance company
licensed in the state in which Franchisee operates and having at least an "A"
Rating Classification as indicated in Best's Key Rating Guide in accordance
with standards and specifications set forth in the Confidential Operations
Manual or otherwise in writing, and shall include, at a minimum (except as
additional coverages and higher policy limits may reasonably be specified for
all franchisees from time to time by Franchisor in the Confidential Operations
Manual or otherwise in writing) the following:
1. All risks coverage insurance on the EASYRIDERS business and
all fixtures, equipment, supplies and inventory and other property used in the
operation of the EASYRIDERS business (which coverage may include flood and/or
earthquake coverage where applicable, and theft insurance) for full repair and
replacement value of the machinery, equipment, improvements and betterments,
without any applicable co-insurance clause except that an appropriate
deductible clause shall be permitted.
2. Worker's compensation and employer's liability insurance as
well as such other insurance as may be required by statute or rule of the
state in which the Franchised Business is located and operated.
3. Comprehensive general liability insurance and product
liability insurance including a per premises aggregate with the following
coverages: broad form contractual liability, personal injury,
products/completed operation; and fire legal; insuring Franchisor and
Franchisee against all claims, suits, obligations, liabilities and damages,
including attorneys' fees, based upon or arising out of actual or alleged
personal injuries or property damage resulting from, or occurring in the
course of, or on or about or otherwise relating to the Franchised Business
including General Aggregate coverage in the following limits:
Recommended Coverage Minimum Limits of Coverage
- -------------------- --------------------------
General Aggregate............................. $1,000,000.00
Products/Completed Operations Aggregate....... $1,000,000.00
Personal and Advertising Injury............... $1,000,000.00
Each Occurrence............................... $1,000,000.00
Fire Damage (any one fire)....................... $50,000.00
Medical Expense (any one person).................. $5,000.00
4. Business interruption insurance for actual losses sustained.
5. Automobile liability insurance, including owned, hired and
non-owned vehicle coverage, with a combined single limit of at least ONE
MILLION DOLLARS ($1,000,000.00)
6. Such additional insurance and types of coverage as may be
required by the terms of any lease for the Franchised Business, or as may be
required from time to time by Franchisor.
7. Franchisees which service motorcycles at the Franchised
Business shall obtain and maintain (i) legal liability insurance with minimum
limits of TEN THOUSAND Dollars ($10,000.00) per vehicle and ONE HUNDRED
THOUSAND Dollars ($100,000.00) per aggregate loss, and (ii) liability
insurance with a minimum coverage limit of ONE MILLION Dollars
($1,000,000.00).
C. The insurance afforded by the policy or policies respecting
liability shall not be limited in any way by reason of any insurance which may
be maintained by Franchisor. Within four (4) months of the signing of this
Agreement, but in no event later than the date on which Franchisee acquires an
interest in the real property on which it will develop and operate the
Franchised Business, a Certificate of Insurance showing compliance with the
foregoing requirements shall be furnished by Franchisee to Franchisor for
approval. Such certificate shall state that said policy or policies will not
be canceled or altered without at least thirty (30) days prior written notice
to Franchisor and shall reflect proof of payment of premiums. Maintenance of
such insurance and the performance by Franchisee of the obligations under this
Paragraph shall not relieve Franchisee of liability under the indemnity
provision set forth in this Agreement. Minimum limits as required above may
be modified from time to time, as conditions require, by written notice to
Franchisee.
D. Should Franchisee, for any reason, not procure and maintain such
insurance coverage as required by this Agreement, Franchisor shall have the
right and authority (without, however, any obligation to do so) immediately to
procure such insurance coverage and to charge to Franchisee the cost of same
together with a reasonable fee for expenses incurred by Franchisor in
connection with such procurement, shall be payable by Franchisee immediately
upon notice.
XV. COVENANTS
A. Unless otherwise specified, the term "Franchisee" as used in this
Paragraph XV. shall include, collectively and individually, all officers,
directors, and holders of a beneficial interest of five percent (5%) or more
of the securities of Franchisee, and of any corporation directly or indirectly
controlling Franchisee, if Franchisee is a corporation; and the general
partners and any limited partner (including any corporation and the officers,
directors, and holders of a beneficial interest of five percent (5%) or more
of securities, of a corporation which controls, directly or indirectly, any
general or limited partner) if Franchisee is a partnership.
B. Franchisee covenants that during the term of this Agreement and
any renewals thereof, except as otherwise approved in writing by Franchisor,
Franchisee (if Franchisee is an individual), a shareholder of a beneficial
interest of ten percent (10%) or more of the securities of Franchisee (if
Franchisee is a corporation), a general partner of Franchisee (if Franchisee
is a partnership), or Franchisee's full-time manager (approved by Franchisor)
shall devote full time, energy, and best efforts, to the management and
operation of the Franchised Business.
C. Franchisee covenants that during the term of this Agreement and
any renewal thereof, unless an exception is specifically approved by
Franchisor in writing, Franchisee shall not, either directly or indirectly,
for himself, for himself, or through, on behalf of, or in conjunction with any
person, persons, partnership, or corporation:
1. Divert or attempt to divert any business or customer of the
Franchised Business to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious
or prejudicial to the goodwill associated with the Marks and the System.
2. Employ or seek to employ any person who is at that time
employed by Franchisor or by any other Franchisee of Franchisor, or otherwise
directly or indirectly induce or seek to induce such person to leave his or
her employment thereat.
3. Own, maintain, engage in, or have any interest in any
business (including any business operated by Franchisee prior to entry into
this Agreement) specializing, in whole or in part, in the wholesale or retail
sale or distribution of motorcycle-related paraphernalia and related hard
goods and related merchandise and products, or offering, selling or providing
merchandise or services the same as or similar to that offered, sold or
provided through the System.
D. Franchisee specifically acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable training and confidential
information, including, without limitation, information regarding the
promotional, operational, sales, and marketing methods and techniques of
Franchisor and the System. Accordingly, Franchisee covenants that, except as
otherwise approved in writing by Franchisor, Franchisee shall not, for a
period of two (2) years after the expiration or termination of this Agreement,
regardless of the cause of the termination, either directly or indirectly, for
himself, or through, on behalf of, or in conjunction with any person, persons,
partnership, or corporation, own, maintain, engage in, or have any interest in
any business specializing, in whole or in part, in the wholesale or retail
sale or distribution of motorcycle-related paraphernalia and related hard
goods, or offering or providing any related services or selling any
merchandise or product the same as or similar to those provided or sold
through the EASYRIDERS System:
1. Within the MSA in which the Franchised Business is located; or
2. Within a radius of ten (10) miles of the Franchised Business;
or
3. Within a radius of ten (10) miles of the location of any other
business using the System, whether franchised or owned by Franchisor.
E. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
The parties have reviewed and acknowledged that the foregoing covenants are
reasonable including but not limited to geographical and time limitations. If
all or any portion of a covenant in this Paragraph XV. is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which Franchisor is a party, Franchisee shall be bound by
any lesser covenant subsumed within the terms of such covenant that imposes
the maximum duty permitted by law, as if the resulting covenant were stated in
and made a part of this Paragraph XV.
F. Franchisee understands and acknowledges that Franchisor shall have
the right, in its sole discretion, to reduce the scope of any covenant set
forth in Paragraphs XV.C. and XV.D. in this Agreement, or any portion thereof,
without Franchisee's consent, effective immediately upon receipt by Franchisee
of written notice thereof, without Franchisee's consent, effective immediately
upon receipt by Franchisee of written notice thereof, and Franchisee shall
comply forthwith with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Paragraph XXVI.
G. Franchisor shall have the right to require all of Franchisee's
personnel performing managerial or supervisory functions and all personnel
receiving special training from Franchisor to execute similar covenants in a
form satisfactory to Franchisor.
XVI. DEFAULT AND TERMINATION
A. If Franchisee is in substantial compliance with this Agreement and
Franchisor materially breaches this Agreement and fails to cure such breach
within a reasonable time after written notice thereof is delivered to
Franchisor, Franchisee may terminate this Agreement. Such termination shall
be effective thirty (30) days after delivery to Franchisor of notice that such
breach has not been cured and Franchisee elects to terminate this Agreement.
A termination of this Agreement by Franchisee for any reason other than breach
of this Agreement by Franchisor and Franchisor's failure to cure such breach
within a reasonable time after receipt of written notice thereof shall be
deemed a termination by Franchisee without cause.
B. This Agreement shall terminate automatically upon delivery of
notice of termination to Franchisee, if Franchisee or its owner(s),
officer(s), or manager(s):
1. Fails to satisfactorily complete the training program as
provided in Paragraph IV of this Agreement;
2. Has made any material misrepresentation or omission in its
application for the franchise;
3. Is convicted of or pleads no contest to a felony or other
crime or offense that is likely to adversely affect the reputation of
Franchisee or the EASYRIDERS Franchised Business;
4. Makes any unauthorized use, disclosure or duplication of any
portion of the Confidential Operations Manual or duplicates or discloses or
makes any unauthorized use of any trade secret or confidential information
provided to Franchisee by Franchisor;
5. Abandons or fails or refuses to actively operate the
Franchised Business for two (2) business days in any twelve (12) month period,
unless the Franchised Business has been closed for a purpose approved by
Franchisor, or fails to relocate to an approved premises within an approved
period of time following expiration or termination of the lease for the
premises of the Franchised Business;
6. Surrenders or transfers control of the operation of the
EASYRIDERS Franchised Business, makes an unauthorized direct or indirect
assignment of the franchise or an ownership interest in Franchisee or fails or
refuses to assign the franchise or the interest in Franchisee of a deceased or
disabled controlling owner thereof as herein required;
7. Submits to Franchisor on three (3) or more separate occasions
at any time during the term of the franchise any reports or other data,
information or supporting records which understate by more than three percent
(3%) the Continuing Services and Royalty Fees owed to Franchisor for any
period of, or periods aggregating, three (3) or more weeks, and Franchisee is
unable to demonstrate that such understatements resulted from inadvertent
error;
8. If Franchisee shall become insolvent or make a general
assignment for the benefit of creditors, or if a petition in bankruptcy is
filed by Franchisee or such a petition is filed against and consented to by
Franchisee, or if Franchisee is adjudicated a bankrupt, or if a bill in equity
or other proceeding for the appointment of a receiver of Franchisee or other
custodian is filed by Franchisee, or if a receiver or other custodian
(permanent or temporary) of Franchisee's assets or property, or any part
thereof, is appointed by any court of competent jurisdiction, or if
proceedings for a composition with creditors under any state or federal law
should be instituted by or against Franchisee, or if a final judgement remains
unsatisfied or of record for thirty (30) days or longer (unless supersedeas
bond is filed), or if execution is levied against Franchisee's Franchised
Business or property, or suit to foreclose any lien or mortgage against the
premises or equipment is instituted against Franchisee and not dismissed
within thirty (30) days, or if the real or personal property of Franchisee's
Franchised Business shall be sold after levy thereupon by any sheriff,
marshall, or constable;
9. Materially misuses or makes an unauthorized use of the Marks
or commits any act which can reasonably be expected to materially impair the
goodwill associated with the Marks;
10. Materially misuses or makes an unauthorized use of the
Proprietary Software Package (if developed); or
11. Fails on two (2) or more separate occasions within any
period of twelve (12) consecutive months to submit when due reports or other
information or supporting records, to pay when due the Continuing Services and
Royalty Fees, advertising contributions, amounts due for purchases from
Franchisor or its affiliates or other payments due to Franchisor or its
affiliates, or otherwise fails to comply with this Agreement, whether or not
such failures to comply are corrected after notice thereof is delivered to
Franchisee.
C. This Agreement shall terminate without further action or notice to
Franchisee if Franchisee's owner:
1. Fails or refuses to make payments of any amounts due
Franchisor for Continuing Services and Royalty Fees, advertising
contributions, purchases from Franchisor or its affiliates or any other
amounts due to Franchisor or its affiliates, and does not correct such failure
or refusal within ten (10) days after written notice of such failure is
delivered to Franchisee;
2. Fails or refuses to comply with any other provision of this
Agreement, or any other agreement to which Franchisor and Franchisee are
parties or any mandatory specification, standard or operating procedure
prescribed in the Confidential Operations Manual or otherwise in writing, and
does not correct such failure within thirty (30) days (or provide proof
acceptable to Franchisor that it has made all reasonable efforts to correct
such failure and will continue to make all reasonable efforts to cure until a
cure is effected, if such failure cannot reasonably be corrected within thirty
(30) days) after written notice of such failure to comply is delivered to
Franchisee.
D. To the extent that the provisions of this Agreement provide for
periods of notice less than those required by applicable law, or provide for
termination, cancellation, non-renewal or the like other than in accordance
with applicable law, such provisions shall, to the extent such are not in
accordance with applicable law, not be effective, and Franchisor shall comply
with applicable law in connection with each of these matters.
E. In addition to Franchisor's right to terminate this Agreement, and
not in lieu of such right or any other rights against Franchisee, Franchisor,
in the event that Franchisee shall not have cured a default under this
Agreement within the twenty (20) days after receipt of the written "Notice to
Cure" from Franchisor, may, at its option, enter upon the premises of the
EASYRIDERS Franchised Business and exercise complete authority with respect to
the operation of said business until such time as Franchisor determines that
the default of Franchisee has been cured and that there is compliance with the
requirements of this Agreement. Franchisee acknowledges that a designated
representative of Franchisor may take over, control, and operate said
business, and that Franchisee shall pay Franchisor a service fee of not less
than FIVE HUNDRED Dollars ($500.00) per day plus all travel expenses, room and
board and other expenses reasonably incurred by such representative so long as
it shall be required by the representative to enforce compliance herewith.
XVII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION
Upon termination or expiration, this Agreement and all rights granted
hereunder to Franchisee shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised
Business under this Agreement, and shall not thereafter, directly or
indirectly, represent to the public or hold itself out as a present or former
Franchisee of Franchisor.
B. Franchisee shall assign to Franchisor upon its demand Franchisee's
interest in any lease then in effect for the Franchised Business premises, and
Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor
of compliance with this obligation within thirty (30) days after termination
or expiration of this Agreement.
C. Franchisee shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any confidential methods, the
Proprietary Software Package (if developed), procedures and techniques
associated with the System; the Marks; and any distinctive form, slogans,
signs, symbols, logos or devices associated with the System. In particular,
Franchisee shall cease to use, without limitation, all signs, advertising
materials, stationery, forms, and any other articles which display the Marks
associated with the System.
D. Franchisee shall take such action as may be necessary to cancel or
assign to Franchisor or Franchisor's designee, at Franchisor's option, any
assumed name or equivalent registration which contains the name "EASYRIDERS"
or any Marks associated with the System, and Franchisee shall furnish
Franchisor with evidence satisfactory to Franchisor of compliance with this
obligation within thirty (30) days after termination or expiration of this
Agreement.
E. Franchisee shall, in the event it continues to operate or
subsequently begins to operate any other business, not use any reproduction,
counterfeit, copy or colorable imitation of the Marks either in connection
with such other business or the promotion thereof, which is likely to cause
confusion, mistake or deception, or which is likely to dilute Franchisor's
exclusive rights in and to the Marks. Franchisee shall not utilize any
designation of origin or description or representation which falsely suggests
or represents an association or connection with Franchisor so as to constitute
unfair competition. Franchisee shall make such modifications or alterations
to the Franchised Business (including, without limitation, the changing of the
telephone number) immediately upon termination or expiration of this Agreement
as may be necessary to prevent any association between Franchisor or the
System and any business thereon subsequently operated by Franchisee or others,
and shall make such specific additional changes thereto as Franchisor may
reasonably request for that purpose, including, without limitation, removal of
all distinctive physical and structural features identify the System. In the
event Franchisee fails or refuses to comply with the requirements of this
Paragraph XVII., Franchisor shall have the right to enter upon the premises
where Franchisee's Franchised Business was conducted, without being guilty of
trespass or any other tort, for the purpose of making or causing to be make
such changes as may be required at the expense of Franchisee, which expense
Franchisee shall pay upon demand.
F. Franchisee shall promptly pay all sums owing to Franchisor and its
affiliates. In the event of termination for any default of Franchisee, such
sums shall include all damages, costs, and expenses, including reasonable
attorneys' fees, incurred by Franchisor as a result of the default.
G. Franchisee shall pay to Franchisor all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Franchisor
subsequent to the termination or expiration of the franchise herein granted in
obtaining injunctive or other relief for the enforcement of any provisions of
this Paragraph XVII or Paragraph XV.
H. Franchisee shall immediately turn over to Franchisor all manuals,
including the Confidential Operations Manual, customer lists, records, files,
instructions, brochures, agreements, disclosure statements, and any and all
other materials provided by Franchisor to Franchisee relating to the operation
of the Franchised Business (all of which are acknowledged to be Franchisor's
property).
I. Franchisor shall acquire right, title and interest to any sign or
sign faces bearing the Marks. Franchisee hereby acknowledges Franchisor's
right to access the Franchised Premises should Franchisor elect to take
possession of any said sign or sign faces bearing the Marks.
J. Franchisor shall have the right (but not the duty), to be
exercised by notice of intent to do so within thirty (30) days after
termination or expiration, to purchase for cash, except as provided in
Paragraph XVII.I, any or all equipment, supplies, and other inventory,
advertising materials, and all items bearing the Marks, at Franchisee's cost
or fair market value, whichever is less. If the parties cannot agree on fair
market value within a reasonable time, the determination of fair market value
shall be submitted to arbitration in accordance with Paragraph XXIX. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set off all amounts due from Franchisee under this Agreement
against any payment therefor.
K. Franchisee hereby acknowledges that all telephone numbers used in
the operation of the franchised businesses constitute assets of the Franchised
Business; and upon termination of expiration of this Agreement Franchisee
shall assign to Franchisor or its designee, all Franchisee's right, title, and
interest in and to Franchisee's telephone numbers and shall notify the
telephone company and all listing agencies of the termination or expiration of
Franchisee's right to use any telephone number and any regular, classified or
other telephone directory listing associated with the Marks and to authorize a
transfer of same to or at the direction of Franchisor.
L. Franchisee shall comply with the covenants contained in Paragraph
XV. of this Agreement.
M. All obligations of Franchisor and Franchisee which expressly or by
their nature survive the expiration or termination of this Agreement shall
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied or by their nature
expire.
XVIII. TRANSFERABILITY OF INTEREST
A. This Agreement and all rights hereunder can be assigned and
transferred by Franchisor and, if so, shall be binding upon and inure to the
benefit of Franchisor's successors and assigns; provided, however, that with
respect to any assignment resulting in the subsequent performance by the
assignee of the functions of Franchisor, the assignee shall;
1. At the time of such assignment, be financially responsible
and economically capable of performing the obligations of Franchisor
hereunder; and
2. Expressly assume and agree to perform such obligations.
Specifically, and without limitation to the foregoing, Franchisee expressly
agrees that Franchisor may sell its assets, Marks or System outright to a
third party; may make a public offering of securities; may engage in a private
placement of some or all of its securities; may merge, acquire other
corporations or entities, or be acquired by another corporation or other
entity; may undertake a refinancing, recapitalization, leveraged buy out or
other economic or financial restructuring; and, with regard to any or all of
the above sales, assignments and dispositions, Franchisee expressly and
specifically waives any claims, demands or damages arising from or related to
the loss of said Marks (or any variation thereof) and/or the loss of
association with or identification of EASYRIDERS FRANCHISING, INC., as
Franchisor hereunder. Nothing contained in this Agreement shall require
Franchisor to remain in the business in the event that Franchisor exercises
its right hereunder to assign its rights in this Agreement.
B. This Agreement and all rights hereunder may be assigned and
transferred by Franchisee and, if so, shall be binding upon and inure to the
benefit of Franchisee's successors and assigns, subject to the following
conditions and requirements, and Franchisor's right of first refusal as set
forth herein:
1. No Franchisee, partner of Franchisee, (if Franchisee is a
partnership), or shareholder of Franchisee (if Franchisee is a corporation),
without Franchisor's prior written consent, by operation of law or otherwise
shall sell, assign, transfer, convey, give away, or encumber to any person,
firm, or corporation, all or any part of its interest in this Agreement or its
interest in the franchise granted hereby or its interest in any
proprietorship, partnership or corporation which owns any interest in the
franchise, nor offer, permit, or suffer the same to be sold, assigned,
transferred, conveyed, given away, or encumbered in any way to any person,
firm, or corporation. Franchisee may not, without the prior written consent
of Franchisor, fractionalize any of the rights of Franchisee granted pursuant
to this Agreement. Any purported assignment of any of Franchisee's rights
herein not having the aforesaid consent shall be null and void and shall
constitute a material default hereunder.
2. Franchisor shall not unreasonably withhold its consent to any
transfer referenced in Paragraphs XVII.B.1 of this Agreement when requested;
provided, however, that the following conditions and requirements shall first
be met to the full satisfaction of Franchisor.
a. If Franchisee is an individual or partnership and
desires to assign and transfer its rights to a corporation:
(1) Said transferee corporation shall be newly
organized and its charter shall provide that its activities are confined
exclusively to acting as a EASYRIDERS Franchisee as franchised under this
Agreement;
(2) Franchisee shall be and shall remain the owner of
the majority stock interest of the transferee corporation;
(3) The individual Franchisee (or, if Franchisee is a
partnership, one of the partners) shall be and shall remain the principal
executive officer of the corporation;
(4) The transferee corporation shall enter into a
written assignment (in a form satisfactory to Franchisor), in which the
transferee corporation assumes all of Franchisee's obligations hereunder;
(5) All shareholders of the transferee corporation
shall enter into a written agreement, in a form satisfactory to Franchisor,
jointly and severally guaranteeing the full payment and performance of the
transferee corporation's obligations to Franchisor under this Agreement;
(6) Each stock certificate of the transferee
corporation shall have conspicuously endorsed upon it a statement that it is
held subject to, and that further assignment or transfer thereof is subject
to, all restrictions imposed upon assignments by this Agreement;
(7) No new shares of common or preferred voting stock
in the transferee corporation shall be issued to any person, partnership,
trust, foundation, or corporation without obtaining Franchisor's prior written
consent and then only upon disclosure of the terms and conditions contained
herein being made to the prospective new holders of the stock;
(8) All accrued money obligations of Franchisee to
Franchisee's suppliers, Franchisor, its affiliates or assignees, shall be
satisfied prior to assignment or transfer.
b. If the transfer, other than such transfer as is
authorized under Paragraph XVIII.B.2.a. of this Agreement, if consummated
alone or together with other related previous, simultaneous, or proposed
transfers, would have the effect of transferring control of the franchise
licensed herein to someone other than an original signatory of this Agreement;
(1) The transferee(s) shall be of good moral character
and reputation and shall have a good credit rating and competent business
qualifications reasonably acceptable to Franchisor. Franchisee shall provide
Franchisor with such information as Franchisor may require to make such
determination concerning each such proposed transferee(s).
(2) The transferee(s) or such other individual(s) as
shall be the actual manager of the franchise shall have successfully completed
and passed the training course then in effect for franchisees, or otherwise
demonstrated to Franchisor's satisfaction, sufficient ability to operate the
unit being transferred.
(3) The transferee(s), including all shareholders,
officers, directors and partners of the transferee(s), shall jointly and
severally execute any or all of the following, at Franchisor's sole discretion
and as Franchisor shall direct:
aa. A Franchise Agreement and other standard
ancillary agreements with Franchisor on the current standard forms being used
by Franchisor, except that an additional franchise fee shall not be charged;
and/or
bb. A written assignment from Franchisee in a
form satisfactory to Franchisor, wherein transferee shall assume all of
Franchisee's obligations hereunder.
(4) Approval by Franchisor of any transfer by
Franchisee of the franchise herein granted or any of Franchisee's rights under
this Agreement shall in no way be deemed a release by Franchisor of
Franchisee's obligations pursuant to this Agreement . Consent by Franchisor to
a transfer of the franchise shall not constitute or be interpreted as consent
for any future transfer thereof.
(5) The term of said agreements required pursuant to
Paragraph XVII.B.2.(3) shall be for the unexpired term of this Agreement and
for any extensions or renewals as provided herein.
(6) If transferee is a corporation:
aa. Each stock certificate of the transferee
corporation shall have conspicuously endorsed upon it a statement that it is
held subject to, and that further assignment or transfer thereof is subject
to, all restrictions imposed upon assignments by this Agreement; and
bb. No new shares of common or preferred voting
stock in the transferee corporation shall be issued to any person,
partnership, trust, foundation, or corporation without obtaining Franchisor's
prior written consent, and then only upon disclosure of the terms and
conditions contained herein being made to the prospective new holders of the
stock; and
cc. All shareholders of the transferee
corporation shall enter into a written agreement, in a form satisfactory to
Franchisor, jointly and severally guaranteeing full payment and the
performance of the transferee corporation of all obligations under this
Agreement.
(7) All accrued money obligations of Franchisee to
Franchisee's suppliers, Franchisor, its affiliates or assignees, shall be
satisfied prior to assignment or transfer, and Franchisee shall not be in
default under the terms of this Agreement.
(8) Franchisee, prior to the transfer, shall execute a
general release, in a form prescribed by Franchisor, of any and all existing
claims against Franchisor and its affiliates, if any, and their respective
officers, directors, agents and employees, except such claims as are not
permitted to be waived under applicable law.
3. Franchisee shall have fully paid and satisfied all of
Franchisee's obligations to Franchisor, and the transferee or Franchisee shall
have fully paid to Franchisor a non-refundable transfer fee equal to one-half
(1/2) the then-current initial franchise fee charged by Franchisor, for start-
up franchises, at the time of the transfer, for the training, supervision,
administrative costs, overhead, counsel fees, accounting and other expenses
incurred by Franchisor in connection with the transfer. This transfer fee
does not apply to an assignment of interest to a corporation under Paragraph
XVIII.B.2.a of this Agreement.
4. No sale, assignment, transfer, conveyance, encumbrance, or
gift of any interest in this Agreement or in the franchise granted thereby,
shall relieve Franchisee and the shareholders or partners participating in any
transfer, of the obligations of the covenants contained in Paragraph XV.,
except where Franchisor shall expressly authorize in writing.
C. Franchisee must give Franchisor ninety (90) days written notice
prior to any sale or assignment by Franchisee. The purpose of this Paragraph
is to enable Franchisor to comply with any applicable state or federal
franchise disclosure laws.
D. Franchisee must promptly ("promptly" herein defined as within
fifteen (15) days of receipt of an offer to buy) give Franchisor written
notice whenever Franchisee has received an offer to buy Franchisee's
franchise. Franchisee must also give Franchisor written notice simultaneously
with any offer to sell the franchise made by, for, or on behalf of Franchisee.
The purpose of this Paragraph is to enable Franchisor to comply with any
applicable state or federal franchise disclosure laws or rules.
E. Franchisee shall not, without prior written consent of Franchisor,
place in, on or upon the location of the Franchised Business, or in any
communication media, any form of advertising relating to the sale of the
Franchised Business or the rights granted hereunder.
XIX. DEATH OR INCAPACITY OF FRANCHISEE
A. In the event of the death or incapacity of an individual
Franchisee, or any partner of a Franchisee which is a partnership or any
shareholder owning fifty percent (50%) of more of the capital stock of a
Franchisee which is a corporation, the heirs, beneficiaries, devisees, or
legal representatives of said individual, partner or shareholders shall,
within one hundred eighty (180) days of such event:
1. Apply to Franchisor for the right to continue to operate the
franchise for the duration of the term of this Agreement and any renewals
hereof, which right shall be granted upon the fulfillment of all of the
conditions set forth in Paragraph XVII.B.2.b of this Agreement (except that no
transfer fee shall be required); or
2. Sell, assign, transfer, or convey Franchisee's interest in
compliance with the provisions of Paragraphs XVIII.B. and XX. of this
Agreement; provided, however, in the event a proper and timely application for
the right to continue to operate has been made and rejected, the one hundred
eighty (180) days to sell, assign, transfer or convey shall be computed from
the date of said rejection. For purposes of this Paragraph, Franchisor's
silence on an application through the one hundred and eighty (180) days
following the event of death or incapacity shall be deemed a rejection made on
the last day of such period.
B. In the event of the death or incapacity of an individual
Franchisee, or any partner or shareholder of a Franchisee which is a
partnership or corporation, where the aforesaid provisions of Paragraph XVIII
have not been fulfilled within the time provided, all rights franchised to
Franchisee under this Agreement shall, at the option of Franchisor, terminate
forthwith and Franchisor shall have the option to purchase the assets of
Franchised Business in accordance with Paragraph XVII.J. of this Agreement.
XX. RIGHT OF FIRST REFUSAL
If Franchisee or its owners propose to sell the Franchised Business (or
its assets) or part or all of the ownership of Franchisee, Franchisee or its
owners shall obtain and deliver a bona fide, executed written offer to
purchase same to Franchisor, which shall, for a period of fifteen (15) days
from the date of delivery of such offer, have the right, exercisable by
written notice to Franchisee or its owners, to purchase the Franchised
Business (or its assets) or such ownership for the price and on the terms and
conditions contained in such offer, provided that Franchisor may substitute
cash for any form of payment proposed in such offer. If Franchisor does not
exercise this right of first refusal, the offer may be accepted by Franchisee
or its owners, subject to the prior written approval of Franchisor, as
provided in Paragraph XVIII hereof, provided that if such offer is not so
accepted within six (6) months of the date thereof, Franchisor shall again
have the right of first refusal herein described. Should a transfer
Franchisee assume the rights and obligations under this Agreement, such
transferee Franchisee shall likewise by subject to Franchisor's right of first
refusal under terms and conditions as set forth herein.
XXI. OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH
In order to prevent any interruption of the Franchised Business which
would cause harm to said business and thereby depreciate the value thereof,
Franchisee authorizes Franchisor, in the event that Franchisee is absent or
incapacitated by reason of illness or death and is not, therefore, in the sole
judgement of Franchisor, able to operate the Franchised Business, to operate
said business for so long as Franchisor deems necessary and practical, and
without waiver of any other rights or remedies Franchisor may have under this
Agreement. Nothing contained herein shall create an obligation on the part of
Franchisor, nor shall Franchisor's operation of the Franchised Business create
an obligation on the part of Franchisor to so operate the Franchised Business.
All monies from the operation of the business during such period of operation
by Franchisor shall be kept in a separate account and the expenses of the
business, including reasonable compensation and expenses for Franchisor's
representative, shall be charged to said account.
XXII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. This Agreement does not create a fiduciary relationship between
the parties, nor does it constitute Franchisee as an agent, legal
representative, joint venturer, partner, employee, or servant of Franchisor
for any purpose whatsoever; and it is understood between the parties hereto
that Franchisee shall be an independent contractor and is in no way authorized
to make any contract, agreement, warranty or representation on behalf of
Franchisor, or to create any obligation, express or implied, on behalf of
Franchisor.
B. During the term of this Agreement and any extension hereof,
Franchisee shall hold itself out to the public as an independent contractor
operating the business pursuant to a franchise from Franchisor. Franchisee
shall take such affirmative action as may be necessary to do so, including,
without limitation, exhibiting a notice of that fact in a conspicuous place on
the Franchised Premises, the content of which Franchisor reserves the right to
specify.
C. Franchisee shall defend at his own cost and indemnify and hold
harmless Franchisor, its affiliates, shareholders, directors, officers,
employees and agents, from and against any and all claims demands, losses,
costs, legal actions, judgements, awards, expenses (including, without
limitation, reasonable accountants', attorneys', and expert witness fees,
costs of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses), damages and liabilities, however,
caused, resulting directly or indirectly from or pertaining to the use,
condition, or construction, equipping, decorating, maintenance or operation of
the Franchised Business, including the sale of any products, service or
merchandise sold from the Franchised Business. Such loss, claims, costs,
expenses, damages and liabilities shall include, without limitation, those
arising from latent or other defects in the Franchised Business, whether or
not discoverable by Franchisor, and those arising from the death or injury to
any person or arising from damage to the property of Franchisee or Franchisor,
their agents or employees, or any third person, firm or corporation, whether
or not such losses, claims, costs, expenses, damages, or liabilities were
actually or allegedly caused wholly or in part through the active or passive
negligence of Franchisor or any of its agents or employees or resulted from
any strict liability imposed on Franchisor or any of its agents or employees.
All such indemnification shall survive the termination of this Agreement.
D. Franchisor shall not, by virtue of any approvals, advice or
services provided to Franchisee, assume responsibility or liability to
Franchisee or any third parties to which Franchisor would not otherwise be
subject.
XXIII. NON-WAIVER
No failure of Franchisor to exercise any power reserved to it hereunder,
or to insist upon strict compliance by Franchisee with any obligation or
condition hereunder, and no custom or practice of the parties in variance with
the terms hereof, shall constitute a waiver of Franchisor's right to demand
exact compliance with the terms hereof. Waiver by Franchisor of any
particular default by Franchisee shall not be binding unless in writing and
executed by the party sought to be charged and shall not affect or impair
Franchisor's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, waiver, forbearance, or omission of
Franchisor to exercise any power or rights arising out of any breach or
default by Franchisee of any of the terms, provisions, or covenants hereof,
affect or impair Franchisor's rights nor shall such constitute a waiver by
Franchisor of any right hereunder of the right to declare any subsequent
breach or default. Subsequent acceptance by Franchisor of any payment(s) due
to it hereunder shall not be deemed to be a waiver by Franchisor of any
preceding breach by Franchisee of any terms, covenants or conditions of this
Agreement.
XXIV. NOTICE
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed by certified mail,
return receipt requested, to the respective parties at the following addresses
unless and until a different address has been designated by written notice to
the other party:
Notices to Franchisor: EASYRIDERS FRANCHISING, INC.
5055 Chesebro Road
Agoura Hill, California 91301
Copy to:
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Notices to Franchisee: New Riders Ltd.
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Leon Hatcher
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105 W. Dakota St. Suite 108
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Clovis, CA 93612
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Copies to:
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Any notice by certified mail shall be deemed to have been given at the date
and time of mailing.
XXV. COST OF ENFORCEMENT OR DEFENSE
In the event that either party to this Agreement is required to employ
legal counsel or to incur other expenses to enforce any obligation of the
second party hereunder, or to defend against any claim, demand, action, or
proceeding by reason of the second party's failure to perform any obligation
imposed upon the second party by this Agreement, and provided that legal
action is filed and such action or the settlement thereof establishes the
second party's default hereunder, then the first party shall be entitled to
recover from the second party the amount of all reasonable attorney's fees of
such counsel and all other expenses incurred in enforcing such obligation or
in defending against such claim, demand, action or proceeding, whether
incurred prior to, or in preparation for, or in contemplation of the filing of
such action or thereafter. Nothing contained in this Paragraph shall relate
to arbitration proceedings pursuant to this Agreement.
XXVI. ENTIRE AGREEMENT
This Agreement, and Exhibit attached hereto, and the documents referred
to herein, shall be construed together and constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof, and supersede all prior agreements. No other representation
has induced Franchisee to execute this Agreement, and there are no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein, which are of any force or effect with
reference to this Agreement or otherwise. No amendment, change or variance
from this Agreement shall be binding on either party unless executed in
writing by both parties.
XXVII. SEVERABILITY AND CONSTRUCTION
A. Each Paragraph, part, term and/or provision of this Agreement
shall be considered severable, and if, for any reason, any Paragraph, part,
term and/or provision herein is determined to be invalid and contrary to, or
in conflict with, any existing or future law or regulation, such shall not
impair the operation of or affect the remaining portions, sections, parts,
terms and/or provisions of this Agreement, and the latter will continue to be
given full force and effect and bind the parties hereto; and said invalid
sections, parts, terms and/or provisions shall be deemed not part of this
Agreement.
B. Anything to the contrary herein notwithstanding, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Franchisor or Franchisee and such of their respective
successors and assigns as may be contemplated by this Agreement, any rights or
remedies under or by reason of this Agreement.
C. Franchisee shall be bound by an promise or covenant imposing the
maximum duty permitted by law which is contained within the terms of any
provision hereof, as though it were separately stated in and made a part of
this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court may hold to be unreasonable and
unenforceable in a final decision to which Franchisor is a party, or from
reducing the scope of any promise or covenant to the extent required to comply
with such a court order.
D. All captions herein are intended solely for the convenience of the
parties, and none shall be deemed to affect the meaning or construction of any
provision hereof.
E. This Agreement may be executed in triplicate, and each copy so
executed shall be deemed an original.
F. The recitals set forth in this Agreement are specifically
incorporated into the terms of this Agreement and hereby constitute a part
thereof.
XXVIII. APPLICABLE LAW
A. THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY
FRANCHISOR IN CALIFORNIA; AND SHALL BE INTERPRETED AND CONSTRUED UNDER THE
LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY CONFLICT OF LAW,
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15, U.S.C. SECTIONS 1051 ET SEQ), THE UNITED STATES COPYRIGHT ACT
OF 1976, AS AMENDED, AND THE UNITED STATES PATENT ACT OF 1952, AS AMENDED.
B. FRANCHISEE ACKNOWLEDGES THAT THIS AGREEMENT IS ENTERED INTO IN LOS
ANGELES COUNTY, CALIFORNIA AND THAT ANY ACTION SOUGHT TO BE BROUGHT BY EITHER
PARTY, EXCEPT THOSE CLAIMS REQUIRED TO BE SUBMITTED TO ARBITRATION SHALL BE
BROUGHT IN THE APPROPRIATE STATE OR FEDERAL COURT IN CALIFORNIA WITH
JURISDICTION OVER THE MATTER, AND THE PARTIES DO HEREBY WAIVE ALL QUESTIONS OF
PERSONAL JURISDICTION OR VENUE FOR THE PURPOSES OF CARRYING OUT THIS
PROVISION.
C. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED TO FRANCHISOR OR
FRANCHISEE BY THIS AGREEMENT IS INTENDED TO BE, NOR SHALL BE DEEMED, EXCLUSIVE
OF ANY OTHER RIGHT OR REMEDY HEREIN OR BY LAW OR EQUITY PROVIDED OR PERMITTED,
BUT EACH SHALL BE CUMULATIVE OF EVERY OTHER RIGHT OR REMEDY.
D. NOTHING HEREIN CONTAINED SHALL BAR FRANCHISOR'S RIGHT TO OBTAIN
INJUNCTIVE RELIEF AGAINST THREATENED CONDUCT THAT WILL CAUSE IT LOSS OR
DAMAGES, UNDER THE USUAL EQUITY RULES, INCLUDING THE APPLICABLE RULES FOR
OBTAINING RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS.
XXIX. ARBITRATION
A. Any monetary claim arising out of or relating to this Agreement,
or any breach thereof, and any controversy regarding the establishment of the
fair market value of leasehold improvements and other Franchised Business
assets pursuant to Paragraph XVII.J. hereof, shall be submitted to arbitration
in Los Angeles County, California, in accordance with the rules of the
American Arbitration Association and judgement upon the award may be entered
in any court having jurisdiction thereof. Nothing contained herein shall,
however, be construed to limit or to preclude Franchisor from bringing any
action in any court of competent jurisdiction for injunctive or other
provisional relief as Franchisor deems to be necessary or appropriate to
compel Franchisee to comply with his obligations hereunder or to protect the
Marks or other property rights of Franchisor. In addition, nothing contained
herein shall be construed to limit or to preclude Franchisor from joining with
any action for injunctive or provisional relief all monetary claims that
Franchisor may have against Franchisee which arise out of the acts or
omissions to act giving rise to the action for injunctive or provisional
relief. This arbitration provision shall be deemed to be self-executing and
in the event that Franchisee fails to appear any properly noticed arbitration
proceeding, award may be entered against Franchisee notwithstanding his
failure to appear.
B. Nothing herein contained shall bar the right of either party to
seek and obtain temporary injunctive relief from a court of competent
jurisdiction in accordance with applicable law against threatened conduct that
will cause loss or damage, pending completion of the arbitration.
C. It is the intent of the parties that any arbitration between
Franchisor and Franchisee shall be of Franchisee's individual claim and that
the claim subject to arbitration shall not be arbitrated on a classwide basis.
XXX. "FRANCHISEE" DEFINED AND GUARANTY
As used in this Agreement, the term "Franchisee" shall include all
persons who succeed to the interest of the original Franchisee by permitted
transfer or operation of law and shall be deemed to include not only the
individual or entity defined as "Franchisee" in the introductory paragraph of
this Agreement but shall also include all partners of the entity that executes
this Agreement, in the event said entity is a partnership, and all
shareholders, officers and directors of the entity that executes this
Agreement, in the event said entity is a corporation. By the signatures
hereto, all partners, shareholders, officers and directors of the entity that
signs this Agreement as Franchisee acknowledges and accepts the duties and
obligations imposed upon each of them, individually, by the terms of this
Agreement. All partners of the entity that executes this Agreement, in the
event said entity is a partnership and all shareholders, officers and
directors of the entity that executed this Agreement, in the event said entity
is a corporation, shall execute the Guaranty and Assumption of Obligations
attached hereto as Exhibit A and made a part hereof.
XXI. FORCE MAJEURE
Whenever a period of time is provided in this Agreement for either party
to do or perform any act or thing, except the payment of monies, neither party
shall be liable or responsible for any delays due to strikes, lockouts,
casualties, acts of God, war, governmental regulation or control or other
causes beyond the reasonable control of the parties, and in any event said
time period for the performance of an obligation hereunder shall be extended
for the amount of time of the delay. This clause shall not apply or not
result in an extension of the term of this Agreement.
XXXII. CAVEAT
The success of the business venture contemplated to be undertaken by
Franchisee by virtue of this Agreement is speculative and depends, to a large
extent, upon the ability of Franchisee as an independent businessman, and his
active participation in the daily affairs of the business as well as other
factors. Franchisor does not make any representation or warranty express or
implied as to the potential success of the business venture contemplated
hereby.
XXXIII. ACKNOWLEDGMENTS
A. Franchisee represents and acknowledges that it has received, read
and understood this Agreement and Franchisor's Uniform Franchise Offering
Circular; and that Franchisor has fully and adequately explained the
provisions of each to Franchisee's satisfaction; and that Franchisor has
accorded Franchisee ample time and opportunity to consult with advisors of its
own choosing about the potential benefits and risks of entering into this
Agreement.
B. Franchisee acknowledges that it has received a copy of this
Agreement and the attachments thereto, at least five (5) business days prior
to the date on which this Agreement was executed. Franchisee further
acknowledges that Franchisee has received the disclosure document required by
the Trade Regulation Rule of the Federal Trade Commission entitled Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures, at least (10) business days prior to the date on which this
Agreement was executed.
C. Franchisee has been advised to consult with its own advisors with
respect to the legal, financial and other aspect of this Agreement, the
business franchised hereby, and the prospects for that business. Franchisee
has either consulted with such advisors or has deliberately declined to do so.
D. The covenants not to compete set forth in this Agreement are fair
and reasonable and will not impose any undue hardship on Franchisee, since
Franchisee has other considerable skills, experience and education which
afford Franchisee the opportunity to derive income from other endeavors.
E. Franchisee affirms that all information set forth in any and all
applications, financial statements and submissions to Franchisor is true,
complete and accurate in all respects, with Franchisee expressly acknowledging
that Franchisor is relying upon the truthfulness, completeness and accuracy of
such information.
F. Franchisee has conducted an independent investigation of the
business contemplated by this Agreement and recognizes that, like any other
business, an investment in a EASYRIDERS Franchised Business involves business
risks and that the success of the venture is primarily dependent upon the
business abilities and efforts of Franchisee.
G. Franchisee hereby consents and agrees that any disputes arising
between Franchisor and Franchisee be submitted to arbitration as provided in
Paragraph XXIX.A. of this Agreement.
H. FRANCHISEE UNDERSTANDS AND ACKNOWLEDGES THAT ALL REPRESENTATIONS
OF FACT CONTAINED HEREIN ARE MADE SOLELY BY FRANCHISOR. ALL DOCUMENTS,
INCLUDING FRANCHISOR'S FRANCHISE AGREEMENT AND UNIFORM FRANCHISE OFFERING
CIRCULAR AND ALL EXHIBITS THERETO, HAVE BEEN PREPARED SOLELY IN RELIANCE UPON
REPRESENTATIONS MADE AND INFORMATION PROVIDED BY FRANCHISOR, ITS OFFICERS AND
DIRECTORS. FRANCHISEE FURTHER AGREES TO INDEMNIFY AND HOLD HARMLESS THE
PREPARER OF ANY AND ALL SUCH FRANCHISE AGREEMENTS, OFFERING CIRCULARS AND
EXHIBITS THERETO FROM ANY AND ALL LOSS, COSTS, EXPENSES, (INCLUDING ATTORNEYS'
FEES), DAMAGES AND LIABILITIES RESULTING FROM ANY REPRESENTATIONS AND/OR
CLAIMS MADE BY FRANCHISOR IN SUCH DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed and delivered this Agreement in triplicate
the day and year first above written.
ATTEST: EASYRIDERS FRANCHISING, INC.
/s/ Signature illegible By: /s/Laina Sullivan
- ------------------------------ ---------------------------------
ATTEST/WITNESS: FRANCHISEE:
/s/ Signature illegible By: /s/ Leon Hatcher
- ------------------------------- ---------------------------------
- ------------------------------- -------------------------------
EXHIBIT A
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this 4 day of Jan.
1997, by Newriders, Inc., a Nevada corporation.
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement of even date herewith ("Agreement") by EASYRIDERS
FRANCHISING, INC. ("Franchisor"), each of the undersigned hereby personally
and unconditionally (1) guarantees to Franchisor, and its successors and
assigns, for the term of the Agreement and thereafter as provided in the
Agreement, that HE ("Franchisee") shall punctually pay and perform each and
every undertaking, agreement and covenant set forth in the Agreement; and (2)
shall be personally bound by, and personally liable for the breach of each and
every provision in the Agreement, both monetary obligations and obligations to
take or refrain from taking specific actions or to engage or refrain from
engaging in specific activities. Each of the undersigned waives: (1)
acceptance and notice of acceptance by Franchisor of the foregoing
undertakings; (2) notice of demand for payment of any indebtedness or non-
performance of any obligations hereby guaranteed; (3) protest and notice of
default to any party with respect to the indebtedness or non-performance of
any obligations hereby guaranteed; (4) any right he may have to require that
an action be brought against Franchisee or any other person as a condition of
liability; and (5) any and all other notices and legal or equitable defenses
to which he may be entitled.
Each of the undersigned consents and agrees that: (1) his direct and immediate
liability under this guaranty shall be joint and several; (2) he shall render
any payment or performance required under the Agreement upon demand if
Franchisee falls or refuses punctually to do so; (3) such liability shall not
be contingent or conditioned upon pursuit by Franchisor of any remedies
against Franchisee or any other person; and (4) such liability shall not be
diminished, relieved or otherwise affected by any extension of time, credit or
other indulgence which Franchisor may from time to time grant to Franchisee or
to any other person, including without limitation the acceptance of any
partial payment or performance, or the compromise or release of any claims,
none of which shall in any way modify or amend this guaranty, which shall be
continuing and Irrevocable during the term of the Agreement.
IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his signature
on the same day and year as the Agreement was executed.
GUARANTOR(S) PERCENTAGE OF OWNERSHIP IN FRANCHISEE
Newriders, Inc. 100 %
_______________________ _____________________%
_______________________ _____________________%
_______________________ _____________________%
_______________________ _____________________%
EXHIBIT B
REFUNDS AND CANCELLATION
This entire contract is further conditioned upon Franchisor's evaluation
of the personal abilities, aptitudes and financial qualifications of
Franchisee, and Franchisee's manager, if applicable. In accordance therewith,
Franchisee, and, Franchisee's manager, if applicable, shall submit all data
requested and Franchisor shall have a reasonable time, not to exceed fifteen
(15) business days after submission of all data, to prepare its evaluations.
If, for any reason, Franchisor elects to cancel this Agreement after the
aforesaid evaluations, he shall notify Franchisee in writing of the
cancellation within fifteen (15) days of Franchisor's receipt of the above
data. Said notice shall be accompanied by a refund to Franchisee of monies
paid to Franchisor under the terms of this Agreement less the amount stated
below, and the notice and refund shall cause an automatic cancellation of this
Agreement without further notice.
In the event of a cancellation of this Agreement as set forth above,
Franchisor shall be entitled to a reasonable fee for its evaluation of
Franchisee and related preparatory work performed and expenses actually
incurred, but not to exceed the sum of FIVE HUNDRED Dollars ($500.00). If
Franchisee has paid franchise fees in excess of the amount owed to Franchisor
for Franchisor's evaluation, Franchisor shall return such excess amount to
Franchisee and Franchisor shall be fully and forever released from any claims
or causes of action the Franchisee may have under or pursuant to the Franchise
Agreement.
EASYRIDERS FRANCHISING, INC.
By: Laina Sullivan
ATTEST: /s/ <signature illegible> Title: V.P. Franchising
------------------------- Date:
FRANCHISEE
By: Leon Hatcher
ATTEST: /s/ <signature illegible> Title: Chairman of the Board
------------------------- Date: Jan 4, 1997
EXHIBIT C
MAP OF DESIGNATED AREA
Exhibit 10.2.1
SHOPPING CENTER LEASE
RESTAURANT LEASE
COX-WALKER/FRESNO, A GENERAL PARTNERSHIP HEREIN CALLED "OWNER," WHOSE
ADDRESSES IS RICHARD D. WALKER P.O. BOX 6479 LOS OSOS, CA 93412 AND NEW RIDERS
LIMITED HEREIN CALLED "TENANT," WHOSE ADDRESSES IS 5515 NORTH BLACKSTONE
FRESNO, CA 93710, AGREE TO THE FOLLOWING TERMS AND CONDITIONS RELATING TO THE
LEASE OF LAND AND IMPROVEMENTS LOCATED AT 5515 N. BLACKSTONE FRESNO, CA 93710.
ARTICLE I
GRANT AND TERM
SECTION 1.01 LEASED PREMISES
IN CONSIDERATION OF THE RENTS, COVENANTS, AND AGREEMENTS HEREINAFTER RESERVED
AND CONTAINED ON THE PART OF TENANT TO BE OBSERVED AND PERFORMED, THE OWNER
DEMISES AND LEASES TO THE TENANT AND TENANT RENTS FROM OWNER, THOSE CERTAIN
PREMISES, NOW AND HEREAFTER TO BE ERECTED IN THE FRESNO, COUNTY OF FRESNO,
CALIFORNIA. WHICH PREMISES CONSISTS OF A RESTAURANT HAVING A DEPTH OF 70
FEET, APPROXIMATELY, EXTERIOR FRONT AND EXTERIOR REAR, FROM OF EXTERIOR WALL
TO EXTERIOR OF WALL, BY A WIDTH OF 107 FEET, APPROXIMATELY, HEREIN CALLED THE
"LEASED PREMISES." APPROXIMATE SQUARE FOOTAGE OF SPACE IS 7500 S.F. THE
ADDRESS IS SAID SPACE IS 5515 N. BLACKSTON FRESNO, CALIFORNIA 93710.
SECTION 1.02 USE OF ADDITIONAL AREAS
THE USE AND OCCUPATION BY THE TENANT OF THE LEASED PREMISES SHALL INCLUDE THE
USE IN COMMON WITH OTHERS ENTITLED THERETO OF THE COMMON AREAS, EMPLOYEES'
PARKING AREAS, SERVICE ROADS, LOADING FACILITIES, SIDEWALKS, AND CUSTOMER CAR
PARKING AREAS. OTHER FACILITIES AS MAY BE DESIGNATED FROM TIME TO TIME BY THE
OWNER, SUBJECT HOWEVER TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND TO
REASONABLE RULES AND REGULATIONS FOR THE USE THEREOF AS PRESCRIBED FROM TIME
TO TIME BY OWNER.
SECTION 1.03 COMMENCEMENT OF TERM
THE TERM OF THIS LEASE, AND TENANTS OBLIGATION TO PAY RENT SHALL COMMENCE ON
THE EARLIER OF THE FOLLOWING DATES.
A) COMMENCEMENT DATE AUGUST 1, 1995, WITH OCCUPANCY UPON MUTUAL
EXECUTION.
SHOULD ANY COMMENCEMENT DATE NOT CORRESPOND TO THE FIRST DAY OF THE MONTH
TENANT SHALL PAY THE RENT BASED UPON THE REMAINING DAYS TILL THE FIRST DAY OF
THE FOLLOWING MONTH. THIS FRACTIONAL MONTH'S RENT SHALL BE DUE ON THE
COMMENCEMENT DATE. THEREAFTER THE RENT SHALL BE PAID IN EQUAL MONTHLY
INSTALLMENTS ON THE FIRST DAY OF EACH AND EVERY MONTH IN ADVANCE.
SECTION 1.04
TENANT SHALL, BY ENTERING INTO AND OCCUPYING THE DEMISED PREMISES, BE
CONCLUSIVELY DEEMED TO HAVE ACCEPTED IT IN 'AS IS' CONDITION AND TO
ACKNOWLEDGE THAT SAID DEMISED PREMISES ARE IN GOOD ORDER, CONDITION AND REPAIR
AND IN ALL RESPECTS CONSTRUCTED AND OR IMPROVED IN ACCORDANCE WITH THE
PROVISIONS OF THIS LEASE.
SECTION 1.05 LENGTH OF TERM
THE TERM OF THIS LEASE SHALL BE FOR TWENTY (20) YEARS AND 0 MONTHS
FOLLOWING THE COMMENCEMENT OF THE TERM IS PROVIDED IN SECTION 1.03 HEREOF.
SECTION 1.06 EXCUSE OF OWNER'S PERFORMANCE
ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, PROVIDING SUCH
CAUSE IS NOT DUE TO THE WILLFUL ACT OR NEGLECT OF THE OWNER. THE OWNER SHALL
NOT BE DEEMED IN DEFAULT WITH RESPECT TO THE PERFORMANCE OF ANY OF THE TERMS,
COVENANTS AND CONDITIONS OF THIS LEASE IF SAME SHALL BE DUE TO ANY STRIKE,
LOCKOUT, CIVIL COMMOTION INVASION, REBELLION, HOSTILITIES, MILITARY OR USURPED
POWER, SABOTAGE, GOVERNMENTAL REGULATIONS, PERMITS OR CONTROLS, INABILITY TO
OBTAIN ANY MATERIAL, SERVICE OR FINANCING, RAIN OR MUDDY CONDITIONS, THROUGH
ACT OF GOD OR OTHER CAUSE BEYOND THE CONTROL OF THE OWNER.
ARTICLE II
RENT
SECTION 2.01 MINIMUM RENT
THE FIXED MINIMUM ANNUAL RENT DURING THE TERM OF THIS LESE SHALL BE PAYABLE BY
TENANT IN EQUAL MONTHLY INSTALLMENTS. ON OR BEFORE THE FIRST DAY OF EACH
MONTH IN ADVANCE, AT THE OFFICE OF OWNER OR AT SUCH OTHER PLACE DESIGNATED BY
OWNER WITHOUT ANY PRIOR DEMAND THEREFOR, AND WITHOUT ANY DEDUCTION OR SET-OFF
WHATSOEVER AND SHALL BE AS FOLLOWS:
FROM 6/1/95 TO 5/31/00 $ 84,000.00 PER ANNUM ($7000.00 PER MONTH)
FROM 6/1/00 TO 5/31/05 $ 102600.00 PER ANNUM ($8550.00 PER MONTH)
FROM 6/1/00 TO 5/31/10 $ 117120.00 PER ANNUM ($9760.00 PER MONTH)
FROM 6/1/10 TO 5/31/15 $ 133740.00 PER ANNUM ($1145.00 PER MONTH)
IN THE EVENT THE FIXED MINIMUM MONTHLY RENT IS NOT PAID TO OWNER BY TENANT
WITHIN TEN (10) DAYS OF THE DATE ON WHICH IT IS DUE, TENANT AGREES TO PAY TO
OWNER AS ADDITIONAL RENT A LATE-CHARGE OF 5% OF TOTAL RENTAL AMOUNT DUE.
TENANT FURTHER AGREES TO PAY OWNER ANY COSTS INCURRED BY OWNER IN EFFECTING
THE COLLECTION OF SUCH PAST DUE RENT AND LATE-CHARGE INCLUDING BUT NOT LIMITED
TO FEES OF AN ATTORNEY OR COLLECTION AGENCY. THE PARTIES HERETO AGREE THAT
ALL LATE CHARGES SHALL BE DEEMED ADDITIONAL RENT AND SHALL BE DUE AND PAYABLE
AS SUCH WITHIN FIVE (5) DAYS OF TENANTS RECEIPT OF A STATEMENT ITEMIZING THE
SAME. NOTHING HEREIN CONTAINED SHALL LIMIT ANY OTHER REMEDY OF OWNER.
SECTION 2.02 REAL ESTATE TAXES
TENANT AGREES TO PAY ALL REAL PROPERTY TAXES, ASSESSMENTS AND SURTAXES WHICH
MAY BE LEVIED OR ASSESSED BY ANY LAWFUL AUTHORITY AGAINST THE LAND ON WHICH
BUILDINGS ARE LOCATED AND IMPROVEMENTS. TENANT SHALL PAY SAID TAXES MONTHLY
UPON RECEIPT FROM OWNER OF A STATEMENT DELINEATING TENANTS SHARE OF SAID TAXES
AND SAID SHARE SHALL BE PAID WITHIN FIVE (5) DAYS AFTER RECEIPT OF SAID
STATEMENT. ALL TAXES FOR THE YEAR IN WHICH THIS LEASE COMMENCES SHALL BE
APPORTIONED AND ADJUSTED. AT OWNER DISCRETION THESE COSTS MAY BE INCLUDED IN
BUDGETED C.A.M. MONTHLY PAYMENTS.
SECTION 2.03 ADDITIONAL RENT
THE TENANT SHALL PAY AS ADDITIONAL RENT MONEY REQUIRED TO BE PAID PURSUANT TO
SECTION 2.01, 2.02, 8.01, 11.02, 12.02 AND ALL OTHER SUMS OF MONEY OR CHARGES
REQUIRED TO BE PAID BY TENANT UNDER THIS LEASE, WITHOUT ANY DEDUCTIONS OR
SETOFFS WHATSOEVER, WHETHER OR NOT THE SAME SHALL BE DESIGNATED "ADDITIONAL
RENT." IF SUCH AMOUNTS OR CHARGES ARE NOT PAID AT THE TIME PROVIDED IN THIS
LEASE, TENANT AGREES TO PAY TO OWNER A LATE CHARGE OF FIVE PERCENT (5%) OF THE
AMOUNT OR CHARGES NOT PAID BY TENANT AND TENANT FURTHER AGREES TO PAY TO OWNER
ANY COST INCURRED BY OWNER IN EFFECTING THE COLLECTION OF SUCH PAST DUE
AMOUNTS OR CHARGES INCLUDING BUT NOT LIMITED TO FEES OF AN ATTORNEY OR A
COLLECTION AGENCY. THE PARTIES HERETO AGREE THAT ALL OF THE HEREINABOVE
MENTIONED CHARGES SHALL BE DEEMED ADDITIONAL RENT AND SHALL BE ALL DUE AND
PAYABLE AS SUCH WITHIN FIVE (5) DAYS OF TENANTS RECEIPT OF A STATEMENT
ITEMIZING THE SAME NOTHING HEREIN CONTAINED SHALL LIMIT ANY OTHER REMEDY OF
OWNER.
SECTION 2.04
TENANTS INTEREST OF EQUITY IN ANY AND ALL TRADE FIXTURES, EQUIPMENT,
INVENTORY, OR OTHER PERSONAL PROPERTY OF ANY NATURE, LOCATED FROM TIME TO TIME
IN THE DEMISED PREMISES, SHALL BECOME AND REMAIN SECURITY FOR THE PERFORMANCE
OF THE TERMS OF THIS LEASE BY TENANT AND THE SAME, SUBJECT TO THE RIGHT OF ANY
CONDITIONAL SELLER, SHALL BE COVERED BY A SECURITY AGREEMENT, PROPERLY
EXECUTED BY TENANT TO LANDLORD AND IN ALL RESPECTS COMPLYING WITH THE
APPLICABLE PROVISIONS OF THE LAW OF THIS STATE FROM TIME TO TIME IN EFFECT,
AND TENANT SHALL EXECUTE SUCH DOCUMENTS AS SHALL BE REQUIRED TO EFFECTUATE THE
PURPOSE HEREOF. REPLACEMENTS, RENEWALS AND REPAIRS OF WORN OUT OR OBSOLETE
PROPERTY SHALL BE PERMITTED SUBJECT, HOWEVER, TO LANDLORD'S RECEIVING AN
EFFECTIVE LIEN UPON TENANT'S EQUITY IN SUCH REPLACEMENTS AND RENEWALS.
ARTICLE III
CONSTRUCTION OF LEASED PREMISES
SECTION 3.01 OWNER'S OBLIGATION
OWNER SHALL NOT BE OBLIGATED TO PERFORM ANY CONSTRUCTION, DEMOLITION OR
REPLACEMENT OF ANY FEATURES OF THE DEMISED SPACE INCLUDING BUT NOT LIMITED TO
WALLS, CEILINGS, FLOOR COVERING, STORE FRONTS, DOORS, ELECTRICAL SYSTEMS, AIR
CONDITIONING SYSTEMS, PLUMBING FIXTURES OR SYSTEMS, EXCEPT AS SPECIFICALLY
AGREED TO IN WRITING BY ADDENDUM TO THE LEASE
SECTION 3.02 CHANGES AND ADDITIONS TO BUILDINGS
OWNER HEREBY RESERVES THE RIGHT AT ANY TIME TO MAKE ALTERATIONS OR ADDITIONS
TO AND TO BUILD ADDITIONAL STORES ON THE BUILDING IN WHICH THE PREMISES ARE
CONTAINED AND TO BUILD ADJOINING THE SAME. OWNER ALSO RESERVES THE RIGHT TO
CONSTRUCT OTHER BUILDINGS OR IMPROVEMENTS IN THE SHOPPING CENTER FROM TIME TO
TIME AND TO MAKE ALTERATIONS THEREOF OR ADDITIONS THERETO AND TO BUILD
ADDITIONAL STORES ON ANY SUCH BUILDING OR BUILDINGS AND TO BUILD ADJOINING
SAME. EASEMENTS FOR LIGHT AND AIR ARE NOT INCLUDED IN THE LEASING OF THESE
PREMISES OF TENANT. LANDLORD FURTHER RESERVES THE EXCLUSIVE RIGHT TO THE ROOF
EXCEPT AS PROVIDED IN THIS LEASE AGREEMENT.
ARTICLE IV
CONDUCT OF BUSINESS BY TENANT
SECTION 4.01 USE OF PREMISES
TENANT SHALL USE THE LEASED PREMISES SOLELY FOR THE PURPOSE OF CONDUCTION THE
BUSINESS OF: A RESTAURANT AND BAR INCLUDING RETAIL SALES OF APPAREL AND OTHER
ITEMS RELATED TO THE THEME OF THE BUSINESS.
TENANT SHALL OCCUPY THE LEASED PREMISES WITHIN TEN (10) DAYS AFTER THE DATE OF
THE NOTICE PROVIDED FOR IN SECTION 1.03 HEREOF, AND SHALL CONDUCT CONTINUOUSLY
IN THE LEASED PREMISES THE BUSINESS ABOVE STATED. TENANT WILL NOT USE OR
PERMIT, OR SUFFER THE USE OF, THE LEASED PREMISES FOR ANY OTHER BUSINESS OR
PURPOSE WITHOUT LANDLORD'S APPROVAL, WHICH SHALL NOT BE UNREASONABLY WITHHELD.
SECTION 4.02 CONDUCT OF BUSINESS
TENANT ACKNOWLEDGES THAT LANDLORD MAKES NO REPRESENTATIONS AS TO THE PRESENT
FUTURE CONDITION OF THE DEMISED PREMISES, OR TO THE FITNESS, DESIRABILITY OR
ZONING THEREOF FOR ANY PARTICULAR PURPOSE, AND LANDLORD SHALL NOT BE LIABLE
FOR ANY CHARGES THEREIN OR ADDITIONS THERETO REQUIRED BY ANY PUBLIC AUTHORITY.
ANY PERMITS OR REQUIREMENTS OF ANY KIND PERTAINING TO THE OPERATION OF TENANTS
BUSINESS WILL BE TENANT'S RESPONSIBILITY AND ANY CONSTRUCTION OR SPECIAL
EQUIPMENT REQUIRED BY PUBLIC AUTHORITY TO ENABLE TENANT TO CONDUCT THE
BUSINESS SHALL LIKEWISE BE TENANT'S SOLE COST AND RESPONSIBILITY. TENANT
SHALL CLEAR ANY LIEN FILED AS A RESULT OF TENANTS ACTION.
SECTION 4.03 COMPETITION
DURING THE TERM OF THIS LEASE TENANT SHALL NOT DIRECTLY OR INDIRECTLY ENGAGE
IN ANY SIMILAR OR COMPETING BUSINESS WITHIN A RADIUS OF THREE MILES FROM THE
OUTSIDE BOUNDARY OF THE SHOPPING CENTER. TENANT SHALL NOT PERFORM ANY ACTS OR
CARRY ON ANY PRACTICES WHICH MAY INJURE THE BUILDING OR BE A NUISANCE OR
MENACE TO OTHER TENANTS IN THE ADJOINING SHOPPING CENTERS.
SECTION 4.04 STORAGE, OFFICE SPACE
TENANT SHALL WAREHOUSE, STORE AND/OR STOCK IN THE LEASED PREMISES ONLY SUCH
GOODS, WARES AND MERCHANDISE IS TENANT INTENDS TO OFFER FOR SALE AT RETAIL AT,
IN, FROM OR UPON THE LEASED PREMISES. THIS SHALL NOT PRECLUDE OCCASIONAL
EMERGENCY TRANSFERS OF MERCHANDISE TO THE OTHER STORES OF TENANT, IF ANY, NOT
LOCATED IN THE SHOPPING CENTER. TENANT SHALL USE FOR OFFICE, CLERICAL OR
OTHER NON-SELLING PURPOSE ONLY SUCH SPACE IN THE LEASED PREMISES AS FROM TIME
TO TIME REASONABLY REQUIRED FOR TENANTS BUSINESS IN THE LEASED PREMISES. NO
AUCTION, FIRE OR BANKRUPTCY SALES MAY BE CONDUCTED IN THE LEASED PREMISES
WITHOUT THE PREVIOUS WRITTEN CONSENT OF OWNER. NO STORAGE IS PERMITTED
EXTERIOR TO THE SPACE.
ARTICLE V
GRANT OF CONCESSIONS
SECTION 5.01 CONDITIONS TO GRANT
THE PROVISION AGAINST SUBLETTING ELSEWHERE CONTAINED IN THIS LEASE SHALL NOT
PROHIBIT TENANT FROM GRANTING CONCESSIONS FOR THE OPERATIONS OF ONE OF MORE
DEPARTMENTS OF THE BUSINESS WHICH TENANT IS PERMITTED BY SECTION 4.01 TO
CONDUCT IN OR UPON THE LEASED PREMISES; PROVIDED, HOWEVER, THAT (A) EACH SUCH
CONCESSION MAY BE GRANTED ONLY UPON RECEIPT BY TENANT OF THE WRITTEN CONSENT
OF THE OWNER AND SHALL BE SUBJECT TO ALL TERMS AND PROVISIONS OF THIS LEASE;
(B) AT LEAST SEVENTY-FIVE PERCENT (75%) OF THE SALES FLOOR AREA OF THE LEASED
PREMISES SHALL BE AT ALL TIMES DEVOTED TO THE BUSINESS OF AND BE OPERATED BY
TENANT.
ARTICLE VI
SECURITY DEPOSIT
SECTION 6.01 AMOUNT OF DEPOSIT
TENANT, CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS LEASE, WILL DEPOSIT WITH
OWNER FORTHWITH THE SUM OF SEVEN THOUSAND DOLLARS ($7000.00). SAID DEPOSIT
SHALL BE HELD BY OWNER, WITHOUT LIABILITY FOR INTEREST, AS SECURITY FOR THE
FAITHFUL PERFORMANCE BY TENANT OF ALL OF THE TERMS, COVENANTS, AND CONDITIONS
OF THIS LEASE BY SAID TENANT TO BE KEPT AND PERFORMED DURING THE TERM HEREOF.
IF AT ANY TIME DURING THE TERM OF THIS LEASE ANY OF THE RENT HEREIN RESERVED
SHALL BE OVERDUE AND UNPAID, OR ANY OTHER SUM PAYABLE BY TENANT TO OWNER
HEREUNDER SHALL BE OVERDUE AND UNPAID THEN OWNER MAY, AT THE OPTION OF OWNER
(BUT OWNER SHALL NOT BE REQUIRED TO), APPROPRIATE AND APPLY ANY PORTION OF
SAID DEPOSIT TO THE PAYMENT OF ANY SUCH OVERDUE RENT OR OTHER SUM. IT IS
EXPRESSLY UNDERSTOOD THAT THIS SUM DOES NOT APPLY TOWARD RENT.
SECTION 6.02 USE AND RETURN OF DEPOSIT
IN THE EVEN OF THE FAILURE OF TENANT TO KEEP AND PERFORM ANY OF THE TERMS,
COVENANTS AND CONDITIONS OF THIS LEASE TO BE PERFORMED BY TENANT, THEN THE
OWNER AT ITS OPTION MAY, AFTER TERMINATING THIS LEASE, APPROPRIATE AND APPLY
SAID ENTIRE DEPOSIT, OR SO MUCH THEREOF AS MAY BE NECESSARY, TO COMPENSATE THE
OWNER FOR ALL LOSS OR DAMAGE SUSTAINED OR SUFFERED BY OWNER DUE TO SUCH BREACH
ON THE PART OF TENANT. SHOULD THE ENTIRE DEPOSIT, OR ANY PORTION THEREOF, BE
APPROPRIATED AND APPLIED BY OWNER FOR THE PAYMENT OF OVERDUE RENT OR OTHER
SUMS DUE AND PAYABLE TO OWNER BY TENANT HEREUNDER, THEN TENANT SHALL, UPON THE
WRITTEN DEMAND OF OWNER, FORTHWITH REMIT TO OWNER A SUFFICIENT AMOUNT OF CASH
TO RESTORE SAID SECURITY TO THE ORIGINAL SUM DEPOSITED, AND TENANTS FAILURE TO
DO SO WHEN FIVE (5) DAYS AFTER RECEIPT OF SUCH DEMAND SHALL CONSTITUTE A
BREACH OF THIS LEASE SHOULD TENANT COMPLY WITH ALL OF SAID TERMS, COVENANTS
AND CONDITIONS AND PROMPTLY PAY ALL OF THE RENTAL HEREIN PROVIDED FOR AS IT
FALLS DUE, AND ALL OTHER SUMS PAYABLE BY TENANT TO OWNER HEREUNDER. THE SAID
DEPOSIT SHALL BE RETURNED IN FULL TO TENANT AT THE END OF THE TERM OF THIS
LEASE, OR UPON THE EARLIER TERMINATION OF THIS LEASE.
SECTION 6.03 TRANSFER OF DEPOSIT
OWNER MAY DELIVER THE FUNDS DEPOSITED HEREUNDER BY TENANT TO THE PURCHASER OF
OWNER'S INTEREST IN THE LEASED PREMISES. IN THE EVENT THAT SUCH INTEREST BE
SOLD, AND THEREUPON OWNER SHALL BE DISCHARGED FROM ANY FURTHER LIABILITY WITH
RESPECT TO SUCH DEPOSIT.
ARTICLE VII
PARKING AND COMMON USE AREA AND FACILITIES
SECTION 7.01 CONTROL OF COMMON AREAS BY OWNER
ALL AUTOMOBILE PARKING AREAS, DRIVEWAYS, ENTRANCES AND EXITS THERETO, AND
OTHER FACILITIES FURNISHED BY OWNER IN OR NEAR THE DEMISED PREMISES, INCLUDING
EMPLOYEE PARKING AREAS, THE TRUCK WAY OR WAYS, LOADING DOCKS, PACKAGE PICK-UP
STATIONS, PEDESTRIAN SIDEWALKS AND RAMPS, LANDSCAPED AREAS, EXTERIOR
STAIRWAYS, COMFORT STATIONS AND OTHER AREAS AND IMPROVEMENTS PROVIDED BY OWNER
FOR THE GENERAL USE, IN COMMON, OF TENANTS, THEIR OFFICERS, AGENTS, EMPLOYEES
AND CUSTOMERS, SHALL AT ALL TIMES BE SUBJECT TO THE EXCLUSIVE CONTROL AND
MANAGEMENT OF OWNER, AND OWNER SHALL HAVE THE RIGHT FROM TIME TO TIME TO
ESTABLISH, MODIFY AND ENFORCE REASONABLE RULES AND REGULATIONS WITH RESPECT TO
ALL FACILITIES AND AREAS MENTIONED IN THIS ARTICLE. OWNER SHALL HAVE THE RIGHT
TO CONSTRUCT, MAINTAIN AND OPERATE LIGHTING FACILITIES ON ALL SAID AREAS AND
IMPROVEMENTS; TO POLICE THE SAME; FROM TIME TO TIME TO CHANGE THE AREA, LEVEL,
LOCATION AND ARRANGEMENT OF PARKING AREAS AND OTHER FACILITIES HEREIN ABOVE
REFERRED TO; TO RESTRICT PARKING BY TENANTS, THEIR OFFICERS, AGENTS AND
EMPLOYEES TO EMPLOYEE PARKING AREAS, TO ENFORCE PARKING CHARGES (BY OPERATIONS
OF METERS OR OTHERWISE), WITH APPROPRIATE PROVISIONS FOR FREE PARKING TICKET
VALIDATING BY TENANTS; TO CLOSE ALL OR ANY PORTION OF SAID AREAS OR FACILITIES
TO SUCH EXTENT AS MAY, IN THE OPINION OF OWNER'S COUNSEL, BE LEGALLY
SUFFICIENT TO PREVENT A DEDICATION THEREOF OF THE ACCRUAL OF ANY RIGHTS TO ANY
PERSON OR THE PUBLIC THEREIN; TO CLOSE TEMPORARILY ALL OR ANY PORTION OF THE
PARKING AREAS OR FACILITIES; TO DISCOURAGE NONCUSTOMER PARKING; AND TO DO AND
PERFORM SUCH OTHER ACTS IN AND TO SAID AREAS AND IMPROVEMENTS AS, IN THE USE
OF GOOD BUSINESS JUDGMENT, THE OWNER SHALL DETERMINE TO BE ADVISABLE WITH A
VIEW TO THE IMPROVEMENT OF THE CONVENIENCE AND USE THEREOF BY TENANTS, THEIR
OFFICERS, AGENTS, EMPLOYEES AND CUSTOMERS. OWNERS WILL OPERATE AND MAINTAIN
THE COMMON FACILITIES REFERRED TO ABOVE IN SUCH A MANNER AS OWNER, IN ITS SOLE
DISCRETION, SHALL DETERMINE FROM TIME TO TIME, WITHOUT LIMITING THE SCOPE OF
SUCH DISCRETION, OWNER SHALL HAVE THE FULL RIGHT AND AUTHORITY TO EMPLOY ALL
PERSONNEL AND TO MAKE ALL RULES AND REGULATIONS PERTAINING TO AND NECESSARY
FOR THE PROPER OPERATION AND MAINTENANCE OF THE COMMON AREAS AND FACILITIES.
SECTION 7.02 LICENSE
ALL COMMON AREAS AND FACILITIES NOT WITHIN THE LEASED PREMISES, WHICH TENANT
MAY BE PERMITTED TO USE AND OCCUPY, ARE TO BE USED AND OCCUPIED UNDER A
REVOCABLE LICENSE, AND IF ANY SUCH LICENSE BE REVOKED, OR IF THE AMOUNT OF
SUCH AREAS BE DIMINISHED, OWNER SHALL NOT BE SUBJECT TO ANY LIABILITY NOR
SHALL TENANT BE ENTITLED TO ANY COMPENSATION OR DIMINUTION OR ABATEMENT OF
RENT, NOR SHALL SUCH REVOCATION OR DIMINUTION OF SUCH ARES BE DEEMED
CONSTRUCTIVE OR ACTUAL EVICTION.
ARTICLE VIII
COST OF MAINTENANCE OF COMMON AREAS
SECTION 8.01 TENANT TO BEAR EXPENSE
(A) IN EACH LEASE YEAR TENANT WILL PAY TO OWNER IN EQUAL MONTHLY INSTALLMENTS,
IN ADDITION TO THE RENTALS SPECIFIED IN ARTICLE II HEREOF, AS FURTHER
ADDITIONAL RENT, SUBJECT TO THE LIMITATION HEREIN AFTER SET FORTH, ALL COST AS
DESCRIBED BELOW.
(B) FOR THE PURPOSE OF THIS SECTION 8.01 THE "OPERATING COST" MEANS THE TOTAL
COST AND EXPENSE INCURRED IN OPERATING AND MAINTAINING THE COMMON FACILITIES,
HEREINAFTER DEFINED, ACTUALLY USED OR AVAILABLE FOR USE BY TENANT AND THE
EMPLOYEES, AGENTS, SERVANTS, CUSTOMERS AND OTHER INVITEES OF TENANT,
SPECIFICALLY INCLUDING WITHOUT LIMITATION, GARDENING AND LANDSCAPING, PARKING
LOT REPAIRS OR REPLACEMENT, MAINTENANCE AND LINE PAINTING, THE COST OF PUBLIC
LIABILITY AND PROPERTY DAMAGE INSURANCE, FIRE AND EXTENDED COVERAGE INSURANCE,
BUILDING REPAIRS, ROOF AND WALL REPAIR, MAINTENANCE AND PAINTING, PEST
CONTROL, LIGHTING, SANITARY AND STORM LINE MAINTENANCE, SIDEWALK CLEANING,
REMOVAL OF TRASH, RUBBISH, GARBAGE AND OTHER REFUSE, REASONABLE RESERVES FOR
REPLACEMENTS AND REPAIRS, PROPERTY MANAGEMENT, SHOPPING CENTER BANNERS,
SHOPPING CENTER SIGNAGE (NOT INCLUDING TENANT SIGNAGE), EMPLOYMENT OF SECURITY
GUARDS, BOOKKEEPING, REAL ESTATE PROPERTY TAXES AND ASSESSMENTS, SURCHARGES
AND FEES THEREON, AND THE COST OF PERSONNEL TO SUPERVISE AND ADMINISTER SUCH
SERVICES, TO DIRECT PARKING AND TO POLICE THE COMMON FACILITIES. "COMMON
FACILITIES" MEANS ALL AREAS, SPACE, EQUIPMENT AND SPECIAL SERVICES PROVIDED BY
OWNER FOR THE COMMON OR JOINT USE AND BENEFIT OF THE OCCUPANTS OF THE SHOPPING
CENTER, THEIR EMPLOYEES, AGENTS, SERVANTS, CUSTOMERS AND OTHER INVITEES,
INCLUDING WITHOUT LIMITATION PARKING AREAS, ACCESS ROADS, DRIVEWAYS, RETAINING
WALLS, LANDSCAPED AREAS, TRUCK SERVICEWAYS OR TUNNELS, LOADING DOCKS,
PEDESTRIAN MALLS, COURTS, STAIRS, RAMPS AND SIDEWALKS, COMFORT AND FIRST-AID
STATIONS, WASHROOMS AND PARCEL PICK-UP STATIONS AND SHOPPING CENTER RENTAL
OFFICE.
(C)THE ADDITIONAL RENT TO BE PAID IN THIS SECTION 8.01 AND ALSO SECTIONS 2.02
AND 11.02 SHALL BE PAID MONTHLY IN ADVANCE. OWNER SHALL ESTABLISH A MONTHLY
BUDGET FOR OPERATING COSTS AND RESERVES AND ADJUSTED AT THE END OF EACH YEAR.
THE ADJUSTMENT UPWARDS OR DOWNWARDS TO REFLECT THE ACTUAL COST INCURRED.
TENANT WILL THEN BE CREDITED OR BILLED ACCORDINGLY AT YEAR END TO REFLECT THIS
ADJUSTMENT.
(D) TENANT SHALL PAY MONTHLY SHOPPING CENTER PROPERTY MANAGEMENT FEE.
SHOPPING CENTER PROPERTY MANAGEMENT FEE SHALL BE FOUR PERCENT OF THE BASE
MINIMUM RENT (SECTION 2.01).
ARTICLE IX
SIGNS, AWNINGS, CANOPIES, FIXTURES, ALTERATIONS
SECTION 9.01 INSTALLATION BY TENANT
ALL FEATURES INSTALLED BY TENANT SHALL BE NEW OR COMPLETELY RECONDITIONED.
TENANT SHALL NOT MAKE OR CAUSE TO BE MADE ANY ALTERATIONS, ADDITIONS OR
IMPROVEMENTS OR INSTALL OR CAUSE TO BE INSTALLED ANY TRADE FIXTURES, EXTERIOR
SIGNS, FLOOR COVERINGS, INTERIOR OR EXTERIOR LIGHTING, PLUMBING FIXTURES,
SHADES OR AWNINGS OR MAKE ANY CHANGES TO THE STORE FRONT WITHOUT FIRST
OBTAINING OWNER,S WRITTEN APPROVAL AND CONSENT. ALL IMPROVEMENTS SHALL MEET
ALL GOVERNMENTAL REQUIREMENTS. TENANT SHALL PRESENT TO THE OWNER PLANS AND
SPECIFICATIONS FOR SUCH WORK AT THE TIME APPROVAL IS SOUGHT.
SECTION 9.02 REMOVAL AND INSURANCE BY TENANT
ALL ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS MADE BY THE TENANT,
OR MADE BY THE OWNER ON THE TENANTS BEHALF BY AGREEMENT UNDER THIS LEASE,
SHALL REMAIN THE PROPERTY OF THE TENANT FOR THE TERM OF THE LEASE, OR ANY
EXTENSION OF RENEWAL THEREOF. THE TENANT SHALL AT ALL TIMES MAINTAIN FIRE
INSURANCE WITH EXTENDED COVERAGE IN THE NAME OF THE OWNER AND TENANT, IN AN
AMOUNT ADEQUATE TO COVER THE COST OF REPLACEMENT OF ALL ALTERATIONS,
DECORATIONS, ADDITIONS OR IMPROVEMENTS IN THE EVENT OF FIRE OR EXTENDED
COVERAGE LOSS. TENANT SHALL DELIVER TO THE OWNER CERTIFICATES OF SUCH FIRE
INSURANCE POLICIES WHICH SHALL CONTAIN A CLAUSE REQUIRING THE INSURER TO GIVE
THE OWNER TEN (10) DAYS NOTICE OF CANCELLATION OF SUCH POLICIES. SUCH
ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS SHALL NOT BE REMOVED FROM
THE PREMISES WITHOUT PRIOR CONSENT IN WRITING FROM THE OWNER. UPON EXPIRATION
OF THE LEASE, OR ANY RENEWAL TERM THEREOF, THE TENANT SHALL REMOVE ALL SUCH
ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS AND RESTORE THE LEASED
PREMISES AS PROVIDED IN SECTION 10.03 HEREOF. IF THE TENANT FAILS TO REMOVE
SUCH ALTERATIONS, DECORATIONS, ADDITIONS OR IMPROVEMENTS AND RESTORE THE
LEASED PREMISES, THEN UPON THE EXPIRATION OF THIS LEASE, OR ANY RENEWAL
THEREOF, AND UPON THE TENANTS REMOVAL FROM THE PREMISES, ALL SUCH ALTERATIONS,
DECORATIONS, ADDITIONS AND IMPROVEMENTS SHALL BECOME THE PROPERTY OF THE
OWNER. COSTS OF REMOVAL BY OWNER MAY BE CHARGED TO TENANT.
SECTION 9.03 TENANT SHALL DISCHARGE ALL LIENS
TENANT SHALL PROMPTLY PAY ALL CONTRACTORS AND MATERIALMEN, SO AS TO MINIMIZE
THE POSSIBILITY OF A LIEN ATTACHING TO THE LEASED PREMISES, AND SHOULD ANY
SUCH LIEN BE MADE OR FILED, TENANT SHALL BOND AGAINST OR DISCHARGE THE SAME
WITHIN TEN (10) DAYS AFTER WRITTEN REQUEST BY OWNER.
SECTION 9.04 SIGNS, AWNINGS AND CANOPIES
TENANT WILL NOT PLACE OR SUFFER TO BE PLACED OR MAINTAINED ON ANY EXTERIOR
DOOR, WALL OR WINDOW OF THE LEASED PREMISES ANY SIGN, AWNING OR CANOPY, OR
ADVERTISING MATTER OR OTHER THING OF ANY KIND, AND WILL NOT PLACE OR MAINTAIN
ANY DECORATION, LETTERING OR ADVERTISING MATTER ON THE GLASS OF ANY WINDOW OR
DOOR OF THE LEASED PREMISES WITHOUT FIRST OBTAINING OWNER'S WRITTEN APPROVAL
AND CONSENT. TENANT FURTHER AGREES TO MAINTAIN SUCH SIGN, AWNING, CANOPY,
DECORATION, LETTERING, ADVERTISING MATTER OR OTHER THING IS MAY BE APPROVED IN
GOOD CONDITION AND REPAIR AT ALL TIMES.
TENANT AGREES, AT TENANT'S SOLE COST TO OBTAIN A CANOPY TYPE SIGN IN STRICT
CONFORMANCE WITH OWNER'S SIGN CRITERIA AS TO DESIGN, MATERIAL, COLOR,
LOCATION, SIZE AND LETTER SIZE. ALL SIGNS SHALL BE APPROVED BY OWNER BEFORE
INSTALLATION. SIGNS SHALL BE INSTALLED WITHIN SIXTY (60) DAYS OF DATE OF
COMMENCEMENT OF LEASE AND SHALL MEET ALL GOVERNMENTAL REQUIREMENTS.
ARTICLE X
MAINTENANCE OF LEASED PREMISES
SECTION 10.01 MAINTENANCE BY TENANT
TENANT SHALL AT ALL TIMES KEEP THE LEASED PREMISES (INCLUDING MAINTENANCE OF
EXTERIOR ENTRANCES, ALL GLASS, PLATE GLASS AND SHOW WINDOW MOULDINGS) AND ALL
PARTITIONS, DOORS, DOOR JAMS, DOOR CLOSER, DOOR HARDWARE, FIXTURES, EQUIPMENT
AND APPURTENANCES THEREOF (INCLUDING ELECTRICAL, LIGHTING AND PANELS FROM THE
UTILITY COMPANY METER, HEATING, AND PLUMBING FIXTURES, AND ANY AIR
CONDITIONING SYSTEM, INCLUDING LEAKS AROUND DUCTS, PIPES, VENTS, OR OTHER
PARTS OF THE AIR CONDITIONING, OR PLUMBING, TENANT SHALL MAINTAIN THE AIR
CONDITIONING AND PROVIDE REGULAR SERVICE AND CHANGING OF FILTERS, ALL COSTS OF
REPAIRS SHALL BE TENANTS RESPONSIBILITY, PLUMBING SYSTEMS SHALL BE MAINTAINED)
IN GOOD ORDER, CONDITION AND REPAIR INCLUDING REPLACEMENTS (INCLUDING
REASONABLY PERIODIC PAINTING AS DETERMINED BY OWNER). IF OWNER IS REQUIRED TO
MAKE REPAIRS TO STRUCTURAL PORTIONS OWNER MAY ADD THE COST OF SUCH REPAIRS TO
THE TENANT WHICH SHALL THEREAFTER BECOME DUE. TENANT SHALL BE RESPONSIBLE FOR
MAINTAINING REPAIR AND REPLACEMENT IF NECESSARY OF ROOF WALLS AND STRUCTURAL
SYSTEMS.
SECTION 10.02 MAINTENANCE BY OWNER
IF TENANT REFUSES OR NEGLECTS TO REPAIR PROPERLY AS REQUIRED HEREUNDER AND TO
THE REASONABLE SATISFACTION OF OWNER AS SOON AS REASONABLY POSSIBLE AFTER
WRITTEN DEMAND, OWNER MAY MAKE SUCH REPAIRS WITHOUT LIABILITY TO TENANT FOR
ANY LOSS OR DAMAGE THAT MAY ACCRUE TO TENANT'S MERCHANDISE, FIXTURES, OR OTHER
PROPERTY OR TO TENANT'S BUSINESS BY REASON THEREOF, AND UPON COMPLETION
THEREOF. TENANT SHALL PAY OWNER'S COST FOR MAKING SUCH REPAIRS, UPON
PRESENTATION OF BILL THEREOF, AS ADDITIONAL RENT. SAID BILL SHALL INCLUDE
INTEREST AT TEN (10%) PERCENT ON SAID COST FROM THE DATE OF COMPLETION OF
REPAIRS BY OWNER.
SECTION 10.03 SURRENDER OF PREMISES
AT THE EXPIRATION OF THE TENANCY HEREBY CREATED, TENANT SHALL SURRENDER THE
LEASED PREMISES IN THE SAME CONDITION AS THE LEASED PREMISES WERE IN UPON
DELIVERY OF POSSESSION THERETO UNDER THIS LEASE. REASONABLE WEAR AND TEAR
EXCEPTED, AND DAMAGE BY UNAVOIDABLE CASUALTY EXPECTED TO THE EXTENT THAT THE
SAME IS COVERED BY OWNER'S FIRE INSURANCE POLICY WITH EXTENDED COVERAGE
ENDORSEMENT, AND SHALL SURRENDER ALL KEYS FOR THE LEASED PREMISES TO OWNER AT
THE PLACE THEN FIXED FOR THE PAYMENT OF RENT AND SHALL INFORM OWNER OF ALL
COMBINATIONS ON LOCKS, SAFES, AND VAULTS, IF ANY, IN THE LEASED PREMISES.
TENANT SHALL REMOVE ALL ITS TRADE FIXTURES AND ANY ALTERATIONS OR IMPROVEMENTS
AS PROVIDED IN SECTIONS 9.02 HEREOF. BEFORE SURRENDERING THE PREMISES AS
AFORESAID AND SHALL REPAIR ANY DAMAGE TO THE LEASED PREMISES CAUSED THEREBY.
TENANTS OBLIGATION TO OBSERVE OR PERFORM THIS COVENANT SHALL SURVIVE THE
EXPIRATION OR OTHER TERMINATION OF THE TERM OF THIS LEASE.
SECTION 10.04 RULES AND REGULATIONS
(A) THE TENANT AGREES IS FOLLOWS:
(1) ALL LOADING AND UNLOADING OF GOODS SHALL BE DONE ONLY AT SUCH TIMES,
IN THE AREA, AND THROUGH THE ENTRANCES DESIGNATED FOR SUCH PURPOSES BY OWNER.
(2) THE DELIVERY OF SHIPPING OF MERCHANDISE, SUPPLIES AND FIXTURES TO AND
FROM THE LEASED PREMISES SHALL BE SUBJECT TO SUCH RULES AND REGULATIONS AS IN
THE JUDGMENT OF THE OWNER ARE NECESSARY FOR THE PROPER OPERATION OF THE LEASED
PREMISES OR SHOPPING CENTER.
(3) ALL GARBAGE AND REFUSE SHALL BE KEPT IN THE KIND OF CONTAINER
SPECIFIED BY OWNER, AND SHALL BE PLACED OUTSIDE OF THE PREMISES PREPARED FOR
COLLECTION IN THE MANNER AND AT THE TIMES AND PLACES SPECIFIED BY OWNER. IF
OWNER SHALL PROVIDE OR DESIGNATE A SERVICE FOR PICKING UP REFUSE AND GARBAGE,
TENANT SHALL USE SAME AT TENANT'S COST. TENANT SHALL PAY THE COST OF REMOVAL
OF ANY OF TENANT'S REFUSE OR RUBBISH. NO REFUSE SHALL BE STORED IN COMMON
AREA SPACES.
(4) NO AERIAL SHALL BE ERECTED ON THE ROOF OR EXTERIOR WALLS OF THE
PREMISES, OR ON THE GROUNDS, WITHOUT IN EACH INSTANCE, THE WRITTEN CONSENT OF
THE OWNER. ANY AERIAL SO INSTALLED WITHOUT WRITTEN CONSENT SHALL BE SUBJECT
TO REMOVAL WITHOUT NOTICE AT ANY TIME.
(5) NO LOUD SPEAKERS, TELEVISIONS, PHONOGRAPHS, RADIOS OR OTHER DEVICES
SHALL BE USED IN A MANNER SO AS TO BE HEARD OR SEEN OUTSIDE OF THE PREMISES
WITHOUT THE PRIOR WRITTEN CONSENT OF THE OWNER.
(6) THE OUTSIDE AREAS IMMEDIATELY ADJOINING THE PREMISES SHALL BE KEPT
CLEAN AND FREE FROM DIRT AND RUBBISH BY THE TENANT TO THE SATISFACTION OF THE
OWNER AND TENANT SHALL NOT PLACE OR PERMIT ANY OBSTRUCTIONS OR MERCHANDISE IN
SUCH AREAS.
(7) TENANT AND TENANT'S EMPLOYEES SHALL PARK THEIR CARS ONLY IN THOSE
PORTIONS OF THE PARKING AREA DESIGNATED FOR THAT PURPOSE BY OWNER. IN THE
EVENT THE TENANT OR ITS EMPLOYEES FAIL TO PARK THEIR CARS IN DESIGNATED
PARKING AREAS AS FORESAID, THEN THE OWNER AT ITS OPTION SHALL CHARGE THE
TENANT TEN DOLLARS ($10.00) PER DAY PER CAR PARKED IN ANY AREA OTHER THAN
THOSE DESIGNATED, AS FOR LIQUIDATED DAMAGES.
(8) THE PLUMBING FACILITIES SHALL NOT BE USED FOR ANY OTHER PURPOSE THAN
THAT FOR WHICH THEY ARE CONSTRUCTED, AND NO FOREIGN SUBSTANCE OF ANY KIND
SHALL BE THROWN THEREIN, AND THE EXPENSE OF ANY BREAKAGE, STOPPAGE OR DAMAGE
RESULTING FROM A VIOLATION OF THIS PROVISION SHALL BE BORNE BY TENANT, WHO
SHALL, OR WHOSE EMPLOYEES, AGENTS OR INVITEES SHALL HAVE CAUSED IT.
(9) TENANT SHALL NOT BURN ANY TRASH OR GARBAGE OF ANY KIND IN OR ABOUT
SHOPPING CENTER.
(10) TENANT SHALL NOT USE COMMON AREA SIDEWALKS OR PARKING LOT FOR
DISPLAYING OR SELLING ANY MERCHANDISE WITHOUT PRIOR APPROVAL OF LANDLORD.
(11) TENANT SHALL CONTROL ANY INSECT/RODENT CONTAMINATION EMANATING FROM
THE TENANT DEMISED SPACE.
(12) TENANT AND TENANTS EMPLOYEES AND AGENTS SHALL NOT SOLICIT BUSINESS
IN THE PARKING OR OTHER COMMON AREAS, NOR SHALL TENANT DISTRIBUTE ANY
HANDBILLS OR OTHER ADVERTISING MATTER IN AUTOMOBILES PARKED IN THE PARKING
AREA OR IN OTHER COMMON AREAS.
(13) TENANT SHALL NOT CAUSE ANY ENVIRONMENT CONTAMINATION WITHIN THE
DEMISED SPACE OR TO BE DISPOSED OF WITHIN THE SPACE. ALL COST OF CLEANUP OF
ANY CONTAMINATION CAUSED BY TENANT SHALL BE THE RESPONSIBILITY OF TENANT.
(B) OWNER RESERVES THE RIGHT FROM TIME TO TIME TO AMEND OR SUPPLEMENT THE
FOREGOING RULES AND REGULATIONS AND TO ADOPT AND PROMULGATE ADDITIONAL RULES
AND REGULATIONS APPLICABLE TO THE LEASED PREMISES. NOTICE OF SUCH RULES AND
REGULATIONS AND AMENDMENTS AND SUPPLEMENTS THERETO, IF ANY, SHALL BE GIVEN TO
THE TENANT.
(C)TENANT AGREES TO COMPLY WITH ALL SUCH RULES AND REGULATIONS UPON NOTICE TO
TENANT FROM OWNER, PROVIDED THAT SUCH RULES AND REGULATIONS SHALL APPLY
UNIFORMLY TO ALL TENANTS OF THE SHOPPING CENTER
ARTICLE XI
INSURANCE AND INDEMNITY
SECTION 11.01 LIABILITY INSURANCE
TENANT SHALL, DURING THE ENTIRE TERM HEREOF, KEEP IN FULL FORCE AND EFFECT A
POLICY OF PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE WITH RESPECT TO THE
LEASED PREMISES, THE SIDEWALKS IN FRONT OF THE LEASED PREMISES, AND THE
BUSINESS OPERATED BY TENANT AND ANY SUBTENANTS OF TENANT IN THE LEASED
PREMISES IN WHICH THE LIMITS OF PUBLIC LIABILITY SHALL NOT BE LESS THAN
$500,000.00 PER PERSON AND $1,000,000.00 PER ACCIDENT AND IN WHICH THE
PROPERTY DAMAGE LIABILITY SHALL NOT BE LESS THAN $50,000.00. THE POLICY SHALL
NAME OWNER. ANY PERSON, FIRMS OR CORPORATIONS DESIGNATED BY OWNER, AND TENANT
AS ADDITIONAL INSURED, AND SHALL CONTAIN A CLAUSE THAT THE INSURER WILL NOT
CANCEL OR CHANGE THE INSURANCE WITHOUT FIRST GIVING THE OWNER TEN (10) DAYS
PRIOR WRITTEN NOTICE. THE INSURANCE SHALL BE IN AN INSURANCE COMPANY APPROVED
BY OWNER AND A COPY OF THE POLICY OF A CERTIFICATE OF INSURANCE SHALL BE
DELIVERED TO OWNER.
SECTION 11.02 FIRE INSURANCE PREMIUM
LANDLORD SHALL, AT ITS COST AND EXPENSE CHARGED PER SECTION 8.01, (TENANT TO
REIMBURSE LANDLORD) MAINTAIN FIRE AND EXTENDED COVERAGE INSURANCE THROUGHOUT
THE TERM OF THIS LEASE IN AN AMOUNT EQUAL TO AT LEAST NINETY PERCENT (90%) OF
THE REPLACEMENT VALUE (EXCLUSIVE OF FOUNDATIONS AND EXCAVATION COSTS) OF THE
LEASED PREMISES AND/OR THE BUILDING OF WHICH THE LEASED PREMISES ARE A PART.
TENANT; AT TENANTS EXPENSE, SHALL MAINTAIN COVERAGE ON TENANT,S PERSONAL
PROPERTY, ALTERATIONS, AND FIXTURES. HOWEVER, TENANT AGREES TO REIMBURSE
LANDLORD FOR TENANTS PRORATA SHARE OF ANY PREMIUMS FOR SAID FIRE AND EXTENDED
COVERAGE INSURANCE THAT MAY BE CHARGED DURING THE TERM OF THIS LEASE ON THE
AMOUNT OF SUCH INSURANCE WHICH MAY BE CARRIED BY OWNER ON SAID PREMISES OR THE
BUILDING OF WHICH THEY ARE A PART. THIS REIMBURSEMENT CHARGE WILL BE PAID
MONTHLY IN ADVANCE AS SPECIFIED IN SECTION 8.01.
SECTION 11.03 INDEMNIFICATION OF OWNER
TENANT WILL INDEMNIFY OWNER AND SAVE IT HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, ACTIONS, DAMAGES, LIABILITY AND EXPENSE IN CONNECTION WITH LOSS OF
LIFE, PERSONAL INJURY AND/OR DAMAGE TO PROPERTY ARISING FROM OR OUT OF ANY
OCCURRENCE IN, UPON OR AT THE LEASED PREMISES, OR THE OCCUPANCY OR USE BY
TENANT OF THE LEASED PREMISES OR ANY PART THEREOF, OR OCCASIONED WHOLLY OR IN
PART BY ANY ACT OR OMISSION OF TENANT, ITS AGENTS, CONTRACTORS, EMPLOYEES,
SERVANTS, LESSEES OR CONCESSIONAIRES. IN CASE OWNER SHALL WITHOUT FAULT ON
ITS PART, BE MADE A PARTY TO ANY LITIGATION COMMENCED BY OR AGAINST TENANT,
THEN TENANT SHALL PROTECT AND HOLD OWNER HARMLESS AND SHALL PAY ALL COSTS,
EXPENSES AND REASONABLE ATTORNEY'S FEES THAT MAY BE INCURRED OR PAID BY OWNER
IN ENFORCING THE COVENANTS AND AGREEMENTS IN THIS LEASE.
ARTICLE XII
UTILITIES
SECTION 12.01 UTILITY SERVICES
IT IS THE LESSEE'S RESPONSIBILITY TO ARRANGE FOR AND PAY FOR GAS AND
ELECTRICAL SERVICE.
SECTION 12.02 UTILITY CHARGES
TENANT SHALL BE SOLELY RESPONSIBLE FOR AND PROMPTLY PAY ALL CHARGES FOR HEAT,
WATER, GAS, ELECTRICITY OR ANY OTHER UTILITY USED OR CONSUMED IN THE LEASED
PREMISES. SHOULD OWNER ELECT TO SUPPLY THE WATER, GAS, HEAT, ELECTRICITY, OR
ANY OTHER UTILITY USED OR CONSUMED IN THE LEASED PREMISES. TENANT AGREES TO
PURCHASE AND PAY FOR THE SAME AS ADDITIONAL RENT AS APPORTIONED BY THE OWNER.
IN NO EVENT SHALL OWNER BE LIABLE FOR AN INTERRUPTION OR FAILURE IN SUPPLY OF
ANY SUCH UTILITIES TO THE LEASED PREMISES.
ARTICLE XIII
OFFSET STATEMENT, ATTORNMENT SUBORDINATION
SECTION 13.01 OFFSET STATEMENT
ESTOPPEL CERTIFICATE: TENANT SHALL AT ANY TIME AND FROM TIME TO TIME, UPON NOT
LESS TEN (10) DAYS PRIOR WRITTEN REQUEST BY LANDLORD EXECUTE, ACKNOWLEDGE, AND
DELIVER TO LANDLORD A STATEMENT IN WRITING CERTIFYING THAT THE LEASE IS
UNMODIFIED AND IN FULL FORCE AND EFFECT (OR, THAT THERE SHALL HAVE BEEN
MODIFICATIONS, THAT THE LEASE IS MODIFIED AND IN FULL FORCE AND EFFECT AS
MODIFIED AND STATING THE MODIFICATIONS) AND THE DATES TO WHICH THE FIXED RENT
AND ANY OTHER CHARGES OR PAYMENTS HAVE BEEN PAID IN ADVANCE. IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT ANY SUCH STATEMENT DELIVERED PURSUANT TO THIS
PARAGRAPH MAY BE RELIED UPON BY OWNER OR ANY PROSPECTIVE PURCHASER, MORTGAGEE,
ASSIGNEE OF ANY MORTGAGEE, OR THE TRUSTEE OR BENEFICIARY OF ANY DEED OF TRUST
PLACED UPON THE DEMISED PREMISES OR THE REAL PROPERTY OF WHICH THE DEMISED
PREMISES ARE A PART.
SECTION 13.02 ATTORNMENT
TENANT SHALL, IN THE EVENT ANY PROCEEDINGS ARE BROUGHT FOR THE FORECLOSURE OF,
OR IN THE EVENT OF EXERCISE OF THE POWER OF SALE UNDER ANY MORTGAGE MADE BY
THE OWNER COVERING THE LEASED PREMISES, ATTORN TO THE PURCHASER UPON ANY SUCH
FORECLOSURE OR SALE AND RECOGNIZE SUCH PURCHASER AS THE OWNER UNDER THIS
LEASE.
SECTION 13.03 SUBORDINATION
UPON REQUEST OF THE OWNER, TENANT WILL SUBORDINATE ITS RIGHTS HEREUNDER TO THE
LIEN OF ANY MORTGAGE OR MORTGAGES OF THE LIEN RESULTING FROM ANY OTHER METHOD
OF FINANCING OR REFINANCING, NOW OR HEREAFTER IN FORCE AGAINST THE LAND AND
BUILDINGS OF WHICH THE LEASED PREMISES ARE A PART OR UPON ANY BUILDING
HEREAFTER PLACED UPON THE LAND OF WHICH THE LEASED PREMISES ARE A PART, AND TO
ALL ADVANCES MADE OR HEREAFTER TO BE MADE UPON THE SECURITY THEREOF. THIS
SECTION SHALL BE SELF-OPERATIVE AND NO FURTHER INSTRUMENT OF SUBORDINATION
SHALL BE REQUIRED BY ANY MORTGAGEE.
SECTION 13.04 ATTORNEY-IN-FACT
THE TENANT, UPON REQUEST OF ANY PARTY IN INTEREST, SHALL EXECUTE PROMPTLY SUCH
INSTRUMENTS OR CERTIFICATES TO CARRY OUT THE INTENT OF SECTIONS 15.02 AND
15.03 ABOVE AS SHALL BE REQUESTED BY THE OWNER. THE TENANT HEREBY IRREVOCABLY
APPOINTS THE OWNER AS ATTORNEY-IN-FACT FOR THE TENANT WITH FULL POWER AND
AUTHORITY TO EXECUTE AND DELIVER IN THE NAME OF THE TENANT ANY SUCH
INSTRUMENTS OR CERTIFICATES. IF FIFTEEN (15) DAYS AFTER THE DATE OF A WRITTEN
REQUEST BY OWNER TO EXECUTE SUCH INSTRUMENTS, THE TENANT SHALL NOT HAVE
EXECUTED THE SAME, THE OWNER MAY, AT ITS OPTION, CANCEL THIS LEASE WITHOUT
INCURRING ANY LIABILITY ON ACCOUNT THEREOF, AND THE TERM HEREBY GRANTED IS
EXPRESSLY LIMITED ACCORDINGLY.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
SECTION 14.01 CONSENT REQUIRED
TENANT WILL NOT ASSIGN THIS LEASE IN WHOLE OR IN PART, NOR SUBLET ALL OR ANY
PART OF THE LEASED PREMISES, WITHOUT THE PRIOR WRITTEN CONSENT OF OWNER IN
EACH INSTANCE. THE CONSENT OF OWNER TO ANY ASSIGNMENT OR SUBLETTING SHALL NOT
CONSTITUTE A WAIVER OF THE NECESSITY FOR SUCH CONSENT TO ANY SUBSEQUENT
ASSIGNMENT OR SUBLETTING. THIS PROHIBITION AGAINST OR SUBLETTING SHALL BE
CONSTRUED TO INCLUDE A PROHIBITION AGAINST ANY ASSIGNMENT OR SUBLETTING BY
OPERATION OF LAW. IF THIS LEASE BE ASSIGNED, OR IF THE LEASED PREMISES OR ANY
PART THEREOF BE UNDERLET OR OCCUPIED BY ANYBODY OTHER THAN TENANT, OWNER MAY
COLLECT RENT FROM THE ASSIGNEE, UNDER-TENANT OR OCCUPANT, AND APPLY THE NEW
AMOUNT COLLECTED TO THE RENT HEREIN RESERVED, BUT NOT SUCH ASSIGNMENT,
UNDERLETTING, OCCUPANCY OR COLLECTION SHALL BE DEEMED A WAIVER OF THIS
COVENANT, OR THE ACCEPTANCE OF THE ASSIGNEE, UNDER-TENANT OR OCCUPANT AS
TENANT, OR A RELEASE OF TENANT FROM THE FURTHER PERFORMANCE BY TENANT OF
COVENANTS ON THE PART OF THE TENANT HEREIN CONTAINED. NOTWITHSTANDING ANY
ASSIGNMENT OR SUBLEASE, TENANT SHALL REMAIN FULLY LIABLE ON THIS LEASE AND
SHALL NOT BE RELEASED FROM PERFORMING ANY OF THE TERMS, COVENANTS AND
CONDITIONS OF THIS LEASE. OWNER'S WRITTEN CONSENT TO THE ASSIGNMENT SHALL NOT
BE UNREASONABLY WITHHELD. THE ACCEPTANCE OF RENT FROM ANY OTHER PERSON SHALL
NOT BE DEEMED TO BE A WAIVER OF ANY OF THE PROVISIONS OF THIS LEASE OR A
CONSENT TO THE ASSIGNMENT OF THE DEMISED PREMISES.
ARTICLE XV
WASTE, GOVERNMENTAL REGULATIONS
SECTION 15.01 WASTE OR NUISANCE
TENANT SHALL NOT COMMIT OR SUFFER TO BE COMMITTED ANY WASTE UPON THE LEASED
PREMISES OR ANY NUISANCE OR OTHER ACT OR THING WHICH MAY DISTURB THE QUIET
ENJOYMENT OF ANY OTHER TENANT IN THE BUILDING IN WHICH THE LEASED PREMISES MAY
BE LOCATED, OR IN THE SHOPPING CENTER, OR WHICH MAY DISTURB THE QUIET
ENJOYMENT OF ANY PERSON WITHIN FIVE HUNDRED FEET OF THE BOUNDARIES OF THE
SHOPPING CENTER.
SECTION 15.02 GOVERNMENTAL REGULATIONS
TENANT SHALL, AT TENANTS SOLE CAST AND EXPENSE, COMPLY WITH ALL OF THE
REQUIREMENTS OF ALL CITY, COUNTY, MUNICIPAL, STATE, FEDERAL AND OTHER
APPLICABLE GOVERNMENTAL AUTHORITIES, NOW IN FORCE, OR WHICH MAY HEREAFTER BE
IN FORCE, PERTAINING TO THE SAID PREMISES, INCLUDING THE INSTALLATION OF
ADDITIONAL FACILITIES AS REQUIRED FOR THE CONDUCT AND CONTINUANCE OF TENANTS
BUSINESS, AND SHALL FAITHFULLY OBSERVE IN THE USE OF THE PREMISES ALL
MUNICIPAL AND COUNTY ORDINANCES AND STATE AND FEDERAL STATUTES NOW IN FORCE OR
WHICH MAY HEREAFTER BE IN FORCE.
ARTICLE XVI
DESTRUCTION OF LEASED PREMISES
SECTION 16.01 TOTAL OR PARTIAL DESTRUCTION
IN THE EVENT THE PREMISES ARE DAMAGED BY FIRE OR OTHER PERILS COVERED BY
EXTENDED COVERAGE INSURANCE. LANDLORD AGREES TO FORTH-WITH REPAIR SAME, AND
THIS LEASE SHALL REMAIN IN FULL FORCE AND EFFECT, EXCEPT THAT TENANT SHALL BE
ENTITLED TO A PROPORTIONATE REDUCTION OF THE MINIMUM RENT FROM THE DATE OF
DAMAGE AND WHILE SUCH REPAIRS ARE BEING MADE, SUCH PROPORTIONATE REDUCTION TO
BE BASED UPON THE EXTENT TO WHICH THE DAMAGE AND MAKING OF SUCH REPAIRS WILL
REASONABLY INTERFERE WITH THE BUSINESS CARRIED ON BY THE TENANT IN THE
PREMISES. IF THE DAMAGE IS DUE TO THE FAULT OR NEGLECT OF TENANT OR ITS
EMPLOYEES, THERE SHALL BE NO ABATEMENT OF RENT.
IN THE EVENT THE PREMISES ARE DAMAGED AS A RESULT OF ANY CAUSE OTHER THAN THE
PERILS COVERED BY FIRE AND EXTENDED COVERAGE INSURANCE, THEN LANDLORD SHALL
FORTHWITH REPAIR THE SAME, PROVIDED THE EXTENT OF THE DESTRUCTION BE LESS THAN
TEN (10%) PERCENT OF THE THEN FULL REPLACEMENT COST OF THE PREMISES. IN THE
EVENT THE DESTRUCTION OF THE PREMISES IS TO AN EXTENT OF TEN (10%) PERCENT OR
MORE OF THE FULL REPLACEMENT COST THEN LANDLORD SHALL HAVE THE OPTION: (1) TO
REPAIR OR RESTORE SUCH DAMAGE, THIS LEASE CONTINUING IN FULL FORCE AND EFFECT,
BUT THE MINIMUM RENT TO BE PROPORTIONATELY REDUCED AS HEREINABOVE IN THIS
ARTICLE PROVIDED; OR (2) GIVE NOTICE TO TENANT AT ANY TIME WITHIN SIXTY (60)
DAYS AFTER SUCH DAMAGE, TERMINATING THIS LEASE AS OF THE DATE SPECIFIED IN
SUCH NOTICE, WHICH DATE SHALL BE NO MORE THAN THIRTY (30) DAYS AFTER THE
GIVING OF SUCH NOTICE. IN THE EVENT OF GIVING SUCH NOTICE, THIS LEASE SHALL
EXPIRE AND ALL INTEREST OF THE TENANT IN THE PREMISES SHALL TERMINATE ON THE
DATE SO SPECIFIED IN SUCH NOTICE AND THE MINIMUM RENT, REDUCED BY A
PROPORTIONATE REDUCTION. BASED UPON THE EXTENT, IF ANY, TO WHICH SUCH DAMAGE
INTERFERED WITH THE BUSINESS CARRIED ON BY THE TENANT IN THE PREMISES, SHALL
BE PAID UP TO DATE OF SAID SUCH TERMINATION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ARTICLE, LANDLORD
SHALL NOT HAVE ANY OBLIGATION WHATSOEVER TO REPAIR, RECONSTRUCT OR RESTORE THE
PREMISES WHEN THE DAMAGE RESULTING FROM ANY CASUALTY COVERED UNDER THIS
ARTICLE OCCURS DURING THE LAST TWENTY-FOUR MONTHS OF THE TERM OF THIS LEASE OR
ANY EXTENSION THEREOF.
LANDLORD SHALL NOT BE REQUIRED TO REPAIR ANY INJURY OR DAMAGE BY FIRE OR OTHER
CAUSE, OR TO MAKE ANY REPAIRS OR REPLACEMENTS OF ANY LEASEHOLD IMPROVEMENTS,
FIXTURES, OR OTHER PERSONAL PROPERTY OF TENANT.
ARTICLE XVII
EMINENT DOMAIN
SECTION 17.01 TOTAL CONDEMNATION
IF THE WHOLE OF THE LEASED PREMISES SHALL BE ACQUIRED OR CONDEMNED BY EMINENT
DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR PURPOSE, THEN THE TERM OF THIS
LEASE SHALL CEASE AND TERMINATE AS OF THE DATE OF TITLE VESTING IN SUCH
PROCEEDING AND ALL RENTALS SHALL BE PAID UP TO THAT DATE AND TENANT SHALL HAVE
NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS LEASE.
SECTION 17.02 TOTAL PARKING AREA
IF THE WHOLE OF THE COMMON PARKING AREA IN THE SHOPPING CENTER SHALL BE
ACQUIRED OR CONDEMNED BY EMINENT DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR
PURPOSE, THEN THE TERM OF THIS LEASE SHALL CEASE AND TERMINATE IS OF THE DATE
OF TITLE VESTING IN SUCH PROCEEDING UNLESS OWNER SHALL TAKE IMMEDIATE STEPS TO
PROVIDE OTHER PARKING FACILITIES SUBSTANTIALLY EQUAL TO THE PREVIOUSLY
EXISTING RATIO BETWEEN THE COMMON PARKING AREAS AND THE LEASED PREMISES, AND
SUCH SUBSTANTIALLY EQUAL PARKING FACILITIES SHALL BE PROVIDED BY OWNER AT ITS
OWN EXPENSE WITHIN NINETY (90) DAYS FROM THE DATE OF ACQUISITION IN THE EVENT
THAT OWNER SHALL PROVIDE SUCH OTHER SUBSTANTIALLY EQUAL PARKING FACILITIES,
THEN THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT. IN ANY EVENT, TENANT
SHALL HAVE NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS
LEASE.
SECTION 17.03 PARTIAL CONDEMNATION
IF ANY PART OF THE LEASED PREMISES SHALL BE ACQUIRED OR CONDEMNED BY EMINENT
DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR PURPOSE, AND IN THE EVENT THAT
SUCH PARTIAL TAKING OR CONDEMNATION SHALL RENDER THE LEASED PREMISES
UNSUITABLE FOR THE BUSINESS OF THE TENANT, THEN THE TERM OF THIS LEASE SHALL
CEASE AND TERMINATE AS OF THE DATE TITLE VESTING IN SUCH PROCEEDING AND TENANT
SHALL HAVE NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS
LEASE. IN THE EVENT OF A PARTIAL TAKING OR CONDEMNATION WHICH IS NOT
EXTENSIVE ENOUGH TO RENDER THE PREMISES UNSUITABLE FOR THE BUSINESS OF THE
TENANT, THEN OWNER SHALL PROMPTLY RESTORE THE LEASED PREMISES TO A CONDITION
COMPARABLE TO ITS CONDITION AT THE TIME OF SUCH CONDEMNATION LESS THE PORTION
LOST IN THE TAKING, AND THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT.
SECTION 17.04 OWNER'S DAMAGES
IN THE EVENT OF ANY CONDEMNATION OR TAKING AS HEREINABOVE PROVIDED, WHETHER
WHOLE OR PARTIAL, THE TENANT SHALL NOT BE ENTITLED TO ANY PART OF THE AWARD,
AS DAMAGES OR OTHERWISE, FOR SUCH CONDEMNATION AND OWNER IS TO RECEIVE THE
FULL AMOUNT OF SUCH AWARD, THE TENANT HEREBY EXPRESSLY WAIVING ANY RIGHT OR
CLAIM TO ANY PART THEREOF.
SECTION 17.05 TENANT'S DAMAGES
ALTHOUGH ALL DAMAGES IN THE EVENT OF ANY CONDEMNATION ARE TO BELONG TO THE
OWNER WHETHER SUCH DAMAGES ARE AWARDED AS COMPENSATION FOR DIMINUTION IN VALUE
OF THE LEASEHOLD OR TO THE FEE OF THE LEASED PREMISES, TENANT SHALL HAVE THE
RIGHT TO CLAIM AND RECOVER FROM THE CONDEMNING AUTHORITY, BUT NOT FROM THE
OWNER, SUCH COMPENSATION AS MAY BE SEPARATELY AWARDED OR RECOVERABLE BY TENANT
IN TENANT'S OWN RIGHT TO ACCOUNT OF ANY AND ALL DAMAGE TO TENANT'S BUSINESS BY
REASON OF THE CONDEMNATION AND FOR OR ON ACCOUNT OF ANY COST OR LOSS TO WHICH
TENANT MIGHT BE PUT IN REMOVING TENANT'S MERCHANDISE, FURNITURE, FIXTURES,
LEASEHOLD IMPROVEMENTS AND EQUIPMENT.
SECTION 17.06 CONDEMNATION OF LESS THAN A FEE
IN THE EVENT OF A CONDEMNATION FOR A LEASEHOLD INTEREST IN ALL OR A PORTION OF
THE LEASED PREMISES WITHOUT THE CONDEMNATION OF THE FEE SIMPLE TITLE ALSO,
THIS LEASE SHALL NOT TERMINATE AND SUCH CONDEMNATION SHALL NOT EXCUSE TENANT
FROM FULL PERFORMANCE OF ALL OF ITS COVENANTS HEREUNDER, BUT TENANT IN SUCH
EVENT SHALL BE ENTITLED TO PRESENT OR PURSUE AGAINST THE CONDEMNING AUTHORITY
ITS CLAIM FOR AND TO RECEIVE ALL COMPENSATION OR DAMAGES SUSTAINED BY IT BY
REASON OF SUCH CONDEMNATION, AND OWNER'S RIGHT TO RECOVER COMPENSATION OR
DAMAGES SHALL BE LIMITED TO COMPENSATION FOR AND DAMAGES OF ANY, TO ITS
REVERSIONARY INTEREST; IT BEING UNDERSTOOD, HOWEVER, THAT DURING SUCH TIME AS
TENANT SHALL BE OUT OF POSSESSION OF THE LEASED PREMISES BY REASON OF SUCH
CONDEMNATION, THE LEASE SHALL NOT BE SUBJECT TO FORFEITURE FOR FAILURE TO
OBSERVE AND PERFORM THOSE COVENANTS NOT CALLING FOR THE PAYMENT OF MONEY. IN
THE EVENT THE CONDEMNING AUTHORITY SHALL FAIL TO KEEP THE PREMISES IN THE
STATE OF REPAIR REQUIRED HEREUNDER, OR TO PERFORM ANY OTHER COVENANT NOT
CALLING FOR THE PAYMENT OF MONEY, TENANT SHALL HAVE NINETY (90) DAYS AFTER THE
RESTORATION OF POSSESSION TO IT WITHIN WHICH TO CARRY OUT ITS OBLIGATIONS
UNDER SUCH COVENANT OR COVENANTS. DURING SUCH TIME AS TENANT SHALL BE OUT OF
POSSESSION OF THE LEASED PREMISES BY REASON OF SUCH LEASEHOLD CONDEMNATION,
TENANT SHALL PAY TO OWNER, IN LIEU OF THE MINIMUM AND PERCENTAGE RENTS
PROVIDED FOR HEREUNDER, AND IN ADDITION TO ANY OTHER PAYMENTS REQUIRED OF
TENANT HEREUNDER, AN ANNUAL RENT EQUAL TO THE AVERAGE ANNUAL MINIMUM AND
PERCENTAGE RENTS PAID BY TENANT FOR THE PERIOD FROM THE COMMENCEMENT OF THE
TERM UNTIL THE CONDEMNING AUTHORITY SHALL TAKE POSSESSION, OR DURING THE
PRECEDING THREE FULL CALENDAR YEARS, WHICHEVER PERIOD IS SHORTER. AT ANY TIME
AFTER SUCH CONDEMNATION PROCEEDINGS ARE COMMENCED, OWNER SHALL HAVE THE RIGHT,
AT ITS OPTION, TO REQUIRE TENANT TO ASSIGN TO OWNER ALL COMPENSATION AND
DAMAGES PAYABLE BY THE CONDEMNOR TO TENANT, TO BE HELD WITHOUT LIABILITY FOR
INTEREST THEREON AS SECURITY FOR THE FULL PERFORMANCE OF TENANT'S COVENANTS
HEREUNDER. SUCH COMPENSATION AND DAMAGES RECEIVED PURSUANT TO SAID ASSIGNMENT
TO BE APPLIED FIRST TO THE PAYMENT OF RENTS AND ALL OTHER SUMS FROM TIME TO
TIME PAYABLE BY TENANT PURSUANT TO THE TERMS OF THIS LEASE AS SUCH SUMS FALL
DUE, AND THE REMAINDER, IF ANY, TO BE PAYABLE TO TENANT AT THE END OF THE TERM
HEREOF OR ON RESTORATION OF POSSESSION OF TENANT, WHICHEVER SHALL FIRST OCCUR,
IT BEING UNDERSTOOD AND AGREED THAT SUCH ASSIGNMENT SHALL NOT RELIEVE TENANT
OF ANY OF ITS OBLIGATIONS UNDER THIS LEASE WITH RESPECT TO SUCH RENTS, AND
OTHER SUMS EXCEPT AS THE SAME SHALL BE ACTUALLY RECEIVED BY OWNER.
ARTICLE XVIII
DEFAULT OF THE TENANT
SECTION 18.01 RIGHT TO RE-ENTER
IN THE EVENT OF ANY FAILURE OF TENANT TO PAY ANY RENTAL DUE HEREUNDER WITHIN
TEN (10) DAYS AFTER THE SAME SHALL BE DUE, OR ANY FAILURE TO PERFORM ANY OTHER
OF THE TERMS, CONDITIONS OR COVENANTS OF THIS LEASE TO BE OBSERVED OR
PERFORMED BY TENANT FOR MORE THAN THIRTY (30) DAYS AFTER WRITTEN NOTICE OF
SUCH DEFAULT SHALL HAVE BEEN MAILED TO TENANT, OR IF TENANT SHALL BECOME
BANKRUPT OR INSOLVENT, OR FILE ANY DEBTOR PROCEEDINGS, OR TAKE OR HAVE TAKEN
AGAINST TENANT IN ANY COURT PURSUANT TO ANY STATUE EITHER OF THE UNITED STATES
OR ANY STATE A PETITION IN BANKRUPTCY OR INSOLVENCY OR FOR REORGANIZATION OR
FOR THE APPOINTMENT OF A RECEIVER OR TRUSTEE OF ALL OR A PORTION OF TENANTS
PROPERTY, OR IF TENANT MAKES AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR
PETITIONS FOR OR ENTERS INTO AN ARRANGEMENT, OR IF TENANT SHALL ABANDON SAID
PREMISES, OR SUFFER THIS LEASE TO BE TAKEN UNDER ANY WRIT OF EXECUTION, THEN
OWNER BESIDES OTHER RIGHTS OR REMEDIES IT MAY HAVE, SHALL HAVE THE IMMEDIATE
RIGHT OF RE-ENTRY AND MAY REMOVE ALL PERSONS AND PROPERTY FROM THE LEASED
PREMISES AND SUCH PROPERTY MAY BE REMOVED AND STORED IN A PUBLIC WAREHOUSE OR
ELSEWHERE AT THE COST OF, AND FOR THE ACCOUNT OF TENANT, ALL WITHOUT SERVICE
OF NOTICE OR RESORT TO LEGAL PROCESS AND WITHOUT BEING DEEMED GUILTY OF
TRESPASS, OR BECOMING LIABLE FOR ANY LOSS OR DAMAGE WHICH MAY BE OCCASIONED
THEREBY.
SECTION 18.02 RIGHT TO RELET
SHOULD OWNER ELECT TO RE-ENTER, AS HEREIN PROVIDED, OR SHOULD IT TAKE
POSSESSION PURSUANT TO LEGAL PROCEEDINGS OR PURSUANT TO ANY NOTICE PROVIDED
FOR BY LAW, IT MAY EITHER TERMINATE THIS LEASE OR IT MAY FROM TIME TO TIME
WITHOUT TERMINATING THIS LEASE, MAKE SUCH ALTERATIONS AND REPAIRS AS MAY BE
NECESSARY IN ORDER TO RELET THE PREMISES, AND RELET SAID PREMISES OR ANY PART
THEREOF FOR SUCH TERM OR TERMS (WHICH MAY BE FOR A TERM EXTENDING BEYOND THE
TERM OF THIS LEASE) AND AT SUCH RENTAL OR RENTALS AND UPON SUCH OTHER TERMS
AND CONDITIONS AS OWNER IN ITS SOLE DISCRETION MAY DEEM ADVISABLE; UPON EACH
SUCH RELETTING ALL RENTALS RECEIVING BY THE OWNER FROM SUCH RELETTING SHALL BE
APPLIED, FIRST, TO THE PAYMENT OF ANY INDEBTNESS OTHER THAN RENT DUE HEREUNDER
FROM TENANT TO OWNER; SECOND, TO THE PAYMENT OF ANY COSTS AND EXPENSES OF
SUCH RELETTING, INCLUDING BROKERAGE FEES AND ATTORNEY'S FEES AND OF COSTS OF
SUCH ALTERATIONS AND REPAIRS; THIRD, TO THE PAYMENT OF RENT DUE AND UNPAID
HEREUNDER, AND THE RESIDUE, IF ANY, SHALL BE HELD BY OWNER AND APPLIED IN
PAYMENT OF FUTURE RENT AS THE SAME MAY BECOME DUE AND PAYABLE HEREUNDER. IF
SUCH RENTALS RECEIVED FROM SUCH RELETTING DURING ANY MONTH BE LESS THAN THAT
TO BE PAID DURING THAT MONTH BY TENANT HEREUNDER, TENANT SHALL PAY SUCH
DEFICIENCY TO OWNER. SUCH DEFICIENCY SHALL BE CALCULATED AND PAID MONTHLY.
NO SUCH RE-ENTRY OR TAKING POSSESSION OF SAID PREMISES BY OWNER SHALL BE
CONSTRUED AS AN ELECTION ON ITS PART TO TERMINATE THIS LEASE UNLESS A WRITTEN
NOTICE OF SUCH INTENTION BE GIVEN TO TENANT OR UNLESS THE TERMINATION THEREOF
BE DECREED BY A COURT OF COMPETENT JURISDICTION. NOTWITHSTANDING ANY SUCH
RELETTING WITHOUT TERMINATION, OWNER MAY AT ANY TIME THEREAFTER ELECT TO
TERMINATE THIS LEASE FOR SUCH PREVIOUS BREACH. SHOULD OWNER AT ANY TIME
TERMINATE THIS LEASE FOR ANY BREACH, IN ADDITION TO ANY OTHER REMEDIES IT MAY
HAVE, IT MAY RECOVER FROM TENANT ALL DAMAGE IT MAY INCUR BY REASON OF SUCH
BREACH, INCLUDING THE COST OF RECOVERING THE LEASE PREMISES, REASONABLE
ATTORNEY'S FEES, AND INCLUDING THE WORTH AT THE TIME OF SUCH TERMINATION OF
THE EXCESS, IF ANY, OF THE AMOUNT OF RENT AND CHARGES EQUIVALENT TO RENT
RESERVED IN THE LEASE FOR THE REMAINDER OF THE STATED TERM OVER THE THEN
REASONABLE RENTAL VALUE OF THE LEASED PREMISES FOR THE REMAINDER OF THE STATED
TERM, ALL OF WHICH AMOUNTS SHALL BE IMMEDIATELY DUE AND PAYABLE FROM TENANT TO
OWNER. IN DETERMINING THE RENT WHICH WOULD BE PAYABLE BY TENANT HEREUNDER,
SUBSEQUENT TO DEFAULT, THE ANNUAL RENT FOR EACH YEAR OF THE UNEXPIRED TERM
SHALL BE EQUAL TO THE AVERAGE MINIMUM AND PERCENTAGE RENTS PAID BY TENANT FROM
THE COMMENCEMENT OF THE TERM TO THE TIME OF DEFAULT, OR DURING THE PRECEDING
THREE CALENDAR YEARS, WHICHEVER PERIOD IS SHORTER.
SECTION 18.03 LEGAL EXPENSES
IN THE EVENT OF ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY AGAINST THE
OTHER UNDER THIS LEASE THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER ALL
COLLECTIONS COSTS AND FEES OF ITS ATTORNEYS IN SUCH ACTION OR PROCEEDINGS,
INCLUDING COSTS OF APPEAL, IF ANY. IN SUCH AMOUNT AS ARE REASONABLE, IN
ADDITION SHOULD IT BE NECESSARY FOR LANDLORD TO EMPLOY LEGAL COUNSEL TO
ENFORCE ANY OF THE PROVISIONS HEREIN CONTAINED. TENANT AGREES TO PAY ALL
ATTORNEY'S FEES AND COURT COSTS REASONABLY INCURRED.
SECTION 18.04 WAIVER OF RIGHTS OF REDEMPTION
TENANT HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS OF REDEMPTION GRANTED BY OR
UNDER ANY PRESENT OR FUTURE LAWS IN THE EVENT OF TENANT BEING EVICTED OR
DISPOSSESSED FOR ANY CAUSE, OR IN THE EVENT OF OWNER OBTAINING POSSESSION OF
THE LEASED PREMISES, BY REASON OF THE VIOLATION BY TENANT OF ANY OF THE
COVENANTS OR CONDITIONS OF THIS LEASE OR OTHERWISE.
ARTICLE XIX
ACCESS BY OWNER
SECTION 19.01 RIGHT OF ENTRY
OWNER OR OWNER'S AGENTS SHALL HAVE THE RIGHT TO ENTER THE LEASED PREMISES AT
ALL TIMES TO EXAMINE THE SAME AND TO SHOW THEM TO PROSPECTIVE PURCHASERS OR
LESSEES OF THE BUILDING, AND TO MAKE SUCH REPAIRS, ALTERATIONS, IMPROVEMENTS
OR ADDITIONS AS OWNER MAY DEEM NECESSARY OR DESIRABLE, AND OWNER SHALL BE
ALLOWED TO TAKE ALL MATERIAL INTO AND UPON SAID PREMISES THAT MAY BE REQUIRED
THEREFOR WITHOUT THE SAME CONSTITUTING AN EVICTION OF TENANT IN WHOLE OR IN
PART AND THE RENT RESERVED SHALL IN TO WISE ABATE WHILE SAID REPAIRS,
ALTERATIONS, IMPROVEMENTS OR ADDITIONS ARE BEING MADE, BY REASON OF LOSS OR
INTERRUPTION OF BUSINESS OF TENANT OR OTHERWISE. DURING THE SIX MONTHS PRIOR
TO THE EXPIRATION OF THE TERM OF THIS LEASE OR ANY RENEWAL TERM, OWNER MAY
EXHIBIT THE PREMISES TO PROSPECTIVE TENANTS OR PURCHASERS, AND PLACE UPON THE
PREMISES THE USUAL NOTICES "TO LET" OF "FOR SALE" WHICH NOTICES TENANT SHALL
PERMIT TO REMAIN THEREON WITHOUT MOLESTATION.
ARTICLE XX
TENANTS PROPERTY
SECTION 20.01 TAXES ON LEASEHOLD
TENANT SHALL BE RESPONSIBLE FOR AND SHALL PAY BEFORE DELINQUENCY ALL
MUNICIPAL, COUNTY OR STATE TAXES ASSESSED DURING THE TERM OF THIS LEASE
AGAINST ANY LEASEHOLD INTEREST OR PERSONAL PROPERTY OF ANY KIND, OWNED BY OR
PLACED IN, UPON OR ABOUT THE LEASED PREMISES BY THE TENANT.
SECTION 20.02 LOSS AND DAMAGE
OWNER SHALL NOT BE LIABLE FOR ANY DAMAGE TO PROPERTY OF TENANT OR OF OTHERS
LOCATED ON THE LEASED PREMISES, NOR FOR THE LOSS OF OR DAMAGE TO ANY PROPERTY
OF TENANT OR OF OTHERS BY THEFT OR OTHERWISE. OWNER SHALL NOT BE LIABLE FOR
ANY INJURY OR DAMAGE TO PERSONS OR PROPERTY RESULTING FROM FIRE, EXPLOSION,
FALLING PLASTER, STEAM, GAS, ELECTRICITY, WATER, RAIN OR LEAKS FROM ANY PART
OF THE LEASED PREMISES OR FROM THE PIPES, APPLIANCES OR PLUMBING WORKS OR FROM
THE ROOF, STREET OR SUB-SURFACE OR FROM ANY OTHER PLACE OR BY DAMPNESS OR BY
ANY OTHER CAUSE OF WHATSOEVER NATURE. OWNER SHALL NOT BE LIABLE FOR ANY SUCH
DAMAGE CAUSED BY OTHER TENANTS OR PERSONS IN THE LEASED PREMISES, OCCUPANTS OF
ADJACENT PROPERTY, OF THE SHOPPING CENTER, OR THE PUBLIC, OR CAUSED BY
OPERATIONS IN CONSTRUCTION OF ANY PRIVATE, PUBLIC OR QUASI-PUBLIC WORK. ALL
PROPERTY OF TENANT KEPT OR STORED ON THE LEASED PREMISES SHALL BE SO KEPT OR
STORED AT THE RISK OF TENANT ONLY AND TENANT SHALL HOLD OWNER HARMLESS FROM
ANY CLAIMS ARISING OUT OF DAMAGE TO THE SAME, INCLUDING SUBROGATION CLAIMS BY
TENANTS INSURANCE CARRIERS, UNLESS SUCH DAMAGE SHALL BE CAUSED BY THE WILLFUL
ACT OR GROSS NEGLECT OF OWNER.
SECTION 20.03 NOTICE BY TENANT
TENANT SHALL GIVE IMMEDIATE NOTICE TO OWNER IN CASE OF FIRE OR ACCIDENTS IN
THE LEASED PREMISES OR IN THE BUILDING OF WHICH THE PREMISES ARE A PART OR OF
DEFECTS THEREIN OR IN ANY FIXTURES OR EQUIPMENT.
ARTICLE XXI
HOLDING OVER SUCCESSORS
SECTION 21.01 HOLDING OVER
ANY HOLDING OVER AFTER THE EXPIRATION OF THE TERM HEREOF, WITH THE CONSENT OF
THE OWNER, SHALL BE CONSTRUED TO BE A TENANCY FROM MONTH TO MONTH AT THE RENTS
HEREIN SPECIFIED (PRORATED ON A MONTHLY BASIS) AND SHALL OTHERWISE BE ON THE
TERMS AND CONDITIONS HEREIN SPECIFIED SO FAR AS APPLICABLE.
SECTION 21.02 SUCCESSORS
ALL RIGHTS AND LIABILITIES HEREIN GIVEN TO, OR IMPOSED UPON, THE RESPECTIVE
PARTIES HERETO SHALL EXTEND TO AND BEND THE SEVERAL RESPECTIVE HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS OF THE SAID PARTIES; AND IF
THERE SHALL BE MORE THAN ONE TENANT, THEY SHALL ALL BE BOUND JOINTLY AND
SEVERALLY BY THE TERMS, COVENANTS AND AGREEMENTS HEREIN. NO RIGHTS, HOWEVER,
SHALL INURE TO THE BENEFIT OF ANY ASSIGNEE OF TENANT UNLESS THE ASSIGNMENT TO
SUCH ASSIGNEE HAS BEEN APPROVED BY OWNER IN WRITING AS PROVIDED IN SECTION
14.01 HEREOF.
ARTICLE XXII
QUIET ENJOYMENT
SECTION 22.01 OWNER'S COVENANT
UPON PAYMENT BY THE TENANT OF THE RENTS HEREIN PROVIDED, AND UPON THE
OBSERVANCE AND PERFORMANCE OF ALL THE COVENANTS, TERMS AND CONDITIONS ON
TENANT'S PART TO BE OBSERVED AND PERFORMED. TENANT SHALL PEACEABLY AND
QUIETLY HOLD AND ENJOY THE LEASED PREMISES FOR THE TERM HEREBY DEMISED WITHOUT
DEMISED WITHOUT HINDRANCE OR INTERRUPTION BY OWNER OR ANY OTHER PERSON OR
PERSONS LAWFULLY OR EQUITABLY CLAIMING BY, THROUGH OR UNDER THE OWNER,
SUBJECT, NEVERTHELESS, TO THE TERMS AND CONDITIONS OF THIS LEASE.
ARTICLE XXIII
MISCELLANEOUS
SECTION 23.01 WAIVER
THE WAIVER BY OWNER OF ANY BREACH OF ANY TERM, COVENANT OR CONDITION HEREIN
CONTAINED SHALL NOT BE DEEMED TO BE A WAIVER OF SUCH TERM, COVENANT OR
CONDITION OR ANY SUBSEQUENT BREACH OF THE SAME OR ANY TERM, COVENANT OR
CONDITION HEREIN CONTAINED. THE SUBSEQUENT ACCEPTANCE OF RENT HEREUNDER BY
OWNER SHALL NOT BE DEEMED TO BE A WAIVER OF ANY PRECEDING BREACH OF TENANT OF
ANY TERM, COVENANT OR CONDITION OF THIS LEASE, OTHER THAN THE FAILURE OF
TENANT TO PAY THE PARTICULAR RENTAL SO ACCEPTED. REGARDLESS OF OWNER'S
KNOWLEDGE OF SUCH PRECEDING BREACH AT THE TIME OF ACCEPTANCE OF SUCH RENT, NO
COVENANT, TERM OR CONDITION OF THIS LEASE SHALL BE DEEMED TO HAVE BEEN WAIVED
BY OWNER, UNLESS SUCH WAIVER BE IN WRITING BY OWNER.
SECTION 23.02 ACCORD AND SATISFACTION
NO PAYMENT BY TENANT OR RECEIPT BY OWNER OF A LESSER AMOUNT THAN THE MONTHLY
RENT HEREIN STIPULATED SHALL BE DEEMED TO BE OTHER THAN ON ACCOUNT OF THE
EARLIEST STIPULATED RENT, NOT SHALL ANY ENDORSEMENT OR STATEMENT ON ANY CHECK
OR ANY LETTER ACCOMPANYING ANY CHECK OR PAYMENT AS RENT BE DEEMED AN ACCORD
AND SATISFACTION, AND OWNER MAY ACCEPT SUCH CHECK OR PAYMENT WITHOUT PREJUDICE
TO OWNER'S RIGHT TO RECOVER THE BALANCE OF SUCH RENT OR PURSUE ANY OTHER
REMEDY IN THIS LEASE PROVIDED.
SECTION 23.03 ENTIRE AGREEMENT
THIS LEASE AND THE EXHIBITS, AND RIDER, IF ANY, ATTACHED HERETO AND FORMING A
PART HEREOF, SET FORTH ALL THE COVENANTS, PROMISES, AGREEMENTS, CONDITIONS OR
UNDERSTANDINGS, EITHER ORAL, OR WRITTEN, BETWEEN THEM OTHER THAN ARE HEREIN
SET FORTH. EXCEPT AS HEREIN OTHERWISE PROVIDED, NO SUBSEQUENT ALTERATION,
AMENDMENT, CHANGE OR ADDITION TO THIS LEASE SHALL BE BINDING UPON OWNER OR
TENANT UNLESS REDUCED TO WRITING AND SIGNED BY THEM.
SECTION 23.04
OWNER DOES NOT, IN ANY WAY OR FOR ANY PURPOSE, BECOME A PARTNER OF TENANT IN
THE CONDUCT OF ITS BUSINESS, OR OTHERWISE, OR JOINT ADVENTURER OR A MEMBER OR
A JOINT ENTERPRISE WITH TENANT. THE PROVISIONS OF THIS LEASE RELATING TO THE
PERCENTAGE RENT PAYABLE HEREUNDER ARE INCLINED SOLELY FOR THE PURPOSE OF
PROVIDING A METHOD WHEREBY THE RENT IS TO BE MEASURED AND ASCERTAINED.
SECTION 23.05 FORCE MAJEURE
IN THE EVENT THAT EITHER PARTY HERETO SHALL BE DELAYED OR HINDERED IN OR
PREVENTED FROM THE PERFORMANCE OF ANY ACT REQUIRED HEREUNDER BY REASON OF
STRIKES, LOCK-OUTS, LABOR TROUBLES, INABILITY TO PROCURE MATERIALS, FAILURE OF
POWER, RESTRICTIVE GOVERNMENTAL LAWS OR REGULATIONS, RIOTS, INSURRECTION, WAR
OR OTHER REASON OF A LIKE NATURE NOT THE FAULT OF THE PARTY DELAYED ON
PERFORMING WORK OR DOING ACTS REQUIRED UNDER THE TERMS OF THIS LEASE, THEN
PERFORMANCE OF SUCH ACTS SHALL BE EXCUSED FOR THE PERIOD OF THE DELAY AND THE
PERIOD FOR THE PERFORMANCE OF ANY SUCH ACT SHALL BE EXTENDED FOR A PERIOD
EQUIVALENT TO THE PERIOD OF SUCH DELAY. THE PROVISIONS OF THIS SECTION 23.05
SHALL NOT OPERATE TO EXCUSE TENANT FROM THE PROMPT PAYMENT OF RENT, PERCENTAGE
RENT, ADDITIONAL RENT OR ANY OTHER PAYMENTS REQUIRED BY THE TERMS OF THIS
LEASE.
SECTION 23.06 NOTICES
(A) ANY NOTICE BY TENANT TO OWNER MUST BE SERVED BY CERTIFIED OR REGISTERED
MAIL, POSTAGE, PREPAID, ADDRESSED TO OWNER AT THE ADDRESS FIRST HEREINABOVE
GIVEN OR AT SUCH OTHER ADDRESS AS OWNER MAY DESIGNATE BY WRITTEN NOTICE.
(B) ANY NOTICE BY OWNER TO TENANT MUST BE SERVED BY CERTIFIED OR REGISTERED
MAIL, POSTAGE, PREPAID, ADDRESSED TO TENANT AT THE LEASED PREMISES OR AT SUCH
OTHER ADDRESS AS TENANT SHALL DESIGNATE BY WRITTEN NOTICE.
SECTION 23.07 CAPTIONS AND SECTION NUMBERS
THE CAPTIONS, SECTION NUMBERS, ARTICLE NUMBERS, AND INDEX APPEARING IN THIS
LEASE ARE INSERTED ONLY AS A MATTER OF CONVENIENCE AND IN WAY DEFINE, LIMIT,
CONSTRUE, OR DESCRIBE THE SCOPE OR INTENT OF SUCH SECTIONS OR ARTICLES OF THIS
LEASE NOR IN ANY WAY AFFECT THIS LEASE.
SECTION 23.08 TENANT DEFINED, USE OF PRONOUN
THE WORD "TENANT" SHALL BE DEEMED AND TAKEN TO MEAN EACH AND EVERY PERSON OR
PARTY MENTIONED AS A TENANT HEREIN, BE THE SAME ONE OR MORE; AND IF THERE
SHALL BE MORE THAN ONE TENANT, ANY NOTICE REQUIRED OR PERMITTED BY THE TERMS
OF THIS LEASE MAY BE GIVEN BY OR TO ANY ONE THEREOF, AND SHALL HAVE THE SAME
FORCE AND EFFECT AS IF GIVEN BY OR TO ALL THEREOF. THE USE OF THE NEUTER
SINGULAR PRONOUN TO REFER TO OWNER OR TENANT SHALL BE DEEMED A PROPER
REFERENCE EVEN THOUGH OWNER OR TENANT MAY BE AN INDIVIDUAL, A PARTNERSHIP, A
CORPORATION, OR A GROUP OF TWO OR MORE INDIVIDUALS OR CORPORATIONS. THE
NECESSARY GRAMMATICAL CHANGES REQUIRED TO MAKE THE PROVISIONS OF THIS LEASE
APPLY IN THE PLURAL SENSE WHERE THERE IS MORE THAN ONE OWNER OR TENANT AND TO
EITHER CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR INDIVIDUALS, MALES OR
FEMALES, SHALL IN ALL INSTANCES BE ASSUMED AS THOUGH IN EACH CASE FULLY
EXPRESSED.
SECTION 23.09 PARTIAL INVALIDITY
IF ANY TERM, COVENANT OR CONDITION OF THIS LEASE OR THE APPLICATION THEREOF
ANY PERSON OR CIRCUMSTANCE SHALL, TO ANY EXTENT, BE INVALID OR UNENFORCEABLE,
THE REMAINDER OF THIS LEASE, OR THE APPLICATION OF SUCH TERM, COVENANT OR
CONDITION TO PERSONS OR CIRCUMSTANCES OTHER THAN THOSE AS TO WHICH IT IS HELD
INVALID OR UNENFORCEABLE SHALL BE VALID AND BE ENFORCED TO THE FULLEST EXTENT
PERMITTED BY LAW.
SECTION 23.10 NO OPTION
THE SUBMISSION OF THIS LEASE FOR EXAMINATION DOES NOT CONSTITUTE A RESERVATION
OF OR OPTION FOR THE LEASED PREMISES AND THIS LEASE BECOMES EFFECTIVE AS A
LEASE ONLY UPON EXECUTION AND DELIVERY THEREOF BY OWNER AND TENANT AND PAYMENT
OF ALL SUMS DUE UNDER LEASE.
SECTION 23.11 RECORDING
TENANT SHALL NOT RECORD THIS LEASE WITHOUT THE WRITTEN CONSENT OF OWNER.
SECTION 23.12 BREACH OF LEASE
IF TENANT BREACHES ANY TERM OF THIS LEASE AND ABANDONS THE DEMISED PREMISES
BEFORE THE END OF THE TERM HEREOF, OR IF TENANT'S RIGHT TO POSSESSION IS
TERMINATED BY-THE OWNER BECAUSE OF A BREACH OF THIS LEASE, OWNER MAY RECOVER
FROM TENANT, IN ADDITION TO ANY OTHER DAMAGES PROVIDED FOR BY LAW, IN EQUITY,
IN THIS LEASE, OR OTHERWISE, THE WORTH AT THE TIME OF AWARD OF THE AMOUNT BY
WHICH THE UNPAID RENT FOR THE BALANCE OF THE TERM AFTER THE TIME OF AWARD
EXCEEDS THE AMOUNT OF SUCH RENTAL LOSS FOR THE SAME PERIOD THE TENANT PROVES
COULD BE REASONABLY AVOIDED.
ATTACHED ADDENDUM IS A PART OF THIS LEASE.
EXECUTED THIS 23 DAY OF FEBRUARY, 1995
OWNER: TENANT: NEW RIDERS LIMITED
/S/ Richard D. Walker By: /s/ <signature illegible>
- ----------------------------- -----------------------------
RICHARD D. WALKER GEN. PARTNER
COX-WALKER/FRESNO
A GENERAL PARTNERSHIP
<PAGE>
ADDENDUM TO LEASE
This Addendum shall be made a part of the attached Lease between NEW RIDERS
LIMITED and COX-WALKER/FRESNO.
1) Tenant agrees to accept the space "as is" with no expense to the Owner
except Owner shall maintain roof for the first five years of the lease term at
owner's expense.
2) Owner and Tenant agree that is a part of Owner's security for entering
into this Lease, Tenant plans on remodeling the building at Tenant's expense.
Tenant agrees to submit plans to the city within 45 days of mutual execution
of a Lease, and to begin work on this remodel within 15 days of receiving
permits from the City of Fresno. In the event Tenant has not started work on
this remodel within said time, Owner may at Owner's discretion, cancel this
Lease and retain Tenant's security deposit and first month's rent as damages.
3) Tenant agrees that during the term of the Lease, it shall maintain the
building mechanical systems, plumbing, electrical systems, structural
components, walls, exterior painting, parking lot, roof (except owner shall
maintain roof at Owner's expense for the first five years of the lease term)
and landscaping. There shall be no expense to the Owner for maintenance
during the term of this lease.
4) Existing equipment listed on the attached Schedule of Equipment has a
lien filed by SBA. Tenant is currently in negotiations to purchase said
equipment from SBA. In the event Tenant elects not to purchase said
equipment, Owner agrees to either purchase the equipment or to immediately
notify SBA to have equipment removed. In the event SBA does not remove
equipment, owner agrees to remove the equipment within 30 days.
5) Tenant agrees to remove or relocate the portion of the existing hot water
shed on the south side of the building that is currently encroaching onto the
adjacent parcel. However, Tenant shall only be responsible for the physical
demolition and construction of said relocation or removal. In the event any
plans, permits, engineering, site plan review, site improvements, or any other
requirements that may arise in relation to this item become required by the
City of Fresno or any other regulatory entity, Owner shall be responsible for
the costs of those items.
6) Provided the Tenant is not in default under the terms of this Lease,
Tenant shall have an option to extend the term of this lease for two (2)
additional five (5) year periods under the same terms and conditions set forth
in this lease, except the base rent under Section 2.01 of this Lease shall be
adjusted to the then market rent for comparable space in the market area.
7) This Lease shall be subject to and contingent upon Tenant receiving
approval for a Liquor License at this location. Tenant shall have 60 days to
remove this contingency.
OWNER TENANT
COX-WALKER/FRESNO NEW RIDERS LIMITED
BY: /s/ Richard D. Walker BY: /s/ <signature illegible> C.E.O.
Date: 2/27/95 Date: 2/23/95
<letterhead of Bolen, Fransen & Boostrom LLP appears here>
November 17, 1997
Thomas Boehm, Esq. FACSIMILE ONLY
Frampton, Hoppe, Williams & Boehm
2444 Main Street, Suite 110
Fresno, CA 93721
Re: Newriders Limited/Easyriders Cafe, 5155 North Blackstone
Our File No. 12128.001
Dear Tom:
This letter shall confirm that Hal H. Bolen II, as attorney for New
Riders Limited, tenant, and Thomas Boehm, is attorney for Cox-Walker/Fresno,
owner, each acknowledge their respective client's agreement that there are
typographical errors with respect to the address of the leased property in the
opening paragraph and Section 1.01 of the Restaurant Lease entered into
between New Riders Limited and Cox-Walker/Fresno executed on February 23,
1995. The correct address of the leased property should be down as "5155
North Blackstone, Fresno, CA 93710."
Please execute this letter where indicated below and fax the signed copy
to me as soon as possible. If you have any questions regarding the enclosed,
please give me a call.
Very truly yours,
Hal H. Bolen II
HHB:mew
ACKNOWLEDGED AND AGREED:
/s/ Thomas Boehm
- ------------------------
THOMAS BOEHM
Dated: 11-17-97
Exhibit 10.2.2
SHOPPING CENTER LEASE
COUNTRY PLAZA SHOPPING CENTER
COUNTRY PLAZA LTD. PARTNERSHIP HEREIN CALLED "OWNER," WHOSE ADDRESS IS RICHARD
D. WALKER P.O. BOX 6479 LOS OSOS, CA 93412 AND NEW RIDERS, A CALIFORNIA
CORPORATION HEREIN CALLED "TENANT," WHOSE ADDRESS IS 1111 E. HERNDON SUITE 306
FRESNO, CA 93720 AGREE TO THE FOLLOWING TERMS AND CONDITIONS RELATING TO THE
LEASE OF LAND AND IMPROVEMENTS WITHIN THE COUNTRY PLAZA LTD. PARTNERSHIP
SHOPPING CENTER.
ARTICLE I
GRANT AND TERM
SECTION 1.01 LEASED PREMISES
IN CONSIDERATION OF THE RENTS, COVENANTS, AND AGREEMENTS HEREINAFTER RESERVED
AND CONTAINED ON THE PART OF TENANT TO BE OBSERVED AND PERFORMED, THE OWNER
DEMISES AND LEASES TO THE TENANT, AND TENANT RENTS FROM OWNER, THOSE CERTAIN
PREMISES NOW AND HEREAFTER TO BE ERECTED IN THE COUNTRY PLAZA LTD. PARTNERSHIP
SHOPPING CENTER (HEREIN CALLED THE "SHOPPING CENTER"), IN THE FRESNO, COUNTY
OF FRESNO, CALIFORNIA WHICH PREMISES CONSISTS OF A STORE HAVING A DEPTH OF
100' FEET, APPROXIMATELY, EXTERIOR FRONT AND EXTERIOR REAR, FROM OF CENTER
WALL TO CENTER OF WALL, BY A WIDTH OF 40' FEET, APPROXIMATELY, HEREIN CALLED
THE "LEASED PREMISES." THE BOUNDARIES AND LOCATION OF THE LEASED PREMISES ARE
OUTLINED IN RED ON THE SITE PLAN OF THE SHOPPING CENTER, WHICH IS MARKED
EXHIBIT "A" ATTACHED HERETO AND MADE APART HEREOF. APPROXIMATE SQUARE FOOTAGE
OF SPACE IS 4,019 S.F.*
THE ADDRESS OF SAID SPACE IS 5191 N. BLACKSTONE FRESNO, CA.
SECTION 1.02 USE OF ADDITIONAL AREAS
THE USE AND OCCUPATION BY THE TENANT OF THE LEASED PREMISES SHALL INCLUDE THE
USE IN COMMON WITH OTHERS ENTITLED THERETO OF THE COMMON AREAS, EMPLOYEES'
PARKING AREAS, SERVICE ROADS, LOADING FACILITIES, SIDEWALKS, AND CUSTOMER CAR
PARKING AREAS. SHOWN AND DEPICTED ON EXHIBIT "A," AND OTHER FACILITIES AS MAY
BE DESIGNATED FROM TIME TO TIME BY THE OWNER, SUBJECT HOWEVER TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT AND TO REASONABLE RULES AND REGULATIONS FOR THE
USE THEREOF AS PRESCRIBED FROM TIME TO TIME BY OWNER.
SECTION 1.03
COMMENCEMENT OF TERM TENANT SHALL HAVE OCCUPANCY OF PREMISES ON MAY 1, 1995.
THE TERM OF THIS LEASE, AND TENANTS OBLIGATION TO PAY RENT SHALL COMMENCE ON
THE EARLIER OF THE FOLLOWING DATE.
A) COMMENCEMENT DATE AUGUST 1, 1995
B) <text was crossed out>
C) <text was crossed out>
SHOULD ANY COMMENCEMENT DATE NOT CORRESPOND TO THE FIRST DAY OF THE MONTH
TENANT SHALL PAY THE RENT BASED UPON THE REMAINING DAYS TILL THE FIRST DAY OF
THE FOLLOWING MONTH. THIS FRACTIONAL MONTH'S RENT SHALL BE DUE ON THE
COMMENCEMENT DATE. THEREAFTER THE RENT SHALL BE PAID IN EQUAL MONTHLY
INSTALLMENTS ON THE FIRST DAY OF EACH AND EVERY MONTH IN ADVANCE.
SECTION 1.04
TENANT SHALL, BY ENTERING INTO AND OCCUPYING THE DEMISED PREMISES, BE
CONCLUSIVELY DEEMED TO HAVE ACCEPTED IT IN "AS IS" CONDITION AND TO
ACKNOWLEDGE THAT SAID DEMISED PREMISES ARE IN GOOD ORDER, CONDITION AND REPAIR
AND IN ALL RESPECTS CONSTRUCTED AND OR IMPROVED IN ACCORDANCE WITH THE
PROVISIONS OF THE LEASE.
SECTION 1.05 LENGTH OF TERM
THE TERM OF THIS LEASE SHALL BE FOR TEN (10) YEARS AND ZERO (0) MONTHS
FOLLOWING THE COMMENCEMENT OF THE TERM AS PROVIDED IN SECTION 1.03 HEREOF,
WITH TWO (2) FIVE (5) YEAR OPTIONS TO RENEW.
SECTION 1.06 EXCUSE OF OWNER'S PERFORMANCE
ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, PROVIDING SUCH
CAUSE IS NOT DUE TO THE WILLFUL ACT OR NEGLECT OF THE OWNER. THE OWNER SHALL
NOT BE DEEMED IN DEFAULT WITH RESPECT TO THE PERFORMANCE OF ANY OF THE TERMS,
COVENANTS AND CONDITIONS OF THIS LEASE IF SAME SHALL BE DUE TO ANY STRIKE,
LOCKOUT, CIVIL COMMOTION, INVASION, REBELLION, HOSTILITIES, MILITARY OR
USURPED POWER, SABOTAGE, GOVERNMENTAL REGULATIONS, PERMITS OR CONTROLS,
INABILITY TO OBTAIN ANY MATERIAL, SERVICE OR FINANCING, RAIN OR MUDDY
CONDITIONS, THROUGH ACT OF GOD OR OTHER CAUSE BEYOND THE CONTROL OF THE OWNER.
ARTICLE II
RENT
SECTION 2.01 MINIMUM RENT
THE FIXED MINIMUM ANNUAL RENT DURING THE TERM OF THIS LEASE SHALL BE PAYABLE
BY TENANT IN EQUAL MONTHLY INSTALLMENTS, ON OR BEFORE THE FIRST DAY OF EACH
MONTH IN ADVANCE, AT THE OFFICE OF OWNER OR AT SUCH OTHER PLACE DESIGNATED BY
OWNER WITHOUT ANY PRIOR DEMAND THEREFOR, AND WITHOUT ANY DEDUCTION OR SET-OFF
WHATSOEVER AND SHALL BE AS FOLLOWS:
FROM APRIL 15,1995 TO July 31, 1995 $ -0- PER ANNUM ($-0- PER MONTH)
FROM AUGUST 1,1995 TO JULY 31, 1997 $48,228.00 PER ANNUM ($4,019.00 PER MONTH)
FROM AUGUST 1,1997 TO JULY 31, 2005 $ **(SEE BELOW) PER ANNUM ($ PER MONTH)
**FROM AUG 1, 1997 THE BASE RENT SHALL BE INCREASED BY 4% PER YEAR AND
APPLIED ANNUALLY INCLUDING OPTIONS.
IN THE EVENT THE FIXED MINIMUM MONTHLY RENT IS NOT PAID TO OWNER BY TENANT
WITHIN TEN (10) DAYS OF THE DATE ON WHICH IT IS DUE, TENANT AGREES TO PAY TO
OWNER AS ADDITIONAL RENT A LATE-CHARGE OF 5% OF TOTAL RENTAL AMOUNT DUE.
TENANT FURTHER AGREES TO PAY OWNER ANY COSTS INCURRED BY OWNER IN EFFECTING
THE COLLECTION OF SUCH PAST DUE RENT AND LATE-CHARGE INCLUDING BUT NOT LIMITED
TO FEES OF AN ATTORNEY OR COLLECTION AGENCY. THE PARTIES HERETO AGREE THAT ALL
LATE CHARGES SHALL BE DEEMED ADDITIONAL RENT AND SHALL BE DUE AND PAYABLE AS
SUCH WITHIN FIVE (5) DAYS OF TENANT'S RECEIPT OF A STATEMENT ITEMIZING THE
SAME. NOTHING HEREIN CONTAINED SHALL LIMIT ANY OTHER REMEDY OF OWNER.
SECTION 2.02 REAL ESTATE TAXES
TENANT AGREES TO PAY TENANT'S PRO RATA SHARE OF ALL REAL PROPERTY TAXES,
ASSESSMENTS AND SURTAXES WHICH MAY BE LEVIED OR ASSESSED BY ANY LAWFUL
AUTHORITY AGAINST THE LAND ON WHICH BUILDINGS ARE LOCATED AND IMPROVEMENTS
THEREON IN THE SHOPPING CENTER. TENANT SHALL PAY SAID TAXES MONTHLY UPON
RECEIPT FROM OWNER OF A STATEMENT DELINEATING TENANT'S SHARE OF SAID TAXES AND
SAID SHARE SHALL BE PAID WITHIN FIVE (5) DAYS AFTER RECEIPT OF SAID STATEMENT.
TENANT'S PRO RATA SHARE SHALL BE APPORTIONED ACCORDING TO THE FLOOR AREA OF
THE DEMISED PREMISE AS IT RELATES TO THE TOTAL FLOOR AREA OF THE BUILDING OR
BUILDINGS INCLUDING THE DEMISED PREMISES. ALL TAXES FOR THE YEAR IN WHICH THIS
LEASE COMMENCES SHALL BE APPORTIONED AND ADJUSTED. AT OWNER DISCRETION THESE
COSTS MAYBE INCLUDED IN BUDGETED C.A.M. MONTHLY PAYMENTS.
SECTION 2.03 ADDITIONAL RENT
THE TENANT SHALL PAY AS ADDITIONAL RENT MONEY REQUIRED TO BE PAID PURSUANT TO
SECTION 2.01, 2.02, 8.01, 11.02, 12.02 AND ALL OTHER SUMS OF MONEY OR CHARGES
REQUIRED TO BE PAID BY TENANT UNDER THIS LEASE, WITHOUT ANY DEDUCTIONS OR
SETOFFS WHATSOEVER, WHETHER OR NOT THE SAME SHALL BE DESIGNATED "ADDITIONAL
RENT." IF SUCH AMOUNTS OR CHARGES ARE NOT PAID AT THE TIME PROVIDED IN THIS
LEASE, TENANT AGREES TO PAY TO OWNER A LATE CHARGE OF FIVE PERCENT (5%) OF THE
AMOUNT OR CHARGES NOT PAID BY TENANT AND TENANT FURTHER AGREES TO PAY TO OWNER
ANY COST INCURRED BY OWNER IN EFFECTING THE COLLECTION OF SUCH PAST DUE
AMOUNTS OR CHARGES INCLUDING BUT NOT LIMITED TO FEES OF AN ATTORNEY OR A
COLLECTION AGENCY. THE PARTIES HERETO AGREE THAT ALL OF THE HEREINABOVE
MENTIONED CHARGES SHALL BE DEEMED ADDITIONAL RENT AND SHALL BE ALL DUE AND
PAYABLE AS SUCH WITHIN FIVE (5) DAYS OF TENANT'S RECEIPT OF A STATEMENT
ITEMIZING THE SAME NOTHING HEREIN CONTAINED SHALL LIMIT ANY OTHER REMEDY OF
OWNER.
SECTION 2.04
TENANT'S INTEREST OR EQUITY IN ANY AND ALL TRADE FIXTURES, EQUIPMENT,
INVENTORY, OR OTHER PERSONAL PROPERTY OF ANY NATURE, LOCATED FROM TIME TO TIME
IN THE DEMISED PREMISES, SHALL BECOME AND REMAIN SECURITY FOR THE PERFORMANCE
OF THE TERMS OF THIS LEASE BY TENANT AND THE SAME, SUBJECT TO THE RIGHT OF ANY
CONDITIONAL SELLER, SHALL BE COVERED BY A SECURITY AGREEMENT, PROPERLY
EXECUTED BY TENANT TO LANDLORD AND IN ALL RESPECTS COMPLYING WITH THE
APPLICABLE PROVISIONS OF THE LAW OF THIS STATE FROM TIME TO TIME IN EFFECT.
AND TENANT SHALL EXECUTE SUCH DOCUMENTS AS SHALL BE REQUIRED TO EFFECTUATE THE
PURPOSE HEREOF. REPLACEMENTS, RENEWALS AND REPAIRS OF WORN OUT OR OBSOLETE
PROPERTY SHALL BE PERMITTED SUBJECT, HOWEVER, TO LANDLORD'S RECEIVING AN
EFFECTIVE LIEN UPON TENANT'S EQUITY IN SUCH REPLACEMENTS AND RENEWALS.
ARTICLE III
CONSTRUCTION OF LEASED PREMISES
SECTION 3.01 OWNER'S OBLIGATION
OWNER SHALL NOT BE OBLIGATED TO PERFORM ANY CONSTRUCTION, DEMOLITION OR
REPLACEMENT OF ANY FEATURES OF THE DEMISED SPACE INCLUDING BUT NOT LIMITED TO
WALLS, CEILINGS, FLOOR COVERING, STORE FRONTS, DOORS, ELECTRICAL SYSTEMS, AIR
CONDITIONING SYSTEMS, PLUMBING FIXTURES OR SYSTEMS, EXCEPT AS SPECIFICALLY
AGREED TO IN WRITING BY ADDENDUM TO THIS LEASE.
SECTION 3.02 CHANGES AND ADDITIONS TO BUILDINGS
OWNER HEREBY RESERVES THE RIGHT AT ANY TIME TO MAKE ALTERATIONS OR ADDITIONS
TO AND TO BUILD ADDITIONAL STORES ON THE BUILDING IN WHICH THE PREMISES ARE
CONTAINED AND TO BUILD ADJOINING THE SAME. OWNER ALSO RESERVES THE RIGHT TO
CONSTRUCT OTHER BUILDINGS OR IMPROVEMENTS IN THE SHOPPING CENTER FROM TIME TO
TIME AND TO MAKE ALTERATIONS THEREOF OR ADDITIONS THERETO AND TO BUILD
ADDITIONAL STORIES ON ANY SUCH BUILDING OR BUILDINGS AND TO BUILD ADJOINING
SAME. EASEMENTS FOR LIGHT AND AIR ARE NOT INCLUDED IN THE LEASING OF THESE
PREMISES TO TENANT. LANDLORD FURTHER RESERVES THE EXCLUSIVE RIGHT TO THE ROOF
EXCEPT AS PROVIDED IN THIS LEASE AGREEMENT.
SECTION 3.03 RIGHT TO RELOCATE
THE PURPOSE OF THE SITE PLAN ATTACHED HERETO AS EXHIBIT "A" IS TO SHOW THE
APPROXIMATE LOCATION OF THE LEASED PREMISES. OWNER RESERVES THE RIGHT AT ANY
TIME TO RELOCATE, VARY, AND ADJUST THE SIZE OF THE VARIOUS BUILDINGS,
COVENANTS, AUTOMOBILE PARKING AREA, AND OTHER COMMON AREAS AS SHOWN ON SAID
SITE PLAN, PROVIDED, HOWEVER, THAT SAID PARKING AREA (INCLUDING LANDSCAPED AND
COMMON AREAS) SHALL AT ALL TIMES BE IN COMPLIANCE WITH THE MINIMUM
REQUIREMENTS OF THE CITY OF FRESNO. COUNTY OF FRESNO, STATE OF CALIFORNIA.
ARTICLE IV
CONDUCT OF BUSINESS BY TENANT
SECTION 4.01 USE OF PREMISES
TENANT SHALL USE THE LEASED PREMISES SOLELY FOR THE PURPOSE OF CONDUCTING THE
BUSINESS OF: SALES, REPAIRS OF MOTORCYCLES, ACCESSORIES FOR MOTORCYCLES,
HELMETS, LEATHER CLOTHING, LEATHER JACKETS, HARLEY DAVIDSON, EASYRIDERS,
ACCESSORIES AND RELATED ITEMS.
TENANT SHALL OCCUPY THE LEASED PREMISES WITHIN TEN (10) DAYS AFTER THE DATE OF
THE NOTICE PROVIDED FOR IN SECTION 1.03 HEREOF, AND SHALL CONDUCT CONTINUOUSLY
IN THE LEASED PREMISES THE BUSINESSES ABOVE STATED. TENANT WILL NOT USE OR
PERMIT, OR SUFFER THE USE OF, THE LEASED PREMISES FOR ANY OTHER BUSINESS OR
PURPOSE WITHOUT LANDLORD'S APPROVAL, WHICH SHALL NOT BE UNREASONABLY WITHHELD.
SECTION 4.02 CONDUCT OF BUSINESS
TENANT ACKNOWLEDGES THAT LANDLORD MAKES NO REPRESENTATIONS AS TO THE PRESENT
OR FUTURE CONDITION OF THE DEMISED PREMISES, OR TO THE FITNESS, DESIRABILITY
OR ZONING THEREOF FOR ANY PARTICULAR PURPOSE, AND LANDLORD SHALL NOT BE LIABLE
FOR ANY CHARGES THEREIN OR ADDITIONS THERETO REQUIRED BY ANY PUBLIC AUTHORITY.
ANY PERMITS OR REQUIREMENTS OF ANY KIND PERTAINING TO THE OPERATION OF
TENANT'S BUSINESS WILL BE TENANT'S RESPONSIBILITY AND ANY CONSTRUCTION OR
SPECIAL EQUIPMENT REQUIRED BY PUBLIC AUTHORITY TO ENABLE TENANT TO CONDUCT THE
BUSINESS SHALL LIKEWISE BE TENANT'S SOLE COST AND RESPONSIBILITY. TENANT SHALL
CLEAR ANY LIEN FILED AS A RESULT OF TENANT'S ACTION.
SECTION 4.03 COMPETITION
DURING THE TERM OF THIS LEASE TENANT SHALL NOT DIRECTLY OR INDIRECTLY ENGAGE
IN ANY SIMILAR OR COMPETING BUSINESS WITHIN A RADIUS OF THREE MILES FROM THE
OUTSIDE BOUNDARY OF THE SHOPPING CENTER. TENANT SHALL NOT PERFORM ANY ACTS OR
CARRY ON ANY PRACTICES WHICH MAY INJURE THE BUILDING OR BE A NUISANCE OR
MENACE TO OTHER TENANTS IN THE SHOPPING CENTER.
SECTION 4.04 STORAGE, OFFICE SPACE
TENANT SHALL WAREHOUSE, STORE AND/OR STOCK IN THE LEASED PREMISES ONLY SUCH
GOODS, WARES AND MERCHANDISE AS TENANT INTENDS TO OFFER FOR SALE AT RETAIL AT,
IN, FROM OR UPON THE LEASED PREMISES. THIS SHALL NOT PRECLUDE OCCASIONAL
EMERGENCY TRANSFERS OF MERCHANDISE TO THE OTHER STORES OF TENANT, IF ANY, NOT
LOCATED IN THE SHOPPING CENTER. TENANT SHALL USE FOR OFFICE, CLERICAL OR OTHER
NON-SELLING PURPOSES ONLY SUCH SPACE IN THE LEASED PREMISES AS IS FROM TIME TO
TIME REASONABLY REQUIRED FOR TENANT'S BUSINESS IN THE LEASED PREMISES. NO
AUCTION, FIRE OR BANKRUPTCY SALES MAY BE CONDUCTED IN THE LEASED PREMISES
WITHOUT THE PREVIOUS WRITTEN CONSENT OF OWNER. NO STORAGE IS PERMITTED
EXTERIOR TO THE SPACE.
ARTICLE V
GRANT OF CONCESSIONS
SECTION 5.01 CONDITIONS TO GRANT
THE PROVISION AGAINST SUBLETTING ELSEWHERE CONTAINED IN THIS LEASE SHALL NOT
PROHIBIT TENANT FROM GRANTING CONCESSIONS FOR THE OPERATION OF ONE OR MORE
DEPARTMENTS OF THE BUSINESS WHICH TENANT IS PERMITTED BY SECTION 4.01 TO
CONDUCT IN OR UPON THE LEASED PREMISES; PROVIDED, HOWEVER, THAT (A) EACH SUCH
CONCESSION MAY BE GRANTED ONLY UPON RECEIPT BY TENANT OF THE WRITTEN CONSENT
OF THE OWNER AND SHALL BE SUBJECT TO ALL TERMS AND PROVISIONS OF THIS LEASE;
(B) AT LEAST SEVENTY-FIVE PERCENT (75%) OF THE SALES FLOOR AREA OF THE LEASED
PREMISES SHALL BE AT ALL TIMES DEVOTED TO THE BUSINESS OF AND BE OPERATED BY
TENANT.
ARTICLE VI
SECURITY DEPOSIT
SECTION 6.01 AMOUNT OF DEPOSIT
TENANT, CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS LEASE, WILL DEPOSIT WITH
OWNER FORTHWITH THE SUM OF FOUR THOUSAND AND NINETEEN ----NO/100 DOLLARS
($4,019.00). SAID DEPOSIT SHALL BE HELD BY OWNER, WITHOUT LIABILITY FOR
INTEREST, AS SECURITY FOR THE FAITHFUL PERFORMANCE BY TENANT OF ALL OF THE
TERMS, COVENANTS, AND CONDITIONS OF THIS LEASE BY SAID TENANT TO BE KEPT AND
PERFORMED DURING THE TERM HEREOF. IF AT ANY TIME DURING THE TERM OF THIS LEASE
ANY OF THE RENT HEREIN RESERVED SHALL BE OVERDUE AND UNPAID, OR ANY OTHER SUM
PAYABLE BY TENANT TO OWNER HEREUNDER SHALL BE OVERDUE AND UNPAID THEN OWNER
MAY, AT THE OPTION OF OWNER (BUT OWNER SHALL NOT BE REQUIRED TO), APPROPRIATE
AND APPLY ANY PORTION OF SAID DEPOSIT TO THE PAYMENT OF ANY SUCH OVERDUE RENT
OR OTHER SUM. IT IS EXPRESSLY UNDERSTOOD THAT THIS SUM DOES NOT APPLY TOWARD
RENT.
SECTION 6.02 USE AND RETURN OF DEPOSIT
IN THE EVENT OF THE FAILURE OF TENANT TO KEEP AND PERFORM ANY OF THE TERMS,
COVENANTS AND CONDITIONS OF THIS LEASE TO BE PERFORMED BY TENANT, THEN THE
OWNER AT ITS OPTION MAY, AFTER TERMINATING THIS LEASE, APPROPRIATE AND APPLY
SAID ENTIRE DEPOSIT, OR SO MUCH THEREOF AS MAY BE NECESSARY, TO COMPENSATE THE
OWNER FOR ALL LOSS OR DAMAGE SUSTAINED OR SUFFERED BY OWNER DUE TO SUCH BREACH
ON THE PART OF TENANT. SHOULD THE ENTIRE DEPOSIT, OR ANY PORTION THEREOF, BE
APPROPRIATED AND APPLIED BY OWNER FOR THE PAYMENT OF OVERDUE RENT OR OTHER
SUMS DUE AND PAYABLE TO OWNER BY TENANT HEREUNDER, THEN TENANT SHALL, UPON THE
WRITTEN DEMAND OF OWNER, FORTHWITH REMIT TO OWNER A SUFFICIENT AMOUNT OF CASH
TO RESTORE SAID SECURITY TO THE ORIGINAL SUM DEPOSITED, AND TENANT'S FAILURE
TO DO SO WITHIN FIVE (5) DAYS AFTER RECEIPT OF SUCH DEMAND SHALL CONSTITUTE A
BREACH OF THIS LEASE. SHOULD TENANT COMPLY WITH ALL OF SAID TERMS, COVENANTS,
AND CONDITIONS AND PROMPTLY PAY ALL OF THE RENTAL HEREIN PROVIDED FOR AS IT
FALLS DUE, AND ALL OTHER SUMS PAYABLE BY TENANT TO OWNER HEREUNDER, THE SAID
DEPOSIT SHALL BE RETURNED IN FULL TO TENANT AT THE END OF THE TERM OF THIS
LEASE, OR UPON THE EARLIER TERMINATION OF THIS LEASE.
SECTION 6.03 TRANSFER OF DEPOSIT
OWNER MAY DELIVER THE FUNDS DEPOSITED HEREUNDER BY TENANT TO THE PURCHASER OF
OWNER'S INTEREST IN THE LEASED PREMISES, IN THE EVENT THAT SUCH INTEREST BE
SOLD, AND THEREUPON OWNER SHALL BE DISCHARGED FROM ANY FURTHER LIABILITY WITH
RESPECT TO SUCH DEPOSIT.
ARTICLE VII
PARKING AND COMMON USE AREA AND FACILITIES
SECTION 7.01 CONTROL OF COMMON AREAS BY OWNER
ALL AUTOMOBILE PARKING AREAS, DRIVEWAYS, ENTRANCES AND EXITS THERETO, AND
OTHER FACILITIES FURNISHED BY OWNER IN OR NEAR THE SHOPPING CENTER, INCLUDING
EMPLOYEE PARKING AREAS, THE TRUCK WAY OR WAYS, LOADING DOCKS, PACKAGE PICK-UP
STATIONS, PEDESTRIAN SIDEWALKS AND RAMPS, LANDSCAPED AREAS, EXTERIOR
STAIRWAYS, COMFORT STATIONS AND OTHER AREAS AND IMPROVEMENTS PROVIDED BY OWNER
FOR THE GENERAL USE, IN COMMON, OF TENANTS, THEIR OFFICERS, AGENTS, EMPLOYEES
AND CUSTOMERS, SHALL AT ALL TIMES BE SUBJECT TO THE EXCLUSIVE CONTROL AND
MANAGEMENT OF OWNER, AND OWNER SHALL HAVE THE RIGHT FROM TIME TO TIME TO
ESTABLISH, MODIFY AND ENFORCE REASONABLE RULES AND REGULATIONS WITH RESPECT TO
ALL FACILITIES AND AREAS MENTIONED IN THIS ARTICLE. OWNER SHALL HAVE THE RIGHT
TO CONSTRUCT, MAINTAIN AND OPERATE LIGHTING FACILITIES ON ALL SAID AREAS AND
IMPROVEMENTS; TO POLICE THE SAME; FROM TIME TO TIME TO CHANGE THE AREA, LEVEL,
LOCATION AND ARRANGEMENT OF PARKING AREAS AND OTHER FACILITIES HEREINABOVE
REFERRED TO; TO RESTRICT PARKING BY TENANTS, THEIR OFFICERS, AGENTS AND
EMPLOYEES TO EMPLOYEE PARKING AREAS; TO ENFORCE PARKING CHARGES (BY OPERATION
OF METERS OR OTHERWISE), WITH APPROPRIATE PROVISIONS FOR FREE PARKING TICKET
VALIDATING BY TENANTS; TO CLOSE ALL OR ANY PORTION OF SAID AREAS OR FACILITIES
TO SUCH EXTENT AS TICKET VALIDATING BY TENANTS; TO CLOSE ALL OR ANY PORTION OF
SAID AREAS OR FACILITIES TO SUCH EXTENT AS MAY, IN THE OPINION OF OWNER'S
COUNSEL, BE LEGALLY SUFFICIENT TO PREVENT A DEDICATION THEREOF OF THE ACCRUAL
OF ANY RIGHTS TO ANY PERSON OR THE PUBLIC THEREIN; TO CLOSE TEMPORARILY ALL OF
ANY PORTION OF THE PARKING AREAS OR FACILITIES; TO DISCOURAGE NONCUSTOMER
PARKING; AND TO DO AND PERFORM SUCH OTHER ACTS IN AND TO SAID AREAS AND
IMPROVEMENTS AS, IN THE USE OF GOOD BUSINESS JUDGMENT, THE OWNER SHALL
DETERMINE TO BE ADVISABLE WITH A VIEW TO THE IMPROVEMENT OF THE CONVENIENCE
AND USE THEREOF BY TENANTS, THEIR OFFICERS, AGENTS, EMPLOYEES AND CUSTOMERS.
OWNERS WILL OPERATE AND MAINTAIN THE COMMON FACILITIES REFERRED TO ABOVE IN
SUCH A MANNER AS OWNER, IN ITS SOLE DISCRETION, SHALL DETERMINE FROM TIME TO
TIME. WITHOUT LIMITING THE SCOPE OF SUCH DISCRETION, OWNER SHALL HAVE THE FULL
RIGHT AND AUTHORITY TO EMPLOY ALL PERSONNEL AND MAKE ALL RULES AND REGULATIONS
PERTAINING TO AND NECESSARY FOR THE PROPER OPERATION AND MAINTENANCE OF THE
COMMON AREAS AND FACILITIES.
SECTION 7.02 LICENSE
ALL COMMON AREAS AND FACILITIES NOT WITHIN THE LEASE PREMISES, WHICH TENANT
MAY BE PERMITTED TO USE AND OCCUPY, ARE TO BE USED AND OCCUPIED UNDER A
REVOCABLE LICENSE, AND IF ANY SUCH LICENSE BE REVOKED, OR IF THE AMOUNT OF
SUCH AREAS BE DIMINISHED, OWNER SHALL NOT BE SUBJECT TO ANY LIABILITY NOR
SHALL TENANT BE ENTITLED TO ANY COMPENSATION FOR DIMINUTION OR ABATEMENT OF
RENT, NOR SHALL REVOCATION OR DIMINUTION OF SUCH AREAS BE DEEMED CONSTRUCTIVE
OR ACTUAL EVICTION.
ARTICLE VIII
COST OF MAINTENANCE OF COMMON AREAS
SECTION 8.01 TENANT TO BEAR PRO RATA SHARE OF EXPENSE
(A) IN EACH LEASE YEAR TENANT WILL PAY OWNER IN EQUAL MONTHLY INSTALLMENTS, IN
ADDITION TO THE RENTALS SPECIFIED IN ARTICLE II HEREOF, AS FURTHER ADDITIONAL
RENT, SUBJECT TO THE LIMITATION HEREINAFTER SET FORTH, A PROPORTION OF THE
SHOPPING CENTER'S OPERATING COST. HEREINAFTER DEFINED, BASED UPON THE RATIO OF
THE SQUARE FEET OF THE LEASED PREMISES TO THE TOTAL SQUARE FEET OF ALL THE
BUILDING SPACE IN THE SHOPPING CENTER.
(B) FOR THE PURPOSE OF THIS SECTION 8.01 THE "SHOPPING CENTER'S OPERATING
COST" MEANS THE TOTAL COST AND EXPENSE INCURRED IN OPERATING AND MAINTAINING
THE COMMON FACILITIES, HEREINAFTER DEFINED, ACTUALLY USED OR AVAILABLE FOR USE
BY TENANT AND THE EMPLOYEES, AGENTS, SERVANTS, CUSTOMERS AND OTHER INVITEES OF
TENANT, SPECIFICALLY INCLUDING WITHOUT LIMITATION, GARDENING AND LANDSCAPING,
PARKING LOT REPAIRS OR REPLACEMENT, MAINTENANCE AND LINE PAINTING, THE COST OF
PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE, FIRE AND EXTENDED COVERAGE
INSURANCE, BUILDING REPAIRS, ROOF AND WALL REPAIR, MAINTENANCE AND PAINTING,
PEST CONTROL, LIGHTING, SANITARY AND STORM LINE MAINTENANCE, SIDEWALK
CLEANING, REMOVAL OF TRASH, RUBBISH, GARBAGE AND OTHER REFUSE, REASONABLE
RESERVES FOR REPLACEMENTS AND REPAIRS, PROPERTY MANAGEMENT, SHOPPING CENTER
BANNERS, SHOPPING CENTER SIGNAGE (NOT INCLUDING TENANT SIGNAGE), EMPLOYMENT OF
SECURITY GUARDS, BOOKKEEPING, REAL ESTATE PROPERTY TAXES AND ASSESSMENTS,
SURCHARGES AND FEES THEREON, AND THE COST OF PERSONNEL TO SUPERVISE AND
ADMINISTER SUCH SERVICES, TO DIRECT PARKING AND TO POLICE THE COMMON
FACILITIES. "COMMON FACILITIES" MEANS ALL AREAS, SPACE, EQUIPMENT AND SPECIAL
SERVICES PROVIDED BY OWNER FOR THE COMMON OR JOINT USE AND BENEFIT OF THE
OCCUPANTS OF THE SHOPPING CENTER, THEIR EMPLOYEES, AGENTS, SERVANTS, CUSTOMERS
AND OTHER INVITEES, INCLUDING WITHOUT LIMITATION PARKING AREAS, ACCESS ROADS,
DRIVEWAYS, RETAINING WALLS, LANDSCAPED AREAS, TRUCK SERVICEWAYS OR TUNNELS,
LOADING DOCKS, PEDESTRIAN MALLS, COURTS, STAIRS, RAMPS AND SIDEWALKS, COMFORT
AND FIRST-AID STATIONS, WASHROOMS AND PARCEL PICK-UP STATIONS AND SHOPPING
CENTER RENTAL OFFICE.
(C) THE ADDITIONAL RENT TO BE PAID IN THIS SECTION 8.01 AND ALSO SECTIONS 2.02
AND 11.02 SHALL BE PAID MONTHLY IN ADVANCE. OWNER SHALL ESTABLISH A MONTHLY
BUDGET FOR OPERATING COSTS AND RESERVES AND ADJUSTED AT THE END OF EACH YEAR.
THE ADJUSTMENT UPWARDS OF DOWNWARDS TO REFLECT THE ACTUAL COST INCURRED.
TENANT WILL THEN BE CREDITED OR BILLED ACCORDINGLY AT YEAR END TO REFLECT THIS
ADJUSTMENT.
(D) CHANGES IN ANY PARTICULAR FLOOR AREA OCCURRING DURING ANY MONTHLY PERIOD
SHALL BE EFFECTIVE ON THE FIRST DAY OF THE NEXT SUCCEEDING MONTH PERIOD, AND
THE AMOUNT OF ANY FLOOR AREA IN EFFECT FOR THE WHOLE OF ANY MONTHLY PERIOD
SHALL BE THE AVERAGE OF THE TOTAL AMOUNTS IN EFFECT ON THE FIRST DAY OF EACH
CALENDAR MONTH IN SUCH MONTHLY PERIOD.
(E) TENANT SHALL PAY MONTHLY SHOPPING CENTER PROPERTY MANAGEMENT FEE. SHOPPING
CENTER PROPERTY MANAGEMENT FEE SHALL BE FOUR PERCENT OF THE BASE MINIMUM RENT
(SECTION 2.01).
ARTICLE IX
SIGNS, AWNINGS, CANOPIES, FIXTURES, ALTERATIONS
SECTION 9.01 INSTALLATION BY TENANT
ALL FIXTURES INSTALLED BY TENANT SHALL BE NEW OR COMPLETELY RECONDITIONED.
TENANT SHALL NOT MAKE OR CAUSE TO BE MADE ANY ALTERATIONS, ADDITIONS OR
IMPROVEMENTS OR INSTALL OR CAUSE TO BE INSTALLED ANY TRADE FIXTURES, EXTERIOR
SIGNS, FLOOR COVERINGS, INTERIOR OR EXTERIOR LIGHTING, PLUMBING FIXTURES,
SHADES OR AWNINGS OR MAKE ANY CHANGES TO THE STORE FRONT WITHOUT FIRST
OBTAINING OWNER'S WRITTEN APPROVAL AND CONSENT. ALL IMPROVEMENTS SHALL MEET
ALL GOVERNMENTAL REQUIREMENTS, TENANT SHALL PRESENT TO THE OWNER PLANS AND
SPECIFICATIONS FOR SUCH WORK AT THE TIME APPROVAL IS SOUGHT.
SECTION 9.02 REMOVAL AND INSURANCE BY TENANT
ALL ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS MADE BY THE TENANT,
OR MADE BY THE OWNER ON THE TENANT'S BEHALF BY AGREEMENT UNDER THIS LEASE,
SHALL REMAIN THE PROPERTY OF THE TENANT FOR THE TERM OF THE LEASE, OR ANY
EXTENSION OR RENEWAL THEREOF. THE TENANT SHALL AT ALL TIMES, MAINTAIN FIRE
INSURANCE WITH EXTENDED COVERAGE IN THE NAME OF THE OWNER AND TENANT, IN AN
AMOUNT ADEQUATE TO COVER THE COST OF REPLACEMENT OF ALL ALTERATIONS,
DECORATIONS, ADDITIONS OR IMPROVEMENTS IN THE EVENT OF FIRE OR EXTENDED
COVERAGE LOSS. TENANT SHALL DELIVER TO THE OWNER CERTIFICATES OF SUCH FIRE
INSURANCE POLICIES WHICH SHALL CONTAIN A CLAUSE REQUIRING THE INSURER TO GIVE
THE OWNER TEN (10) DAYS NOTICE OF CANCELLATION OF SUCH POLICIES. SUCH
ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS SHALL NOT BE REMOVED FROM
THE PREMISES WITHOUT PRIOR CONSENT IN WRITING FROM THE OWNER. UPON EXPIRATION
OF THIS LEASE, OR ANY RENEWAL TERM THEREOF, THE TENANT SHALL REMOVE SUCH ALL
SUCH ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS AND RESTORE THE
LEASED PREMISES AS PROVIDED IN SECTION 10.03 HEREOF. IF THE TENANT FAILS TO
REMOVE SUCH ALTERATIONS, DECORATIONS, ADDITIONS OR IMPROVEMENTS AND RESTORE
THE LEASED PREMISES, THEN UPON THE EXPIRATION OF THIS LEASE, OR ANY RENEWAL
THEREOF, AND UPON THE TENANT'S REMOVAL FROM THE PREMISES, ALL SUCH
ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS SHALL BECOME THE PROPERTY
OF THE OWNER. COSTS OF REMOVAL BY OWNER MAY BE CHARGED TO TENANT.
SECTION 9.03 TENANT SHALL DISCHARGE ALL LIENS
TENANT SHALL PROMPTLY PAY ALL CONTRACTORS AND MATERIALMEN, SO AS TO MINIMIZE
THE POSSIBILITY OF A LIEN ATTACHING TO THE LEASED PREMISES, AND SHOULD ANY
SUCH LIEN BY MADE OR FILED, TENANT SHALL BOND AGAINST OR DISCHARGE THE SAME
WITHIN TEN (10) DAYS AFTER WRITTEN REQUEST BY OWNER.
SECTION 9.04 SIGNS, AWNINGS AND CANOPIES
TENANT WILL NOT PLACE OR SUFFER TO BE PLACED OR MAINTAINED ON ANY EXTERIOR
DOOR, WALL OR WINDOW OF THE LEASED PREMISES ANY SIGN, AWNING OR CANOPY, OR
ADVERTISING MATTER OR OTHER THING OF ANY KIND, AND WILL NOT PLACE OR MAINTAIN
ANY DECORATION, LETTERING OR ADVERTISING MATTER ON THE GLASS OF ANY WINDOW OR
DOOR OF THE LEASED PREMISES WITHOUT FIRST OBTAINING OWNER'S WRITTEN APPROVAL
AND CONSENT. TENANT FURTHER AGREES TO MAINTAIN SUCH SIGN, AWNING, CANOPY,
DECORATION, LETTERING, ADVERTISING MATTER OR OTHER THING AS MAY BE APPROVED IN
GOOD CONDITION AND REPAIR AT ALL TIMES.
TENANT AGREES, AT TENANT'S SOLE COST, TO OBTAIN A CANOPY TYPE SIGN IN STRICT
CONFORMANCE WITH THE OWNER'S SIGN CRITERIA AS TO DESIGN, MATERIAL, COLOR,
LOCATION, SIZE AND LETTER SIZE. ALL SIGNS SHALL BE APPROVED BY OWNER BEFORE
INSTALLATION. SIGNS SHALL BE INSTALLED WITHIN SIXTY (60) DAYS OF DATE OF
COMMENCEMENT OF LEASE AND SHALL MEET ALL GOVERNMENTAL REQUIREMENTS.
ARTICLE X
MAINTENANCE OF LEASED PREMISES
SECTION 10.01 MAINTENANCE BY TENANT
TENANT SHALL AT ALL TIMES KEEP THE LEASED PREMISES (INCLUDING MAINTENANCE OF
EXTERIOR ENTRANCES, ALL GLASS, PLATE GLASS AND SHOW WINDOW MOLDINGS) AND ALL
PARTITIONS, DOORS, DOOR JAMS, DOOR CLOSERS, DOOR HARDWARE, FIXTURES, EQUIPMENT
AND APPURTENANCES THEREOF (INCLUDING ELECTRICAL, LIGHTING AND PANELS FROM THE
UTILITY COMPANY METER, HEATING, AND PLUMBING, AND PLUMBING FIXTURES, AND ANY
AIR CONDITIONING SYSTEM, INCLUDING LEAKS AROUND DUCTS, PIPES, VENTS, OR OTHER
PARTS OF THE AIR CONDITIONING, OR PLUMBING. TENANT SHALL MAINTAIN THE AIR
CONDITIONING AND PROVIDE REGULAR SERVICE AND CHANGING OF FILTERS, ALL COSTS OF
REPAIRS SHALL BE TENANT'S RESPONSIBILITY. PLUMBING SYSTEMS WHICH PROTRUDE
THROUGH THE ROOF SHALL BE MAINTAINED) IN GOOD ORDER, CONDITION AND REPAIR
INCLUDING REPLACEMENTS (INCLUDING REASONABLY PERIODIC PAINTING AS DETERMINED
BY OWNER), IF OWNER IS REQUIRED TO MAKE REPAIRS TO STRUCTURAL PORTIONS BY
REASON OF TENANT'S NEGLIGENT ACTS OR OMISSION TO ACT. OWNER MAY ADD THE COST
OF SUCH REPAIRS TO THE RENT WHICH SHALL THEREAFTER BECOME DUE.
SECTION 10.02 MAINTENANCE BY OWNER
IF TENANT REFUSES OR NEGLECTS TO REPAIR PROPERLY AS REQUIRED HEREUNDER AND TO
THE REASONABLE SATISFACTION OF OWNER AS SOON AS REASONABLY POSSIBLE AFTER
WRITTEN DEMAND. OWNER MAY MAKE SUCH REPAIRS WITHOUT LIABILITY TO TENANT FOR
ANY LOSS OR DAMAGE THAT MAY ACCRUE TO TENANT'S MERCHANDISE, FIXTURES, OR OTHER
PROPERTY OR TO TENANT'S BUSINESS BY REASON THEREOF, AND UPON COMPLETION
THEREOF, TENANT SHALL PAY OWNER'S COST FOR MAKING SUCH REPAIRS, UPON
PRESENTATION OF BILL THEREOF, AS ADDITIONAL RENT. SAID BILL SHALL INCLUDE
INTEREST AT TEN (10%) PERCENT ON SAID COST FROM THE DATE OF COMPLETION OF
REPAIRS BY OWNER.
SECTION 10.03 SURRENDER OF PREMISES
AT THE EXPIRATION OF THE TENANCY HEREBY CREATED, TENANT SHALL SURRENDER THE
LEASED PREMISES IN THE SAME CONDITION AS THE LEASED PREMISES WERE IN UPON
DELIVERY OF POSSESSION THERETO UNDER THIS LEASE, REASONABLE WEAR AND TEAR
EXCEPTED, AND DAMAGE BY UNAVOIDABLE CASUALTY EXCEPTED TO THE EXTENT THAT THE
SAME IS COVERED BY OWNER'S FIRE INSURANCE POLICY WITH EXTENDED COVERAGE
ENDORSEMENT, AND SHALL SURRENDER ALL KEYS FOR THE LEASED PREMISES TO OWNER AT
THE PLACE THEN FIXED FOR THE PAYMENT OF RENT AND SHALL INFORM OWNER OF ALL
COMBINATIONS ON LOCKS, SAFES AND VAULTS, IF ANY, IN THE LEASED PREMISES.
TENANT SHALL REMOVE ALL ITS TRADE FIXTURES AND ANY ALTERATIONS OR IMPROVEMENTS
AS PROVIDED IN SECTION 9.02 HEREOF, BEFORE SURRENDERING THE PREMISES AS
AFORESAID AND SHALL REPAIR ANY DAMAGE TO THE LEASED PREMISES CAUSED THEREBY.
TENANT'S OBLIGATION TO OBSERVE OR PERFORM THIS COVENANT SHALL SURVIVE THE
EXPIRATION OR OTHER TERMINATION OF THE TERM OF THIS LEASE.
SECTION 10.03 RULES AND REGULATIONS
(A) THE TENANT AGREES AS FOLLOWS:
(1) ALL LOADING AND UNLOADING OF GOODS SHALL BE DONE ONLY AT SUCH TIMES,
IN THE AREA, AND THROUGH THE ENTRANCES, DESIGNATED FOR SUCH PURPOSES BY OWNER.
(2) THE DELIVERY OR SHIPPING OF MERCHANDISE, SUPPLIES AND FIXTURES TO AND
FROM THE LEASED PREMISES SHALL BE SUBJECT TO SUCH RULES AND REGULATIONS AS IN
THE JUDGEMENT OF THE OWNER ARE NECESSARY FOR THE PROPER OPERATION OF THE
LEASED PREMISES OR SHOPPING CENTER.
(3) ALL GARBAGE AND REFUSE SHALL BE KEPT IN THE KIND OF CONTAINER
SPECIFIED BY OWNER, AND SHALL BE PLACED OUTSIDE OF THE PREMISES PREPARED FOR
COLLECTION IN THE MANNER AND AT THE TIMES AND PLACES SPECIFIED BY OWNER. IF
OWNER SHALL PROVIDE OR DESIGNATE A SERVICE FOR PICKING UP REFUSE AND GARBAGE,
TENANT SHALL USE SAME AT TENANT'S COST. TENANT SHALL PAY THE COST OF REMOVAL
OF ANY OF TENANT'S REFUSE OR RUBBISH. NO REFUSE SHALL BE STORED IN COMMON AREA
SPACES.
(4) NO AERIAL SHALL BE ERECTED ON THE ROOF OR EXTERIOR WALLS OF THE
PREMISES, OR ON THE GROUNDS, WITHOUT IN EACH INSTANCE, THE WRITTEN CONSENT OF
THE OWNER. ANY AERIAL SO INSTALLED WITHOUT WRITTEN CONSENT SHALL BE SUBJECT TO
REMOVAL WITHOUT NOTICE AT ANY TIME.
(5) NO LOUD SPEAKERS, TELEVISIONS, PHONOGRAPHS, RADIOS OR OTHER DEVICES
SHALL BE USED IN AN MANNER SO AS TO BE HEARD OR SEEN OUTSIDE OF THE PREMISES
WITHOUT THE PRIOR WRITTEN CONSENT OF THE OWNER.
(6) THE OUTSIDE AREAS IMMEDIATELY ADJOINING THE PREMISES SHALL BE KEPT
CLEAN AND FREE FROM DIRT AND RUBBISH BY THE TENANT TO THE SATISFACTION OF THE
OWNER AND TENANT SHALL NOT PLACE OR PERMIT ANY OBSTRUCTIONS OR MERCHANDISE IN
SUCH AREAS.
(7) TENANT AND TENANT'S EMPLOYEES SHALL PARK THEIR CARS ONLY IN THOSE
PORTIONS OF THE PARKING AREA DESIGNATED FOR THAT PURPOSE BY OWNER. IN THE
EVENT THE TENANT OR ITS EMPLOYEES FAIL TO PARK THEIR CARS IN DESIGNATED
PARKING AREAS AS FORESAID, THEN THE OWNER AT ITS OPTION SHALL CHARGE THE
TENANT TEN DOLLARS ($10.00) PER DAY PER CAR PARKED IN ANY AREA OTHER THAN
THOSE DESIGNATED, AS AND FOR LIQUIDATED DAMAGES.
(8) THE PLUMBING FACILITIES SHALL NOT BE USED FOR ANY OTHER PURPOSE THAN
THAT FOR WHICH THEY ARE CONSTRUCTED, AND NO FOREIGN SUBSTANCE OF ANY KIND
SHALL BE THROWN THEREIN, AND THE EXPENSE OF ANY BREAKAGE, STOPPAGE OR DAMAGE
RESULTING FROM A VIOLATION OF THIS PROVISION SHALL BE BORNE BY TENANT, WHO
SHALL, OR WHOSE EMPLOYEES, AGENTS OR INVITEES SHALL HAVE CAUSED IT.
(9) TENANT SHALL NOT BURN ANY TRASH OR GARBAGE OF ANY KIND IN OR ABOUT
THE LEASED PREMISES, OR THE SHOPPING CENTER.
(10) TENANT SHALL NOT USE COMMON AREA SIDEWALKS OR PARKING LOT FOR
DISPLAYING OR SELLING ANY MERCHANDISE WITHOUT PRIOR APPROVAL OF LANDLORD.
(11) TENANT SHALL CONTROL ANY INSECT/RODENT CONTAMINATION EMANATING FROM
TENANT DEMISED SPACE.
(12) TENANT AND TENANTS EMPLOYEES AND AGENTS SHALL NOT SOLICIT BUSINESS
IN THE PARKING OR OTHER COMMON AREAS, NOR SHALL TENANT DISTRIBUTE ANY
HANDBILLS OR OTHER ADVERTISING MATTER IN AUTOMOBILES PARKED IN THE PARKING
AREA OR IN OTHER COMMON AREA.
(13) TENANT SHALL NOT CAUSE ANY ENVIRONMENT CONTAMINATION WITHIN THE
DEMISED SPACE OR TO BE DISPOSED OF WITHIN THE SPACE. ALL COSTS OF CLEANUP OF
ANY CONTAMINATION CAUSED BY TENANT SHALL BE THE RESPONSIBILITY OF TENANT.
(B) OWNER RESERVES THE RIGHT FROM TIME TO TIME TO AMEND OR SUPPLEMENT THE
FOREGOING RULES AND REGULATIONS AND TO ADOPT AND PROMULGATE ADDITIONAL RULES
AND REGULATIONS APPLICABLE TO THE LEASED PREMISES. NOTICE OF SUCH RULES AND
REGULATIONS AND AMENDMENTS AND SUPPLEMENTS THERETO, IF ANY, SHALL BE GIVEN TO
THE TENANT.
(C) TENANT AGREES TO COMPLY WITH ALL SUCH RULES AND REGULATIONS UPON NOTICE TO
TENANT FROM OWNER, PROVIDED THAT SUCH RULES AND REGULATIONS SHALL APPLY
UNIFORMLY TO ALL TENANTS OF THE SHOPPING CENTER.
ARTICLE XI
INSURANCE AND INDEMNITY
SECTION 11.01 LIABILITY INSURANCE
TENANT SHALL, DURING THE ENTIRE TERM HEREOF, KEEP IN FULL FORCE AND EFFECT A
POLICY OF PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE WITH RESPECT TO THE
LEASED PREMISES, THE SIDEWALKS IN FRONT OF THE LEASED PREMISES, AND THE
BUSINESS OPERATED BY TENANT AND ANY SUBTENANTS OF TENANT IN THE LEASED
PREMISES IN WHICH THE LIMITS OF PUBLIC LIABILITY SHALL NOT BE LESS THAN
$500,000.00 PER PERSON AND $1,000,000.00 PER ACCIDENT AND IN WHICH THE
PROPERTY DAMAGE LIABILITY SHALL NOT BE LESS THAN $50,000.00. THE POLICY SHALL
NAME OWNER, ANY PERSON, FIRMS OR CORPORATIONS DESIGNATED BY OWNER, AND TENANT
AS ADDITIONAL INSURED, AND SHALL CONTAIN A CLAUSE THAT THE INSURER WILL NOT
CANCEL OR CHANGE THE INSURANCE WITHOUT FIRST GIVING THE OWNER TEN (10) DAYS
PRIOR WRITTEN NOTICE. THE INSURANCE SHALL BE IN AN INSURANCE COMPANY APPROVED
BY OWNER AND A COPY OF THE POLICY OF A CERTIFICATE OF INSURANCE SHALL BE
DELIVERED TO OWNER.
SECTION 11.02 FIRE INSURANCE PREMIUM
LANDLORD SHALL, AT ITS COST AND EXPENSE, CHARGED PER SECTION 8.01, MAINTAIN
FIRE AND EXTENDED COVERAGE INSURANCE THROUGHOUT THE TERM OF THIS LEASE IN AN
AMOUNT EQUAL TO AT LEAST NINETY PERCENT (90%) OF THE REPLACEMENT VALUE
(EXCLUSIVE OF FOUNDATION AND EXCAVATION COSTS) OF THE LEASED PREMISES AND/OR
THE BUILDING OF WHICH THE LEASED PREMISES ARE A PART. TENANT, AT TENANT'S
EXPENSE, SHALL MAINTAIN COVERAGE ON TENANT'S PERSONAL PROPERTY, ALTERATIONS,
AND FIXTURES. HOWEVER, TENANT AGREES TO REIMBURSE LANDLORD FOR TENANT'S PRO
RATA SHARE OF ANY PREMIUMS FOR SAID FIRE AND EXTENDED COVERAGE INSURANCE THAT
MAY BE CHARGED DURING THE TERM OF THIS LEASE ON THE AMOUNT OF SUCH INSURANCE
WHICH MAY BE CARRIED BY OWNER ON SAID PREMISES OR THE BUILDING OF WHICH THEY
ARE A PART. THIS REIMBURSEMENT CHARGE WILL BE PAID MONTHLY IN ADVANCE AS
SPECIFIED IN SECTION 8.01.
IN DETERMINING THE TENANT'S PRO RATA SHARE OF THE PREMIUM FOR SAID INSURANCE
FOR THE LEASED PREMISES, A SCHEDULE ISSUED BY THE ORGANIZATION MAKING THE
INSURANCE RATE ON THE LEASED PREMISES, SHOWING THE VARIOUS COMPONENTS OF SUCH
RATE, SHALL BE CONCLUSIVE EVIDENCE OF THE CHARGES WHICH MAKE UP THE FIRE
INSURANCE RATE ON THE LEASED PREMISES. BILLS FOR SUCH PREMIUMS SHALL BE
RENDERED BY OWNER TO TENANT AT SUCH TIMES AS OWNER MAY ELECT, AND SHALL BE DUE
AND PAYABLE BY TENANT WHEN RENDERED, AND THE AMOUNT THEREOF SHALL BE DEEMED TO
BE, AND BE PAID AS, ADDITIONAL RENT.
SECTION 11.03 INDEMNIFICATION OF OWNER
TENANT WILL INDEMNIFY OWNER AND SAVE IT HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, ACTIONS, DAMAGES, LIABILITY AND EXPENSE IN CONNECTION WITH LOSS OF
LIFE, PERSONAL INJURY AND/OR DAMAGE TO PROPERTY ARISING FROM OR OUT OF ANY
OCCURRENCE IN, UPON OR AT THE LEASED PREMISES, OR THE OCCUPANCY OR USE BY
TENANT OF THE LEASED PREMISES OR ANY PART THEREOF, OR OCCASIONED WHOLLY OR IN
PART BY ANY ACT OR OMISSION OF TENANT, ITS AGENTS, CONTRACTORS, EMPLOYEES,
SERVANTS, LESSEES OR CONCESSIONAIRES. IN CASE OWNER SHALL WITHOUT FAULT ON ITS
PART, BE MADE A PARTY TO ANY LITIGATION COMMENCED BY OR AGAINST TENANT, THEN
TENANT SHALL PROTECT AND HOLD OWNER HARMLESS AND SHALL PAY ALL COSTS, EXPENSES
AND REASONABLE ATTORNEY'S FEES THAT MAY BE INCURRED OR PAID BY OWNER IN
ENFORCING THE COVENANTS AND AGREEMENTS IN THIS LEASE.
ARTICLE XII
UTILITIES
SECTION 12.01 UTILITY SERVICES
IT IS THE LESSEE'S RESPONSIBILITY TO ARRANGE FOR AND PAY FOR GAS AND
ELECTRICAL SERVICE.
SECTION 12.02 UTILITY CHARGES
TENANT SHALL BE SOLELY RESPONSIBLE FOR AND PROMPTLY PAY ALL CHARGES FOR HEAT,
WATER, GAS, ELECTRICITY OR ANY OTHER UTILITY USED OR CONSUMED IN THE LEASED
PREMISES. SHOULD OWNER ELECT TO SUPPLY THE WATER, GAS, HEAT, ELECTRICITY, OR
ANY OTHER UTILITY USED OR CONSUMED IN THE LEASED PREMISES. TENANT AGREES TO
PURCHASE AND PAY FOR THE SAME AS ADDITIONAL RENT AS APPORTIONED BY THE OWNER.
IN NO EVENT SHALL OWNER BE LIABLE FOR AN INTERRUPTION OR FAILURE IN SUPPLY OF
ANY SUCH UTILITIES TO THE LEASED PREMISES.
ARTICLE XIII
OFFSET STATEMENT, ATTORNMENT SUBORDINATION
SECTION 13.01 OFFSET STATEMENT
ESTOPPEL CERTIFICATE: TENANT SHALL AT ANY TIME, AND FROM TIME TO TIME, UPON
NOT LESS TEN (10) DAYS PRIOR WRITTEN REQUEST BY LANDLORD EXECUTE, ACKNOWLEDGE,
AND DELIVER TO LANDLORD A STATEMENT IN WRITING CERTIFYING THAT THIS LEASE IS
UNMODIFIED AND IN FULL FORCE AND EFFECT (0R, THAT THERE SHALL HAVE BEEN
MODIFICATIONS, THAT THE LEASE IS MODIFIED AND IN FULL FORCE AND EFFECT AS
MODIFIED AND STATING THE MODIFICATIONS) AND THE DATES TO WHICH THE FIXED RENT
AND ANY OTHER CHARGES OR PAYMENTS HAVE BEEN PAID IN ADVANCE. IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT ANY SUCH STATEMENT DELIVERED PURSUANT TO THIS
PARAGRAPH MAY BE RELIED UPON BY OWNER OR ANY PROSPECTIVE PURCHASER, MORTGAGEE,
ASSIGNEE OF ANY MORTGAGEE, OR THE TRUSTEE OR BENEFICIARY OF ANY DEED OF TRUST
PLACED UPON THE DEMISED PREMISES OR THE REAL PROPERTY OF WHICH THE DEMISED
PREMISES ARE A PART.
SECTION 13.02 ATTORNMENT
TENANT SHALL, IN THE EVENT ANY PROCEEDINGS ARE BROUGHT FOR THE FORECLOSURE OF,
OR IN THE EVENT OF EXERCISE OF THE POWER OF SALE UNDER ANY MORTGAGE MADE BY
THE OWNER COVERING THE LEASED PREMISES, ATTORN TO THE PURCHASER UPON ANY SUCH
FORECLOSURE OR SALE AND RECOGNIZE SUCH PURCHASER AS THE OWNER UNDER THIS
LEASE.
SECTION 13.03 SUBORDINATION
UPON REQUEST OF THE OWNER, TENANT WILL SUBORDINATE ITS RIGHTS HEREUNDER TO THE
LIEN OF ANY MORTGAGE OF MORTGAGES OF THE LIEN RESULTING FROM ANY OTHER METHOD
OF FINANCING OR REFINANCING, NOW OR HEREAFTER IN FORCE AGAINST THE LAND AND
BUILDINGS OF WHICH THE LEASED PREMISES ARE A PART OR UPON ANY BUILDING
HEREAFTER PLACED UPON THE LAND OF WHICH THE LEASED PREMISES ARE A PART, AND TO
ALL ADVANCES MADE OR HEREAFTER TO BE MADE UPON THE SECURITY THEREOF. THIS
SECTION SHALL BE SELF-OPERATIVE AND NO FURTHER INSTRUMENT OF SUBORDINATION
SHALL BE REQUIRED BY ANY MORTGAGEE.
SECTION 13.04 ATTORNEY-IN-FACT
THE TENANT, UPON REQUEST OF ANY PARTY IN INTEREST, SHALL EXECUTE PROMPTLY SUCH
INSTRUMENTS OR CERTIFICATES TO CARRY OUT THE INTENT OF SECTIONS 15.02 AND
15.03 ABOVE AS SHALL BE REQUESTED BY THE OWNER. THE TENANT HEREBY IRREVOCABLY
APPOINTS THE OWNER AS ATTORNEY-IN-FACT FOR THE TENANT WITH FULL POWER AND
AUTHORITY TO EXECUTE AND DELIVER IN THE NAME OF THE TENANT ANY SUCH
INSTRUMENTS OR CERTIFICATES. IF FIFTEEN (15) DAYS AFTER THE DATE OF A WRITTEN
REQUEST BY OWNER TO EXECUTE SUCH INSTRUMENTS, THE TENANT SHALL NOT HAVE
EXECUTED THE SAME, THE OWNER MAY, AT ITS OPTION, CANCEL THIS LEASE WITHOUT
INCURRING ANY LIABILITY ON ACCOUNT THEREOF, AND THE TERM HEREBY GRANTED IS
EXPRESSLY LIMITED ACCORDINGLY.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
SECTION 14.01 CONSENT REQUIRED
TENANT WILL NOT ASSIGN THIS LEASE IN WHOLE OR IN PART, NOR SUBLET ALL OR ANY
PART OF THE LEASED PREMISES, WITHOUT THE PRIOR WRITTEN CONSENT OF OWNER IN
EACH INSTANCE. THE CONSENT OF OWNER TO ANY ASSIGNMENT OR SUBLETTING SHALL NOT
CONSTITUTE A WAIVER OF THE NECESSITY FOR SUCH CONSENT TO ANY SUBSEQUENT
ASSIGNMENT FOR SUBLETTING. THIS PROHIBITION AGAINST OR SUBLETTING SHALL BE
CONSTRUED TO INCLUDE A PROHIBITION AGAINST ANY ASSIGNMENT OR SUBLETTING BY
OPERATION OF LAW. IF THIS LEASE BE ASSIGNED, OR IF THE LEASED PREMISES OR ANY
PART THEREOF BE UNDERLET OR OCCUPIED BY ANYBODY OTHER THAN TENANT, OWNER MAY
COLLECT RENT FROM THE ASSIGNEE, UNDER TENANT OR OCCUPANT, AND APPLY THE NEW
AMOUNT COLLECTED TO THE RENT HEREIN RESERVED, BUT NO SUCH ASSIGNMENT,
UNDERLETTING, OCCUPANCY OR COLLECTION SHALL BE DEEMED A WAIVER OF THIS
COVENANT, OR THE ACCEPTANCE OF THE ASSIGNEE, UNDER TENANT OR OCCUPANT AS
TENANT, OR A RELEASE OF TENANT FROM THE FURTHER PERFORMANCE BY TENANT OF
COVENANTS ON THE PART OF TENANT HEREIN CONTAINED. NOTWITHSTANDING ANY
ASSIGNMENT OR SUBLEASE, TENANT SHALL REMAIN FULLY LIABLE ON THIS LEASE AND
SHALL NOT BE RELEASED FROM PERFORMING ANY OF THE TERMS, COVENANTS AND
CONDITIONS OF THIS LEASE. OWNER'S WRITTEN CONSENT TO THE ASSIGNMENT SHALL NOT
BE UNREASONABLY WITHHELD. THE ACCEPTANCE OF RENT FROM ANY OTHER PERSON SHALL
NOT BE DEEMED TO BE A WAIVER OF ANY OF THE PROVISIONS OF THIS LEASE OF A
CONSENT TO THE ASSIGNMENT OF THE DEMISED PREMISES.
ARTICLE XV
WASTE, GOVERNMENTAL REGULATIONS
SECTION 15.01 WASTE OR NUISANCE
TENANT SHALL NOT COMMIT OR SUFFER TO BE COMMITTED ANY WASTE UPON THE LEASED
PREMISES OR ANY NUISANCE OR OTHER ACT OR THING WHICH MAY DISTURB THE QUIET
ENJOYMENT OF ANY OTHER TENANT IN THE BUILDING IN WHICH THE LEASED PREMISES MAY
BE LOCATED, OR IN THE SHOPPING CENTER, OR WHICH MAY DISTURB THE QUIET
ENJOYMENT OF ANY PERSON WITHIN FIVE HUNDRED FEET OF THE BOUNDARIES OF THE
SHOPPING CENTER.
SECTION 15.02 GOVERNMENTAL REGULATIONS
TENANT SHALL, AT TENANT'S SOLE COST AND EXPENSE, COMPLY WITH ALL OF THE
REQUIREMENTS OF ALL CITY, COUNTY, MUNICIPAL, STATE, FEDERAL AND OTHER
APPLICABLE GOVERNMENTAL AUTHORITIES, NOW IN FORCE, OR WHICH MAY HEREAFTER BE
IN FORCE, PERTAINING TO THE SAID PREMISES, INCLUDING THE INSTALLATION OF
ADDITIONAL FACILITIES AS REQUIRED FOR THE CONDUCT AND CONTINUANCE OF TENANT'S
BUSINESS, AND SHALL FAITHFULLY OBSERVE IN THE USE OF THE PREMISES ALL
MUNICIPAL AND COUNTY ORDINANCES AND STATE AND FEDERAL STATUTES NOW IN FORCE OF
WHICH MAY HEREAFTER BE IN FORCE.
ARTICLE XVI
DESTRUCTION OF LEASED PREMISES
SECTION 16.01 TOTAL OR PARTIAL DESTRUCTION
IN THE EVENT THE PREMISES ARE DAMAGED BY FIRE OR OTHER PERILS COVERED BY
EXTENDED COVERAGE INSURANCE, LANDLORD AGREES TO FORTH-WITH REPAIR SAME, AND
THIS LEASE SHALL REMAIN IN FULL FORCE AND EFFECT, EXCEPT THAT TENANT SHALL BE
ENTITLED TO A PROPORTIONATE REDUCTION OF THE MINIMUM RENT FROM THE DATE OF
DAMAGE AND WHILE SUCH REPAIRS ARE BEING MADE, SUCH PROPORTIONATE REDUCTION TO
BE BASED UPON THE EXTENT TO WHICH THE DAMAGE AND MAKING OF SUCH REPAIRS WILL
REASONABLY INTERFERE WITH THE BUSINESS CARRIED ON BY THE TENANT IN THE
PREMISES. IF THE DAMAGE IS DUE TO THE FAULT OR NEGLECT OF TENANT OR ITS
EMPLOYEES, THERE SHALL BE NO ABATEMENT OF RENT.
IN THE EVENT THE PREMISES ARE DAMAGED AS A RESULT OF ANY CAUSE OTHER THAN THE
PERILS COVERED BY FIRE AND EXTENDED COVERAGE INSURANCE, THEN LANDLORD SHALL
FORTHWITH REPAIR THE SAME, PROVIDED THE EXTENT OF THE DESTRUCTION BE LESS THAN
TEN (10%) PERCENT OF THE THEN FULL REPLACEMENT COST OF THE PREMISES. IN THE
EVENT THE DESTRUCTION OF THE PREMISES IS TO AN EXTENT OF TEN (10%) PERCENT OR
MORE OF THE FULL REPLACEMENT COST THEN LANDLORD SHALL HAVE THE OPTION; (1) TO
REPAIR OR RESTORE SUCH DAMAGE, THIS LEASE CONTINUING IN FULL FORCE AND EFFECT,
BUT THE MINIMUM RENT TO BE PROPORTIONATELY REDUCED AS HEREINABOVE IN THIS
ARTICLE PROVIDED; OR (2) GIVE NOTICE TO TENANT AT ANY TIME WITHIN SIXTY (60)
DAYS AFTER SUCH DAMAGE, TERMINATING THIS LEASE AS OF THE DATE SPECIFIED IN
SUCH NOTICE, WHICH DATE SHALL BE NO MORE THAN THIRTY (30) DAYS AFTER THE
GIVING OF SUCH NOTICE. IN THE EVENT OF GIVING SUCH NOTICE, THIS LEASE SHALL
EXPIRE AND ALL INTEREST OF THE TENANT IN THE PREMISES SHALL TERMINATE ON THE
DATE SO SPECIFIED IN SUCH NOTICE AND THE MINIMUM RENT, REDUCED BY A
PROPORTIONATE REDUCTION, BASED UPON THE EXTENT, IF ANY, TO WHICH SUCH DAMAGE
INTERFERED WITH THE BUSINESS CARRIED ON BY THE TENANT IN THE PREMISES, SHALL
BE PAID UP TO DATE OF SAID SUCH TERMINATION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ARTICLE, LANDLORD
SHALL NOT HAVE ANY OBLIGATION WHATSOEVER TO REPAIR, RECONSTRUCT OR RESTORE THE
PREMISES WHEN THE DAMAGE RESULTING FROM ANY CASUALTY COVERED UNDER THIS
ARTICLE OCCURS DURING THE LAST TWENTY-FOUR MONTHS OF THE TERM OF THIS LEASE OR
ANY EXTENSION THEREOF.
LANDLORD SHALL NOT BE REQUIRED TO REPAIR ANY INJURY OR DAMAGE BY FIRE OR OTHER
CAUSE, OR TO MAKE ANY REPAIRS OR REPLACEMENTS OF ANY LEASEHOLD IMPROVEMENTS,
FIXTURES, OR OTHER PERSONAL PROPERTY OF TENANT.
ARTICLE XVII
EMINENT DOMAIN
SECTION 17.01 TOTAL CONDEMNATION
IF THE WHOLE OF THE LEASED PREMISES SHALL BE ACQUIRED OR CONDEMNED BY EMINENT
DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR PURPOSE, THEN THE TERM OF THIS
LEASE SHALL CEASE AND TERMINATE AS OF THE DATE OF TITLE VESTING IN SUCH
PROCEEDING AND ALL RENTALS SHALL BE PAID UP TO THAT DATE AND TENANT SHALL HAVE
NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS LEASE.
SECTION 17.02 TOTAL PARKING AREA
IF THE WHOLE OF THE COMMON PARKING AREA IN THE SHOPPING CENTER SHALL BE
ACQUIRED OR CONDEMNED BY EMINENT DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR
PURPOSE, THEN THE TERM OF THIS LEASE SHALL CEASE AND TERMINATE AS OF THE DATE
OF TITLE VESTING IN SUCH PROCEEDING UNLESS OWNER SHALL TAKE IMMEDIATE STEPS TO
PROVIDE OTHER PARKING FACILITIES SUBSTANTIALLY EQUAL TO THE PREVIOUSLY
EXISTING RATIO BETWEEN THE COMMON PARKING AREAS AND THE LEASED PREMISES, AND
SUCH SUBSTANTIALLY EQUAL PARKING FACILITIES SHALL BE PROVIDED BY OWNER AT ITS
OWN EXPENSE WITHIN NINETY (90) DAYS FROM THE DATE OF ACQUISITION. IN THE EVENT
THAT OWNER SHALL PROVIDE SUCH OTHER SUBSTANTIALLY EQUAL PARKING FACILITIES,
THEN THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT. IN ANY EVENT, TENANT
SHALL HAVE NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS
LEASE.
SECTION 17.03 PARTIAL CONDEMNATION
IF ANY PART OF THE LEASED PREMISES SHALL BE ACQUIRED OR CONDEMNED BY EMINENT
DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OR PURPOSE, AND IN THE EVENT THAT
SUCH PARTIAL TAKING OR CONDEMNATION SHALL RENDER THE LEASED PREMISES
UNSUITABLE FOR THE BUSINESS OF THE TENANT, THEN THE TERM OF THIS LEASE SHALL
CEASE AND TERMINATE AS OF THE DATE OF TITLE VESTING IN SUCH PROCEEDING AND
TENANT SHALL HAVE NO CLAIM AGAINST OWNER FOR THE VALUE OF ANY UNEXPIRED TERM
OF THIS LEASE. IN THE EVENT OF A PARTIAL TAKING OR CONDEMNATION WHICH IS NOT
EXTENSIVE ENOUGH TO RENDER THE PREMISES UNSUITABLE FOR THE BUSINESS OF THE
TENANT, THEN OWNER SHALL PROMPTLY RESTORE THE LEASED PREMISES TO A CONDITION
COMPARABLE TO ITS CONDITION AT THE TIME OF SUCH CONDEMNATION LESS THE PORTION
LOST IN THE TAKING, AND THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT.
SECTION 17.04 OWNERS DAMAGES
IN THE EVENT OF ANY CONDEMNATION OR TAKING AS HEREINABOVE PROVIDED, WHETHER
WHOLE OR PARTIAL, THE TENANT SHALL NOT BE ENTITLED TO ANY PART OF THE AWARD,
AS DAMAGES OR OTHERWISE, FOR SUCH CONDEMNATION AND OWNER IS TO RECEIVE THE
FULL AMOUNT OF SUCH AWARD, THE TENANT HEREBY EXPRESSLY WAIVING ANY RIGHT OR
CLAIM TO ANY PART THEREOF.
SECTION 17.05 TENANT'S DAMAGES
ALTHOUGH ALL DAMAGES IN THE EVENT OF ANY CONDEMNATION ARE TO BELONG TO THE
OWNER WHETHER SUCH DAMAGES ARE AWARDED AS COMPENSATION FOR DIMINUTION IN VALUE
OF THE LEASEHOLD OR TO THE FEE OF THE LEASED PREMISES. TENANT SHALL HAVE THE
RIGHT TO CLAIM AND RECOVER FROM THE CONDEMNING AUTHORITY, BUT NOT FROM OWNER,
SUCH COMPENSATION AS MAY BE SEPARATELY AWARDED OR RECOVERABLE BY TENANT IN
TENANT'S OWN RIGHT TO ACCOUNT OF ANY AND ALL DAMAGE TO TENANT'S BUSINESS BY
REASON OF THE CONDEMNATION AND FOR OR ON ACCOUNT OF ANY COST OR LOSS TO WHICH
TENANT MIGHT BE PUT IN REMOVING TENANT'S MERCHANDISE, FURNITURE, FIXTURES,
LEASEHOLD IMPROVEMENTS AND EQUIPMENT.
SECTION 17.06 CONDEMNATION OF LESS THAN A FEE
IN THE EVENT OF A CONDEMNATION OF A LEASEHOLD INTEREST IN ALL OR A PORTION OF
THE LEASED PREMISES WITHOUT THE CONDEMNATION OF THE FEE SIMPLE TITLE ALSO,
THIS LEASE SHALL NOT TERMINATE AND SUCH CONDEMNATION SHALL NOT EXCUSE TENANT
FROM FULL PERFORMANCE OF ALL OF ITS COVENANTS HEREUNDER, BUT TENANT IN SUCH
EVENT SHALL BE ENTITLED TO PRESENT OR PURSUE AGAINST THE CONDEMNING AUTHORITY
ITS CLAIM FOR AND TO RECEIVE ALL COMPENSATION OR DAMAGES SUSTAINED BY IT BY
REASON OF SUCH CONDEMNATION, AND OWNER'S RIGHT TO RECOVER COMPENSATION OR
DAMAGES SHALL BE LIMITED TO COMPENSATION FOR AND DAMAGES OF ANY, TO ITS
REVERSIONARY INTEREST; IT BEING UNDERSTOOD, HOWEVER, THAT DURING SUCH TIME AS
TENANT SHALL BE OUT OF POSSESSION OF THE LEASED PREMISES BY REASON OF SUCH
CONDEMNATION, THE LEASE SHALL NOT BE SUBJECT TO FORFEITURE FOR FAILURE TO
OBSERVE AND PERFORM THOSE COVENANTS NOT CALLING FOR THE PAYMENT OF MONEY. IN
THE EVENT THE CONDEMNING AUTHORITY SHALL FAIL TO KEEP THE PREMISES IN THE
STATE OF REPAIR REQUIRED HEREUNDER, OR TO PERFORM ANY OTHER COVENANT NOT
CALLING FOR THE PAYMENT OF MONEY, TENANT SHALL HAVE NINETY (90) DAYS AFTER THE
RESTORATION OF POSSESSION TO IT WITHIN WHICH TO CARRY OUT ITS OBLIGATIONS
UNDER SUCH COVENANT OR COVENANTS. DURING SUCH TIME AS TENANT SHALL BE OUT OF
POSSESSION OF THE LEASED PREMISES BY REASON OF SUCH LEASEHOLD CONDEMNATION.
TENANT SHALL PAY TO OVER, IN LIEU OF THE MINIMUM AND PERCENTAGE RENTS PROVIDED
FOR HEREUNDER, AND IN ADDITION TO ANY OTHER PAYMENTS REQUIRED OF TENANT
HEREUNDER, AN ANNUAL RENT EQUAL TO THE AVERAGE ANNUAL MINIMUM AND PERCENTAGE
RENTS PAID BY TENANT FOR THE PERIOD FROM THE COMMENCEMENT OF THE TERM UNTIL
THE CONDEMNING AUTHORITY SHALL TAKE POSSESSION, OR DURING THE PRECEDING THREE
FULL CALENDAR YEARS, WHICHEVER PERIOD IS SHORTER. AT ANY TIME AFTER SUCH
CONDEMNATION PROCEEDINGS ARE COMMENCED, OWNER SHALL HAVE THE RIGHT, AT ITS
OPTION, TO REQUIRE TENANT TO ASSIGN TO OWNER ALL COMPENSATION AND DAMAGES
PAYABLE BY THE CONDEMNOR TO TENANT, TO BE HELD WITHOUT LIABILITY FOR INTEREST
THEREON AS SECURITY FOR THE FULL PERFORMANCE OF TENANT'S COVENANTS HEREUNDER,
SUCH COMPENSATION AND DAMAGES RECEIVED PURSUANT TO SAID ASSIGNMENT TO BE
APPLIED FIRST TO THE PAYMENT OF RENTS AND ALL OTHER SUMS FROM TIME TO TIME
PAYABLE BY TENANT PURSUANT TO THE TERMS OF THIS LEASE AS SUCH SUMS FALL DUE,
AND THE REMAINDER, IF ANY, TO BE PAYABLE TO TENANT AT THE END OF THE TERM
HEREOF OR ON RESTORATION OF POSSESSION OF TENANT, WHICHEVER SHALL FIRST OCCUR,
IT BEING UNDERSTOOD AND AGREED THAT SUCH ASSIGNMENT SHALL NOT RELIEVE TENANT
OF ANY OF ITS OBLIGATIONS UNDER THIS LEASE WITH RESPECT TO SUCH RENTS, AND
OTHER SUMS EXCEPT AS THE SAME SHALL BE ACTUALLY RECEIVED BY OWNER.
ARTICLE XVIII
DEFAULT OF THE TENANT
SECTION 18.01 RIGHT TO RE-ENTER
IN THE EVENT OF ANY FAILURE OF TENANT TO PAY ANY RENTAL DUE HEREUNDER WITHIN
TEN (10) DAYS AFTER THE SAME SHALL BE DUE, OR ANY FAILURE TO PERFORM ANY OTHER
OF THE TERMS, CONDITIONS OR COVENANTS OF THIS LEASE TO BE OBSERVED OF
PERFORMED BY TENANT FOR MORE THAN THIRTY (30) DAYS AFTER WRITTEN NOTICE OF
SUCH DEFAULT SHALL HAVE BEEN MAILED TO TENANT, OR IF TENANT SHALL BECOME
BANKRUPT OR INSOLVENT, OR FILE ANY DEBTOR PROCEEDINGS, OR TAKE OR HAVE TAKEN
AGAINST TENANT IN ANY COURT PROCEEDINGS, OR TAKE OR HAVE TAKEN AGAINST TENANT
IN ANY COURT PURSUANT TO ANY STATUTE EITHER OF THE UNITED SATES OR ANY STATE A
PETITION IN BANKRUPTCY OR INSOLVENCY OR FOR REORGANIZATION OR FOR THE
APPOINTMENT OF A RECEIVER OR TRUSTEE OF ALL OR A PORTION OF TENANT'S PROPERTY,
OR IF TENANT MAKES AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR PETITIONS
FOR OR ENTERS INTO AN ARRANGEMENT, OR IF TENANT SHALL ABANDON SAID PREMISES,
OR SUFFER THIS LEASE TO BE TAKEN UNDER ANY WRIT OF EXECUTION, THEN OWNER
BESIDES OTHER RIGHTS OR REMEDIES IT MAY HAVE, SHALL HAVE THE IMMEDIATE RIGHT
OF RE-ENTRY AND MAY REMOVE ALL PERSONS AND PROPERTY FROM THE LEASED PREMISES
AND SUCH PROPERTY MAY BE REMOVED AND STORED IN A PUBLIC WAREHOUSE OR ELSEWHERE
AT THE COST OF, AND FOR THE ACCOUNT OF TENANT, ALL WITHOUT SERVICE OF NOTICE
OR RESORT TO LEGAL PROCESS AND WITHOUT BEING DEEMED GUILTY OF TRESPASS, OR
BECOMING LIABLE FOR ANY LOSS OR DAMAGE WHICH MAY BE OCCASIONED THEREBY.
SECTION 18.02 RIGHT TO RELET
SHOULD OWNER ELECT TO RE-ENTER, AS HEREIN PROVIDED, OR SHOULD IT TAKE
POSSESSION PURSUANT TO LEGAL PROCEEDINGS OR PURSUANT TO ANY NOTICE PROVIDED
FOR BY LAW, IT MAY EITHER TERMINATE THIS LEASE OR IT MAY FROM TIME TO TIME
WITHOUT TERMINATING THIS LEASE, MAKE SURE ALTERATIONS AND REPAIRS AS MAY BE
NECESSARY IN ORDER TO RELET THE PREMISES, AND RELET SAID PREMISES OR ANY PART
THEREOF FOR SUCH TERM OR TERMS (WHICH MAY BE FOR A TERM EXTENDING BEYOND THE
TERM OF THIS LEASE) AND AT SUCH RENTAL OR RENTALS AND UPON SUCH OTHER TERMS
AND CONDITIONS AS OWNER IN ITS SOLE DISCRETION MAY DEEM ADVISABLE; UPON EACH
SUCH RELETTING ALL RENTALS RECEIVING BY THE OWNER FROM SUCH RELETTING SHALL BE
APPLIED, FIRST, TO THE PAYMENT OF ANY INDEBTEDNESS OTHER THAN RENT DUE
HEREUNDER FROM TENANT TO OWNER; SECOND, TO THE PAYMENT OF ANY COSTS AND
EXPENSES OF SUCH RELETTING, INCLUDING BROKERAGE FEES AND ATTORNEY'S FEES AND
OF COSTS OF SUCH ALTERATIONS AND REPAIRS; THIRD, TO THE PAYMENT OF RENT DUE
AND UNPAID HEREUNDER, AND THE RESIDUE, IF ANY, SHALL BE HELD BY OWNER AND
APPLIED IN PAYMENT OF FUTURE RENT AS THE SAME MAY BECOME DUE AND PAYABLE
HEREUNDER. IF SUCH RENTALS RECEIVED FROM SUCH RELETTING DURING ANY MONTH BE
LESS THAN THAT TO BE PAID DURING THAT MONTH BY TENANT HEREUNDER, TENANT SHALL
PAY ANY SUCH DEFICIENCY TO OWNER. SUCH DEFICIENCY SHALL BE CALCULATED AND PAID
MONTHLY. NO SUCH RE-ENTRY OR TAKING POSSESSION OF SAID PREMISES BY OWNER SHALL
BE CONSTRUED AS AN ELECTION ON ITS PART TO TERMINATE THIS LEASE UNLESS A
WRITTEN NOTICE OF SUCH INTENTION BE GIVEN TO TENANT OR UNLESS THE TERMINATION
THEREOF BE DECREED BY A COURT OF COMPETENT JURISDICTION. NOTWITHSTANDING ANY
SUCH RELETTING WITHOUT TERMINATION, OWNER MAY AT ANY TIME THEREAFTER ELECT TO
TERMINATE THIS LEASE FOR SUCH PREVIOUS BREACH. SHOULD OWNER AT ANY TIME
TERMINATE THIS LEASE FOR ANY BREACH, IN ADDITION TO ANY OTHER REMEDIES IT MAY
HAVE, IT MAY RECOVER FROM TENANT ALL DAMAGES IT MAY INCUR BY REASON OF SUCH
BREACH, INCLUDING THE COST OF RECOVERING THE LEASED PREMISES, REASONABLE
ATTORNEY'S FEES, AND INCLUDING THE WORTH AT THE TIME OF SUCH TERMINATION OF
THE EXCESS, IF ANY, OF THE AMOUNT OF RENT AND CHARGES EQUIVALENT TO RENT
RESERVED IN THIS LEASE FOR THE REMAINDER FOR THE STATED TERM OVER THE THEN
REASONABLE RENTAL VALUE OF THE LEASED PREMISES OF THE REMAINDER OF THE STATED
TERM, ALL OF WHICH AMOUNTS SHALL BE IMMEDIATELY DUE AND PAYABLE FROM TENANT TO
OWNER. IN DETERMINING THE RENT WHICH WOULD BE PAYABLE BY TENANT HEREUNDER,
SUBSEQUENT TO DEFAULT, THE ANNUAL RENT FOR EACH YEAR OF THE UNEXPIRED TERM
SHALL BE EQUAL TO THE AVERAGE MINIMUM AND PERCENTAGE RENTS PAID BY TENANT FROM
THE COMMENCEMENT OF THE TERM TO THE TIME OF DEFAULT, OR DURING THE PRECEDING
THREE CALENDAR YEARS, WHICHEVER PERIOD IS SHORTER.
SECTION 18.03 LEGAL EXPENSE
IN THE EVENT OF ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY AGAINST THE
OTHER UNDER THIS LEASE THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER ALL
COLLECTIONS COSTS AND FEES OF ITS ATTORNEYS IN SUCH ACTION OR PROCEEDINGS,
INCLUDING COSTS OF APPEAL, IF ANY, IN SUCH AMOUNT AS ARE REASONABLE. IN
ADDITION, SHOULD IT BE NECESSARY FOR LANDLORD TO EMPLOY LEGAL COUNSEL TO
ENFORCE ANY OF THE PROVISIONS HEREIN CONTAINED, TENANT AGREES TO PAY ALL
ATTORNEY'S FEES AND COURT COSTS REASONABLY INCURRED.
SECTION 18.04 WAIVER OF RIGHTS OF REDEMPTION
TENANT HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS OF REDEMPTION GRANTED BY OR
UNDER ANY PRESENT OR FUTURE LAWS IN THE EVENT OF TENANT BEING EVICTED OR
DISPOSSESSED FOR ANY CAUSE, OF IN THE EVENT OF OWNER OBTAINING POSSESSION OF
THE LEASED PREMISES, BY REASON OF THE VIOLATION BY TENANT OF ANY OF THE
COVENANTS OR CONDITIONS OF THIS LEASE OR OTHERWISE.
ARTICLE XIX
ACCESS BY OWNER
SECTION 19.01 RIGHT OF ENTRY
OWNER OR OWNER'S AGENTS SHALL HAVE THE RIGHT TO ENTER THE LEASED PREMISES AT
ALL TIMES TO EXAMINE THE SAME AND TO SHOW THEM TO PROSPECTIVE PURCHASERS OR
LESSEES OF THE BUILDING, AND TO MAKE SUCH REPAIRS, ALTERATIONS, IMPROVEMENTS
OR ADDITIONS AS OWNER MAY DEEM NECESSARY OR DESIRABLE, AND OWNER SHALL BE
ALLOWED TO TAKE ALL MATERIAL INTO AND UPON SAID PREMISES THAT MAY BE REQUIRED
THEREFOR WITHOUT THE SAME CONSTITUTING AN EVICTION OF TENANT IN WHOLE OR IN
PART AND THE RENT RESERVED SHALL IN NO WISE ABATE WHILE SAID REPAIRS,
ALTERATIONS, IMPROVEMENTS OR ADDITIONS ARE BEING MADE, BY REASON OF LOSS OR
INTERRUPTION OF BUSINESS OF TENANT OR OTHERWISE. DURING THE SIX MONTHS PRIOR
TO THE EXPIRATION OF THE TERM OF THIS LEASE OR ANY RENEWAL TERM, OWNER MAY
EXHIBIT THE PREMISES TO PROSPECTIVE TENANTS OF PURCHASERS, AND PLACE UPON THE
PREMISES THE USUAL NOTICES "TO LET" OR "FOR SALE" WHICH NOTICES TENANT SHALL
PERMIT TO REMAIN THEREON WITHOUT MOLESTATION.
ARTICLE XX
TENANTS PROPERTY
SECTION 20.01 TAXES ON LEASEHOLD
TENANT SHALL BE RESPONSIBLE FOR AND SHALL PAY BEFORE DELINQUENCY ALL
MUNICIPAL, COUNTY OR STATE TAXES ASSESSED DURING THE TERM OF THIS LEASE
AGAINST ANY LEASEHOLD INTEREST OR PERSONAL PROPERTY OF ANY KIND, OWNED BY OR
PLACED IN, UPON OR ABOUT THE LEASED PREMISES BY THE TENANT.
SECTION 20.02 LOSS AND DAMAGE
OWNER SHALL NOT BE LIABLE FOR ANY DAMAGE TO PROPERTY OF TENANT OR OF OTHERS
LOCATED ON THE LEASED PREMISES, NOR FOR THE LOSS OF OR DAMAGE TO ANY PROPERTY
OF TENANT OR OF OTHERS BY THEFT OR OTHERWISE. OWNER SHALL NOT BE LIABLE FOR
ANY INJURY OR DAMAGE TO PERSONS OR PROPERTY RESULTING FROM FIRE, EXPLOSION,
FALLING PLASTER, STEAM, GAS, ELECTRICITY, WATER, RAIN OR LEAKS FROM ANY PART
OF THE LEASED PREMISES OR FROM THE PIPES, APPLIANCES OR PLUMBING WORKS OR FROM
THE ROOF, STREET OR SUB-SURFACE OR FROM ANY OTHER PLACE OR BY DAMPNESS OR BY
ANY OTHER CAUSE OF WHATSOEVER NATURE. OWNER SHALL NOT BE LIABLE FOR ANY SUCH
DAMAGE CAUSED BY OTHER TENANTS OR PERSONS IN THE LEASED PREMISES, OCCUPANTS OF
ADJACENT PROPERTY, OF THE SHOPPING CENTER, OR THE PUBLIC, OR CAUSED BY
OPERATIONS IN CONSTRUCTION OF ANY PRIVATE, PUBLIC OR QUASI-PUBLIC WORK. ALL
PROPERTY OF TENANT KEPT OR STORED ON THE LEASED PREMISES SHALL BE SO KEPT OR
STORED AT THE RISK OF TENANT ONLY AND TENANT SHALL HOLD OWNER HARMLESS FROM
ANY CLAIMS ARISING OUT OF DAMAGE TO THE SAME, INCLUDING SUBROGATION CLAIMS BY
TENANT'S INSURANCE CARRIERS, UNLESS SUCH DAMAGE SHALL BE CAUSED BY THE WILLFUL
ACT OR GROSS NEGLECT OF OWNER.
SECTION 20.03 NOTICE BY TENANT
TENANT SHALL GIVE IMMEDIATE NOTICE TO OWNER IN CASE OF FIRE OR ACCIDENTS IN
THE LEASED PREMISES OR IN THE BUILDING OF WHICH THE PREMISES ARE A PART OR OF
DEFECTS THEREIN OR IN ANY FIXTURES OR EQUIPMENT.
ARTICLE XXI
HOLDING OVER, SUCCESSORS
SECTION 21.01 HOLDING OVER
ANY HOLDING OVER AFTER THE EXPIRATION OF THE TERM HEREOF, WITH THE CONSENT OF
THE OWNER, SHALL BE CONSTRUED TO BE A TENANCY FROM MONTH TO MONTH AT THE RENTS
HEREIN SPECIFIED (PRORATED ON A MONTHLY BASIS) AND SHALL OTHERWISE BE ON THE
TERMS AND CONDITIONS HEREIN SPECIFIED, SO FAR AS APPLICABLE.
SECTION 21.02 SUCCESSORS
ALL RIGHTS AND LIABILITIES HEREIN GIVEN TO, OR IMPOSED UPON, THE RESPECTIVE
PARTIES HERETO SHALL EXTEND TO AND BIND THE SEVERAL RESPECTIVE HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS OF THE SAID PARTIES; AND IF
THERE SHALL BE MORE THAN ONE TENANT, THEY SHALL ALL BE BOUND JOINTLY AND
SEVERALLY BY THE TERMS, COVENANTS AND AGREEMENTS HEREIN. NO RIGHTS, HOWEVER,
SHALL INURE TO THE BENEFIT OF ANY ASSIGNEE OF TENANT UNLESS THE ASSIGNMENT TO
SUCH ASSIGNEE HAS BEEN APPROVED BY OWNER IN WRITING AS PROVIDED IN SECTION
14.01 HEREOF.
ARTICLE XXII
QUIET ENJOYMENT
SECTION 22.01 OWNER'S COVENANT
UPON PAYMENT BY THE TENANT OF THE RENTS HEREIN PROVIDED, AND UPON THE
OBSERVANCE AND PERFORMANCE OF ALL THE COVENANTS, TERMS AND CONDITIONS ON
TENANT'S PART TO BE OBSERVED AND PERFORMED, TENANT SHALL PEACEABLY AND QUIETLY
HOLD AND ENJOY THE LEASED PREMISES FOR THE TERM HEREBY DEMISED WITHOUT DEMISED
WITHOUT HINDRANCE OR INTERRUPTION BY OWNER OR ANY OTHER PERSON OR PERSONS
LAWFULLY OR EQUITABLY CLAIMING BY, THROUGH OR UNDER THE OWNER, SUBJECT,
NEVERTHELESS, TO THE TERMS AND CONDITIONS OF THIS LEASE.
ARTICLE XXIII
MISCELLANEOUS
SECTION 23.01 WAIVER
THE WAIVER BY OWNER OF ANY BREACH OF ANY TERM, COVENANT OR CONDITION HEREIN
CONTAINED SHALL NOT BE DEEMED TO BE A WAIVER OF SUCH TERM, COVENANT OR
CONDITION OR ANY SUBSEQUENT BREACH OF THE SAME OR ANY TERM, COVENANT OR
CONDITION HEREIN CONTAINED. THE SUBSEQUENT ACCEPTANCE OF RENT HEREUNDER BY
OWNER SHALL NOT BE DEEMED TO BE A WAIVER OF ANY PRECEDING BREACH OF TENANT OF
ANY TERM, COVENANT OR CONDITION OF THIS LEASE, OTHER THAN THE FAILURE OF
TENANT TO PAY THE PARTICULAR RENTAL SO ACCEPTED, REGARDLESS OF OWNER'S
KNOWLEDGE OF SUCH PRECEDING BREACH AT THE TIME OF ACCEPTANCE OF SUCH RENT. NO
COVENANT, TERM OR CONDITION OF THIS LEASE SHALL BE DEEMED TO HAVE BEEN WAIVED
BY OWNER, UNLESS SUCH WAIVER BE IN WRITING BY OWNER.
SECTION 23.02 ACCORD AND SATISFACTION
NO PAYMENT BY TENANT OR RECEIPT BY OWNER OF A LESSER AMOUNT THAN THE MONTHLY
RENT HEREIN STIPULATED SHALL BE DEEMED TO BE OTHER THAN ON ACCOUNT OF THE
EARLIEST STIPULATED RENT, NOR SHALL ANY ENDORSEMENT OR STATEMENT ON ANY CHECK
OR ANY LETTER ACCOMPANYING ANY CHECK OR PAYMENT AS RENT BE DEEMED AN ACCORD
AND SATISFACTION, AND OWNER MAY ACCEPT SUCH CHECK OR PAYMENT WITHOUT PREJUDICE
TO OWNER'S RIGHT TO RECOVER THE BALANCE OF SUCH RENT OR PURSUE ANY OTHER
REMEDY IN THIS LEASE PROVIDED.
SECTION 23.03 ENTIRE AGREEMENT
THIS LEASE AND THE EXHIBITS, AND RIDER, IF ANY, ATTACHED HERETO AND FORMING A
PART HEREOF, SET FORTH ALL THE COVENANTS, PROMISES, AGREEMENTS, CONDITIONS OR
UNDERSTANDINGS, EITHER ORAL, OR WRITTEN, BETWEEN THEM OTHER THAN ARE HEREIN
SET FORTH. EXCEPT AS HEREIN OTHERWISE PROVIDED, NO SUBSEQUENT ALTERATION,
AMENDMENT, CHANGE OR ADDITION TO THIS LEASE SHALL BE BINDING UPON OWNER OR
TENANT UNLESS REDUCED TO WRITING AND SIGNED BY THEM.
SECTION 23.04 NO PARTNERSHIP
OWNER DOES NOT, IN ANY WAY OR FOR ANY PURPOSE, BECOME A PARTNER OF TENANT IN
THE CONDUCT OF ITS BUSINESS, OR OTHER WISE, OR JOINT ADVENTURER OR A MEMBER OR
A JOINT ENTERPRISE WITH TENANT. THE PROVISIONS OF THIS LEASE RELATING TO THE
PERCENTAGE RENT PAYABLE HEREUNDER ARE INCLINED SOLELY FOR THE PURPOSE OF
PROVIDING A METHOD WHEREBY THE RENT IS TO BE MEASURED AND ASCERTAINED.
SECTION 23.05 FORCE MAJEURE
IN THE EVENT THAT EITHER PARTY HERETO SHALL BE DELAYED OR HINDERED IN OR
PREVENTED FROM THE PERFORMANCE OF ANY ACT REQUIRED HEREUNDER BY REASON OF
STRIKES, LOCK-OUTS, LABOR TROUBLES, INABILITY TO PROCURE MATERIALS, FAILURE OF
POWER, RESTRICTIVE GOVERNMENTAL LAWS OR REGULATIONS, RIOTS, INSURRECTION, WAR
OR OTHER REASON OF A LIKE NATURE NOT THE FAULT OF THE PARTY DELAYED ON
PERFORMING WORK OR DOING ACTS REQUIRED UNDER THE TERMS OF THIS LEASE, THEN
PERFORMANCE OF SUCH ACTS SHALL BE EXCUSED FOR THE PERIOD OF THE DELAY AND THE
PERIOD FOR THE PERFORMANCE OF ANY SUCH ACT SHALL BE EXTENDED FOR A PERIOD
EQUIVALENT TO THE PERIOD OF SUCH DELAY. THE PROVISIONS OF THIS SECTION 23.05
SHALL NOT OPERATE TO EXCUSE TENANT FROM THE PROMPT PAYMENT OF RENT, PERCENTAGE
RENT, ADDITIONAL RENT OR ANY OTHER PAYMENTS REQUIRED BY THE TERMS OF THIS
LEASE.
SECTION 23.06 NOTICES
(A) ANY NOTICE BY TENANT TO OWNER MUST BE SERVED BY CERTIFIED OR REGISTERED
MAIL, POSTAGE, PREPAID, ADDRESSED TO OWNER AT THE ADDRESS FIRST HEREINABOVE
GIVEN OR AT SUCH OTHER ADDRESS AS OWNER MAY DESIGNATE BY WRITTEN NOTICE.
(B) ANY NOTICE BY OWNER TO TENANT MUST BE SERVED BY CERTIFIED OR REGISTERED
MAIL, POSTAGE, PREPAID, ADDRESSED TO TENANT AT THE LEASED PREMISES OR AT SUCH
OTHER ADDRESS AS TENANT SHALL DESIGNATE BY WRITTEN NOTICE.
SECTION 23.07 CAPTIONS AND SECTION NUMBERS
THE CAPTIONS, SECTION NUMBERS, ARTICLE NUMBERS, AND INDEX APPEARING IN THIS
LEASE ARE INSERTED ONLY AS A MATTER OF CONVENIENCE AND IN WAY DEFINE, LIMIT,
CONSTRUE, OR DESCRIBE THE SCOPE OR INTENT OF SUCH SECTIONS OR ARTICLES OF THIS
LEASE NOR IN ANY WAY AFFECT THIS LEASE.
SECTION 23.08 TENANT DEFINED, USE OF PRONOUN
THE WORD "TENANT" SHALL BE DEEMED AND TAKEN TO MEAN EACH AND EVERY PERSON OR
PARTY MENTIONED AS A TENANT HEREIN, BE THE SAME ONE OR MORE; AND IF THERE
SHALL BE MORE THAN ONE TENANT, ANY NOTICE REQUIRED OR PERMITTED BY THE TERMS
OF THIS LEASE MAY BE GIVEN BY OR TO ANY ONE THEREOF, AND SHALL HAVE THE SAME
FORCE AND EFFECT AS IF GIVEN BY OR TO ALL THEREOF. THE USE OF THE NEUTER
SINGULAR PRONOUN TO REFER TO OWNER OR TENANT SHALL BE DEEMED A PROPER
REFERENCE EVEN THOUGH OWNER OR TENANT MAY BE AN INDIVIDUAL, A PARTNERSHIP, A
CORPORATION, OR A GROUP OF TWO OR MORE INDIVIDUALS OR CORPORATIONS. THE
NECESSARY GRAMMATICAL CHANGES REQUIRED TO MAKE THE PROVISIONS OF THIS LEASE
APPLY IN THE PLURAL SENSE WHERE THERE IS MORE THAN ONE OWNER OR TENANT AND TO
EITHER CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR INDIVIDUALS, MALES OR
FEMALES, SHALL IN ALL INSTANCES BE ASSUMED AS THOUGH IN EACH CASE FULLY
EXPRESSED.
SECTION 23.09 PARTIAL INVALIDITY
IF ANY TERM, COVENANT OR CONDITION OF THIS LEASE OR THE APPLICATION THEREOF
ANY PERSON OR CIRCUMSTANCE SHALL, TO ANY EXTENT, BE INVALID OR UNENFORCEABLE,
THE REMAINDER OF THIS LEASE, OR THE APPLICATION OF SUCH TERM, COVENANT OR
CONDITION TO PERSONS OR CIRCUMSTANCES OTHER THAN THOSE AS TO WHICH IT IS HELD
INVALID OR UNENFORCEABLE SHALL BE VALID AND BE ENFORCED TO THE FULLEST EXTENT
PERMITTED BY LAW.
SECTION 23.10 NO OPTION
THE SUBMISSION OF THIS LEASE FOR EXAMINATION DOES NOT CONSTITUTE A RESERVATION
OF OR OPTION FOR THE LEASED PREMISES AND THIS LEASE BECOMES EFFECTIVE AS A
LEASE ONLY UPON EXECUTION AND DELIVERY THEREOF BY OWNER AND TENANT AND PAYMENT
OF ALL SUMS DUE UNDER LEASE.
SECTION 23.11 RECORDING
TENANT SHALL NOT RECORD THIS LEASE WITHOUT THE WRITTEN CONSENT OF OWNER.
SECTION 23.12 BREACH OF LEASE
IF TENANT BREACHES ANY TERM OF THIS LEASE AND ABANDONS THE DEMISED PREMISES
BEFORE THE END OF THE TERM HEREOF, OR IF TENANT'S RIGHT TO POSSESSION IS
TERMINATED BY THE OWNER BECAUSE OF A BREACH OF THIS LEASE, OWNER MAY RECOVER
FROM TENANT, IN ADDITION TO ANY OTHER DAMAGES PROVIDED FOR BY LAW, IN EQUITY,
IN THIS LEASE, OR OTHERWISE, THE WORTH AT THE TIME OF AWARD OF THE AMOUNT BY
WHICH THE UNPAID RENT FOR THE BALANCE OF THE TERM AFTER THE TIME OF AWARD
EXCEEDS THE AMOUNT OF SUCH RENTAL LOSS FOR THE SAME PERIOD THE TENANT PROVES
COULD BE REASONABLY AVOIDED.
EXECUTED THIS 21ST DAY OF MARCH, 1995
OWNER: COUNTRY PLAZA, LTD PARTNERSHIP TENANT: NEW RIDERS, A CALIFORNIA
CORPORATION
/s/Richard Walker /s/ Michael Purcell
- ----------------------------------- ---------------------------------
Richard D. Walker, Authorized Agent SIGNATURE
Country Plaza Ltd Partnership
Michael Purcell
----------------------------------
PRINTED
Sr. V.P.
------------------------------------
TITLE
EXHIBIT "A"
<Map of Kmart Shopping Center showing location>
EXHIBIT"B"
Tenant has inspected leased space and will take leased space in an "as is"
condition. Landlord will perform the following:
1. Landlord shall warrant that heating and air conditioning systems, all
electrical and all plumbing shall be in good working order at the time Tenant
takes possession of promises. If Tenant shall find that any of these items are
not in good working order, Tenant shall have thirty (30) days in which to
notify Landlord of such defect. Failure of Tenant to notify Landlord within
said thirty (30) day period shall render Landlord's warranty null and void.
2. Any improvements made by Tenant to the exterior shall be approved by
Landlord prior to installation of doors or changes made to the facia, windows
and signs.
3. All signage must be approved by Landlord prior to installation. If there
are any open panels on pole sign that are not being saved for any other
tenants in the center Tenant, with Landlord's approval, may use the vacant
unused portion of the pole sign. Tenant is aware that this option is at
Landlord's discretion only.
OPTION TO EXTEND
If the Tenant is not in default under the terms of this Lease, Tenant shall
have the option to extend the term of this lease for two (2) additional five
(5) year periods upon all terms and conditions set forth in this Lease except
that the fixed minimum rent shall be adjusted upward by four percent (4%) per
year for the first option period and four percent (4%) per year for the second
option period.
Tenant shall exercise this option by delivering written notice to the Landlord
no less than one hundred eighty (180) days prior to the termination of the
original term of this Lease of its election to extend the term thereof.
Failure of the Tenant to provide said notice within said period shall cause
this option to automatically become null and void.
NO BROKER LIABILITY FOR HAZARDOUS MATERIALS AND TOXIC WASTE
Tenant acknowledges that various materials utilized in the construction of any
improvements on the property may contain materials that have been or may in
the future be determined to be hazardous or undesirable and may need to be
specially treated, specially handled and/or removed from the property. For
example, some electrical transformers and other electrical components can
contain PCBs, and asbestos has been used in a wider variety of building
components such as fire-proofing, heating and cooling equipment, air duct
insulation, acoustical tiles, spray on acoustical materials, linoleum, floor
tiles, and plaster. Due to current or prior uses, the property or improvements
may contain materials such as metals, minerals, chemicals, hydrocarbons,
biological or radioactive materials and other substances which are considered,
or in the future may be determined to be, hazardous materials, toxic wastes or
undesirable substances, such items also may be in above- and below-ground
containers on the property or may not be accessible or noticeable. The Brokers
In this transaction have no expertise with respect to the detection or
identification of undesirable substances, hazardous materials or toxic wastes.
Proper inspections of the property by qualified experts are an absolute
necessity to determine whether or not there are any current or potential
undesirable substances, hazardous materials or toxic waste problems related to
the property. The Brokers In this transaction have not made any
representations, either expressed or implied, regarding the existence or non-
existence of toxic waste, hazardous materials, or undesirable substances. It
is the responsibility of Owner and Tenant to retain qualified experts to deal
with the detection and correction of such matters and to consult legal counsel
of their choice to determine what provisions, if any, they may wish to add to
this Contract regarding toxic wastes, hazardous materials or undesirable
substances.
RECEIPT/NO BROKER ADVICE
The undersigned parties hereby acknowledge receipt of a copy of Contract and
certify that they have read and understand the provisions hereof and further
acknowledge that they have not received or relied upon any statements or
representations by Broker(s) which are not contained herein. Tenant and Owner
each hereby acknowledge and agree that they have not received or relied upon
any legal or tax advice or any representations not contained herein by either
Listing Broker or Selling Broker, including, without limitation, the legal
sufficiency or effect of this Contract or the federal, state or local tax
consequences or the within transaction, and that if they desire any legal or
tax advice they must consult with their own attorney and/or accountant.
BROKER REPRESENTATION
Tenant and Landlord agree that Commercial Retail Associates, Inc. represents
both parties and consents to dual representation by Commercial Retail
Associates, Inc., Mark Salto (agent). Landlord shall pay the leasing
commission to Commercial Retail Associates, Inc. and that the Tenant has no
broker.
Exhibit 10.2.3
CELEBRITY SQUARE
BROADWAY AT THE BEACH
Myrtle Beach, South Carolina
LEASE BETWEEN
BURROUGHS & CHAPIN COMPANY, INC.
And
NEWRIDERS, INC
d/b/a/ EASYRIDERS CAGE
ARTICLE I
Basic Lease Terms and Definitions
1.1 Basic Lease Terms
a. "Broadway at the Beach"
b. "Celebrity Square"
c. "Celebrity Square Area"
d. "Landlord's Building"
e. "Premises"
f. "Term"
g. "Commencement Date"
h. "Termination Date"
i. "Permitted Use"
j. "Annual Basic Rental
k. "Annual Common Area Maintenance Charges"
1. "Advance Rental"
m. "Annual Marketing and Advertising Fund Contribution"
n. (INTENTIONALLY DELETED)
o. (INTENTIONALLY DELETED)
p. "Tenant Notice Address"
q. "Tenant Trade Name"
r. "Retail Radius Restriction"
s. (INTENTIONALLY DELETED)
t. "Landlord's Floor Area"
u. "Tenant's Floor Area"
v. "Common Areas"
w. "Default Rate"
1.2 Additional Defined Terms
1.3 Attachments
ARTICLE II
Premises
2.1 Demise
ARTICLE III
Term
3.1 Term
3.2 Termination
3.3 Holding Over
ARTICLE IV
Use
4.1 Prompt Occupancy and Use
4.2 Storage and Office Areas
4.3 Tenant's Trade Name
4.4 Store Hours
ARTICLE V
Rental
5.1 Rentals Payable
5.2 Annual Basic Rental
5.3 Annual Percentage Rental
5.4 "Rental Year" Defined
5.5 "Gross Sales" Defined
5.6 Statements of Gross Sales
5.7 Tenant's Records
5.8 Payment of Rental
5.9 Advance Rental
ARTICLE VI
Taxes
6.1 Tenant to Pay Proportionate Share of Taxes
6.2 Payment of Proportionate Share of Taxes
6.3 "Tax Year" Defined
6.4 Taxes on Rental
ARTICLE VII
Improvements
7.1 Tenant's Improvements
7.2 Effect of Opening for Business
7.3 Mechanic's Liens
7.4 Tenant's Trade Fixtures
ARTICLE VIII
Operations
8.1 Operations by Tenant
8.2 Signs and Advertising
8.3 Painting and Displays by Tenant
8.4 Trash Removal
ARTICLE IV
Repairs and Alterations
9.1 Repairs to be Made by Landlord
9.2 Repairs to be Made by Tenant
9.3 Damage to Premises
9.4 Alterations by Tenant
9.5 Changes and Additions to Celebrity Square
9.6 Roof and Walls
ARTICLE X
Common Areas
10.1 Use of Common Areas
10.2 Management and Operation of Common Areas
10.3 Employee Parking Areas
10.4 Tenant to Share Expense of Common Areas
10.5 Landlord's Operating Costs
ARTICLE XI
Marketing and Advertising
11.1 Marketing and Advertising Fund
11.2 Tenant's Contribution to Marketing and Advertisin
11.3 (INTENTIONALLY DELETED)
11.4 "Promotion Year" Defined
11.5 (INTENTIONALLY DELETED)
ARTICLE XII
Utilities
12.1 Water, Electricity, Telephone, Sanitary Sewer and Air
12.2 Water and Sewer Charges
12.3 Fire Protection Sprinkler System
12.4 Discontinuances and Interruptions of Utility Services
12.5 Landlord's Right to Alter Utilities
ARTICLE XIII
Indemnity and Insurance
13.1 Indemnity by Tenant
13.2 Landlord Not Responsible for Acts of Others
13.3 Tenant's Insurance
13.4 Tenant's Contractor's Insurance
13.5 Policy Requirements
13.6 Increase in Insurance Premiums
13.7 Waiver of Right of Recovery
13.8 Tenant to Pay Proportionate Share of Insurance Costs
13.9 Tenant's Failure to Comply
13.10 (INTENTIONALLY DELETED)
ARTICLE XIV
Damage and Destruction
14.1 Landlord's Obligation to Repair and Reconstruct
14.2 Landlord's Option to Terminate Lease
14.3 Demolition of Landlord's Building
14.4 Insurance Proceeds
ARTICLE XV
Condemnation
15.1 Effect of Taking
15.2 Condemnation Awards
ARTICLE XVI
Assignments and Subletting
16.1 Landlord's Consent Required
16.2 Transfer of Corporate Shares
16.3 Acceptance of Rent from Transferee
ARTICLE XVII
Default
17.1 "Event of Default" Defined
17.2 Remedies
17.3 Damages
17.4 Assignment in Bankruptcy
ARTICLE XVIII
Subordination and Attornment
18.1 Subordination
18.2 Mortgagee's Unilateral Subordination
18.3 Attornment
ARTICLE XIX
Notices
19.1 Sending of Notices
19.2 Notice to Mortgagees
ARTICLE XX
Quiet Enjoyment
20.1 Warranty
ARTICLE XXI
Miscellaneous
21.1 Retail Restriction Limit
21.2 Estoppel Certificates
21.3 Inspections and Access by Landlord
21.4 Memorandum of Lease
21.5 Remedies Cumulative
21.6 Successors and Assigns
21.7 Compliance with Laws and Regulations
21.8 Captions and Headings
21.9 Joint and Several Liability
21.10 Broker's Commission
21.11 No Discrimination
21.12 No Joint Venture
21.13 No Option
21.14 No Modification
21.15 Severability
21.16 Third Party Beneficiary
21.17 Corporate Tenants
21.18 Applicable Law
21.19 Time of Essence
21.20 Performance of Landlord's Obligations by Mortgagee
21.21 Waiver of Jury Trial
21.22 Landlord's Option to Terminate Lease
21.23 Limitation on Right of Recovery Against Landlord
21.24 Force Majeure
21.25 Air Rights
21.26 Rules and Regulations
21.27 (INTENTIONALLY DELETED)
21.28 Hazardous Materials
21.29 Compliance with the Americans With Disabilities Act
21.30 No Inducements or Representations
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made as of the 24th day of January, 1997 by
and between BURROUGHS & CHAPIN COMPANY, INC., a South Carolina corporation
("Landlord") and NEW RIDERS, INC., a Nevada corporation, d/b/a EASYRIDER CAFE
("Tenant").
FOR AND IN CONSIDERATION of the mutual covenants and agreements herein
contained, the parties hereto do covenant and agree as follows.
ARTICLE I
Basic Lease Terms and Definitions
1.1 Basic Lease Terms
The terms set out and defined in this Section, whenever used in this Lease
with the first letter of each word capitalized, shall have only the meanings
set forth in this section, unless such meanings are expressly modified,
limited or expanded elsewhere in this Lease.
a. "Broadway at the Beach" is the registered trade name of a mixed use real
estate project being developed by Landlord. The project may include but may
not be limited to retail stores, restaurants, theaters, entertainment
facilities, night clubs, bars, amusements and any other uses deemed
appropriate by the Landlord. The Landlord may include any land it owns or
acquires in this development but makes no representation that any specific
land will be so included or that any specific use will be made of any area.
Tenant shall acquire no rights whatsoever to such name, shall not use it in
any manner without Landlord's written permission, and shall discontinue any
permitted use immediately upon Landlord's request.
b. "Celebrity Square": The Celebrity Square Area and any adjacent parcel
or parcels of land more particularly described in Schedule "B" and known as
"Broadway at the Beach Celebrity Square."
C. "Celebrity Square Area": That certain parcel of land owned or
controlled by Landlord situated in the City of Myrtle Beach, State of South
Carolina, more particularly described in Schedule "B", and upon the opening
for business with the public of any expansion of the Celebrity Square Area,
the term "Celebrity Square Area" shall include the property used for such
expansion. Such expansion shall include only those areas specifically
designated as a part of Broadway at the Beach Celebrity Square and shall not
include any adjacent development unless so designated by Landlord.
d. "Landlord's Building": The structure(s) owned by or to be constructed
by Landlord in the location shown on Schedule "A", as the same may be altered,
reduced, expanded or replaced from time to time. Schedule "A" is attached for
the purpose of graphically depicting the location of the Premises within
Landlord's Building, and the matters appearing thereon, other than the
location and configuration of the Premises, whether indicated graphically or
in writing do not confer on Tenant any rights of use, access, or continued
existence or any obligation of Landlord to continue to maintain such
structures, areas, or matters in the configuration shown or depicted.
Landlord's Building may in fact be multiple buildings.
e. "Premises": Tenant's portion of Landlord's Building shown on Schedule
"A" having a Floor Area of approximately 8,259 square feet of enclosed area
plus a patio area of approximately 700 square feet,
TENANT /s/ MP LANDLORD /s/ DPW
Said patio area more particularly shown on Schedule A-1 attached hereto. The
Premises shall also include the Outdoor Motorcycle Display Area (as
hereinafter defined).
f. "Term": The period of ten (10) years, as further defined in Section
3.1, extending from the commencement date through the termination date.
g. "Commencement Date": The commencement shall be the earlier of April 1,
1997 or the date Tenant opens for business.
h. "Termination Date": Midnight, March 31, 2007 or on such earlier date
as this Lease Agreement shall be terminated by either party as permitted
herein.
i. "Permitted Use": Tenant shall use the Premises under Tenant's Trade
Name (as hereinafter described) solely for the purpose of conducting the
Permitted Use as such term is hereinafter defined; and shall not use or permit
or suffer the use of the Premises for any other business or purpose. As used
herein, Permitted Use shall mean the operation of a restaurant/night club
known as the EasyRider Cafe similar in operation to other EasyRider Cafes. The
Permitted Use shall also include in conjunction with the operation of an
EasyRider Cafe (i) The sale of EasyRider Cafe apparel and merchandise which
displays the Easy Rider Cafe logo or name or other merchandise related to
Tenant's motorcycle/hot rod theme (ii) The display within the Premises of one
or more motorcycles and motorcycle accessories; (iii) The display within the
area designated as the outdoor motorcycle display area on Schedule A-1 (the
"Outdoor Motorcycle Displays") of not more than three (3) motorcycles; (iv)
The operation of licensed gaming machines and video machines; and (v) live
entertainment. Dancing and the implementation of cover charges, admission
fees, door charges or similar charges shall be permitted on the Premises so
long as Landlord does not reinstate The Celebrity Square admissions policy as
set forth on the Admissions Rider attached hereto as amended by the Landlord
from time to time. Landlord in its sole discretion reserves the right to
institute an admissions policy for Celebrity Square and to amend the terms of
said admissions policy from time to time. In the event Landlord reinstates an
admissions policy for Celebrity Square dancing and the charging of admission
fees, cover charges, door charges or similar charges shall no longer be
permitted on the Premises unless Tenant elects in writing to be subject to the
admissions policy for Celebrity Square. Notwithstanding, Tenant may request
Landlord's approval for Special Events as set forth in Section 3 of the
General Rider attached hereto and incorporated herein which consent will not
be unreasonably withheld.
j. "Annual Basic Rental": Tenant shall pay in advance on the first day of
each month beginning on the Commencement Date base rent in accordance with the
following schedule:
Commencement Date thru 3/31/98: $12,044.38 per month
4/1/98 thru 3/31/99: $13,248.21 per month
4/1/99 thru 3/31/00: $14,570.25 per month
4/1/00 thru 3/31/02: $17,481.55 per month
4/1/02 thru 3/31/07: $20,991.63 per month
k. "Annual Common Area Maintenance Fee": Tenant shall pay in
advance on the first day of each month beginning on the Commencement Date CAM
in accordance with the following schedule:
TENANT /s/ MP LANDLORD /s/ DPW
Commencement Date thru 12/31/97: $1,376.50 per month
1/1/98 thru 3/31/07: CAM shall be increased
annually in accordance
the Consumer Price In
(See Section 10.4)
l. "Advance Rental": The sum of $12,044.38. See Section 5.9.
m. "Annual Marketing and Advertising Fund Contribution": Tenant shall
pay in advance on the first day of each month beginning on the Commencement
Date the Annual Marketing and Advertising Contribution in accordance with the
following schedule:
Commencement Date thru 12/31/97: $1,376.50 per month
1/1/98 thru 3/31/07: The Annual Marketing Fund
and Advertising Fund
Contribution shall be
increased annually in
accordance with the
Consumer Price Index.
(See Section 11.2)
n. (INTENTIONALLY DELETED)
o. "Annual Percentage Rental": (See Section 5.3) From the Commencement
Date through March 31, 2002 a sum equal to 7.5% of the amount by which Gross
Sales exceeds the natural breakpoint and from April 1, 2002 through March 31,
2007 a sum equal to 6% of the amount by which Gross Sales exceeds the natural
breakpoint.
p. "Tenant Notice Address": 1040 E. Herndon, #102, Fresno, CA 93720.
See Section 19.1.
q. "Tenant Trade Name": Easyrider Cafe. Tenant shall not change Tenant's
Trade Name of its business operated in the Premises without the written
consent of Landlord.
r. "Retail Radius Restriction": Within five (5) miles of the Celebrity
Square. See Section 21.1.
s. (INTENTIONALLY DELETED)
t. "Landlord's Floor Area": The aggregate amount of square feet of
leasable floor area in Landlord's Building, which, with respect to any such
floor area which has been leased to any rent-paying tenant, shall be
determined in accordance with the provisions of any lease applicable thereto
and which, with respect to any floor area not so leased, shall consist of all
such leasable floor area in Landlord's Building designed for the exclusive use
and occupancy of rent-paying tenants, which shall exclude Common Areas, kiosks
and temporary vendors, mezzanine areas and areas used for management and
promotion offices and storage.
u. "Tenant's Floor Area": That portion of Landlord's Floor Area
constituting the Premises which shall be measured (a) with respect to the
front and rear width thereof, from the exterior face of the adjacent exterior
or corridor wall, or, if none, to the center of the demising partition, and
(b) with respect to the depth thereof, from the exterior front face of the
Premises to the exterior face of the rear exterior wall, or corridor wall, or,
if neither, to the center of the rear demising partition;
TENANT /s/ MP LANDLORD /s/ DPW
and in no case shall there be any deduction for columns or other structural
elements within any tenant's premises.
v. "Common Areas": Those areas and facilities, if any, which may be
furnished by Landlord, now or hereafter, in or near the Celebrity Square for
the non-exclusive general common use of tenants, and other occupants of the
Celebrity Square, their officers, agents, employees and customers, including
(without limitation) all parking areas, access roads, employee parking areas,
truckways, driveways, loading docks and areas, delivery passages, package
pick-up stations, sidewalks, malls, roofs, and sprinklers in Common Areas,
courts, ramps, landscaped and planted areas, retaining walls, stairways,
escalators, elevators, bus stops, first aid stations, sewage treatment
facilities, if any, lighting facilities, comfort stations or rest rooms, civic
center, meeting rooms, ticketing facilities and other similar areas,
facilities or improvements.
w. "Default Rate": An annual rate of interest equal to the lesser of (i)
the maximum rate of interest for which Landlord may lawfully collect upon
default or the contract rate if otherwise not provided in the State in which
the Celebrity Square is situate, or (ii) eighteen percent (18%).
1.2 Additional Defined Terms
The following additional terms are defined in the places in this Lease noted
below:
TERM SECTION
- ---- --------
"Additional Rental" 5.1
"Casualty" 14.1
"Consumer Price Index" 11.2
"Event of Default 17.1
"Gross Sales" 5.5
"Landlord's Operating Costs" 10.5
"Laws and Regulations" 8.1
"Mortgage" 18.1
"Mortgagee" 18.1
"Ready for Occupancy" 7.2
"Rental" 5.1
"Rental Year" 5.4
"Special Event" General Rider
"Taxes" 6.1
"Tax Year" 6.3
1.3 Attachments
The following documents are attached hereto, and such documents, as well as
all drawings and documents prepared pursuant thereto, shall be deemed to be a
part hereof:
General Rider
Schedule "A" - Drawing of Celebrity Square Area including Landlord's
Building and Tenant's Premises.
Schedule "A-1" - Drawing denoting maximum patio perimeter limits.
Schedule "A-2" - Drawing denoting the motorcycle parking area.
Schedule "B" - Legal Description of Celebrity Square Area.
Schedule "C" - Landlord's and Tenant's construction obligations with respect
to the Premises.
TENANT /s/ MP LANDLORD /s/ DPW
Schedule "D" - Rules and Regulations.
Schedule "F" - Definition of "Adult".
Entertainment Rider.
Admissions Rider.
ARTICLE II
Premises
2.1 Demise
Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, the
Premises. Notwithstanding anything to the contrary contained herein, if basic
construction is complete, the Premises have been inspected by Tenant who shall
be deemed to have accepted the same as existing as of the date Landlord
delivers the Premises to Tenant for completion of all work required of it,
subject to completion of Landlord's construction obligations, if any, provided
for in Schedule "C".
ARTICLE III
Term
3.1 Term
The term shall commence on the earlier to occur of (a) April 1, 1997, or (b)
Tenant's opening of its business in the Premises, and shall be for the number
of years set forth in Section 1.1.f., plus the part of a month, if any, from
the date of the commencement of the Term through the last day of the month
immediately prior to the first full calendar month in the Term, and end on the
Termination Date set out in Section 1.1.h.
The taking of possession of the Premises by Tenant shall be conclusive
evidence against Tenant that, except for the completion of items of Landlord's
work which are to be done pursuant to the Lease, (i) the Premises are suitable
for the purpose for which leased, (ii) the Premises and each and every part
and appurtenance thereof are in good and satisfactory condition. To the best
of Landlord's knowledge and belief, Landlord's Building was constructed in
accordance with all applicable laws, ordinances and building codes.
3.2 Termination
Unless terminated sooner as hereinafter provided, this Lease shall terminate
on the stated Termination Date or at the end of any extension or renewal
thereof, without the necessity of any notice from either Landlord or Tenant to
terminate the same. Tenant hereby agrees that if it fails to surrender the
Premises at the end of the Term, or any renewal thereof, or earlier
termination as provided in this Lease, Tenant will be liable to Landlord for
any and all damages which Landlord shall suffer by reason thereof, and Tenant
will indemnify Landlord against all claims and demands made by any succeeding
tenants against Landlord, founded upon delay by Landlord in delivering
possession of the Premises to such succeeding tenant caused by Tenant's
holding over.
3.3 Holding 0ver
If Tenant shall be in possession of the Premises after the Termination Date,
in the absence of any agreement extending the Term hereof, or Landlord's
demand to Tenant to sooner vacate the Premises, the tenancy under this Lease
shall become one from month to month terminable by either party on thirty (30)
days prior written notice, at a monthly rental equal to twice the sum of (i)
the monthly installment of Annual Basic Rental payable during the last month
of the Term and (ii) one twelfth (1/12th) of the average Annual Percentage
Rental payable hereunder for the last three (3) Rental Years, or with respect
to a term of less than three (3) years, each complete
TENANT /s/ MP LANDLORD/s/
Rental Year preceding termination. Tenant shall also pay all other charges
payable under the terms of the Lease, prorated for the period during which
Tenant remains in possession. Such tenancy shall also be subject to all other
conditions, provisions and obligations of this Lease. Tenant shall not
interpose any counterclaim or counterclaims in a summary proceeding or other
action based on holdover.
ARTICLE IV
Use
4.1 Prompt Occupancy and Use
Tenant shall occupy the Premises upon commencement of the Term and thereafter
will continuously use the Premises for the Permitted Use and for no other
purpose whatsoever.
4.2 Storage and Office Areas
Tenant shall use only such minor portions of the Premises for storage and
office purposes as are reasonably required therefor to operate a
restaurant/nightclub within the Celebrity Square. In no event can office and
storage exceed fifty percent (50%) of the space.
4.3 Tenant's Trade Name
Unless otherwise approved in writing by Landlord, Tenant shall conduct
business in the Premises only in Tenant's Trade Name.
4.4 Store Hours
Tenant shall cause its business to be conducted and operated in good faith and
in such manner as shall assure the transaction of a maximum volume of business
in and at the Premises. Unless other hours are designated or approved by
Landlord in writing, Tenant shall cause the Premises to be open at 11 a.m.,
local time, and shall remain open until such minimum time as Landlord may from
time to time prescribe for all tenants seven (7) days per week. Landlord shall
set closing hours based upon seasonal factors. The Celebrity Square shall be
closed for business on Thanksgiving Day and Christmas Day, but Landlord may
permit Tenants to be open on such holidays. Landlord, in its sole discretion,
shall have the right to reduce or eliminate operating Hours on any or all of
New Year's Day, Thanksgiving Eve and Christmas Eve. If Tenant shall fail to
operate during all such hours, in addition to constituting an Event of Default
hereunder, Tenant shall be required to pay, for each hour that Tenant shall
fail to be open, liquidated damages equal to the greater of Fifty and No/100
Dollars ($50.00) or ten percent (10%) of Tenant's average hourly Gross Sales
computed for the month immediately preceding the month in question. If Tenant
shall request Landlord's approval of the opening of the Premises for business
for periods exceeding those specified above and Landlord shall approve such
request, Tenant shall pay for any additional costs incurred by Landlord in
connection with Tenant's opening the Premises for business during such
additional hours, including but not limited to, any additional amounts of
Landlord's Operating Costs, additional costs of heating, ventilating and air-
conditioning the Common Areas and the Premises, and additional utilities
furnished to the Premises by Landlord.
ARTICLE V
Rental
5.1 Rentals Payable
Tenant covenants and agrees to pay to Landlord as rental ("Rental") for the
Premises, the following:
(a) the Annual Basic Rental specified in Section 1.1.j, commencing the
earlier of April 1, 1997 or the date Tenant opens for business; plus
TENANT /s/ MP LANDLORD /s/ DPW
(b) the Annual Percentage Rental specified in Section 1.1.o; plus:
(c) all additional sums, charges, or amounts of whatever nature to be
paid by Tenant to Landlord in accordance with the provisions of this Lease,
whether or not such sums, charges or amounts are referred to as additional
rental (collectively referred to as "Additional Rental");
provided, however, that the Annual Basic Rental shall be adjusted
proportionately (on a per diem basis) for any Rental Year of more or less than
twelve (12) calendar months.
5.2 Annual Basic Rental
Annual Basic Rental shall be payable without prior demand in equal monthly
installments in advance on the first day of each full calendar month during
the Term, the first such payment to include also any prorated Annual Basic
Rental for the period from the date of the commencement of the Term to the
first day of the first full calendar month in the Term.
5.3 Annual Percentage Rental
Until Tenant's Gross Sales exceed the natural break point, the natural break
point shall be monitored by Tenant on a monthly basis. If the cumulative
monthly sales exceed the natural break point, in addition to the payment of
Annual Basic Rental the Tenant shall begin paying Annual Percentage Rental on
a monthly basis the following month. Effective with the Rental Year following
the Rental Year that the Tenant pays Percentage Rental, the Tenant will be
billed an estimated Annual Percentage Rental equal to the previous Rental
Year's Annual Percentage Rental paid, payable in increments of one-twelfth
(1/12) on the first of each month. Fifteen (15) days after the close of each
Rental Year, the Tenant shall report its Gross Sales and pay any additional
Annual Percentage Rental due. If Tenant paid excess Annual Percentage Rental
during the preceding Rental Year, such excess amount shall be credited to
Annual Percentage Rental due in the then current Rental Year. At the end of
the Term including any extensions, the Landlord shall reimburse Tenant for any
over payment in the preceding Rental Year. If there is a partial Rental Year
(as hereinafter defined) at the beginning and end of the term, the natural
break point and Annual Percentage Rental shall be prorated for such periods.
5.4 "Rental Year" Defined
The first full Rental Year shall commence on the first day of January 1998 and
end on December 31, 1998; thereafter, each Rental Year shall be the successive
calendar years. Any portion of the Term prior to January 1, 1998, or remaining
at the end of the last full Rental Year shall constitute the first and final
Rental Year, respectively, and all Rental shall be apportioned therefor.
5.5 "Gross Sales" Defined
"Gross Sales" means the sum of the actual sales prices of all goods, wares and
merchandise sold, leased, licensed, or delivered, food and beverages sold, and
the actual charges for all services performed by Tenant or by any subtenant,
licensee or concessionaire in, at, from or arising out of the use of the
Premises, whether for wholesale, retail, cash, credit, or trade-ins or
otherwise, without reserve or deduction for inability or failure to collect.
Gross Sales shall not include the proceeds of sales from charity events, to
the extent that such proceeds are donated by Tenant to qualified Internal
Revenue Service approved charitable organizations within sixty (60) days of
the event.
5.6 Statements of Gross Sales
Tenant shall deliver to Landlord all South Carolina sales tax reports
simultaneous with filing with the South Carolina Tax Commission, which shall
serve as Tenant's Statement of Gross Sales for Landlord's purposes.
TENANT/s/ LANDLORD /s/ DPW
5.7 Tenant's Records
Tenant covenants and agrees that the business upon the Premises shall be
operated so that a duplicate sales slip, invoice or non-resettable cash
register receipt, serially numbered, or such other device for recording sales
as Landlord approves, shall be issued with each sale or transaction, whether
for cash, credit or exchange.
For the purpose of permitting verification by Landlord of any amounts due as
Rental, Tenant will keep and preserve for at least three (3) years, and during
the Term shall keep at the Premises, a general ledger, required receipts and
disbursement journals and such sales records and other supporting
documentation together with original or duplicate books and records which
shall disclose in detail all information required to permit Landlord to verify
Tenant's Gross Sales and which shall conform to and be in accordance with
generally accepted accounting principles. At any time or from time to time
after twenty-four (24) hours' advance notice to Tenant, Landlord or any
Mortgagee, their agents and accountants, shall have the right during business
hours to make any examination or audit of such books and records which
Landlord or such Mortgagee may desire. If such audit shall disclose a
liability in any Rental Year for Rental in excess of the Rental theretofore
paid by Tenant for such period, Tenant shall promptly pay such liability. In
addition, if such audit shall disclose that Tenant has either under-reported
Gross Sales by five percent (5%) or more during any Rental Year or that Tenant
has underpaid by three percent (3%) or more any Rental payable by Tenant the
amount of which is based on Gross Sales, then in such event, in addition to
being an Event of Default hereunder, Tenant shall promptly pay the cost of
audit and interest at the Default Rate on all additional Annual Percentage
Rental then payable, accounting from the date such additional Annual
Percentage Rental was due and payable. If such audit shall disclose that
Tenant's records, in Landlord's reasonable determination, are inadequate to
reflect accurately Tenant's Gross Sales, Landlord shall have the right to
retain a consultant to prepare and establish a proper recording system in
which Tenant can determine Gross Sales, using books and records in a form
prescribed by such consultant and Tenant shall pay to Landlord as Additional
Rental the costs, consultant's fees and any other charges relating thereto. In
the event such audit shall disclose that Tenant has under paid Annual
Percentage Rent by five percent (5%) or more, the Landlord shall have the
right to terminate this Lease by giving Tenant thirty (30) days notice.
5.8 Payment of Rental
Tenant shall pay all Rental when due and payable, without any setoff,
deduction or prior demand therefor whatsoever. If Tenant shall fail to pay any
Rental within seven (7) days after the same is due, Tenant shall be obligated
to pay a late payment charge equal to the greater of One Hundred and No/1 00
Dollars ($100.00) or five percent (5%) of any Rental payment not paid when due
to reimburse Landlord for its additional administrative costs, In addition,
any Rental which is not paid within seven (7) days after the same is due shall
bear interest at the Default Rate from the first day due until paid. Any
Additional Rental which shall become due shall be payable, unless otherwise
provided herein, with the next monthly installment of Annual Basic Rental.
Rental and statements required of Tenant shall be paid and delivered to
Landlord at its notice address set out in Section 19.1 or at such other place
as Landlord may, from time to time, designate in a notice to Tenant. Any
payment by Tenant or acceptance by Landlord of a check for a lesser amount
than shall be due from Tenant to Landlord shall be treated as a payment on
account. The acceptance by Landlord of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full shall be given no effect, and
Landlord may accept such check without prejudice to any other rights or
remedies which Landlord may have against Tenant.
5.9 Advance Rental
Landlord acknowledges receipt from Tenant of an amount equal to the Advance
Rental, the same to be held as security for the performance by Tenant of all
obligations imposed under this Lease which Tenant is required to perform. If
Tenant shall fail to perform such obligations, Landlord shall be entitled to
apply the
TENANT /s/ MP LANDLORD /s/ DPW
Advance Rental, pro tanto, against any damages which it may sustain by reason
of Tenant's failure to perform such obligations, but such application shall
not preclude Landlord from recovering greater damages if the same can be
established. Otherwise, if Tenant shall faithfully perform all such
obligations, then the Advance Rental shall be applied, pro tanto, by Landlord
against the Rental last becoming due hereunder.
ARTICLE VI
Taxes
6.1 Tenant to Pay Proportionate Share of Taxes
Tenant shall pay in each Tax Year during the Term, as Additional Rental, a
proportionate share of all real estate taxes, ad valorem taxes and
assessments, general and special assessments, taxes on real estate rental
receipts, taxes on Landlord's gross receipts, or any other tax imposed upon or
levied against real estate or upon owners of real estate as such rather than
persons generally, including taxes imposed on leasehold improvements which are
assessed against Landlord, payable with respect to or allocable to the
Celebrity Square Area, including all land, Landlord's Building and all other
buildings and improvements situated thereon, together with the reasonable cost
(including fees of attorneys, consultants, and appraisers) of any negotiation,
contest or appeal pursued by Landlord in an effort to reduce any such tax,
assessment or charge, and all of Landlord's administrative costs in relation
to the foregoing, all the foregoing being collectively referred to herein as
"Taxes". Tenant's proportionate share of Taxes for any Tax Year shall be
computed by multiplying the amount of such Taxes by a fraction, the numerator
of which shall be Tenant's Floor Area and the denominator of which shall be
Landlord's Floor Area. For the Tax Year in which the Term commences or
terminates, the provisions of this Section shall apply, but Tenant's liability
for its proportionate share of any taxes for such year shall be subject to a
pro rata adjustment based upon the number of days of such Tax Year falling
within the Term.
6.2 Payment of Proportionate Share of Taxes
Tenant's proportionate share of Taxes shall be paid by Tenant in equal monthly
installments in such amounts as are estimated and billed for each Tax Year by
Landlord during the Term, each such installment being due on the first day of
each calendar month. If at any time during a Tax Year it shall appear that
Landlord has underestimated Tenant's proportionate share of Taxes, it may bill
Tenant for any deficiency which may have accrued during such Tax Year and
thereafter the monthly installment payable by Tenant shall also be adjusted.
Within one hundred twenty (120) days after Landlord's receipt of tax bills for
each Tax Year, or such reasonable (in Landlord's determination) time
thereafter, Landlord will notify Tenant of the amount of Taxes for the Tax
Year in question, and the amount of Tenant's proportionate share thereof. Any
overpayment or deficiency in Tenant's payment of its proportionate share of
Taxes for each Tax Year shall be adjusted between Landlord and Tenant, and
Landlord and Tenant hereby agree that Tenant shall pay Landlord or Landlord
shall credit to Tenant's account (or, if such adjustment is at the end of the
Term, pay Tenant), as the case may be, within thirty (30) days of the
aforesaid notification to Tenant, such amount necessary to effect such
adjustment. The failure of Landlord to provide such notification within the
time prescribed above shall not relieve Tenant of its obligations hereunder.
6.3 "Tax Year" Defined
The term "Tax Year" means each twelve (12) month period (deemed, for the
purpose of this Section, to have 365 days) established as the real estate tax
year by the taxing authorities having lawful jurisdiction over the Celebrity
Square Area.
TENANT /s/ MP LANDLORD /s/ DPW
6.4 Taxes on Rental
In addition to Tenant's proportionate share of Taxes, Tenant shall pay to the
appropriate agency any and all sales, excise and other taxes (not including,
however, Landlord's income taxes) levied, imposed or assessed by the State in
which the Celebrity Square is situate or any political subdivision thereof or
other taxing authority upon any Rental payable hereunder. Tenant shall also be
solely responsible for and pay within the time provided by law all taxes
imposed on its inventory, furniture, trade fixtures, apparatus, leasehold
improvements (installed by or on behalf of Tenant), equipment and any other of
Tenant's personal or other property.
ARTICLE VII
Improvements
7. 1 Tenant's Improvements
(a) Within thirty (30) days after execution of this Lease, Tenant shall,
at its sole cost and expense, submit to Landlord its plans for improvements
to the Premises and, after approval thereof by Landlord, shall complete all
improvements and other work to be performed by it pursuant to such plans
and the manner set out in Schedule "C". Tenant will be permitted by Landlord
to enter the Premises in accordance with Schedule "C" for the purpose of
performing its obligations under Schedule "C" and for the purpose of
installing its fixtures and other equipment, provided (i) Tenant shall have
obtained Landlord's prior written approval of the plans and specifications for
such work; and (ii) Tenant shall have deposited with Landlord the policies or
certificates of insurance required in Section 13.5. Tenant's activities shall
be conducted so as not to unreasonably interfere with Landlord's construction
activities or the business of other tenants or their tenancies, Tenant shall
maintain the Premises in a clean and orderly condition during construction
and merchandising. All trash which may accumulate in connection with
Tenant's construction activities shall be removed daily from the Celebrity
Square Area by Tenant at its expense. During such period, Tenant shall
perform all duties and obligations imposed by this Lease, including, without
limitation, those provisions relating to insurance and indemnification, saving
and excepting only the obligation to pay Rental (other than any Additional
Rental arising out of failure of Tenant to perform its obligations under this
Lease), which obligation shall commence when the Term commences.
(b) (INTENTIONALLY DELETED)
7.2 Effect of Opening for Business
By opening for business, Tenant shall be deemed to have: (a) accepted the
Premises, (b) acknowledged that the Premises are "Ready for Occupancy"
hereunder, and (c) agreed that the obligations of Landlord under Schedule "C"
have been fully performed except for defects in Landlord's work of which
Tenant notifies Landlord in writing prior to Tenant's opening for business.
7.3 Mechanic's Liens
No work performed by Tenant pursuant to this Lease, whether in the nature of
erection, construction, alteration or repair, shall be deemed to be for the
immediate use and benefit of Landlord so that no mechanic's or other lien
shall be allowed against the estate of Landlord by reason of any consent given
by Landlord to Tenant to improve the Premises. Tenant shall pay promptly all
persons furnishing labor or materials with respect to any work performed by
Tenant or its contractor on or about the Premises. In the event any mechanic's
or other lien shall at any time be filed against the Premises by reason of
work, labor, services, or materials performed or furnished, or alleged to have
been performed or furnished, to Tenant or to anyone holding the Premises
through or under Tenant, Tenant shall forthwith cause the same to be
discharged of record or bonded to the satisfaction of Landlord, If
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Tenant shall fail to cause such lien forthwith to be so discharged or bonded
after being notified of the filing thereof, then, in addition to any other
right or remedy of Landlord, Landlord may bond or discharge the same by paying
the amount claimed to be due, and the amount so paid by Landlord including
reasonable attorney's fees incurred by Landlord either defending against such
lien or in procuring the discharge of such lien, together with interest
thereon at the Default Rate, shall be due and payable by Tenant to Landlord as
Additional Rental.
7.4 Tenant's Trade Fixtures
All trade fixtures and apparatus (as distinguished from leasehold
improvements) owned by Tenant and installed in the Premises by Tenant at its
expense shall remain the property of Tenant and shall be removable at any
time, including upon the expiration of the Term; provided Tenant shall not at
such time be in default of any terms or covenants of this Lease; and provided
further that Tenant shall repair any damage to the Premises caused by the
removal of said trade fixtures and apparatus. Tenant shall provide Landlord
with a list of the trade fixtures owned by Tenant and shall update such list
as needed from time to time.
ARTICLE VIII
Operations
8.1 Operations by Tenant
Tenant agrees that the Premises shall be used and occupied by Tenant only for
those uses permitted by Section 1.1.i of this Lease, and Tenant agrees to use
and maintain the Premises in compliance with all applicable laws, decrees,
ordinances, orders, rules and regulations of all governmental bodies (federal,
state, county and/or parish and municipal) (hereinafter collectively referred
to as "Laws and Regulations") from time to time in force which shall affect
(a) Tenant's use of the Premises, (b) the manner or conduct of Tenant's
business or operation of Tenant's installations, equipment or other property
therein, (c) any cause or condition created by or at the instance of Tenant,
and Tenant shall pay all the costs, expenses, fines, penalties and damages
which may be imposed upon Landlord by reason of or arising out of Tenant's
failure to fully and promptly comply with and observe such laws or which
Landlord may incur as a result of Tenant's breach of the above covenants.
Notwithstanding the aforesaid, the Tenant shall have no obligation to repair
the Premises on account of any defect in the construction of the Premises
which breaches any applicable codes, laws or regulations governing the
Premises applicable prior to the date of this Lease or the date Tenant
commenced to occupy the Premises, whichever date is earlier. Tenant shall give
prompt notice to Landlord of any notice Tenant receives of the violation of
any Laws and Regulations of any such governmental body with respect to the
Premises or the use or occupancy thereof. If Landlord shall be required under
this Lease or pursuant to Laws and Regulations to take measures to comply with
Laws and Regulations affecting the Premises, Landlord may, at Landlord's
option, elect to terminate this Lease by giving not less than thirty (30)
days' notice thereof to Tenant unless Tenant shall give evidence satisfactory
to Landlord within fifteen (15) days after the giving by Landlord of such
notice of termination, that Tenant has commenced steps reasonably calculated
to comply with Laws and Regulations at Tenant's sole cost and expense. Tenant
shall not, at any time, leave the Premises vacant, but shall, in good faith,
continuously throughout the Term of this Lease conduct and carry on the type
of business for which the Premises are leased.
Tenant agrees not to use or to allow or permit the Premises to be used for any
purpose prohibited by any Laws and Regulations and Tenant agrees not to commit
waste or suffer or permit waste to be committed or to allow or permit any
nuisance on or in the Premises. Tenant will not occupy or use nor permit any
portion of the Premises to be occupied or used for any business or purpose
that Landlord may deem disreputable in any manner. Tenant will continuously
conduct Tenant's business in and occupy the Premises, and will control
Tenant's agents, employees and invitees in such a manner so as not to create
any nuisance or interfere with, annoy or disturb any of the other tenants in
Landlord's Building or Landlord in Landlord's management of Landlord's
Building. Notwithstanding anything to the
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contrary contained herein, Tenant shall not use the Premises or allow or
permit the same to be used in any way or for any purpose that Landlord may
deem to be extra hazardous on account of the possibility of fire or other
casualty or which will increase the rate of fire or other casualty or which
will increase the rate of fire or other insurance for Landlord's Building or
the contents thereof, or which may render Landlord's Building uninsurable at
normal rates by responsible insurance carriers authorized to do business in
the State of South Carolina or which may render void or voidable any insurance
on Landlord's Building or the contents thereof. Tenant shall not violate, or
permit the violation of, any condition imposed by any insurance policy then
issued in respect of Landlord's Building and/or the Celebrity Square Area and
shall not do, or permit anything to be done, or keep or permit anything to be
kept in the Premises which would subject Landlord to any liability or
responsibility for any personal injury or death or property damage, or which
would result in the cancellation of, or limit the assertion of any defense by
the insured, in whole or claims under any policy of insurance in respect of
Landlord's Building, or the Celebrity Square Area. In the event that by reason
of Tenant's acts or conduct of business there shall be an increase in the rate
of insurance on Landlord's Building or the contents thereof, then Tenant
hereby agrees to pay such increase.
In regard to the use and occupancy of the Premises, Tenant will at its
expense: (a) keep the inside and outside of all glass in the doors and windows
of the Premises clean; (b) keep all exterior store surfaces of the Premises
clean; (c) replace promptly any cracked or broken glass of the Premises with
glass of like grade and quality; (d) maintain the Premises in a clean, orderly
and sanitary condition and free of insects, rodents, vermin and other pests,
including cleaning, repairing or replacing as needed all floor covering within
the public areas of the Premises; (e) keep any garbage, trash, rubbish or
other refuse in rat-proof containers within the interior of the Premises until
removed; (f) have such garbage, trash, rubbish and refuse removed on a daily
basis; (g) keep all mechanical apparatus free of vibration and noise which may
be transmitted beyond the Premises; (h) comply with all laws, ordinances,
rules and regulations of governmental authorities and all recommendations of
Landlord's fire insurance rating organization now or hereafter in effect; (i)
comply with and observe all rules and regulations established by Landlord from
time to time which apply generally to all nightclub tenants in the Celebrity
Square Area; (j) conduct its business in all respects in a dignified manner in
accordance with high standards of nightclub operation consistent with the
quality of operation of the Celebrity Square Area as determined by Landlord;
and (k) provide top quality live entertainment consistent with the terms of
the Entertainment Rider attached hereto.
In regard to the use and occupancy of the Premises and the Common Areas,
Tenant will not: (l) place or maintain any merchandise, trash, refuse or
other articles in any vestibule or entry of the Premises, on the footwalks or
corridors adjacent thereto or elsewhere on the exterior of the Premises so as
to obstruct any driveway, corridor, footwalk, parking area, mail or any other
Common Area; (m) use or permit the use of any objectionable advertising
medium, such as, without limitation, loudspeakers, phonographs, public address
systems, sound amplifiers, reception of radio or television broadcasts within
the Celebrity Square, which is in any manner audible or visible outside of the
Premises; (n) permit undue accumulations of or burn garbage, trash, rubbish or
other refuse within or without the Premises; (o) cause or permit objectionable
odors to emanate or to be dispelled from the Premises; (p) solicit business in
the parking area or any other Common Area; (q) distribute handbills or other
advertising matter to, in or upon any automobiles parked in the parking areas
or in any other Common Area; (r) permit the parking of vehicles so as to
interfere with the use of any driveway, corridor, footwalk, parking area, mall
or other Common Areas; (s) receive or ship articles of any kind outside the
designated loading areas for the Premises; (t) use the mall, corridor or any
other Common Area adjacent to the Premises for the sale or display of any
merchandise or for any other business, occupation or undertaking; (u) conduct
any auction, fire or bankruptcy sale; (v) use or permit the use of any portion
of the Premises for any unlawful purpose or for any activity of a type which
is not generally considered appropriate; or (w) place a load upon any floor
which exceeds the floor load which the floor was designed to carry.
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Tenant acknowledges that it is Landlord's intent that the Celebrity Square
Area be operated in a manner which is consistent with the highest standards of
decency and morals prevailing in the community which it serves. Toward that
end, Tenant agrees that it will not operate or allow to be operated any event,
entertainment or promotional activity considered to be "adult", lewd or
suggestive, as defined in Schedule "F" attached hereto. Without limiting the
generality of the foregoing, Tenant will not allow events, entertainment or
activities such as wet t-shirt contests, mud wrestling or other similar type
activity. Tenant's employees shall be dressed in attire considered to be in
good taste and not provocative or suggestive. Tenant acknowledges that
Landlord does not provide and has no responsibility for security within the
Premises. Security within the Premises is solely the responsibility of Tenant.
8.2 Signs and Advertising
Tenant will not place or suffer to be placed or maintained on the exterior of
the Premises or in any part of Landlord's Building any sign, advertising
matter or any other thing of any kind, and will not place or maintain any
decoration, letter or advertising matter on the glass of any window or door of
the Premises or interior sign visible from outside the Premises without first
obtaining Landlord's prior written approval. Tenant will, at its sole cost and
expense, maintain such sign, decoration, lettering, advertising matter or
other thing as may be permitted hereunder in good condition and repair at all
times. Under no circumstances shall Tenant be permitted to place hand-lettered
advertising on the exterior of the Premises or any glass of any window or door
of the Premises. Notwithstanding the aforesaid, Tenant may utilize a hand
lettered display board on the Premises which display board promotes daily food
and drink specials provided said display board is tasteful in appearance and
in accordance with the high quality of the operation of Celebrity Square.
8.3 Painting and Displays by Tenant
Tenant will not paint or decorate any part of the exterior of the Premises, or
any part of the interior visible from the exterior thereof, without first
obtaining Landlord's written approval.
8.4 Trash Removal
Tenant shall keep any garbage, trash, rubbish, or other refuse in rat-proof
containers within the interior of the Premises. The procedure to be followed
by Tenant in storing, disposing and removal of such refuse shall be in
accordance with rules and regulations prescribed from time to time by
Landlord.
ARTICLE IX
Repairs and Alterations
9.1 Repairs to be Made by Landlord
Landlord, at its expense, will make, or cause to be made structural repairs to
exterior walls, structural columns and structural floor which collectively
enclose the Premises (excluding, however, all doors, door frames, storefronts,
windows and glass); provided Tenant shall give Landlord notice of the
necessity for such repairs. Notwithstanding the foregoing, if the necessity
for such repairs shall have arisen from or shall have been caused by the
negligence or willful acts of Tenant, its agents, concessionaires, officers,
employees, licensees, invitees or contractors, to the extent such damage is
not covered by proceeds from hazard insurance actually maintained or required
to be maintained by Landlord hereunder, Landlord may make or cause the same to
be made, but shall not be obligated to do so, and Tenant agrees to pay to
Landlord promptly upon Landlord's demand, as Additional Rental, the cost of
such repairs, if made, with interest thereon at the Default Rate until paid.
In the event Landlord elects not to make such repairs caused by Tenant's
negligence, Landlord may require Tenant to make such repairs at Tenant's sole
cost and expense.
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9.2 Repairs to be Made by Tenant
All repairs to the Premises or any installations, equipment or facilities
therein, other than those repairs required to be made by Landlord pursuant to
Section 9.1 or Section 14.1, shall be made by Tenant at its expense. Without
limiting the generality of the foregoing, Tenant will keep the interior of the
Premises, together with all electrical, plumbing, heating, ventilating, air-
conditioning, and other mechanical installations therein (other than items to
be repaired by Landlord pursuant to Section 9.1), in good order and repair and
will make all replacements from time to time required thereto at its expense;
and will surrender the Premises at the expiration of the Term or at such other
time as it may vacate the Premises in as good condition as when received,
excepting depreciation caused by ordinary wear and tear, damage by Casualty
(other than such damage by Casualty which is caused by the negligence of
Tenant, its agents, concessionaires, officers, employees, contractors,
licensees or invitees, and which is not wholly covered by Landlord's hazard
insurance policy), unavoidable accident or Act of God. Tenant will not
overload the electrical wiring serving the Premises or within the Premises,
and will install at its expense, subject to the provisions of Section 9.4, any
additional electrical wiring which may be required in connection with Tenant's
apparatus. Any damage or injury sustained by any person because of mechanical,
electrical, plumbing or any other equipment or installations, whose
maintenance and repair shall be the responsibility of Tenant shall be paid for
by Tenant, and Tenant shall indemnify and hold Landlord harmless from and
against all claims, actions, damages and liability in connection therewith,
including but not limited to attorney's and other professional fees, and any
other cost which Landlord might reasonably incur.
In the event the Premises (including the Premises' electrical, plumbing,
heating, ventilating, air conditioning and other mechanical installations) are
not properly maintained in a timely manner by Tenant, Landlord may provide
such maintenance and/or perform such repairs as it deems necessary and Tenant
agrees to pay to Landlord promptly upon Landlord's demand, as Additional
Rental, the cost thereof with interest thereon at the Default Rate until paid.
9.3 Damage to Premises
Tenant will repair promptly at its expense any damage to the Premises, except
those repairs required to be made by Landlord pursuant to Section 9.1 and
Section 14. 1, and, upon demand, shall reimburse Landlord as Additional Rental
for the cost of the repair of any damage elsewhere in the Celebrity Square,
caused by or arising from the installation or removal of property in or from
the Premises, regardless of fault or by whom such damage shall be caused
(unless caused by Landlord, its agents, employees or contractors). If Tenant
shall fail to commence such repairs within five (5) days after notice to do
so from Landlord, Landlord may make or cause the same to be made and Tenant
agrees to pay to Landlord promptly upon Landlord's demand, as Additional
Rental, the cost thereof with interest thereon at the Default Rate until paid.
9.4 Alterations by Tenant
Tenant will not make any alterations, renovations, improvements or other
installations in excess of $ 25,000,00 in, on or to the Premises or any part
thereof (including, without limitation, any alterations of the store front or
signs, structural alterations, or any cutting or drilling into any part of the
Premises or any securing of any fixture, apparatus, or equipment of any kind
to any part of the Premises) unless and until Tenant shall have caused plans
and specifications therefor to have been prepared, at Tenant's expense, by an
architect or other duly qualified person and shall have obtained Landlord's
approval thereof. If such approval is granted, Tenant shall cause the work
described in such plans and specifications to be performed, at its expense,
promptly, efficiently, competently and in a good and workmanlike manner by
duly qualified or licensed persons or entities using first grade materials,
without interference with or disruption to the operations of tenants or other
occupants of the Celebrity Square. All such work shall comply with all
applicable governmental codes, rules, regulations, and ordinances.
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9.5 Changes and Additions to Celebrity Square
Landlord reserves the right at any time and from time to time (a) to make or
permit changes or revisions in its plan for the Celebrity Square or the
Celebrity Square Area including additions to, subtractions from,
rearrangements of, alterations of, modifications of or supplements to the
building areas, walkways, parking areas, driveways or other Common Areas, (b)
to construct other buildings or improvements in the Celebrity Square Area and
to make alterations thereof or additions thereto and to build additional
stories on any such building or buildings and to build adjoining same and (c)
to make or permit changes or revisions in the Celebrity Square or the
Celebrity Square Area, including additions thereto, and to convey portions of
the Celebrity Square Area, including additions thereto, and to convey portions
of the Celebrity Square Area to others for the purpose of constructing thereon
other buildings or improvements, including additions thereto and alterations
thereof. Notwithstanding anything contained in this Lease to the contrary,
Landlord shall not materially impair the visibility of the Premises nor
materially limit Tenant's access to the Premises or the motorcycle parking
area.
9.6 Roof and Walls
Landlord shall have the exclusive right to use all or any part of the roof of
the Premises for any purpose; to erect additional stories or other structure
over all or any part of the Premises; to erect in connection with the
construction thereof temporary scaffolds and other aids to construction on the
exterior of the Premises, provided that access to the Premises shall not be
denied; and to install, maintain, use, repair and replace within the Premises
pipes, ducts, conduits, wires and all other mechanical equipment serving other
parts of the Celebrity Square Area, the same to be in locations within the
Premises as will not unreasonably deny Tenant's use thereof. Landlord may make
any use it desires of the side or rear walls of the Premises, provided that
such use shall not encroach on the interior of the Premises, and provided such
encroachment does not materially impair the visibility of the storefront of
the Premises nor materially limit Tenant's access to the Premises or the
motorcycle parking area. Tenant agrees to give Landlord access to the Premises
for the purposes of this Section 9.6.
ARTICLE X
Common Areas
10.1 Use of Common Areas
Landlord grants to Tenant and its agents, employees and customers a non-
exclusive license to use the Common Areas in common with others during the
Term, subject to the exclusive control and management thereof at all times by
Landlord, the rights of the Landlord to designate up to 150 parking spaces for
the exclusive use of another tenant from time to time, and subject, further,
to the rights of Landlord set forth in Sections 9.5 and 10.2.
10.2 Management and Operation of Common Areas
Landlord will operate and maintain or will cause to be operated and maintained
the Common Areas in a manner deemed by Landlord to be reasonable and
appropriate and in the best interests of the Celebrity Square. Landlord will
have the right (i) to establish, modify and enforce reasonable rules and
regulations with respect to the Common Areas; (ii) to enter into, modify and
terminate easement and other agreements pertaining to the use and maintenance
of the parking areas and other Common Areas; (iii) Landlord reserves the right
for non-exclusive parking for special events so long as such use does not
materially adversely effect Tenant's business; (iv) to close all or any
portion of said parking areas or other Common Areas to such extent as may, in
the opinion of Landlord, be necessary to prevent a dedication thereof or the
accrual of any rights to any person or to the public therein; (v) to close
temporarily any or all portions of the Common Areas; (vi) to discourage non-
customer parking; (vii) to do and perform such other acts in and to said areas
and improvements as, in the exercise of good business judgment, Landlord shall
determine to be advisable.
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10.3 Employee Parking Areas
Notwithstanding any other provision of this Lease, Tenant and Tenant's
employees shall park their cars only in areas specifically designated for this
purpose by Landlord from time to time. Tenant further agrees that upon notice
from Landlord, Tenant will within five (5) days furnish to Landlord the
automobile license numbers assigned to Tenant's car and the cars of all of
Tenant's employees. In the event that Tenant or any of Tenant's employees fail
to park their cars in the designated parking areas, the Landlord may at its
option charge the Tenant, and Tenant agrees to pay Landlord as additional rent
the sum of Ten Dollars ($10.00) per day per car parked in any area other than
those designated for Tenant and employee Parking as distinguished from public
parking areas.
10.4 Tenant to Share Expense of Common Areas
In each Rental Year, Tenant will pay Landlord, as Additional Rental, the
Annual Common Area Maintenance Fee. The Annual Common Area Maintenance Fee
shall be paid by Tenant in monthly installments beginning on the Commencement
Date. The Annual Common Area Maintenance Fee shall be adjusted annually for
the Rental Year beginning January 1, 1998 and as of the first day of each
Rental Year thereafter, in the same proportion as the Consumer Price Index for
all Urban consumers published by the Bureau of Labor Statistics of the United
States Department of Labor.
10.5 The term "Landlord's Operating Costs" shall mean all costs and
expenses incurred by Landlord in operating and maintaining the Common Areas
pursuant to Section 10.2 including all costs and expenses of operating,
maintaining, repairing, lighting, signing, cleaning, painting, striping,
policing any security of the Common Areas. Landlord's Operating Costs shall
include, but not be limited to, cost of uniforms, equipment and employment
taxes; alarm, systems; insurance, including, without limitation, liability
insurance for personal injury, death and property damage, insurance against
fire, extended coverage, theft or other casualties, workmen's compensation
insurance covering personnel, fidelity bonds for personnel, insurance against
liability for assault and battery, defamation and claims of false arrest
occurring on and about the Common Areas, plate glass insurance for glass, if
any, exclusively serving the Common Areas; maintenance of sprinkler systems
serving the Common Areas; maintenance of sprinkler systems serving the
Celebrity Square Area; removal of snow, ice, trash and debris; regulation of
traffic including employee parking areas, tram systems and shuttles for
employees and visitors; surcharges levied upon or assessed against parking
spaces or areas, payments toward mass transit or car pooling facilities or
otherwise as required by Federal, State or local governmental authorities;
costs and expenses in connection with maintaining Federal, State or local
governmental ambient air and environmental standards; the cost of any capital
item purchased which reduces Landlord's Operating Costs (such cost to be
amortized over the useful life of the item plus interest at the Default Rate);
the cost of all materials, supplies and services purchased or hired therefor;.
operation of public toilets and other project amenities; installing and
renting of signs; fire protection; maintenance, repair and replacement of
utility systems serving the Common Areas, including, but not limited to,
water, sanitary sewer and storm water lines and other utility lines, pipes and
conduits; costs and expenses of maintenance and repair to the roofs and plate
glass, if any; costs and expenses of maintaining and operating sewage
treatment facilities, if any; costs and expenses of inspecting and
depreciation of machinery and equipment used in the operation, heating,
cooling, ventilating and maintenance of the Common Areas, if any and personal
property taxes and other charges incurred in connection with such equipment;
costs and expenses of repair or replacement of paving, curbs, walkways,
landscaping, drainage pipes, ducts, conduits and similar items, and lighting
facilities; costs and expenses of planting, replanting and replacing flowers,
shrubbery and planters; costs and expenses incurred in the rental of music
program services and loudspeaker systems, if any, including furnishing
electricity therefor; costs of providing light and power to the Common Areas;
costs of providing energy to heat, ventilate and air-condition areas in which
the Common Areas are located and the maintenance, repair and replacement of
such equipment; cost of water services, if any, furnished by Landlord for the
non-exclusive use of all tenants;
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parcel pick-up and delivery services; and administrative costs attributable to
the Common Areas for on-site personnel, including the General Manager,
Assistant General Manager, clerical, bookkeepers and other administrative
personnel, cost associated with the operation of Celebrity Square ticket
office or kiosk and management office including tickets, office equipment,
office supplies and accounting supplies, reasonable allocation of expenses of
off site personnel engaged in functions related to Landlord's Operating Costs
(including accounting or bookkeeping services), and an overhead cost equal to
five percent (5%) of the total Landlord's Operating Costs set forth above.
Such costs and expenses shall not include depreciation (other than
depreciation as above specified). Such costs shall not include salaries or
expenses of Landlord's supervisory personnel unless located in or for
Celebrity Square and devoting substantially full time to supervision of
operations of Celebrity Square, including administration of the ticket office
and sales therefrom. Notwithstanding the foregoing, such costs and expenses
shall not include matters separately reimbursed under any other provision of
this Lease.
ARTICLE XI
Marketing and Advertising
11.1 Marketing and Advertising Fund
Landlord will maintain a bank account, separate from all of its other bank
accounts, into which Landlord shall deposit the Annual Marketing and
Advertising Fund Contributions paid by Tenant pursuant to Section 11.2 as well
as similar contributions which Landlord may receive from time to time from
other tenants of the Celebrity Square Area (the aggregate of such funds on
hand from time to time being referred to herein as the "Marketing and
Advertising Fund"). The Marketing and Advertising Fund shall be used by
Landlord to pay all costs and expenses associated with the formulation and
carrying out of an ongoing program for the promotion of the Celebrity Square,
which program may include, without limitation, special events, shows,
displays, signs, marquees, decor, seasonal events, institutional advertising
for the Celebrity Square Area and other activities within the Celebrity Square
to attract customers; and to pay part of all costs and expenses when deemed
beneficial for advertising arranged by Landlord on Tenant's behalf when
Tenant's advertising is part of a Celebrity Square cooperative advertising
event and the same right is provided to all other tenants within the Center.
In addition, Landlord may use the Marketing and Advertising Fund to defray the
costs of administration of the Marketing and Advertising Fund, including
(without limitation) the salary of a promotion and advertising director and
related administrative personnel, rent and insurance. Landlord shall not be
responsible for the content of any advertising copy supplied by Tenant, and
Tenant shall indemnify, hold harmless and defend Landlord from and against any
actions, claims or demands of others arising out of the use of any such
advertising copy. Upon reasonable notice, Landlord shall make available for
Tenant's inspection, during normal business hours at Landlord's office,
Landlord's records relating to the contributions to and disbursements from the
Marketing and Advertising Fund. Tenant shall fully cooperate with Landlord and
the other tenants of the Celebrity Square in promoting the use of such trade
names and slogans as may be adopted for the Celebrity Square and in all
promotional and advertising campaigns.
11.2 Tenant's Contribution to Marketing and Advertising Fund
In each Promotion Year, Tenant shall pay to Landlord the Annual Marketing and
Advertising Fund Contribution. The Annual Marketing and Advertising Fund
Contribution shall be paid by Tenant in monthly installments, with each
installment being due on the first day of each month beginning on the
Commencement Date. The Annual Marketing and Advertising Fund Contribution
shall be adjusted annually as of the first day of each year beginning January
1, 1998 and each Promotion Year during the Term, in the same proportion as the
Consumer Price Index for all Urban Consumers (U.S. City Average) published by
the Bureau of Labor Statistics of the United States Department of Labor (the
"Consumer Price Index") most recently reported as of such adjustment date
bears to the Consumer Price Index reported for the first full calendar month
of the Term, all such adjustments to be apportioned for
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fractional years. The Annual Marketing and Advertising Fund Contribution for
any Promotion Year shall be prorated if Tenant opens the Premises for business
after the commencement of any such Promotion Year. If during the Term the
Consumer Price Index is changed or discontinued, Tenant and Landlord shall
agree upon a comparable index, formula or other means of measurement of the
relative purchasing power of the dollar and such substitute index, formula or
other means shall be utilized in place of the Consumer Price Index as if it
had been originally designated in this Lease.
11.3 (intentionally Deleted)
11.4 "Promotion Year" Defined
"Promotion Year" means each calendar year or portion thereof occurring during
the Term.
11.5 (Intentionally Deleted)
ARTICLE XII
Utilities
12.1 Water, Electricity, Telephone, Sanitary Sewer and Air Conditioning.
Landlord will provide at points in or near the Premises the facilities
necessary to enable Tenant to obtain for the Premises water, electricity,
telephone and sanitary sewer service. Tenant shall not at any time over burden
or exceed the capacity of the mains, feeders, ducts, conduits, or other
facilities by which such utilities are supplied to, distributed in or serve
the Premises. If Tenant desires to install any equipment which shall require
additional utility facilities or utility facilities of a greater capacity than
the facilities provided by Landlord, such installation shall be subject to
Landlord's prior written approval of Tenant's plans and specifications
therefor. If such installation is approved by Landlord and if Landlord
provides such additional facilities to accommodate Tenant's installation,
Tenant agrees to pay Landlord, on demand, the cost for providing such
additional utility facilities or utility facilities of greater capacity.
Tenant shall pay for all water, sanitary sewer, electricity and telephone
service required by or used by Tenant in the Premises. Landlord may supply any
or all of the above-named services, except electricity and telephone service,
to the Premises and Tenant agrees to pay Landlord in accordance with the terms
of this Article XII and the Schedule(s) referred to herein. With respect to
water and sanitary sewer, Tenant shall pay to Landlord therefore in accordance
with the provisions of Section 12.2.
12.2 Water and Sewer Charges
Water and sanitary sewer service shall be supplied to the Celebrity Square by
municipal utility or public companies serving the area in which the Celebrity
Square is located.
12.3 Fire Protection Sprinkler System
The fire protection sprinkler system and sprinkler heads in the Premises shall
be maintained by Tenant and shall remain the property of Landlord at the
termination of this Lease. Any modifications or additions required to the
existing sprinkler system within the Premises shall be at Tenant's sole cost
and expense.
12.4 Discontinuances and Interruptions of Utility Services
Landlord reserves the right to cut off and discontinue, without notice to
Tenant, furnishing any utility services furnished by Landlord at any time when
Tenant has failed to pay timely any amount (whether as Rental or otherwise)
due under this Lease. Landlord shall not be liable for any damages resulting
from or arising out of
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any such discontinuance and the same shall not constitute a termination of
this Lease or an eviction of Tenant. Landlord shall not be liable to Tenant in
damages or otherwise (i) if any utility shall become unavailable from any
public utility company, public authority or any other person or entity
(including Landlord) supplying or distributing such utility, or (ii) for any
interruption in any utility service caused by the making of any necessary
repairs or improvements or by any cause beyond Landlord's reasonable control,
and the same shall not constitute a termination of this Lease or an eviction
of Tenant.
12.5 Landlord's Right to Alter Utilities
Landlord, at its sole discretion, reserves and shall at all times, have the
right to alter utilities and equipment serving the Celebrity Square and Tenant
agrees to execute and deliver to Landlord without delay such documentation as
may be required to effect such alteration.
Landlord reserves the right, without any liability to Tenant and without
affecting Tenant's covenants and obligations hereunder, to stop or interrupt
or reduce any of the services listed in this Section or to stop or interrupt
or reduce any other services, required of Landlord under this Lease, whenever
and for so long as may be necessary, by reason of (i) accidents, emergencies,
strikes or the occurrence of any of the other events of force majeure, (ii)
the making of repairs or changes which Landlord is required or is permitted by
this Lease or by law to make or in good faith deems necessary, (iii)
difficulty in securing proper supplies of fuel, steam, water, electricity, or
(iv) any other cause beyond Landlord's reasonable control, whether similar or
dissimilar to the foregoing. Landlord does not warrant that the services
provided for in this Lease will be free from interruption or stoppage
resulting from the above causes, and specifically no reduction, interruption
or stoppage of any such services for any reason, shall ever be construed as an
eviction of Tenant nor shall the same cause any abatement of the rent payable
hereunder or in any manner or for any purpose relieve Tenant from any of
Tenant's obligations hereunder, and in any event, Landlord shall not be liable
for any loss, cost or damage, direct or consequential, of any nature arising
in connection with interruption or stoppage of any of such services or for any
damage to persons or property resulting therefrom; provided, however, Landlord
agrees to use reasonable diligence to resume the service or to cause the same
to be resumed.
ARTICLE XIII
Indemnity and Insurance
13.1 Indemnity by Tenant
Tenant assumes full responsibility for the Premises and shall indemnity, hold
harmless and defend Landlord, its agents, servants and employees from and
against any and all claims, actions, damages, liabilities and expenses,
including, but not limited to, attorney's and other professional fees and
defense costs, (i) arising from any loss of life, personal injury and/or
damage to any person or property occurring in, on, or about the Premises or
(ii) arising from any loss of life, personal injury and/or damage to any
person or property occurring outside of the Premises and resulting from any
act, omission, or negligence of Tenant, its contractors, licensees, agents or
employees, in whole or in part, except to the extent that such injury or
damage is attributable to the negligent acts or omissions of Landlord.
13.2 Landlord Not Responsible for Acts of Others
Landlord shall not be responsible or liable to Tenant, or to those claiming
by, through or under Tenant, for any loss or damage which may be occasioned by
or through the acts or omissions of persons occupying space adjoining the
Premises or any part of the premises adjacent to or connecting with the
Premises or any other part of the Celebrity Square, or otherwise, or for any
loss or damage resulting to Tenant, or those claiming by, through or under
Tenant, or its or their property, from the breaking, bursting, stoppage or
leaking of electrical cable and wires, and water, gas, sewer or steam pipes.
To the maximum extent permitted by law, Tenant agrees to use and occupy the
Premises and to use such other portions of the Celebrity Square as Tenant is
herein given the right to use, at Tenant's own risk.
13.3 Tenant's Insurance
At all times after the execution hereto, the Tenant shall carry or cause to be
carried at its expense non-deductible worker's compensation insurance in the
amount required by applicable statutes and policies of insurance against
public liability and property damage, including, without limitation,
commercial general liability, employer's liability, employee's vehicle
liability coverages and insurance against assumed or contractual liability
under this Lease (collectively the "Tenant's Liability Insurance")
specifically naming the Landlord, as an additional insured, with a combined
single limit of at least $2,000,000.00.
Tenant's Liability insurance shall also include any specific coverages that
Landlord requires due to the specific nature of Tenant's use of Premises
(i.e., "dram shop" or liquor liability" coverage for a Tenant whose allowable
use includes the sale of alcoholic beverages).
13.4 Tenant's Contractor's Insurance
Tenant shall require any contractor performing work on the Premises to carry
and maintain, at no expense to Landlord, non-deductible policies of insurance
in the same manner as Tenant is required under 13.3.
13.5 Policy Requirements
The company or companies writing any insurance which Tenant and/or Tenant's
contractor is required to carry and maintain or cause to be carried or
maintained pursuant to Sections 13.3 and 13.4 as well as the form of such
insurance shall at all times be subject to Landlord's approval and any such
company or companies shall be licensed to do business in the State of South
Carolina and have a Best rating or at least B+. Public liability and all-risks
property and casualty insurance policies evidencing such insurance shall name
Landlord and any other entities designated by Landlord as additional insureds
and shall also contain a provision by which the insurer agrees that such
policy shall not be canceled except after thirty (30) days' written notice to
Landlord or its designee. Each such policy, or a certificate thereof, shall be
deposited with Landlord by Tenant promptly upon commencement of Tenant's
obligation to procure the same. If Tenant shall fail to perform any of its
obligations under Sections 13.3, 13.4, or 13.5, Landlord may perform the same
and the cost of same together with Landlord's administrative costs shall be
deemed Additional Rental and shall be payable upon Landlord's demand.
13.6 Increase in Insurance Premiums
Tenant will not do or suffer to be done, or keep or suffer to be kept,
anything in, upon or about the Premises which will violate Landlord's policies
of hazard or liability insurance or which will prevent Landlord from procuring
such policies in companies acceptable to Landlord. If anything done, omitted
to be done or suffered by Tenant to be kept in, upon or about the Premises
shall cause the rate of fire or other insurance on the Premises or on other
property of Landlord or of others within the Celebrity Square to be increased
beyond the minimum rate from time to time applicable to the Premises or to any
such property for the use or uses made thereof, Tenant will pay, as Additional
Rental, the amount of any such increase upon Landlord's demand.
13.7 Waiver of Right of Recovery
Neither Landlord nor Tenant shall be liable to the other party or to any
insurance company (by way of subrogation or otherwise) insuring the other
party for any loss or damage to any building, structure or other tangible
property or liability for personal injury, or losses under workmen's
compensation laws and benefits, even though such loss or damage might have
been occasioned by the negligence of such
TENANT /s/ MP LANDLORD /s/ DPW
party, its agents or employees. However, if by reason of the foregoing waiver,
either party shall be unable to obtain any such insurance, such waiver shall
be deemed not to have been made by such party.
13.8 Tenant to Pay Proportionate Share of Insurance Costs
In each Rental Year Tenant shall pay Landlord, as Additional Rental, a
proportionate share of Landlord's cost of maintaining all insurance with
respect to Landlord's Building, including, without limitation, all-risks
property and casualty insurance, flood insurance and rent insurance. Such
insurance may be carried at the discretion of Landlord in such amounts and
companies as Landlord shall determine.
Tenant's proportionate share of such costs for any Rental Year shall be
computed by multiplying Landlord's insurance costs for the Rental Year in
question by a fraction, the numerator of which shall be Tenant's Floor Area,
and the denominator of which shall be Landlord's Floor Area. Such
proportionate share shall be paid by Tenant in monthly installments in such
amounts as are estimated and billed by Landlord during each twelve (12) month
period commencing and ending on dates designated by Landlord, each installment
being due on the first day of each calendar month. If at any time during such
twelve (12) month period, it shall appear that Landlord has underestimated
Tenant's proportionate share of Landlord's insurance costs for such twelve
(12) month period, Landlord may re-estimate Tenant's proportionate share of
Landlord's insurance costs and may bill Tenant for any deficiency which may
have accrued during such twelve (12) month period and thereafter the monthly
installment payable by Tenant shall also be adjusted. Within six (6) months,
or such reasonable time (in Landlord's determination) after the end of each
such twelve (12) month period, Landlord shall deliver to Tenant a statement of
such insurance costs for such twelve (12) month period. Any overpayment or
deficiency in Tenant's payment of its proportionate share of such insurance
costs shall be adjusted between Landlord and Tenant, and Tenant shall pay
Landlord or Landlord shall credit to Tenant's account or (if such adjustment
is at the end of the Term) pay Tenant, as the case may be, within thirty (30)
days of receipt of such statement, such amounts as may be necessary to effect
such adjustment. Upon reasonable notice, Landlord shall make available for
Tenant's inspection at Landlord's office during normal business hours,
Landlord's records relating to such insurance costs for such preceding twelve
(12) month period. The failure of Landlord to provide the statement called for
hereunder within the time prescribed shall not relieve Tenant of its
obligations hereunder.
13.9 Tenant's Failure to Comply.
If Tenant fails to comply with the foregoing requirements relating to
insurance, Landlord may obtain such insurance and Tenant shall pay to Landlord
immediately on demand the premium cost thereof.
13.10 (Intentionally Deleted)
ARTICLE XIV
Damage and Destruction
14.1 Landlord's Obligation to Repair and Reconstruct
If the Premises shall be damaged by fire, the elements, accident or other
casualty (any of such causes being referred to herein as a "Casualty"), but
the Premises shall not be thereby rendered wholly or partially untenantable,
Landlord shall promptly cause such damage to be repaired and there shall be no
abatement of Rental. If, as the result of Casualty, the Premises shall be
rendered wholly or partially untenantable, then, subject to the provisions of
Section 14.2, Landlord shall cause such damage to be repaired and, provided
such damage is not caused by the negligence of Tenant, its agents,
concessionaires, officers, employees, contractors, licensees or invitees, all
Rental (other than any Additional Rental due Landlord by reason of Tenant's
failure to perform any of its obligations hereunder) shall be abated
proportionately as to the portion of the Premises rendered untenantable
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during the period of such untenantability. All such repairs shall be made at
the expense of the Landlord, subject to Tenant's responsibilities set forth
herein. Landlord shall not be liable for interruption to Tenant's business or
for damage to or replacement or repair of Tenant's personal property
(including, without limitation, inventory, trade fixtures, floor coverings,
furniture and other property removable by Tenant under the provisions of this
Lease) or to any leasehold improvements installed in the Premises, all of
which damage, replacement or repair shall be undertaken and completed by
Tenant promptly.
14.2 Landlord's Option to Terminate Lease
If the Premises are (a) rendered wholly untenantable, or (b) damaged as a
result of any cause which is not covered by Landlord's insurance or (c)
damaged or destroyed in whole or in part during the last three (3) years of
the Term, or if Landlord's Building is damaged to the extent of fifty percent
(50%) or more of Landlord's Floor Area, then, in any of such events, Landlord
may elect to terminate this Lease by giving to Tenant notice of such election
within ninety (90) days after the occurrence of such event. If such notice is
given, the rights and obligations of the parties shall cease as of the date of
such notice, and Rental (other than any Additional Rental due Landlord by
reason of Tenant's failure to perform any of its obligations hereunder) shall
be adjusted as of the date of such termination.
14.3 Demolition of Landlord's Building
If Landlord's Building shall be so substantially damaged that it is reasonably
necessary, in Landlord's judgment, to demolish such Building for the purpose
of reconstruction, Landlord may demolish the same in which event the Rental
shall be abated to the same extent as if the Premises were rendered
untenantable by a Casualty.
14.4 Insurance Proceeds
If Landlord does not elect to terminate this Lease pursuant to Section 14.2,
Landlord shall, subject to the prior rights of any Mortgagee, disburse and
apply any insurance proceeds received by Landlord to the restoration and
rebuilding of Landlord's Building in accordance with Section 14.1 hereof. All
insurance proceeds payable with respect to the Premises (excluding proceeds
payable to Tenant pursuant to Section 13.3) shall belong to and shall be
payable to Landlord.
ARTICLE XV
Condemnation
15.1 Effect of Taking
If the whole or any part of the Premises shall be taken under the power of
eminent domain, this Lease shall terminate as to the part so taken on the date
Tenant is required to yield possession thereof to the condemning authority.
Landlord shall make such repairs and alterations as may be necessary in order
to restore the part not taken to useful condition and all Rental (other than
any Additional Rental due Landlord by reason of Tenant's failure to perform
any of its obligations hereunder) shall be reduced in the same proportion as
the portion of the Floor Area of the Premises so taken bears to Tenant's Floor
Area. If the aforementioned taking renders the remainder of the Premises
unsuitable for the Permitted Use, either party may terminate this Lease as of
the date when Tenant is required to yield possession by giving notice to that
effect within thirty (30) days after such date. If twenty percent (20%) or
more of Landlord's Floor Area in the Celebrity Square Area is taken as
aforesaid, Landlord may elect to terminate this Lease as of the date on which
possession thereof is required to be yielded to the condemning authority, by
giving notice of such election within ninety (90) days after such date. If any
notice of termination is given pursuant to this Section, this Lease and the
rights and obligations of the parties hereunder shall cease as of the date of
such notice and Rental (other than any Additional Rental due Landlord by
reason of Tenant's failure
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to perform any of its obligations hereunder) shall be adjusted as of the date
of such termination.
15.2 Condemnation Awards
All compensation awarded for any taking of the Premises or the Celebrity
Square Area or any interest in either shall belong to and be the property of
Landlord, Tenant hereby assigning to Landlord all rights with respect thereto;
provided, however, nothing contained herein shall prevent Tenant from applying
for reimbursement from the condemning authority (if permitted by law) for
moving expenses, or the expense of removal of Tenant's trade fixtures, or loss
of Tenant's business good will, but if and only if such action shall not
reduce the amount of the award or other compensation otherwise recoverable
from the condemning authority by Landlord or the owner of the fee simple
estate in the Celebrity Square Area.
ARTICLE XVI
Assignments and Subletting
16.1 Landlord's Consent Required
Tenant will not assign this Lease, in whole or in part, nor sublet all or any
part of the Premises, nor license concessions or lease departments therein,
nor pledge or secure by mortgage or other instruments this Lease, without
first obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld. This prohibition includes, without limitation, (i) any
subletting or assignment which would otherwise occur by operation of law,
merger, consolidation, reorganization, transfer or other change of Tenant's
corporate or proprietary structure; (ii) an assignment or subletting to or by
a receiver or trustee in any Federal or State bankruptcy, insolvency, or other
proceedings; (iii) the sale, assignment or transfer of all or substantially
all of the assets of Tenant, with or without specific assignment of Lease; or
(iv) the change in control in a partnership. Consent by Landlord to any
assignment or subletting shall not constitute a waiver of the requirement for
such consent to any subsequent assignment or subletting, nor shall such
consent be deemed to release Tenant or any Guarantor from liability under this
Lease except to the extent such consent specifically provides in writing.
Tenant shall pay to Landlord, as Additional Rental, the sum of Five Hundred
and No/100 Dollars ($500.00) to cover Landlord's administrative costs,
overhead and counsel fees, plus all out-of-pocket expenses, in connection with
such assignment or subletting consented to by Landlord and any and all
additional costs and expenses incurred hereunder. The parties of this Lease
agree that it shall be deemed to be reasonable under this Lease and under
applicable law for Landlord to withhold consent to an assignment of the Lease
or the subletting of the Premises where one or more of the following apply:
(i) The transferee is a character or reputation or engaged in a business
which is not consistent with the quality of operation of the Celebrity Square
Area or would be a significantly less prestigious occupant of the Premises
than Tenant.
(ii) The transferee is not a party of at least equivalent credit-
worthiness as the Tenant.
(iii) The transferee is not a party with at least equivalent experience
in operating an EasyRider Cafe.
16.2 Transfer of Corporate Shares
If Tenant is a corporation or is a partnership with a corporate general
partner that controls a majority interest or voting control of the partnership
(other than a corporation the outstanding voting stock of which is listed on a
"national securities exchange", as defined in the Securities Exchange Act of
1934) and if at any time after execution of this Lease any part or all of the
corporate shares shall be transferred by sale, assignment, bequest,
inheritance, operation of law or other
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disposition (including, but not limited to, such a transfer to or by a
receiver or trustee in Federal or State bankruptcy, insolvency, or other
proceedings) so as to result in a change in the present control of said
corporation by the person or persons now owning a majority of said corporate
shares, Tenant shall give Landlord notice of such event within fifteen (15)
days from the date of such transfer. In such event and whether or not Tenant
has given such notice, Landlord may elect to terminate this Lease at any time
thereafter by giving Tenant notice of such election, in which event this Lease
and the rights and obligations of the parties hereunder shall cease as of a
date set forth in such notice. In the event of any such termination, all
Rental (other than any Additional Rental due Landlord resulting from Tenant's
failure to perform any of its obligations hereunder) shall be adjusted as of
the date of such termination.
16.3 Acceptance of Rent from Transferee
The acceptance by Landlord of the payment of Rental following any assignment
or other transfer prohibited by this Article shall not be deemed to be a
consent by Landlord to any such assignment or other transfer nor shall the
same be deemed to be a waiver of any right or remedy of Landlord hereunder.
ARTICLE XVII
Default
17.1 "Event of Default" Defined
Any one or more of the following events shall constitute an "Event of
Default":
(a) The sale of Tenant's interest in the Premises under attachment,
execution or similar legal process; or if Tenant is adjudicated a bankrupt or
insolvent under any State bankruptcy or insolvency law or an order for relief
is entered against Tenant under the Federal Bankruptcy Code and such
adjudication or order is not vacated within ten (10) days.
(b) The commencement of a case under any chapter of the Federal
Bankruptcy Code by or against Tenant or any guarantor of Tenant's obligations
hereunder, or the filing of a voluntary or involuntary petition proposing the
adjudication of Tenant or any guarantor a bankrupt or insolvent, or the
reorganization of Tenant or any such guarantor, or an arrangement by Tenant
or any guarantor with its creditors, unless the petition is filed or case
commenced by a party other than Tenant or any such guarantor and is
withdrawn or dismissed within thirty (30) days after the date of its filing.
(c) The admission in writing by Tenant or any guarantor of Tenant's
obligations hereunder of its inability to pay its debts when due.
(d) The appointment of a receiver or trustee for the business or property
of Tenant or any guarantor of Tenant's obligations hereunder, unless such
appointment shall be vacated within ten (10) days of its entry,
(e) The making by Tenant or any guarantor of Tenant's obligations
hereunder of an assignment for the benefit of its creditors, or if in any
other manner. Tenant's interest in this Lease shall pass to another by
operation of law.
(f) The failure of Tenant to pay any Rental or other sum of money within
seven (7) days after the same is due hereunder. Tender of Rentals due after
legal action has been commenced against Tenant for non-payment of Rental shall
not be a defense to such action.
(g) Default by Tenant in the performance or observance of any covenant or
agreement of this Lease (other than a default involving the payment of
money), which default is not cured within ten (10) days after the giving of
notice thereof by Landlord, unless such default is of such nature that it
cannot be cured within such ten (10) day period, in which case no Event of
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Default shall occur so long as Tenant shall commence the curing of the default
within such ten (10) day period and shall thereafter diligently prosecute the
curing of same; provided, however, if Tenant shall default in the performance
of any such covenant or agreement of this Lease two (2) or more times in any
twelve (12) month period, that notwithstanding such defaults have each been
cured by Tenant, any further similar default shall be deemed an Event of
Default without the ability for cure.
(h) The vacating or abandonment of the Premises by Tenant at any time
during the Term of this Lease or closing the Premises as a retail sales store
for a period in excess of thirty (30) days unless such closing is for the
purpose of renovation, repair or permitted alterations.
(j) The occurrence of any other event described as constituting an "Event
of Default" elsewhere in this Lease.
17.2 Remedies
Upon the occurrence and continuance of an Event of Default, Landlord, without
notice to Tenant in any instance (except where expressly provided for below)
may:
(a) With such judicial process as may be required by law, enter the
Premises and take possession of any and all goods, inventory, equipment,
fixtures and all other personal property of Tenant situated in the Premises
without liability for trespass or conversion, and may sell all or any part
thereof at public or private sale. Tenant agrees that five (5) days notice of
any public sale and five (5) days prior notice of the date after which any
private sale shall be held shall constitute reasonable notice. The proceeds of
any such sale shall be applied, first, to the payment of all costs and
expenses of conducting the sale or caring for or storing said property,
including all attorneys' fees; second, toward the payment of any indebtedness,
including (without limitation) indebtedness for Rental, which may be or may
become due from Tenant to Landlord; and third, to pay the Tenant, on demand in
writing, any surplus remaining after all indebtedness of Tenant to Landlord
has been fully paid.
(b) With such judicial process as may be required by law, perform, on
behalf and at the expense of Tenant, any obligation of Tenant under this Lease
which Tenant has failed to perform and of which Landlord shall have given
Tenant notice, the cost of which performance by Landlord, together with
interest thereon at the Default Rate from the date of such expenditure, shall
be deemed Additional Rental and shall be payable by Tenant to Landlord upon
demand.
(c) Elect to terminate this Lease and the tenancy created hereby by
giving notice of such election to Tenant, and may with judicial process
reenter the Premises, and may remove Tenant and all other persons (if Tenant
is still in possession) and property from the Premises, and may store such
property in a public warehouse or elsewhere at the cost of and for the account
of Tenant and without Landlord being deemed guilty of trespass or becoming
liable for any loss or damage occasioned thereby.
(d) Exercise any other legal or equitable right or remedy which it may
have.
Notwithstanding the provisions of clause (b) above and regardless of whether
an Event of Default shall have occurred, Landlord may exercise the remedy
described in clause (b) without any notice to Tenant if Landlord, in its good
faith judgment, believes it would be injured by failure to take rapid action
or if the unperformed obligation of Tenant constitutes an emergency.
Any reasonable costs and expenses incurred by Landlord (including attorneys'
fees) in enforcing any of its rights or remedies under this Lease shall be
deemed to be Additional Rental and shall be repaid to Landlord by Tenant upon
demand.
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17.3 Damages
If Tenant's right of possession under this Lease is terminated by Landlord
pursuant to Section 17.2, Tenant nevertheless shall remain liable for any
Rental and damages which may be due or sustained by Landlord and all
reasonable costs, fees and expenses including, but not limited to, attorneys'
fees, costs and expenses incurred by Landlord in pursuit of its remedies
hereunder, or in renting the Premises to others from time to time and
additional damages which shall be an amount or amounts equal to the Rental
which, but for termination of Tenant's rights of possession under this Lease,
would have become due during the remainder of the Term, less the amount or
amounts of rental, if any, which Landlord shall receive during such period
from others to whom the Premises may be rented (other than any Additional
Rental received by Landlord as a result of any failure of such other person to
perform any of its obligations to Landlord).
If this Lease is terminated pursuant to Section 17.2, Landlord may relet the
Premises or any part thereof, alone or together with other premises, for such
term or terms (which may be greater or less than the period which otherwise
would have constituted the balance of the Term) and on such terms and
conditions (which may include concessions or free rent and alterations of the
Premises) as Landlord, in its absolute discretion, may determine, but Landlord
shall not be liable for, nor shall Tenant's obligations hereunder be
diminished by reason of, any failure by Landlord to relet the Premises or any
failure by Landlord to collect any rent due upon such reletting.
17.4 Assignment in Bankruptcy
In the event of an assignment by operation of law under the Federal Bankruptcy
Code, or any State bankruptcy or insolvency law and Landlord elects not to
terminate or is stayed from termination of Tenant's rights of possession under
this Lease, the assignee shall provide Landlord with adequate assurance of
future performance of all of the terms, conditions and covenants of the Lease,
which shall include, but which shall not be limited to, assumption of all the
terms, covenants and conditions of the Lease by the assignee and the making by
the assignee of the following express covenants to Landlord:
(a) That assignee has sufficient capital to pay the Rental and other
charges due under the Lease for the entire Term; and
(b) That Annual Percentage Rental due under the Lease will not decline
substantially from the highest Annual Percentage Rental paid by Tenant prior
to such bankruptcy or insolvency proceedings; and
(c) That assumption of the Lease by the assignee will not cause Landlord
to be in violation or breach of any provision in any other lease, financing
agreement or operating agreement relating to the Celebrity Square; and
(d) That such assignment and assumption by the assignee will not
substantially disrupt or impair any existing tenant mix in the Celebrity
Square.
ARTICLE XVIII
Subordination and Attornment
18.1 Subordination
Unless a Mortgagee (as hereinafter defined) shall otherwise elect as provided
in section 18.2, Tenant's rights under this Lease are and shall remain subject
and subordinate to the operation and effect of
(a) any lease of land only or of land and buildings in a sale-leaseback
transaction involving the Premises, or
(b) any mortgage, deed of trust or other security instrument constituting
a mortgage lien upon the Premises,
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whether the same shall be in existence at the date hereof or created
hereafter, any such lease, mortgage, deed of trust or other security
instrument being referred to herein as a "Mortgage" and the party or parties
having the benefit of the same, whether as lessor, mortgagee, trustee or
noteholder, being referred to herein as "Mortgagee". Tenant's acknowledgment
and agreement of subordination provided for in this Section is self-operative
and no further instrument of subordination shall be required; however, Tenant
shall execute such further assurances thereof as shall be requisite or as may
be requested from time to time by Landlord or a Mortgagee.
Notwithstanding any other provisions of this Lease to the contrary, no
subordination of this Lease and no obligation of Tenant to attorn shall be
effective unless the Mortgagee delivers to Tenant a binding written
undertaking enforceable by and for the benefit of Tenant under applicable law,
that this Lease and Tenant's rights hereunder shall continue undisturbed while
Tenant is not in default beyond express periods for cure.
18.2. Mortgagee's Unilateral Subordination
If a Mortgagee shall so elect by notice to Tenant or by the recording of
unilateral declaration of subordination, this Lease and Tenant's rights
hereunder shall be superior and prior in right to the Mortgage of which such
Mortgagee has the benefit, with the same force and effect as if this Lease had
been executed, delivered and recorded prior to the execution, delivery and
recording of such Mortgage, subject, nevertheless, to such conditions as may
be set forth in any such notice or declaration.
18.3 Attornment
If any person shall succeed to all or part of Landlord's interest in the
Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power
of sale, termination of lease, or otherwise, and if so requested or required
by such successor in interest, Tenant shall attorn to such successor in
interest and shall execute such agreement in confirmation of such attornment
as such successor in interest shall reasonably request; provided that any such
successor in interest shall be deemed by reliance on this Section 18.3 to have
agreed that it shall not disturb possession by Tenant of the Premises except
as provided in this Lease and such successor in interest will acknowledge such
non-disturbance agreement in any confirmation of attornment as it requests.
ARTICLE XIX
Notices
19.1 Sending of Notices
Any notice, request, demand, approval or consent given or required to be given
under this Lease shall be in writing and shall be deemed to have been given as
follows:
(i) If intended for Landlord, on the third day following the day on which the
same shall have been mailed by United States registered or certified mail,
return receipt requested, with all postage charges prepaid, addressed to
Landlord at each of the following address: Burroughs & Chapin Company,
Inc., 2411 Oak Street, Myrtle Beach, South Carolina 29577; with a copy to
Landlord's management office in the Celebrity Square, except that payment
of Rental and sales reports shall be delivered to Landlord's main office.
(ii) If intended for Tenant, the third day following the day on which the
same shall have been mailed by the United States registered or certified mail,
return receipt requested, with all postal charges prepaid, addressed to Tenant
at the Tenant Notice Address with a copy to the Premises.
TENANT /s/ MP LANDLORD /s/ DPW
Either party may, at any time, change its Notice Address and for the above
purposes by sending a notice to the other party stating the change and setting
forth the new address.
19.2 Notice to Mortgagees
If any Mortgagee shall notify Tenant that it is the holder of a Mortgage
affecting the Premises, no notice, request or demand thereafter sent by Tenant
to Landlord shall be effective unless and until a copy of the same shall also
be sent to such Mortgagee in the manner prescribed in Section 19.1 and to such
address as such Mortgagee shall designate.
ARTICLE XX
Quiet Enjoyment
20.1 Warranty
Landlord warrants that it has full right and authority to lease the Premises
upon the terms and conditions herein set forth; and the Tenant shall
peacefully and quietly hold and enjoy the Premises for the full Term hereof so
long as it does not default in the performance of any of its covenants
hereunder.
ARTICLE XXI
Miscellaneous
21.1 Retail Restriction Limit
Except for a sales and service store which store sells Easy Rider apparel and
other merchandise (and does not contain restaurant, bar or cafe)Tenant agrees
that Tenant (and if Tenant is a corporation or partnership, its officers,
directors, stockholders, any affiliates or partners) shall not, directly or
indirectly, operate, manage or have any interest in any other store (unless in
operation on the date of this Lease) or business which is similar to or in
competition with the Permitted Use within the Retail Radius Restriction except
in other properties owned and/or operated by Landlord.
'21.2 Estoppel Certificates
At any time and from time to time, within ten (10) days after Landlord shall
request the same, Tenant will execute, acknowledge and deliver to Landlord and
to such Mortgagee or other party as may be designated by Landlord, a
certificate in the acceptable form with respect to the matters required by
such party and such other matters relating to this Lease or the status of
performance of obligations of the parties hereunder as may be reasonably
requested by Landlord. In the event that Tenant falls to provide such
certificate within ten (10) days after request therefor by Landlord, Tenant
shall be deemed to have approved the contents of any such certificate
submitted to Tenant by Landlord and Landlord is hereby authorized to so
certify. Said certificate shall be considered delivered to the Landlord and
Mortgagee or other designated party when it has been transmitted in accordance
with Section 19.1 of this Lease. Any Guarantor of this Lease shall be obliged
to deliver said certificates as outlined above.
21.3 Inspections and Access by Landlord
Tenant will permit Landlord, its agents, employees and contractors to enter
all parts of the Premises during Tenant's business hours to inspect the same
and to enforce or carry out any provision of this Lease, including, without
limitation, any access necessary for the making of any repairs which are
Landlord's obligation hereunder; provided that, in an emergency situation,
such access shall be at any time upon Landlord's oral request.
21.4 Memorandum of Lease
TENANT /s/ MP LANDLORD /s/ DPW
This Lease shall not be recorded.
The parties hereby agree that, upon the request of either party, each will
execute, acknowledge and deliver a short form or memorandum of this Lease in
recordable form. Recording, filing and like charges and any stamp, charge for
recording, transfer or other tax shall be paid by the Tenant. In the event of
termination of this Lease, within thirty (30) days after written request from
Landlord, Tenant agrees to execute, acknowledge and deliver to Landlord an
agreement removing such short form of lease from record. If Tenant fails to
execute such agreement within said thirty (30) day period or fails to notify
Landlord within said thirty (30) day period of its reasons for refusing to
execute such agreement, Landlord is hereby authorized to execute and record
such agreement removing the short form of lease from record. These provisions
shall survive any termination of this Lease.
21.5 Remedies Cumulative
No reference to any specific right or remedy shall preclude Landlord from
exercising any other right or from having any other remedy or from maintaining
any action to which it may otherwise be entitled at law or in equity. No
failure by Landlord to insist upon the strict performance of any agreement,
term, covenant or condition hereof, or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial rent
during the continuance of any such breach, shall constitute a waiver of any
such breach, agreement, term, covenant or condition. No waiver by Landlord of
any breach by Tenant under this Lease or of any breach by any other tenant
under any other lease of any portion of the Celebrity Square shall affect or
alter this Lease in any way whatsoever.
21.6 Successors and Assigns
This Lease and the covenants and conditions herein contained shall inure to
the benefit of and be binding upon Landlord, its successors and assigns, and
shall be binding upon Tenant, its successors and assigns and shall inure to
the benefit of Tenant and only such assigns of Tenant to whom the assignment
of this Lease by Tenant has been consented to by Landlord. Upon any sale or
other transfer by Landlord of its interest in the Premises, Landlord shall be
relieved of any obligations under this Lease occurring thereafter.
21.7 Compliance with Laws and Regulations
Tenant, at its sole cost and expense, shall comply with and shall cause the
Premises to comply with (a) all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, and ordinances
affecting the Premises or any part thereof, or the use thereof, including, but
not limited to, those which require the making of any structural, unforeseen
or extraordinary changes, whether or not any such statutes, laws, rules,
orders, regulations or ordinances which may be hereafter enacted involve a
change of policy on the part of the governmental body enacting the same, and
(b) all rules, orders and regulations of the National Board of Fire
Underwriters or Landlord's fire insurance rating organization or other bodies
exercising similar functions in connection with the prevention of fire or the
correction of hazardous conditions which apply to the Premises.
21.8 Captions and Headings
The Article and Section captions and headings are for convenience of reference
only and in no way shall be used to construe or modify the provisions set
forth in this Lease.
21.9 Joint and Several Liability
If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) shall sign this Lease
as Tenant, the liability of each such individual, corporation, partnership or
other business association to pay rent and perform all other obligations
hereunder shall be deemed
TENANT /s/ MP LANDLORD /s/ DPW
to be joint and several, and all notices, payments and agreements given or
made by, with or to any one of such individuals, corporations, partnerships or
other business associations shall be deemed to have been given or made by,
with or to all of them. In like manner, if Tenant shall be a partnership or
other business association, the members of which are, by virtue of statute or
federal law, subject to personal liability, the liability of each member shall
be joint and several.
21.10 Broker's Commission
Each of the parties represents and warrants that there are no claims for
brokerage commissions or finders' fees in connection with the execution of
this Lease, and agrees to indemnify the other against, and hold it harmless
from, all liability arising from any such claim based on the alleged act or
representation of such party, including, without limitation, the cost of
counsel fees in connection therewith.
21.11 No Discrimination
It is intended that the Celebrity Square shall be developed so that all
prospective tenants thereof, and all customers, employees, licensees and
invitees of all tenants shall have the opportunity to obtain all the goods,
services, accommodations, advantages, facilities and privileges of the
Celebrity Square without discrimination because of race, creed, color, sex,
age, national origin or ancestry. To that end, Tenant shall not discriminate
in the conduct and operation of its business in the Premises against any
person or group of persons because of the race, creed, color, sex, age,
national origin or ancestry of such person or group of persons.
21.12 No Joint Venture
Any intention to create a joint venture or partnership relation between the
parties hereto is hereby expressly disclaimed. The provisions of this Lease in
regard to the payment by Tenant and the acceptance by Landlord of a percentage
of admissions sales or Gross Sales of Tenant and others is a reservation for
rent for the use of the Premises.
21.13 No Option
The submission of this Lease for examination does not constitute a reservation
of or option for the Premises, and this Lease shall become effective only upon
execution and delivery thereof by both parties.
21.14 No Modification
This writing is intended by the parties as a final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having
been incorporated herein. No course of prior dealings between the parties or
their officers, employees, agents or affiliates shall be relevant or
admissible to supplement, explain or vary any of the terms of this Lease.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their affiliates shall not be
relevant or admissible to determine the meaning of any of the terms of this
Lease. No representations, understandings or agreements have been made or
relied upon in the making of this Lease other than those specifically set
forth herein. This Lease can be modified only by a writing signed by the party
against whom the modification is enforceable.
21.15 Severability
If any term or provision, or any portion thereof, of this Lease, or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances, other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
TENANT /s/ MP LANDLORD /s/ DPW
21.16 Third Party Beneficiary
Nothing contained in this Lease shall be construed so as to confer upon any
other party the rights of a third party beneficiary except rights contained
herein for the benefit of a Mortgagee.
21.17 Corporate Tenants
In the event Tenant is a corporation, the persons executing this Lease on
behalf of Tenant hereby covenant and warrant that: Tenant is a duly
constituted corporation qualified to do business in the state in which the
Celebrity Square is located; all Tenant's franchises and corporate taxes have
been paid to date; all future forms, reports, fees and other documents
necessary for Tenant to comply with applicable laws will be filed by Tenant
when due; and such persons are duly authorized by the board of directors of
such corporation to execute and deliver this Lease on behalf of the
corporation. Further, Tenant shall submit to Landlord a copy of its corporate
resolutions authorizing the execution of the Lease at the time it submits the
executed Leases to Landlord.
21.18 Applicable Law
This Lease and the rights and obligations of the parties hereunder shall be
construed in accordance with the laws of the state in which the Celebrity
Square is located.
21.19 Time of Essence
Time is of the essence of this Lease.
21.20 Performance of Landlord's Obligations by Mortgagee
Tenant shall accept performance of any of Landlord's obligations hereunder by
any Mortgagee.
21.21 Waiver of Jury Trial
Landlord and Tenant hereby mutually waive any and all right which either may
have to request a jury trial in any proceeding at law or in equity in any
court of competent jurisdiction.
21.22 Landlord's Option to Terminate Lease
Notwithstanding any provision herein to the contrary, if for any reason
whatsoever the Premises shall not be Ready for Occupancy as of one (1) year
following the execution of this Lease Agreement, Landlord may elect to
terminate this Lease by giving notice of such election to Tenant. If such
notice is given, this Lease and the rights and obligations of the parties
hereunder shall thereupon cease and terminate without need for the execution
of any further or other instrument, but, if Landlord shall request, Tenant
shall execute an instrument, in recordable form, whereby Tenant releases and
surrenders all right, title and interest which it may have in and to the
Premises under this Lease or otherwise.
21.23 Limitation on Right of Recovery Against Landlord
Tenant acknowledges and agrees that the liability of Landlord under this Lease
shall be limited to its interest in the Celebrity Square and any judgments
rendered against Landlord shall be satisfied solely out of the proceeds of
sale of its interest in the Celebrity Square. No personal judgment shall lie
against Landlord upon extinguishment of its rights in the Celebrity Square and
any judgments so rendered shall not give rise to any right of execution or
levy against Landlord's assets. The provisions hereof shall inure to
Landlord's successors and assigns including any Mortgagee. The foregoing
provisions are not intended to relieve Landlord from the performance of any of
Landlord's obligations under this Lease, but only to limit the personal
liability of Landlord in case of recovery of a judgment against Landlord; nor
shall the foregoing be deemed to limit Tenant's rights to obtain injunctive
relief or
TENANT /s/ MP LANDLORD /s/ DPW
specific performance or to avail itself of any other right or remedy which may
be awarded Tenant by law or under this Lease.
21.24 Force Majeure
In the event Landlord or Tenant shall be delayed, hindered or prevented from
the performance of any act required hereunder, by reason of governmental
restrictions, scarcity of labor or materials, strikes, fire, or any other
reasons beyond its control, the performance of such act shall be excused for
the period of delay, and the period for the performance of any such act shall
be extended for the period necessary to complete performance after the end of
the period of such delay. Notwithstanding anything herein contained to the
contrary, the provisions of this Section 21,24 shall not be applicable to
Tenant's obligations to pay rent or any other sums, monies, costs, charges or
expenses required to be paid by Tenant subsequent to the Commencement Date.
21.25 Air Rights
Notwithstanding anything to the contrary contained in this Lease, Landlord
reserves to itself, its successors and assigns and specifically reserves from
the demise hereunder any rights to use, dispose and/or further develop those
rights commonly referred to as "air rights" or "development rights". Nothing
herein contained shall prevent Landlord from using, selling, leasing or
developing such rights during the Term of this Lease, provided that any such
use, sale, leasing or development shall be accomplished with minimal
inconvenience to Tenant. Unless actual usable space of Tenant is actually
taken by Landlord for its use, sale, leasing or development of such rights,
the rent payable hereunder shall not be reduced or abated during the Term of
this Lease.
21.26 Rules and Regulations
The rules and regulations described in Schedule D attached hereto and made a
part hereof, for the Landlord's Building and the Premises which Landlord may
hereafter from time to time, reasonably adopt and promulgate for the
government and management of the Landlord's Building and Premises are hereby
made a part of this Lease and shall, during the Term thereof be in all things
observed and performed by Tenant and by Tenant's employees and agents.
21.27 (INTENTIONALLY DELETED)
21.28 Hazardous Materials
Tenant warrants that no substances or materials which are or may be governed
or regulated by any governmental authority as hazardous waste, hazardous
substances, pollutants or contaminants will be used on, stored on, or
deposited on the Demised Premises. Further, Tenant warrants that Tenant does
not and will not engage in any activity which would involve the use of the
Premises for the storage, use, treatment, transportation or disposal of any
chemical, material or substance which is regulated as toxic or hazardous or
exposure to which is prohibited, limited or regulated by any Federal, state,
county, regional, local or other governmental authority. Tenant shall, and
does hereby agree to, hold harmless and indemnify Landlord from all actions,
claims, liability, loss and/or damage, including reasonable attorney's fees,
arising from the breach of warranties contained in this Article. These
provisions shall survive the date of termination of the Lease.
21.29 Compliance with the Americans with Disabilities Act
Tenant shall comply with all of the applicable provisions of the Americans
with Disabilities Act and shall not discriminate against anyone on the basis
of disability. The Premises shall be accessible to individuals with
disabilities so that an individual shall have full and equal enjoyment of all
goods and services if the individual does not pose a direct threat to the
health or safety of others. Additionally, all alterations must be made
accessible to people with disabilities to the maximum extent feasible.
TENANT /s/ MP LANDLORD /s/ DPW
In the event any claims, grievances, complaints or concerns are made to the
Tenant alleging a failure to comply with the Americans with Disabilities Act,
the Tenant shall immediately notify the Landlord. Tenant shall indemnify and
hold harmless the Landlord from all matters relating to the Americans with
Disabilities Act including any and all claims, actions, or proceedings
involving the Landlord. The Tenant shall indemnify Landlord for all expenses,
charges, fines, penalties, damages, judgments, attorney's fees, expert fees,
witness fees, compliance costs and expenses, and any other expenses incurred
by the Landlord as a result of any matters associated with the Americans with
Disabilities Act.
21.30 No Inducements or Representations
This Lease (including its exhibits) contains the complete and exclusive
agreement of Landlord and Tenant and Landlord and Tenant acknowledge and agree
that all negotiations, understandings, considerations and representations and
inducements between them have been fully incorporated in this Lease as they
intended. No negotiations, understandings, considerations, inducements or
representations between Landlord and Tenant not incorporated in this Lease
shall be of any force and effect. The provisions of this Lease may be modified
only by a writing signed by Landlord and Tenant and not by any other act or
conduct of theirs. Tenant warrants that it has conducted its own due diligence
as to all matters related to its decision to enter into this Lease and
expressly acknowledges that it has not executed this Lease in reliance upon
any representations by Landlord, its agent for leasing or management purposes,
or any other representative or affiliate of Landlord concerning the occupancy
or continued occupancy of the Celebrity Square, the number of existing or
future tenants in the Celebrity Square, the nature of any business conducted
by any existing tenants or to be conducted by any future tenants of the
Celebrity Square, projected vehicular or pedestrian traffic for the Celebrity
Square, or projected sales for the Celebrity Square or for Tenant or any other
tenants of the Celebrity Square.
Continued Next Page
TENANT /s/ MP LANDLORD /s/ DPW
The parties acknowledge that all Riders, Schedules and other attachments
hereto are a part hereof and are incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Lease Agreement under their respective seals as of
the day and year first above written.
LANDLORD:
BURROUGHS & CHAPIN COMPANY, INC.
WITNESSES:
/s/ Vicki K. Allison /s/ Douglas P Wendel
- ----------------------- ---------------------------------
Douglas P. Wendel
President & CEO
/s/ Philip Blake Ap /s/ Franklin J. Long
- ----------------------- ---------------------------------
Franklin J. Long
Secretary
TENANT:
NEW RIDERS, INC.
d/b/a EASYRIDER CAFE
WITNESS /s/ Michael T. Purcell
Hal H. <llegible> -----------------------------
- ---------------------
(WITNESS #1) Name: Michael T. Purcell
Title: Pres. + CEO
/s/ Melissa <illegible>
- ---------------------
(WITNESS #2)
LANDLORD
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF HORRY )
PERSONALLY appeared before me the undersigned witness who, on oath,
deposes and says that (s)he saw the within-named LANDLORD, by its proper
officers hereunto duly authorized, sign the foregoing document, and that
deponent with the other witness whose name is subscribed above witnessed the
execution thereof.
/s/ Vicki K. Allison
---------------------
Witness #1
SWORN TO BEFORE ME THIS 20th
day of February, 1996
/s/Philip Blake AP (L.S.)
- ------------------
Notary Public for South Carolina
My Commission Expires: September 23, 2006
TENANT
STATE OF CALIFORNIA)
) 'PROBATE
COUNTY OF FRESNO )
PERSONALLY appeared before me the undersigned witness who, on oath,
deposes and says that (s)he saw the within-named TENANT, by its proper
officers hereunto duly authorized, sign the foregoing document, and that
deponent with the other witness whose name is subscribed above witnessed the
execution thereof.
/s/ Hal S. <illegible>
-------------------
Witness #1
SWORN TO BEFORE ME THIS 31st
day of January 1997
/s/ MELISSA E. WEBB (L.S.) <Notary Public Stamp of
Notary Public for California Melissa E. Webb appears
My Commission Expires 3/15/99 Here>
GENERAL RIDER
The provisions of this General Rider are made a part of the Lease to
which it is attached as if fully set forth in the body thereof. In the event
of a direct conflict between any terms of the Lease and this General Rider,
the terms of this Rider shall control.
1) Amusements and Video Games: Tenant is aware that the Landlord has a
Division within the Landlord's company engaged in the amusement and video
game business. Tenant agrees that should the Tenant elect to place
amusements and/or video games within the Premises, Tenant shall utilize the
Landlord's company to supply such amusements and/or video games
providing that Landlord can supply the type amusements and/or video games
the Tenant desires at competitive rates in the market. Tenant shall notify
Landlord from time to time of its requirements for amusements and video
games or of any offers and the terms thereof from third party suppliers of
amusements and video games and Landlord shall thereafter have a
reasonable time to bid on Tenant's amusement and video game requirements
or match the offers from third party vendors.
2) Motorcycle Parking: Landlord shall cooperate with Tenant in
designating and designing an area in close proximity to Stool Pigeons which
motorcycle parking area is more specifically shown on Schedule A-2 hereto for
use for motorcycle parking for customers of Tenant and others. Tenant shall be
responsible at its sole expense for constructing all improvements to the
motorcycle parking area. Prior to commencing construction, Tenant shall at
its sole cost and expense have prepared and submit to Landlord for its prior
written approval complete plans and specifications for all improvements to be
located on the motorcycle parking area. All signage designating the
motorcycle parking area or directing motorcyclist to the same shall be
subject to the prior written approval of the Landlord and such signage shall
be the sole cost and expense of the Tenant. Landlord agrees to cooperate
with Tenant in erecting such directional signage; however, Landlord reserves
the right in its sole discretion to approve the number and location of said
signs. Furthermore, all such signage and the improvements to the
motorcycle parking area shall be in accordance with all the requirements of
applicable laws, ordinances and codes.
3) Special Events: Tenant may host special events, as determined by
Landlord in its sole discretion (a "Special Event"), from time to time. A
"Special Event" shall be live entertainment consisting of a nationally known
and recognized entertainer, celebrity, comedian, actor, musician, band or
performer or other nationally known and recognized act of the type for which
a fee, door charge, minimum charge or similar charge can be charged and
collected. To obtain Special Event status, the Tenant shall notify Landlord in
writing at least seven (7) days prior to such event requesting the Special
Event status for the date(s) and time(s) specified therein. The notice shall
describe the event with specificity and list the names of the entertainers,
celebrities, performers and/or acts for such Special Event. Landlord shall
have the right to approve or disapprove the proposed Special Event, in its
sole discretion. All revenues to Tenant related to a Special Event shall be
included in Gross Sales as defined in Section 5.5. Tenant shall be
responsible for negotiating and paying all admissions taxes or similar taxes
payable as a result of such Special Event.
Cross-Default. Landlord and Tenant further agree that a default under
this Entertainment Rider shall be deemed a default under the Lease.
LANDLORD:
BURROUGHS & CHAPIN COMPANY, INC.
Initials /s/
TENANT:
Initials
ENTERTAINMENT RIDER
In order to promote the entertainment and celebrity theme of Celebrity
Square and Broadway at The Beach, each Anchor Tenant In Celebrity Square shall
offer to Its patrons top quality, live entertainment throughout the term of
the Lease as set forth herein.
Live Entertainment. Live entertainment shall be top quality
entertainment compatible with the overall theme of Celebrity Square and
Broadway at The Beach and shall include musicians, bands, celebrity
appearances and known performers, and such other forms of live entertainment
as Landlord shall approve in its sole discretion. In no event shall any such
entertainment constitute "adult" entertainment as defined In Schedule "F"
attached hereto. Disc jockeys, televisions, juke boxes and similar types of
audio-video equipment shall not be deemed live entertainment. Tenant shall
provide such live entertainment at least [n/a days per Rental Year].
Special Events. Anchor Tenants may host special events, as determined by
Landlord in its sole discretion (a "Special Event"), from time to time. A
"Special Event" shall be live entertainment consisting of a nationally known
and recognized entertainer, celebrity, comedian, actor, musician, band
or performer or other nationally known and recognized act of the type for
which a premium fee can be charged and collected. If any Anchor Tenant
sponsors a Special Event, the General Admission Tickets as set forth in the
Admissions Rider will not be applicable to such Anchor Tenant's Night Club
during the date(s) and time(s) of such Special Event, For admission into the
Anchor Tenant's Night Club (for an amount greater than that charged for a
General Admission Ticket), hosting a Special Event, patrons must purchase
Special Event Tickets as set forth in the Admissions Rider. Such Special Event
Tickets shall be sold at a premium fee and shall admit patrons only into the
Night Club of the Anchor Tenant hosting the Special Event. General Admission
Tickets may still be purchased but will exclude the Night Club hosting the
Special Event. To obtain Special Event status, the Anchor Tenant hosting such
event shall notify Landlord In writing at least fifteen (15) days prior to
such event requesting the Special Event status for the date(s) and time(s)
specified therein. The notice shall describe the event with specificity and
list the names of any and all nationally known and recognized entertainers,
celebrities, performers and/or acts for such Special Event. Special Event
Ticket sales shall be shared between such applicable Anchor Tenant and
Landlord as set forth in the Admissions Rider.
Entertainment Budget. During each Rental Year, Tenant shall expend at
least [n/a Dollars] on quality live entertainment as required herein (the
"Entertainment Expense"). The Entertainment Expense shall be adjusted
annually, as of the first day of each Rental Year during the Term, in the same
proportion as the Consumer Price Index most recently reported as of such
adjustment date bears to the Consumer Price Index reported for the first full
calendar month of the Term. Tenant shall preserve original or duplicate books
and records at such Tenant's Notice Address which shall disclose all
information required to determine Tenant's live entertainment expenditures.
Upon advance notice, Landlord, its agents and accountants, shall have the
right to audit such books and records. If the audit discloses noncompliance by
Tenant for any Rental Year in question, Tenant, in addition to the remedies
contained in this Lease, shall pay to Landlord a sum equal to Landlord's cost
of the audit, which sum shall be deemed to be Additional Rental, plus as
liquidated damages, a sum equal to the amount by which Tenant's actual
expenditures for live entertainment as required above shall be less than
Tenant's required minimum Entertainment Expense for such period, plus interest
at the Default Rate calculated for the full Rental Year plus such additional
time thereafter until the amounts are paid In full. Landlord shall have the
right to off-set such amounts against Tenant's proportionate share of the
Shared Fees for all ticket sales and deduct those amounts from the next
payment(s) due to Tenant under the provision of the Admissions Rider. Of such
amounts paid by Tenant or off-set by Landlord, Landlord shall retain the cost
attributable to the audit and interest on the amounts due, calculated at the
Default Rate. The remaining amount, representing the difference between the
Entertainment Expense minimum requirement amount and the actual amount spent
by Tenant on live entertainment for such period shall be shared as follows:
(1) forty percent (40%) shall be deposited Into the Promotion and Advertising
Fund for Celebrity Square for the benefit of all tenants; (ii) forty percent
(40%) shall be shared equally between the other Anchor Tenants which met the
Entertainment Expense minimum requirements for such period; and (iii) twenty
percent (20%) shall be retained by Landlord.
Gross Sales from Entertainment. In addition to the items set forth in
Section 5.5 of the Lease, gross sales shall also include all revenue, cover
charges, admission fees, door charges and similar charges together with all
revenue, proceeds from entertainment, special events and the like.
Notwithstanding the aforesaid, gross sales shall not include the proceeds of
sales from charity events to the extent that such proceeds are donated by
Tenant to qualified Internal Revenue Service approved charitable organizations
within sixty (60) days of the event.
Incorporation. Landlord and Tenant agree that this Entertainment Rider to
the Lease is incorporated herein and made part and parcel of the Lease between
Landlord and Tenant to which is attached.
Cross-Default. Landlord and Tenant further agree that a default under
this Entertainment Rider shall be deemed a default under the Lease.
LANDLORD: BURROUGHS & CHAPIN COMPANY, INC.
Initials /s/
-----
TENANT:
NEW RIDERS, INC.
- ---------------
Initials
ADMISSIONS RIDER
Celebrity Square at Broadway At The Beach is a distinct area established
by Landlord upon which will be located various night club venues and other
enterprises that would complement its entertainment theme (collectively,
"Night Clubs" or individually, "Night Club"). A primary purpose for the
establishment of the various Night Clubs is to promote Celebrity Square to a
broad range of prospective patrons and thereby benefit all tenants located in
Celebrity Square. Celebrity Square will consist of a number of Anchor Tenants
and certain other smaller compatible tenants. An "Anchor Tenant" in Celebrity
Square shall be defined as a Night Club within the Celebrity Square area that
would typically charge a cover charge or admission fee and shall not include
any restaurant.
Admission Tickets. Entrance to each Anchor Tenant Night Club will be only
by an admission ticket purchased by the prospective patron. The exclusive
sales booth for these admissions tickets will be located as shown on Schedule
"A" or as may be determined by Landlord from time to time in its discretion.
The ticketing office(s) in Celebrity Square shall be constructed and operated
by Landlord at Landlord's expense. Landlord shall have the sole and exclusive
right to sell, solicit, distribute, control and account for admissions fees.
Three (3) classes of tickets will be offered:
(1) General Admission: A general admission ticket may be purchased that
will permit each individual patron to enter all Night Clubs in Celebrity
Square, except those hosting a Special Event (as defined in the Entertainment
Rider) ("General Admission Ticket"). In the event of a Special Event, the
General Admission Ticket price may be reduced in an amount as determined by
Landlord.
(2) Single Admission: At the patron's option, a ticket may be purchased
which will allow admission to only one specific Night Club ("Single Admission
Ticket"). All such Single Admission Tickets shall be purchased at the same
price, as determined by Landlord.
(3) Special Event: If an Anchor Tenant sponsors a Special Event (as
defined in the Entertainment Rider), a patron may purchase a special event
ticket which will allow admission into the Anchor Tenant Night Club hosting
the Special Event only ("Special Event Ticket"). However, at the option of any
Anchor Tenant Night Club, patrons with a Special Event Ticket may be admitted
into that Anchor Tenants Night Club, for that date(s) only, without purchasing
any additional Admission Ticket (such Anchor Tenant shall not be entitled to
any portion of the Special Event Ticket revenues).
Tenant covenants and agrees that it will not permit free or discounted
admissions at its Premises. Admission shall be only by ticket purchased
pursuant hereto.
Tenant Audits; Penalties. Tenant acknowledges that all Anchor Tenants
participating in the ticketing activities described in this Admissions Rider
depend upon each Anchor Tenant complying with all rules and regulations
established herein or pursuant hereto. To enforce the provisions of this
Admissions Rider, Landlord may establish such audit programs as are reasonably
designed to insure the compliance of the Anchor Tenants with the provisions
hereof. If Tenant violates the admissions program, Tenant shall pay a penalty
to Landlord of Five Hundred and 00/100 Dollars ($500.00) for the first
violation, One Thousand and 00/100 Dollars ($1,000.00) for the second
violation, and Two Thousand and 00/100 Dollars ($2,000.00) for the third
violation. The Landlord may set-off against Tenants proportionate share of the
Shared Fees (as defined herein) and deduct such penalty from the next payments
due Tenant under the provisions hereof. For more than three (3) violations, in
addition to collecting the maximum penalty, Landlord, at its option, may
terminate this Lease upon thirty (30) days written notice to Tenant.
Association. Landlord shall establish for purposes of making
recommendations regarding admission fee pricing, group discount programs,
local programs, and any other pricing structures, the Celebrity Square
Association ("Association"). The Association shall consist of one (1)
representative of the Landlord and one (1) representative from each Anchor
Tenant in Celebrity Square. The power and the authority of the Association
shall be limited to an advisory capacity which will assist the Landlord in
operating Celebrity Square to its optimal profitability by making
recommendations, which recommendations shall not be binding on Landlord.
Landlord shall have final approval on the pricing and packaging of all
admission fees to Celebrity Square. Landlord may elect to establish a limited
free or reduced admission program which will be evenly administered as to all
tenants of Celebrity Square. Landlord may solicit the advise of the
Association in formulating such policy.
Revenue Sharing. Tenant acknowledges that the rental charged by the
Landlord for the Premises anticipates the Landlord's sharing of revenues from
the ticket sales. The receipts of the sale of the admissions tickets shall be
shared as follows:
(1) General Admission: For General Admission Ticket sales, Landlord shall
retain twenty percent (20%) of gross receipts, and the remaining gross
receipts shall be shared ("Shared Fees") by the Anchor Tenants in Celebrity
Square (except for any Anchor Tenant hosting a Special Event, as set forth
below). Tenant shall receive on a bi-weekly basis, Tenant's proportionate
share of the Shared Fees collected. Tenant's proportionate share of Shared
Fees for any time period shall be computed by multiplying the amount of such
Shared Fees by a fraction, the numerator of which shall be, Tenant's Floor
Area and the denominator of which shall be Anchor Tenants' Floor Area. The
total square footage of all Anchor Tenants shall be known as the "Anchor
Tenants' Floor Area".
(2) Single Admission: As for Single Admission Ticket sales, the
applicable Anchor Tenant shall be entitled to eighty percent (80%) of the
gross receipts thereof, and Landlord shall retain twenty percent (20%). No
other tenants shall share in the proceeds derived from such Single Admission
Tickets.
(3) Special Event: As for Special Event Ticket sales, the applicable
Anchor Tenant shall be entitled to eighty percent (80%) of the gross receipts
thereof, and Landlord shall retain twenty percent (20%). No other tenants
shall share in the proceeds derived from such Special Event Tickets. Any
Anchor Tenant hosting a Special Event shall be entitled to receive its
proportionate share of the proceeds from the sale of the Special Event Tickets
only and shall not be entitled to receive any portion of the Shared Fees for
the General Admission Tickets attributable to the date(s) of any such Special
Event.
Landlord Audits. An independent accounting, auditing company approved by
Landlord and the Association shall be retained to review and audit all
procedures and accounting performed by Landlord and operations of the
ticketing office sales. For the purpose hereof, gross receipts shall be all
receipts for the sale of General Admission Tickets, Single Admission Tickets
or Special Event Tickets, respectively, less any and all admissions taxes,
sales taxes, and other similar taxes, fees or assessments.
No Liability of Landlord. It is understood and acknowledged by Tenant
that in selling such admissions tickets, Landlord does not undertake, in any
form or fashion, participation in the operation of Tenant's business. Further,
Landlord is not responsible nor will assume or be construed as assuming any
responsibility for identifying any person whose admission to Tenant's Night
Club might be inappropriate by reason of any factor including, but not limited
to, patron's age or physical condition (e.g., intoxication). Tenant
acknowledges that the admission and policing of its Night Club is its sole
responsibility. Tenant shall indemnify, defend and hold harmless Landlord, its
officers, directors, agents, servants and employees from and against any and
all claims, actions, liabilities, losses, demands, expenses, and attorneys'
fees and costs which relate to our arise from the admission of patrons to
Celebrity Square in any respect whatsoever, including, without limitation, any
of the foregoing, which relate to or arise from the consumption of any
alcoholic beverage in Celebrity Square.
Incorporation. Landlord and Tenant agree that this Rider to the Lease is
incorporated herein and made part and parcel of the Lease between Landlord and
Tenant to which is attached.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this General Rider under their respective seals as of
the day and year first above written.
LANDLORD:
BURROUGHS & CHAPIN, COMPANY, INC.
Initials /s/
TENANT:
NEW RIDERS, INC.
d/b/a EASYRIDER CAFE
Initials /s/
Exhibit 10.2.4
STATE OF SOUTH CAROLINA )
) LEASE AGREEMENT
COUNTY OF HORRY )
THIS LEASE AGREEMENT made and entered into this 6th day of June, 1997,
between ARCHIE MCNAIR CABINETS, INC. and ARCHIE M. MCNAIR, d/b/a MCNAIR
RENTAL, (collectively, "Lessor"), and NEWRIDERS, INC., a Nevada Corporation,
(hereinafter referred to as "Lessee").
WITNESSETH:
IN CONSIDERATION of the rents hereinafter reserved and the
covenants and agreements herein expressed on the part of the Lessee to be
performed, the Lessor has leased, and by these presents, does lease unto the
Lessee that certain real property, with the improvements thereon, located at
4019 Highway 501, near the City of Myrtle Beach, Horry County, South Carolina,
being more particularly described as shown on Exhibit "A" attached hereto and
made a part and parcel hereof, which property together with all and singular
the rights, members, hereditaments, and appurtenances to the said demised
premises belonging, or in anywise incident or appertaining, is hereinafter
referred to as the "demised premises".
TO HAVE AND TO HOLD, all and singular, the demised premises unto the
Lessee, its successors and assigns, for the term set forth herein, under the
following terms and conditions:
1. Term. The term of this lease shall be from June 1, 1997, through May
31, 2017.
2. Rental. Lessee shall pay to the Lessor for said demised premises the
following rental:
a. For the period of June 1, 1997, through May 31, 2002, an annual
rental of Twenty-Six Thousand Four Hundred ($26,400.00) Dollars, payable in
monthly installments of Two Thousand Two Hundred ($2,200.00) Dollars with the
first installment being due upon the execution of this Lease Agreement, and on
the first day of each month throughout the balance of said five (5) year term,
commencing on July 1, 1997, and through May 1, 2002.
b. For the period commencing January 1, 2002, through May 31, 2007,
an annual rental equivalent to the May 1, 1997, purchasing power of Twenty-Six
Thousand Four Hundred ($26,400. 00) Dollars (the base annual rental). Such
rental shall be determined by dividing the base annual rental of Twenty-Six
Thousand Four Hundred ($26,400.00) Dollars by the index number of the calendar
month of May, 1997, as appears in the column "All Items" in the CPI-US
(defined below) and then multiplying that amount by the corresponding index
number for the month of April, 2002. The Consumer Price Index referred to is
the Consumer Price Index for all urban consumers, clerical workers, U.S. City
Average, All Items, 1982-1984 Base, published by the Bureau of Labor
Statistics, United States Labor Department of Labor (the "CPI-US"). If the
Bureau of Labor Statistics changes the form or the basis of calculating the
Consumer Price Index, the parties agree to request the Bureau to make
available, for the life of this Agreement, a monthly price index in its
present form and calculated on the same basis as the index for the year 1997.
Said rental as so determined shall be paid in twelve (12) equal monthly
installments with the first being due on June 1, 2002, and on the first day of
each month thereafter through and including May 1, 2007.
In no event, however, shall the annual rental be less than the sum of
Twenty-Six Thousand Four Hundred ($26,400.00) Dollars per annum.
The annual rental for each successive five (5) year term of the lease term
shall be determined by dividing the base annual rental of Twenty-Six Thousand
Four Hundred ($26,400.00) Dollars by the index number of the month of May,
1997, as appears in the column "All Items" of the Consumer Price Index above
referred to, and multiplying that amount by the corresponding index number of
the Consumer Price Index above referred to, for the month of April immediately
preceding commencement of the five (5) year term for which the rental is being
calculated. For an example, for the five (5) year term commencing on June 1,
2007, the base rental of Twenty-Six Thousand Five Hundred ($26,400.00) Dollars
shall be divided by the index number for the month of May, 1997, and then
multiplying that amount by the corresponding index number for April, 2007. In
no event, however, will the annual rental be less than the sum of Twenty-Six
Thousand Four Hundred ($26,400.00) Dollars.
All rental shall be payable in equal monthly installments and payable to
Archie McNair, at 3000 Bratcher Road, Conway, South Carolina 29526.
3. Quiet Possession. Lessor covenants and warrants that it has full right
and lawful authority to enter into this Lease Agreement for the full term
hereof, and that Lessor is lawfully seized of the entire demised premises
during the term of this Lease Agreement, Lessee's quiet and peaceable
enjoyment of the demised premises shall not be disturbed or interfered with by
anyone except as herein provided. Lessee, performing all of its covenants
hereunder, shall have quiet and peaceful possession of the demised premises
during the term of this Lease Agreement against the acts of all parties
claiming title to or right to possession of the demised premises.
4. Improvements. There is now situate upon the demised premises certain
improvements and buildings and Lessee hereby acknowledges that no
representations or warranties have been made by the Lessor as to the condition
of the demised premises or any improvements thereon and same have been
inspected by the Lessee's agents and the Lessee accepts the demised premises
and improvements thereon in the condition that same now exist. At all times
during the term of this Lease the Lessee, at its own cost and expense,
shall keep the demised premises and the buildings and improvements now or
hereafter located on the premises and all sidewalks, curbs, roadways, parking
areas, and other improvements on the demised premises in a state of good
condition and repair with reasonable wear and tear excepted. Notwithstanding
anything in the foregoing to the contrary, Lessee shall have no responsibility
to maintain or to repair any defect, deficiency, or condition existing on the
demised premises as of the execution of this Lease.
5. Additions to Improvements. The Lessee during the term of this lease
shall have the right to erect additional improvements and remodel the present
improvements on the premises with Lessor's written consent, which consent
shall not be unreasonably withheld or delayed. Any improvements or alterations
made by the Lessee shall be at the Lessee's own cost and expense and Lessee
shall hold the Lessor harmless against any claims arising by reason of the
construction thereof, expressly including but without limiting the generality,
mechanic's liens, and public liability. At the termination of this Lease,
Lessee has no duty to remove any improvements and if Lessee does not, any
remaining improvements shall become the property of the Lessor without
compensation to the Lessee.
6. Use. The demised premises shall be used for the sale, service,
assembly, and manufacture of motorcycles or motor operated bicycles, sale of
parts, supplies, clothing, accessories, the rental of motorcycles, storage
thereof, and related activities, and for no other purposes except with the
written consent of the Lessor which shall not be unreasonably withheld.
Further, Lessee agrees that it will not install any underground storage tanks
or selling or dispensing gasoline or diesel fuel without Lessor's consent
which consent shall not be unreasonably withheld.
7. Assignment or Subletting. The Lessee may sublet a portion or all of
the premises without the written consent of the Lessor. The Lessee may not
assign this lease without the written consent of the Lessor which will not be
unreasonably withheld. No assignment or sublease by Lessee will relieve the
Lessee of its obligation to pay the rent and abide by all the other terms and
conditions of this Lease.
8. Utilities. Lessee agrees that during the term of this Lease that it
will pay all charges of electricity, gas, heat, water, telephone, and other
utility services utilized on the demised premises with the understanding that
water to the demised premises is furnished by a well owned by Lessor and sewer
is by septic tank. Lessor agrees to furnish water from the present source
without monthly charge to the Lessee. Lessee will maintain the septic tank and
septic tank service on the premises. In the event water and sewer are
connected to Grand Strand Water and Sewer Authority or any other public
utility, Lessor covenants and agrees to pay any "tap on" fees and the Lessee
shall pay any monthly service fees.
9. Use of Parking Lot. It is understood by the parties that the Lessor
owns adjoining property and improvements which are occupied mostly during the
night or evening hours and that the driveway upon the demised premises is
utilized for access to adjoining properties. Lessor and Lessee covenant and
agree to cooperate in providing full use of the driveway and parking lot on
the demised premises to Lessee and adjoining tenants of Lessor at such times
that use of the parking lot on the demised premises by adjoining tenants does
not interfere with the operation of the Lessee's business.
10. Ad Valorem Taxes and Assessments. During the term of this Lease, the
Lessee shall pay all ad valorem taxes and other assessments assessed against
the demised premises and any improvements thereon. Lessee shall pay all taxes
and assessments before same become in default but the Lessee reserves the
right to contest the amount of said taxes and Lessor agrees to execute any
documents necessary to assist the Lessee in the protest of any said taxes and
assessments. Any protest proceedings shall be at the sole cost and expense of
the Lessee. The taxes and assessments for the year 1997 and the final year of
this lease shall be prorated among the parties.
11. Insurance. Lessee, at Lessee's sole cost and expense, shall maintain
and keep in effect throughout the term of this Lease:
a. Insurance against loss or damage to the Lessor's building and any
other improvements the Lessee may hereinafter locate on the premises by fire
and such other casualties as may be included in the standard form of extended
coverage insurance in an amount of the fully insurable value thereof, and an
amount sufficient to prevent the application of co-insurance provisions.
b. Insurance against claims for personal injury (including death) or
property damage under policies of general and umbrella excess for liability
insurance, with limits of liability of not less than One Million
($1,000,000.00) Dollars for any one accident. This coverage may be provided by
a blanket insurance coverage maintained by Lessee on the demised premises as
well as other premises of the Lessee.
The policies of insurance described above shall name both Lessor and
Lessee as the insured parties, a copy of said policies or proof of insurance
shall be delivered to the Lessor.
If Lessee shall fail, refuse, or neglect to obtain or maintain such
insurance, or to furnish Lessor with satisfactory evidence of the payment of
the premium of any policy, Lessor shall have the right, at Lessor's option, to
purchase such insurance and to pay the premiums thereon or to pay the premiums
on insurance which Lessee should have obtained, and to thereafter require
Lessee to pay the estimated cost of such insurance coverage to Lessor in
monthly installments in advance. All such payments made by Lessor shall be
recoverable by Lessor from Lessee on demand as additional rental, together
with interest at the rate of ten percent (10%) per annum from the date of
Lessor's making of the payments. Policies of insurance so procured by Lessor
shall be written for the shortest period available from comparable insurers in
the area, and Lessee shall be given prompt notice of the payment of premiums
by the Lessor, the amounts paid, the names of the insurer and insured, and the
duration of the coverage obtained. The Lessee shall have the right to replace
said insurance as of any coverage expiration date, and Lessee shall duly
notify Lessor of said replacement.
12. Destruction of Premises. If any building, fixture, or improvements
now or hereafter situate on the demised premises should at any time during the
term of this Lease be damaged or destroyed by any casualty required by this
Lease to be covered by fire or extended coverage insurance, Lessee shall
restore and rebuild the same as nearly as possible to the condition same were
in immediately prior to such damage or destruction, and such rebuilding or
replacement shall be prosecuted with reasonable diligence and shall be
completed as soon as reasonably possible. If the building is unable to be
utilized during the period of improvements, rental shall be abated or reduced
accordingly during the period of repairs in the event of damage.
Lessor shall, at Lessee's cost and expense, cooperate fully with Lessee
to obtain the largest possible recovery on all applicable policies of fire and
extended coverage insurance and all such policies shall provide that the
proceeds be paid to the Lessor and Lessee and the same shall be placed in a
joint account and utilized for the replacement of the improvements upon the
premises. The Lessee's obligation to replace or improve shall be limited to
the amount of insurance coverage required to be maintained on the premises by
the Lessee under the terms of this Lease. In the event, however, the
improvements on the premises shall be destroyed during the last five (5) years
of the term of this lease to an extent that same are not useable by Lessee,
Lessee, at its option, may elect to terminate this lease and pay to the Lessor
all insurance proceeds received from said loss, provided the amounts are as
required by this Lease Agreement, and the Lessee shall have no further
obligation under the terms of this lease. To exercise said option to cancel,
Lessee must give to the Lessor written notice of its intention within thirty
(30) days after any such loss.
13. Indemnity. The Lessee agrees to indemnify and save harmless the
Lessor from and against any and all costs, expenses, legal proceedings,
reasonable attorney's fees, claims or demands, from injury to person, loss of
life, or damage to property occurring within the demised premises during the
term of this lease. Excepted from this requirement of indemnification is any
loss resulting from Lessor's negligence, intentional acts or breach of the
Lease and/or the pre-existing condition of the demised premises.
14. Ordinances and Regulations. The Lessee during the term of the Lease
shall comply with all lawful ordinances, statutes, and regulations of
municipal, county, state, and federal authorities with reference to use and
occupancy of the demised premises. Lessee's obligation to comply with
applicable laws does not require Lessee to undertake remediations,
retrofitting, alteration, repair, reconstruction, or removal of any portion of
the demised premises in order to correct a condition existing at the time of
the execution of this Lease Agreement.
15. Insolvency. The filing by or on behalf of the Lessee of any petition
or pleading to declare the Lessee bankrupt under any bankruptcy law or act, or
to declare the Lessee insolvent or unable to pay its debts, or the filing
against the Lessee of any petition or pleading to declare the Lessee bankrupt
or unable to pay its debts, or the attachment of any property of the Lessee
located on the demised premises, or the appointment by any court or under any
law of a receiver, trustee, or other custodian of a substantial part of the
property, assets, or business of the Lessee, or the levy of execution or other
taking of property, assets of the leasehold interest of the Lessee by process
of the law or otherwise, for the satisfaction of any judgment, debt, tax
liens, or claim, shall at the option of the Lessor operate as a termination of
this Lease immediately and without prior notice and without prejudice of the
Lessor's right to prosecute any other remedy which Lessor may have for the
breach of this Lease, but subject to the rights of correction by the Lessee as
provided in paragraph 17 hereof.
16. Condemnation. If the demised premises, or any part thereof, shall be
taken or condemned for a public or quasipublic use or purpose, and the parties
are unable to agree on the effect of the condemnation or the allocation of the
award, then the Lessor and Lessee agree to subject to arbitration under the
procedure provided for same in this Lease the question of whether such taking
or condemnation shall constitute a termination of this Lease. Each party
hereto shall appoint one arbitrator and the two arbitrators so appointed shall
appoint a third arbitrator. The decision of the majority of the three
arbitrators as to whether this Lease shall be terminated by such taking or
condemnation shall be binding on the parties hereto. In making their decision,
the three arbitrators shall consider all facts and circumstances they deem
relevant, including, but not limited to, the following: the Lessee's ability
to continue the conduct of its normal business operations on the demised
premises remaining after such taking or condemnation; the amount of rent that
shall thereafter be payable by the Lessee to the Lessor; the continuing
obligation of the Lessee to pay such rent; and, the amount of any award made
by the condemnation authority.
The amount of any award resulting from such condemnation or taking shall
be allocated between the Lessor and the Lessee by the arbitrators and the
decision of a majority of the arbitrators shall be binding on the parties
hereto.
In the event the Lease shall not be terminated in the manner hereinabove
provided, the annual rental from the date of such taking or condemnation shall
be adjusted, if necessary, on the next rental payment date by prorata credit
for any prepaid rent beyond the date of condemnation.
If this Lease shall be terminated in the manner hereinabove provided,
both parties shall be relieved of any further obligations hereunder except
those accrued at the time of such termination.
17. Default. If the Lessee shall fail or neglect to pay any installment
of rent after the same is due and payable, the Lessor may elect to terminate
this Lease and enter upon the premises and take possession thereof and hold
and enjoy the same as if this Lease had not been entered into; provided,
however, that before Lessor shall have the right to terminate this Lease for
nonpayment of rent, it shall first mail to the Lessee, by Registered or
Certified Mail, addressed as provided in paragraph 21 hereof relating to
notices, notification that the rent is in arrears and the amount thereof, and,
if within ten (10) days after the mailing of such notice, Lessee shall pay
such rent as may then be in arrears, together with a late payment penalty of
Fifty ($50.00) Dollars for each day said rent is in arrears, this Lease shall
thereupon be reinstated, but if the rent at the time in arrears and late
penalty thereon is not paid within such ten (10) days, Lessor may immediately
terminate this Lease and take possession of the premises as herein provided.
If the Lessee at any time shall fail or neglect to perform or observe any
of the agreements or covenants herein contained, other than the payment of
rental, and such default shall continue for a period of thirty (30) days after
the notice provided for below, the Lessor may elect to terminate this Lease
and enter upon the premises and take possession thereof and hold and enjoy the
same as if this Lease had not been entered into; provided, however, that
Lessor shall first mail to Lessee by Registered or Certified Mail,
notification that one or more of the provisions or covenants of this Lease
have been violated (stating the respects in which same have been violated),
and if the Lessee shall, within thirty (30) days after the date of mailing of
such notice, undertake with due diligence the performance of such covenant or
provision of the Lease contained in said notice and shall without unnecessary
delay fully comply with such provision or covenant, the Lessor will not cancel
this Lease on account of the breach of such provision or covenant.
In the event the Lessor shall exercise the right to terminate this
Lease under any of the aforesaid provisions, Lessor will not thereby be
deprived of any other rights Lessor may have against Lessee, but shall at all
times be entitled to recover of Lessee any and all rents or other obligations
due by Lessee and all damages sustained by the Lessor on account of the breach
of any of the covenants or agreements herein contained which Lessee is
obligated to perform.
18. Arbitration. When any approval of Lessor is required by any of the
provisions of this Lease, such approval will not be unreasonably withheld. Any
differences between the Lessor and the Lessee (other than breach of any
expressed covenants of this Lease) will be arbitrated on the written request
of either party who shall name an arbitrator at the time of making such
request. The other party shall select an arbitrator within ten (10) days after
written request with the power being given to those arbitrators to select a
third, if either of them consider it advisable to do so, within ten (10) days
thereafter, and to render a written decision within sixty (60) days after the
initial request for arbitration. Majority opinion will control in the case of
three arbitrators.
19. Failure to Appoint Arbitrator or Appraiser. Whenever in this Lease
the parties hereto are each required to appoint an arbitrator or an appraiser,
and one of the parties refuses or fails to appoint such arbitrator or
appraiser, after the specified notice from the other party, then any Resident
or Presiding Judge of the Fifteenth Judicial Circuit of the Court of Common
Pleas for Horry County, South Carolina, shall be empowered to appoint such
other arbitrator or appraiser upon the petition of either party. Whenever two
arbitrators or appraisers appointed as provided in this Lease fail to agree
upon a third arbitrator or appraiser, then any Resident or Presiding Circuit
Judge of the Court of Common Pleas for Horry County, South Carolina, shall be
empowered to appoint such third arbitrator or appraiser upon the petition of
either party hereto. The Judge of said Court may make such appointment ex
parte, but shall give Lessor, Lessee, and the other arbitrators or appraisers
notice of the appointment by regular United States Mail.
20. Termination. On termination of this Lease for any cause, Lessee will
surrender peaceful possession of the premises to the Lessor, together with all
improvements thereon, with the exception of personal property, supplies, and
inventory of the Lessee, in as good condition as same now exists, except for
normal wear and tear. Lessee shall have the right to remove its trade fixtures
and other improvements upon termination of the Lease provided that such
removal does not cause irreparable damage and any damage inflicted is repaired
by Lessee at Lessee's cost and expense.
21. Notices. Any notices to be given by either party to the other shall
be by Registered or Certified United States Mail and shall be conclusively
presumed to have been sufficiently given when deposited in The United States
Mails, postage prepaid, Registered or Certified Mail, addressed to:
Lessor: Archie McNair Cabinets, Inc.
Archie M. McNair
3000 Bratcher Road
Conway, South Carolina 29526
With Copy To: Mr. John C. Thompson
Attorney At Law
P. 0. Box 1533
Conway, South Carolina 29528
Lessee: Newriders, Inc.
1040 E. Herndon Avenue
Suite 102
Fresno, CA 93720
With Copy To: Hal H. Bolen, II
Bolen, Fransen & Boostrom, LLP
Suite 430, East Tower
Guarantee Financial Center
1322 East Shaw Avenue
Fresno, CA 93710-7906
Either party may given written notice to the other of any change of address.
22. Inspection. During the term of this Lease Agreement, the Lessor,
their agents, servants, and employees, shall have rights at all reasonable
times to enter onto the premises to inspect same and to see that the terms of
this Lease Agreement are being fulfilled.
23. Nonwaiver. The failure of the Lessor or of Lessee to insist upon the
strict performance of any of the terms, conditions, or covenants herein, shall
not be deemed a waiver of any subsequent breach of any of the terms,
conditions, or covenants herein contained.
24. Applicable Law and Jurisdiction. This Lease shall be construed in
accordance with and governed by the laws of the State of South Carolina, and
the parties do hereby submit to the jurisdiction of the Courts of the State of
South Carolina in any dispute concerning its terms or enforcement of its
conditions.
25. Environmental Compliance.
a. Lessee shall not cause or permit any "Hazardous Substance" (as
defined in 42 U.S.C.A. Section 9601(14) (Supp. 1990) (as amended) to be used,
stored, or generated on the Premises, except for Hazardous Substances of types
and quantities customarily used or found in motor vehicle assembly sales and
service establishments such as contemplated by this Lease.
b. Lessee shall not cause or permit the Release (as defined in 42
U.S.C.A. Section 9601(22)(as amended) of any Hazardous Substance, contaminant,
pollutant, or petroleum in, on, or under the Premises or into any ditch,
conduit, stream, storm sewer, or sanitary sewer connected thereto or located
thereof.
c. Subject to the provisions of this Lease, Lessee shall use, store,
and dispose of all Hazardous Material in strict compliance with and otherwise
fully and timely comply with all applicable federal, state, and local statutes
and regulations relating to public health and safety and protection of the
environment ("Environmental Laws").
d. Lessor represents and warrants to Lessee that, to the best of
Lessor's actual knowledge without independent investigation or inquiry, as of
the effective date of this Lease:
(i) there has been no release onto or under the demised
premises of any Hazardous Material in violation of any Environmental Law;
(ii) the demised premises contains no PCBs, PCB contaminated
electrical equipment or asbestos-containing materials;
(iii) Lessor has received no notice that the demised premises is
in violation of any Environmental Law; and
(iv) there are no underground storage tanks on or under the
demised premises in which Hazardous Materials are or have been stored.
If during the term of this Lease, either Lessor or Lessee becomes aware
of (1) any actual or threatened release of any Hazardous Material on, under or
about the demised premises; or (ii) any inquiry, investigation, proceeding, or
claim by any government agency or other person regarding the presence of
Hazardous Material on, under or about the demised premises, that party shall
give the other party written notice of the release or investigation within
five (5) days after learning of it and shall simultaneously furnish to the
other party copies of any claims, notices of violation, reports or other
writings received by the party providing such notice that concern the release
or investigation.
e. If the presence of any Hazardous Material brought onto the
demised premises by either Lessor or Lessee or by their respective employees,
agents, contractors, invitees, prior tenants or subtenants results in
contamination of the demised premises, that party shall promptly take all
necessary actions, at such party's sole expense, to return the demised
premises to the condition that existed before the introduction of such
Hazardous Material. Lessee shall first obtain Lessor's approval of the
proposed remedial action, which may not be unreasonably withheld or delayed.
If Lessor undertakes any cleanup, detoxification, or similar action,
whether or not required by any governmental or quasi-governmental agency, as a
result of the presence, release or disposal on, under, in or about the demised
premises, and that action results in denying Lessee use of or access to the
demised premises or Lessee is otherwise unable to conduct its business on the
demised premises for a period of more than twenty-four (24) hours, the rent
payable under paragraph 2 shall be abated for the period that Lessee is unable
to conduct its business on the demised premises.
f. Lessor and Lessee shall, at that party's sole expense and with
counsel reasonably acceptable to the other party, indemnify, defend, and hold
harmless the other party and the other party's shareholders, directors,
officers, employees, partners, affiliates, and agents with respect to all
losses arising out of or resulting from the release of any Hazardous Material
in or about the demised premises, or the violation of any Environmental Law by
that party or its employees, agents, contractors, invitees, prior tenants, or
subtenants. This indemnification includes all losses, liabilities,
obligations, penalties, fines, claims, actions (including remedial or
enforcement actions of any kind and administrative or judicial proceedings,
orders, or judgments), damages (including attorney, consultant, and expert
fees and expenses) resulting from the release or violation. This
indemnification shall survive the termination of this Lease.
26. Memorandum of Lease. The parties agree, at either parties' request,
to enter into a Memorandum or short form Lease for the purposes of recordation
which shall specify the term of the Lease hereunder.
27. Parties Bound. Each and all of the covenants, terms, agreements,
obligations, and conditions of this Lease shall extend to, and bind and inure
to the benefit of the heirs, legal representatives, successors, and permitted
assigns of Lessor and Lessee respectfully.
IN WITNESS WHEREOF the parties have caused this Lease Agreement to be
executed the date and year first above written.
LESSOR:
ARCHIE MCNAIR CABINETS, INC.
By: /s/ Archie M. McNair (L.S.)
Witnesses: ---------------------
/s/ Kathy J. Hardee Title: Pres.
- -----------------------
/s/ Betty Causey
- ------------------ /s/ Archie M. McNair (L.S.)
As to Lessor ----------------------
ARCHIE M. MCNAIR
d/b/a MCNAIR RENTAL
LESSEE:
NEWRIDERS, INC.
A NEVADA CORPORATION
/s/ Kathy J. Hardee By: /s/ Rion Hatchell (L.S.)
- ---------------------- ---------------------
/s/ Philip C. Thompson Title: Chairman of the Board
- -----------------------
As to Newrider Inc. By:
--------------------------- (L.S.)
Title:
-------------------------
STATE OF SOUTH CAROLINA )
)
COUNTY OF HORRY )
PERSONALLY appeared before me Kathy J. Hardee and made oath that she
was present and saw the within named Archie McNair Cabinets, Inc. and Archie
M. McNair, d/b/a McNair Rental, by Archie M. McNair, as Lessor, sign, seal,
and as his act and deed, deliver the foregoing Lease Agreement; and that she
with Betty H. Causey witnessed the execution thereof.
/s/ Kathy J. Hardee
----------------------
Sworn to before me this
6th day of June, 1997.
Betty H. Causey (L.S.)
- -------------------------------
Notary Public for South Carolina
My commission Expires: 10 - 11 - 98
STATE OF SOUTH CAROLINA )
)
COUNTY OF HORRY )
PERSONALLY appeared before me Kathy J. Hardee and made oath that she was
present and saw the within named Newriders, Inc., a Nevada Corporation, as
Lessees, by Rion Hatchell its Chairman of the Board, sign, seal, and as the
corporate act and deed, deliver the foregoing Lease Agreement; and that she
with Philip C. Thompson witnessed the execution thereof.
/s/ Kathy J. Hardee
-------------------
Sworn to before me this
9th day of June, 1997.
/s/ Philip C. Thompson
- ------------------------(L. S.)
Notary Public for South Carolina
My Commission Expires: 4-18-06
Exhibit "A"
ALL AND SINGULAR that certain piece, parcel or lot of land lying and being in
Conway Township, County and State aforesaid, and being shown on map by J. F.
Thomas, R.L.S., dated October 12, 1971. Bounded and described on said map as
follows:
Beginning at Concrete Monument N. # 407 located on the Southwestern margin of
U. S. Highway # 501 and running South 34 degrees 35 minutes East with the said
highway 100 feet to Concrete Monument # 4046; thence South 55 degrees 25
minutes West 305 feet to Concrete Monument # 4046 located in the center of a
power line; thence North 34 degrees 35 minutes West with the aforesaid power
line 100 feet to Concrete Monument N. # 410; thence North 55 degrees 25
minutes East 305 feet to Concrete Monument N. 407, the point of beginning.
Bounded on the North by U. S. Highway # 501, on the Southeast by Lot 3A and 3B
on said map, on the Southwest by other lands of Burroughs Timber Company and
on the Northwest by now or formerly Burroughs Timber Company, a portion of Lot
2A and 2B.
This is the identical property conveyed to James W. Edwards and Archie M.
McNair by deed of Burroughs Timber co. recorded November 9, 1971, in Deed Book
459 at page 533, Office of the R.M.C. for Horry County, South Carolina.
This conveyance is subject to the restrictive covenants as contained in the
aforementioned deed from Burroughs Timber Co. to James W. Edwards and Archie
M. McNair.
This is the identical property conveyed to Edwards-McNair, Inc. by James W.
Edwards and Archie M. McNair by deed recorded March 28, 1972, in Deed Book 466
at page 707, in the Office of the R.M.C. for Horry County, South Carolina.
Exhibit 10.2.5
ASSIGNMENT OF LESSEE'S INTEREST IN LEASE
FOR VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged,
NEWRIDERS, INC., a Nevada corporation ("Assignor") hereby assigns, transfers
and conveys to LEON HATCHER ("Assignee"), all of its right, title and interest
as a Lessee under that certain Lease Agreement with ARCHIE MCNAIR CABINETS,
INC., and ARCHIE M. MCNAIR, d.b.a. MCNAIR RENTAL dated June 6,1997 (the
"Lease"), with respect to real property and improvements located at 4019
Highway 501 near the City of Myrtle Beach, Horry County, South Carolina.
Assignee hereby accepts such assignment, agrees to assume and perform all
of Assignor's duties and obligations under the Lease including without
limitation, the obligation to pay rent as required under the Lease, from and
after the Effective Date as provided below. Assignee further agrees to
indemnify, defend and hold Assignor harmless from and against any and all
loss, cost, damage, liability, claim or expense arising from or attributable
to the Lease from and after the Effective Date.
The Effective Date of this Assignment shall be March 1, 1998.
In Witness Whereof, the parties have executed this Assignment on the
dates opposite their respective signatures, to be effective for all purposes
as of the Effective Date.
ASSIGNOR
NEWRIDERS, INC., a
Nevada Corporation
By: /s/ WR Nordstrom
- ------------------- Dated: 2/9/1998
ASSIGNEE
/s/ Leon Hatcher
- -----------------
LEON HATCHER Dated: 2/9/98
Exhibit 10.3.1
PASIANO PUBLICATIONS INC.
28210 Dorothy Drive, Agoura Hills, CA 91301-2693
Tel. (818)889-8740 Fax (818)889-4726
DEALERSHIP AGREEMENT
- --------------------
This agreement is made by and between PAISANO PUBLICATIONS, INC., a
California corporation with its principal place of business at 28210 Dorothy
Drive, Agoura Hills, California 91301 and EASYRIDERS OF FRESNO, hereafter
referred to as "Dealer".
1. Dealership Grant.
----------------
Paisano grants to Dealer a non-transferable right to operate a full line
EASYRIDERS dealership in Fresno, California. This right includes the right to
offer, sell, advertise, promote, ship and otherwise distribute Paisano's
complete line of motorcycle apparel and accessories as are from time to time
available through the EASYRIDERS dealership catalogue. This right includes
the right to use the name and trademark EASYRIDERS as expressly approved by
Paisano in association with the dealership granted herein. The name and mark
EASYRIDERS will not be used in association with any other goods and services
other than those comprising the EASYRIDERS dealership program.
2. Scope of Exclusivity.
--------------------
As long as this agreement is in effect Paisano shall not license another
full line dealership in the Fresno, California area as that area is defined
from time to time by the United States Census Bureau.
3. Term of This Agreement.
----------------------
This agreement shall be effective upon the date of the signature of the
last signing party hereafter and shall automatically expire six (6) month
later unless sooner terminated in the accordance with the provisions hereafter
or unless extended in accordance with the provisions hereof.
4. Minimum Initial Inventory.
--------------------------
Dealer agrees to purchase a minimum inventory of goods to become a full
line dealer. This minimum start-up inventory shall be in a quantity
determined by Paisano which in no event exceeds the quantity of product that a
reasonable businessman would have as start-up inventory and as necessary to
maintain a going inventory or supply sufficient to meet reasonably anticipated
demand.
5. Sales Territory.
---------------
Dealer is not authorized to open any store other than at the location
approved by Paisano in Fresno, California. Dealer agrees that it will not
use, sell, advertise or promote EASYRIDERS goods offered under the dealership
program to customers and persons located outside of Fresno.
6. Payment of Invoices.
-------------------
Dealer shall pay all invoices from Paisano COD. Paisano represents to
Dealer that all prices offered herein for any of the goods purchased under the
EASYRIDERS full line dealership program are the bona fide wholesale price from
time to time in effect for all dealers in the United States. Shipping charges
may vary depending upon destination. Prices, terms, conditions and policies
are subject to change in accordance with Paisano's standard business
practices.
7. Repurchase of Inventory Upon Termination.
----------------------------------------
In the event that Paisano terminates this Agreement prior to its six (6)
month expiration date, Paisano shall repurchase all re-stockable unsold
EASYRIDERS inventory of Dealer at cost.
8. Quality Standards.
-----------------
Dealer agrees that all usages of the EASYRIDERS name and mark at whatever
location shall be of such style, appearance and quality as to be suited to the
best advantage and to the protection and enhancement of the EASYRIDERS name
and mark and the good will pertaining thereto, and that Dealer's policies of
display, sale, distribution and promotion shall be of a high standard and
shall in no manner reflect adversely upon the good name or reputation of
Paisano, its EASYRIDERS name and mark, or any of its products or property.
Dealer shall at all times provide to Paisano, free of cost, for prior approval
a sample of all usages of the EASYRIDERS name and mark including by way of
example, signage, packaging, labels, containers, samples, trade dress,
promotional literature, brochures and advertisements. Any materials not
expressly disapproved by Paisano within ten business days after receipt by
Paisano shall be deemed to have been approved. After approval Dealer shall
not in any respect change the approved materials.
9. Termination and Extension.
-------------------------
Paisano shall have the unilateral right to allow this Agreement to expire
by its own terms at the expiration of six (6) month or to extend it for any
additional time as determined by Paisano. Paisano may otherwise terminate
this Agreement at any time prior to its natural expiration, or during any such
extensions, provided that Dealer is in material breach and remains in material
breach even after thirty days notice from Paisano to cure said material breach
within said thirty day period. Upon receipt of any termination notice, Dealer
shall immediately deliver all inventory to Paisano for repurchase in
accordance with this contract, and Dealer shall not have any further right to
display, advertise, sell, offer, use or otherwise exploit the name or mark
EASYRIDERS in any fashion.
10. Right of Entry.
--------------
Paisano shall have the right of entry upon twenty-four hours notice to
enter all business premises wherein the EASYRIDERS dealership is in operation
at any time during the term of this Agreement, or after its termination, to
monitor and remove all unauthorized usages of the name and mark EASYRIDERS and
other unauthorized indicia or representations of Dealer's association with
Paisano or any of its magazines. Dealer acknowledges that any unauthorized
use of Paisano's marks or names, at any time, or its failure to cease use of
the name or mark EASYRIDERS or any other rights granted hereunder after
termination will result in immediate and irreparable harm to Paisano. Dealer
acknowledges and admits that there is no adequate remedy at law and that
Paisano is entitled to equitable relief temporary and preliminary injunction
in addition to all other legal and equitable relief including to which Paisano
is entitled under this Agreement or under applicable law.
11. Indemnification and Insurance.
-----------------------------
Dealer shall at all times maintain liability insurance for its business
for not less than One Million Dollars ($1,000,000) for bodily injury and
property damage arising out of each occurrence naming Paisano as a co-insured,
and in a form and substance acceptable to Paisano. Such insurance policy
shall be provided to Paisano at least thirty days prior to its effective date
showing full compliance with these requirements. Dealer shall give immediate
notice to Paisano of any occurrence that actually does, or might reasonably be
expected to, result in a claim made against Dealer or Paisano. Dealer shall
fully defend and indemnify Paisano from all claims, damages, costs and
expenses including reasonable attorneys fees arising directly or indirectly
out of Dealer's operation of its business wherever located or otherwise
arising out of any action or omission of Dealer not emanating from Paisano.
Paisano does not warrant that Dealer's use of the name or mark EASYRIDERS is
noninfringing of any other name or mark.
12. Best Efforts.
------------
Dealer agrees to use its best efforts by maximizing the sales of goods
sold under the EASYRIDERS dealership program including its efforts to
continuously, diligently and competently sell, promote, inventory and supply
EASYRIDERS goods.
13. Relationship.
------------
Dealer and Paisano are not partners, joint ventures, principal/agent,
master/servant, employer/employee, and have no other relationship other than
that of licensor and licensee.
14. Cooperation.
-----------
Dealer agrees to fully cooperate with Paisano for the purpose of securing
and protecting Paisano's interest in whatever form and wherever required.
Dealer hereby grants to Paisano an irrevocable power of attorney to sign on
behalf of Dealer any and all applications or other documents relating to
copyright, trademark or tradename protection and registration of works, names,
or marks in the name of Paisano.
15. Ownership.
---------
All marks, names, pictorial, graphics, sculptural and audio visual works,
designs, logos, characters, symbols and licenses or other works created or
conceived by Dealer and used in association with the name or mark EASYRIDERS
or any of the goods sold under the EASYRIDERS dealership program and their
related trade dress, containers and advertising are the sole and exclusive
property of Paisano. Dealer shall fix to all products, advertisement, works,
and materials, as directed by Paisano, any and all copyright and trademark
notices or other inscriptions which Paisano deems necessary to protect and
enforce its rights. Dealer agrees that it will not at any time attack the
title or rights of Paisano in and to the name or mark EASYRIDERS or any of the
rights or property of Paisano during or after the term of this Agreement.
Dealer shall promptly notify Paisano of any infringements or imitations by
others of the mark or name EASYRIDERS which come to Dealer's attention.
Dealer shall have no right of enforcement to protect the name or mark
EASYRIDERS unless expressly authorized in writing by Paisano to do so.
16. Fictitious Name.
---------------
Dealer may use the name EASYRIDERS as a fictitious business name only so
long as this Agreement remains in effect. Dealer hereby grants to Paisano an
unconditional and irrevocable power of attorney to act on Dealer's behalf to
revoke said fictitious business name statement or file any appropriate legal
document in Dealer's name to effectuate the termination of Dealer's right to
any name or mark granted under this Agreement including EASYRIDERS.
17. Governmental Approvals and Compliance with Laws.
-----------------------------------------------
Dealer agrees to obtain all necessary governmental approvals to legally
operate the dealership and shall otherwise comply with all applicable state,
federal and municipal laws, regulations, orders and ordinances.
18. Transfer Agreement.
------------------
This Agreement or any right or duty hereunder may be assigned by Paisano
without the consent of Dealer. Dealer may no assign or license any of the
rights or duties hereunder and any attempt to do so may be deemed a material
breach of this Agreement.
19. Forum Selection and Costs.
-------------------------
In the event of any dispute arising under this Agreement Dealer agrees
that it submits to the jurisdiction and venue of the state and federal courts
of the County of Los Angeles, California. The parties agree that this
Agreement is formed under and pursuant to the laws of the State of California
and the United States of America to the extent applicable and that in any
action to enforce, interpret, construe or litigate the relationship of the
parties including under this Agreement that the law of California and the
United States, if applicable, shall be the governing law. In any action to
enforce, interpret, construe or litigate this Agreement, the prevailing party
shall be entitled to its cost and reasonable attorneys fees incurred therein.
IN WITNESS WHEREOF the parties have executed this Agreement through its
authorized officers as of the date set forth hereafter.
PAISANO PUBLICATION, INC.
DATE: 12-8-93 BY:/s/ <signature illegible>
---------------------------
TITLE: <illegible>
---------------------
Easyriders of Fresno
----------------------------
NAME OF DEALERSHIP
DATE: 12-9-93 BY:/s/ <signature illegible>
TITLE: Executive Vice President
Exhibit 10.3.2
PAISANO PUBLICATIONS, INC.
LICENSE AGREEMENT
TRADEMARK/COPYRIGHT
"EASYRIDERS CAFE"
LICENSEE: NEWRIDERS, INC.
Para. Page
1. Definitions 4
(a) Property 4
(b) Licensed Article 4
(c) Licensed Territory 4
(d) Affiliate 4
(e) Sale 4
(f) Gross Sales 5
(g) Premium 5
2. Grant of License 5
(a) Grant 5
(b) Official Licensed Product 5
(c) Scope of Exclusivity 5
(d) Prohibition Against Extra
Territorial Sales 5
(e) Term 5
3. Compensation and Statement 6
(a) Royalty Rate 6
(b) Advance Payment 6
(c) Minimum Royalty 6
(d) Statement and Payments 6
(e) Administrative Fee 6
(f) Interest 6
(g) Payment on Termination 6
4. Quality and Approvals 6
(a) Standards 6
(b) Samples and Trade Dress 7
(c) Advertising 7
5. Records 7
6. Termination 8
7. Disposal of Stock 9
8. Remedies 9
9. Indemnification and Insurance 10
10. Best Efforts and Distribution
Requirements 10
11. Notices 11
12. No Joint Venture 11
13. Title to Property 11
(a) Cooperation 11
(b) Ownership 12
14. Protection of Property 12
15. Government Approvals 13
16. Combination and Premium Sales 13
17. Assignment 13
18. Miscellaneous 13
19. Severability 14
20. Survivorship of Provisions 14
21. Confidentiality 14
22. Costs 14
SIGNATURE PAGE 15
EXHIBIT A 16
EXHIBIT B 17
EXHIBIT C 18
EXHIBIT D 19
LICENSE AGREEMENT
AGREEMENT made this 15th day of January, 1997 by and between PAISANO
PUBLICATIONS, INC., a California corporation, with its principal place of
business at 28210 Dorothy Drive, Agoura, CA 91301 (hereinafter referred to as
"Paisano" or "Licensor") and NEWRIDERS, INC. a California corporation, with
its principal place of business at 5155 N. Blackstone, Fresno, CA, 93705
(hereinafter referred to as "Licensee");
WITNESSETH:
A. PAISANO is the owner of certain proprietary rights in and to the
PROPERTY, defined in paragraph 1(a) below, and PAISANO is willing to grant to
LICENSEE such rights to use the PROPERTY on the LICENSED ARTICLES as defined
in paragraph 1(b) below, in the LICENSED TERRITORY, as defined in paragraph
1(c) below, on the terms herein; and
B. LICENSEE desires to use the PROPERTY in association with the
manufacture, sale, advertisement, and distribution of the LICENSED ARTICLES,
on the terms herein.
THEREFORE, in consideration of the mutual promises herein, the parties
agree as follows:
1. Definitions for the purposes hereof.
(a) "Property" means and includes the marks, names, literary, pictorial,
graphic, sculptural, audiovisual works, designs, logos, characters, symbols,
likenesses, visual representations, and each component thereof identified and
depicted in EXHIBIT A.
(b) "Licensed Articles" means the goods and services as specified and
limited in EXHIBIT B which contain any of the PROPERTY. It does not include
any goods which incorporate the LICENSED ARTICLE in any larger assembly or
compilation or as a component.
(c) "Licensed Territory" means the geographic territory, channels of
trade, and fields of use as specified in EXHIBIT C.
(d) "Affiliate" means (1) any person or entity which owns any part of
LICENSEE or is owned in any part by LICENSEE; or (2) any person or entity
having ownership or control which is common to both it and LICENSEE when the
common ownership or common control is at least ten percent (10%) in both it
and LICENSEE.
(e) "Sale" means the sale or other distribution of LICENSED ARTICLES by
LICENSEE or its AFFILIATE to any customer. A LICENSED ARTICLE is sold when
shipped and invoiced by or at the direction of LICENSEE or LICENSEE'S
AFFILIATE.
(f) "Gross Sales" means the price of all LICENSED ARTICLES as invoiced by
LICENSEE and LICENSEE's AFFILIATE to their customers for the sale of LICENSED
ARTICLES, less sales taxes, shipping costs, and returns actually made and
allowed. In computing Gross Sales, no costs incurred in manufacturing,
selling, advertising or distributing the LICENSED ARTICLES covered by this
AGREEMENT shall be deducted, nor shall any deduction be made for uncollectible
accounts. cash discounts or similar allowances. LICENSEE warrants that all
invoices will accurately reflect the actual price charged to its customers for
sales of LICENSED ARTICLES.
(g) "Premium" means any article used for the purpose of increasing the
sale, promoting, or publicizing any goods or services, including but not
limited to incentives for sales forces, the trade or the consumer.
2. Grant of License
(a) Grant: Subject to the limitations set forth in this AGREEMENT,
PAISANO hereby grants to LICENSEE the "non-exclusive" and non-transferable
right, without the right of sublicense, to use the PROPERTY for the
manufacture, offer for sale, sale, advertisement, promotion, shipment, and
distribution of the LICENSED ARTICLES in the LICENSED TERRITORY.
(b) Official Licensed Product: ALL LICENSED ARTICLES, as well as all
packaging and advertising therefor, shall have imprinted thereon the words
"EASYRIDERS, Official Licensed Product" in any approved form including, as
depicted in EXHIBIT A, subject to mutual agreement as to size and placement.
PAISANO, in its sole discretion, may also require LICENSEE to place any other
indicia or symbols on the LICENSED ARTICLES, as well as all packaging and
advertising therefor, as a means of further identifying LICENSEE and/or the
LICENSED ARTICLES.
(c) Scope of Exclusivity: Nothing in this AGREEMENT shall be construed to
prevent PAISANO from: (i) granting any other licenses for the use of the
PROPERTY; (ii) utilizing the PROPERTY on any goods or services whatsoever that
PAISANO itself may elect to sell to its dealers, distributors and other
customers; or (iii) utilizing the PROPERTY in any other manner whatsoever.
(d) Prohibition Against Extra-Territorial Sales: The grant hereby extends
only to the LICENSED TERRITORY. LICENSEE agrees that it will not use,
manufacture or sell, nor authorize any use, manufacture, or sale of any goods
or services which use the PROPERTY outside of the LICENSED TERRITORY, and that
it will not sell any goods or services using the PROPERTY for resale or
distribution outside of the LICENSED TERRITORY.
(e) Term: This AGREEMENT shall be effective on January 15, 1997 and shall
expire automatically on January 15, 2002 unless sooner terminated in
accordance with the provisions hereof, as attached to existing franchise
agreement dated January 15, 1997.
3. Compensation and Statement
(a) Royalty Rate: LICENSEE agrees that it will pay PAISANO an amount
equal to ten percent (10%) of all GROSS SALES made during the term of this
AGREEMENT and during any period of any permitted extension or renewal. All
payments made hereunder shall be in U.S. currency.
(b) Advance Payment: Upon execution of this AGREEMENT, LICENSEE shall pay
PAISANO the amount of USD$ 0.00. This amount is comprised of USD$ 0.00 which
is non-refundable (except as provided in paragraph 3(g) below), but credited
against royalties due during term of this AGREEMENT and USD$ 0.00 per calendar
quarter which is a non-refundable payment of administrative licensing costs of
LICENSEE, which is not credited against royalties.
(c) Minimum Royalty: For each year of the term of this AGREEMENT,
LICENSEE agrees to pay PAISANO a non-refundable annual minimum royalty of USD
$0.00 which is due and payable on each anniversary of this AGREEMENT to be
credited against any royalties which may be due for the succeeding year.
Minimum royalty payments may not be accrued and credited against any year
other than the year next succeeding the minimum royalty due date. See
Addendum/Exhibit "D".
(d) Statement and Payments: On or before the 15th day of each calendar
month, whether or not any Sales of any LICENSED ARTICLES have been made,
LICENSEE shall submit to PAISANO a full and accurate statement certified by a
knowledgeable officer as accurate, showing the quantity, description, and
Gross Sales of all LICENSED ARTICLES distributed and/or sold during the
preceding calendar month. Simultaneously therewith LICENSEE shall make any
payments due to PAISANO under provisions of paragraphs 3, 4 and 5 of this
AGREEMENT.
(e) Administrative Fee: Any delay in making my report required under this
AGREEMENT, or the making of any incomplete report, entities PAISANO to an
additional administrative delay fee of $100.00 per report.
(f) Interest: Any sums which have not been timely paid by LICENSEE,
including without limitation the sums due under paragraphs 3 and 4 and the
costs of any PAISANO examination under paragraph 5 shall accrue interest
compounded daily from the final date on which LICENSEE could cure any late
payment of each sum until the date of actual receipt of payment at the annual
rate of twelve percent (12%).
(g) Payment on Termination: Upon expiration, or in the event Paisano
terminates this AGREEMENT pursuant to section 6, then all amounts owed, under
this AGREEMENT, by LICENSEE to PAISANO, shall become due and payable
immediately.
4. Quality and Approvals
(a) Standard: LICENSEE agrees that the LICENSED ARTICLES covered by this
AGREEMENT shall be of such style, appearance and quality as to be suited to
their exploitation to the best advantage and to the protection and enhancement
of the PROPERTY and the goodwill pertaining thereto; that such LICENSED
ARTICLES will be manufactured, sold and distributed in accordance with all
applicable federal, state and local laws, and industry codes and standards;
that LICENSEE's policies of sale, distribution and/or exploitation shall be of
high standard; and that the foregoing shall in no manner reflect
adversely upon the good name of PAISANO or any of its products or the
PROPERTY.
(b) Samples and Trade Dress: LICENSEE shall, before selling or
distributing any LICENSED ARTICLES, furnish to PAISANO free of cost, for
written approval, two samples of each LICENSED ARTICLE, together with all of
each LICENSED ARTICLE's trade dress, (including packaging and labels), and all
containers (including packing and wrapping material), and any additional
samples as may be requested by PAISANO. Notwithstanding the foregoing, Paisano
shall be entitled to 20 samples at no cost; any additional samples requested
shall be purchased from Licensee at Licensee's wholesale price. It is a
material requirement of this AGREEMENT, that within sixty (60) days of the
beginning of the term of this AGREEMENT, LICENSEE shall submit to PAISANO for
its written approval, the proposed samples of the LICENSED ARTICLES and all
proposed trade dress and containers. The LICENSED ARTICLES, all trade dress,
and all containers, shall be of a quality, appearance and style approved by
PAISANO before any advertising, sales, distribution or use of it. Any LICENSED
ARTICLE, its trade dress, and containers (including packing and wrapping
material), submitted and not disapproved by PAISANO within thirty (3 0) days
after receipt, shall be deemed to have been approved. After samples of such
items have been approved pursuant to this paragraph, LICENSEE shall not change
any aspect thereof without the prior written consent of PAISANO. From time to
time after LICENSEE has commenced selling the LICENSED ARTICLES, and upon
PAISANO's written request, LICENSEE shall furnish without cost to PAISANO no
more than two (2) additional random samples of each LICENSED ARTICLE being
manufactured and sold by LICENSEE hereunder, together with all trade dress and
all containers (including packing and wrapping material) used in connection
therewith. In the event PAISANO determines in its sole discretion there is a
material departure from the approved sample, trade dress, or containers for
such materials, PAISANO shall have the right in its sole discretion to
withdraw its approval of any such materials and/or terminate this AGREEMENT
upon written notice for LICENSEE's breach of its duties under this paragraph,
unless LICENSEE cures such breach within thirty (30) days of its receipt of
PAISANO's written notice of termination.
(c) Advertising: LICENSEE agrees that he shall use his best efforts to
promote the sale of the LICENSED ARTICLES throughout the licensed territory.
5. Records
(a) LICENSEE agrees to keep accurate books of account and records
covering all transactions relating to the subject matter hereof. Upon at least
five (5) business days written notice to LICENSEE PAISANO and its duly
authorized representatives shall have the right at all reasonable hours of any
business day to examine such books of account and records in LICENSEE's
possession or under its control with respect to the subject matter and terms
of this AGREEMENT, and shall have free and full access thereto for such
purposes and for the purpose of making copies and extracts therefrom. All such
books of account and records shall be kept available for at least four years
after the termination or expiration of this AGREEMENT. LICENSEE further agrees
that, to facilitate the examination of its books and records with respect to
any amounts due, it will designate a symbol or number which will be used
exclusively in connection with the LICENSED ARTICLES and with no other
articles which LICENSEE may manufacture, sell or distribute.
(b) In the event an examination of LICENSEE's books reveals a deficiency
in sums owed to PAISANO in excess of 10% for the term and (i) LICENSEE agrees
with such figures; or (ii) the parties settle on some other figure in excess
of the amounts set out; or (iii) it is adjudicated that there is a deficiency
in excess of such amount then LICENSEE shall bear the cost of reasonable
accountants fees related to the conduct of such audit.
6. Termination
(a) PAISANO shall have the right to terminate this AGREEMENT prior to its
expiration upon written notice to LICENSEE at any time if
(i) LICENSEE shall fail to make any payment due hereunder or to deliver
any of the statements herein referred to or if LICENSEE shall fail to comply
with any other term or condition of this AGREEMENT, if such failure shall
continue for a period of thirty (30) calendar days after written notice of
such failure is received by LICENSEE by certified maiI, telex, telegram, or
telecopier to LICENSEE; or
(ii) LICENSEE files a petition in bankruptcy, is adjudicated a bankrupt or
files a petition or otherwise seeks relief under or pursuant to any
bankruptcy, insolvency or reorganization statute or proceeding, or if a
petition in bankruptcy is filed against it or it becomes insolvent or makes an
assignment for the benefit of its creditors or a custodian, receiver or
trustee is appointed for it or a substantial portion of its business or
assets, this AGREEMENT shall terminate automatically, provided such
circumstance shall not be cured within thirty (30) days of the commencement of
the above-stated event. This AGREEMENT is entered into by PAISANO based upon
and in reliance upon the personal services of LICENSEE. No assignee for the
benefit of creditors, custodian, receiver, trustee in bankruptcy, sheriff or
any other officer of the court of official charged with taking over custody of
LICENSEE's assets or business shall have any right to continue this AGREEMENT
or to exploit or in any way use the PROPERTY if this AGREEMENT terminates
pursuant to this paragraph. Notwithstanding the foregoing provisions, in the
event that, pursuant to the U.S. Bankruptcy Code, a trustee in bankruptcy of
LICENSEE or LICENSEE, as debtor, is permitted to assume this AGREEMENT and
does so and, thereafter, desires to assign this AGREEMENT to a third party,
which assignment satisfies the requirements of the Bankruptcy Code, the
trustee or LICENSEE, as the case may be, shall notify PAISANO of same in
writing. Said notice shall set forth the name and address of the proposed
assignee, the proposed consideration for the assignment and all other relevant
details thereof. The giving of such notice shall be deemed to constitute an
offer to PAISANO to have this AGREEMENT assigned to it or its designee for
such consideration, or its equivalent in money, and upon such terms as are
specified in the notice. The aforesaid offer may be accepted only by written
notice given to the trustee or LICENSEE, as the case may be, by PAISANO within
thirty (30) days after PAISANO's receipt of the notice from such party. If
PAISANO fails to give its notice to such party within this period, such party
may complete the assignment referred to in its notice, but only if such
assignment is to the entity named in said notice and for the consideration and
upon the terms specified therein. Nothing contained herein shall be deemed to
preclude or impair any rights which PAISANO may have as a creditor in any
bankruptcy proceeding.
(b) PAISANO shall be under no obligation to terminate this AGREEMENT on
the happening of any or all of the events set forth in this paragraph 6, and
its failure to do so in any instance shall not be deemed a waiver of its
rights to do so. PAISANO's rights under this paragraph 6 are in addition to
all other rights which PAISANO may have against LICENSEE for damages and
equitable relief.
7. Disposal of Stock
(a) After the expiration or termination of this AGREEMENT, LICENSEE shall
have no further right to manufacture, advertise, distribute, sell, or
otherwise deal in any LICENSED ARTICLES except as hereinafter provided. Upon
such expiration or termination, LICENSEE may dispose of finished LICENSED
ARTICLES on hand or in process at the time of such expiration or termination,
for a period of ninety (90) days thereafter, provided all further payments due
with respect to that ninety (90) day period are made in accordance with
paragraph 3 hereof.
(b) If this AGREEMENT is terminated for any reason excepted in the
previous paragraph, then LICENSEE shall have no rights of disposal under the
previous paragraph and LICENSEE shall immediately ship to PAISANO, without
cost to PAISANO, all existing inventory of LICENSED PRODUCTS and all items
utilized in the manufacture of LICENSED ARTICLES and within its control,
except for those items which contain information proprietary to LICENSEE (e.g.
positive films) and all trade dress and containers embodying the property
along with a written inventory of LICENSED ARTICLES remaining and on hand,
which shall be certified by an officer of LICENSEE. PAISANO's receipt of such
inventory, written inventory and other materials shall not constitute a waiver
by PAISANO of its right to recover any amounts due PAISANO or a waiver of its
right to exercise any other remedies which are provided by law or this
AGREEMENT.
8. Remedies
LICENSEE acknowledges that its failure (except as otherwise expressly
provided herein) to cease the manufacture, sale or distribution of the
LICENSED ARTICLES upon the termination or expiration of this AGREEMENT will
result in immediate and irreparable damage to PAISANO. LICENSEE acknowledges
and admits that there is no adequate remedy at law for such failure to cease
manufacture, sale or distribution, and LICENSEE agrees that in the event of
such failure the goods shall be deemed counterfeit and PAISANO shall be
entitled to equitable relief including, without limitation, temporary and
permanent injunctions and such other and further relief as any court or agency
with jurisdiction may deem just and proper. Resort to any remedy referred to
hereinabove shall not be construed as a waiver of any other rights and
remedies to which PAISANO is entitled under this AGREEMENT or under applicable
law.
9. Indemnification and Insurance
(a) LICENSEE shall be solely responsible for, and defend and indemnify
PAISANO, and the officers and directors of both of the foregoing (hereinafter
collectively "Indemnities"), and hold such Indemnities harmless from any and
all claims, demands, causes of action, damages, costs and expenses whatsoever
(including but not limited to reasonable attorneys' fees and product warranty
and recall expenses. if any) arising directly or indirectly from or out of
LICENSEE's use of the PROPERTY, out of the design, manufacture, sale,
distribution, use or misuse of the LICENSED ARTICLES or otherwise arising
directly or indirectly from or out of any alleged action or omission of
LICENSEE, any affiliate, or any of their customers.
(b) LICENSEE will obtain and maintain at all times product liability
insurance for the LICENSED ARTICLES in the amount of coverage specified below.
Such product liability insurance shall be in a form and substance acceptable
to PAISANO and shall cover any claims, demands, causes of action or damages,
including reasonable attorneys' fees, arising from or out of any alleged
defects in the LICENSED ARTICLES, or otherwise from or out of any use or
misuse of the LICENSED ARTICLES. A certificate of insurance evidencing same,
along with the name, address and telephone number of the insurance
underwriter, shall be sent, pursuant to paragraph 11, to PAISANO. Such
insurance policy shall name the Indemnities as additional insureds and shall
provide that it may not be canceled without at least thirty (30) days prior
written notice to PAISANO. LICENSEE shall furnish PAISANO with a certificate
of such insurance showing compliance with the foregoing requirements. LICENSEE
agrees that, for the initial term of this AGREEMENT, such insurance policy or
policies shall contain a combined single limit of no less than $1,000,000. for
bodily injuries and property damage arising out of each occurrence. LICENSEE
shall give immediate notice to PAISANO of all occurrences that might
reasonably be expected to result in any claim against it or any one or more of
the Indemnities or which could impose any liability upon any one or more of
the Indemnities.
10. Best Efforts and Distribution Requirements
LICENSEE agrees to maximize the sales of LICENSED ARTICLES and to use its
best efforts to continuously, diligently and competitively design, sell,
advertise, promote, distribute, inventory and supply each of the LICENSED
ARTICLES throughout the LICENSED TERRITORY. This requires in part the
maintenance of adequate facilities and trained personnel. LICENSEE shall
maintain sufficient facilities and hire sufficient personnel for the broadest
possible distribution of LICENSED ARTICLES through-out the LICENSED TERRITORY.
It is a material requirement of this AGREEMENT that, within ninety (90) days
of the beginning term of this AGREEMENT, LICENSEE begin the bona fide
manufacture, distribution and sale of all LICENSED ARTICLES. PAISANO or its
designee shall be entitled to view and inspect any and all locations
pertaining to the manufacture, distribution, and sale of LICENSED ARTICLES
upon reasonable notice to LICENSEE.
11. Notices
All notices and statements to be given, and all payments to be made
hereunder, shall be given or made at the respective addresses of the parties
as set forth below unless notification of a change of address is given in
writing. Any notice which is posted in the United States and forwarded by
registered or certified mail, telegram, mailgram, telex, or telecopier shall
be deemed to have been given at the time it is mailed. Any other form of
notice shall be deemed given at the time of receipt.
If to PAISANO: PAISANO PUBLICATIONS, Inc.
28210 Dorothy Drive
Agoura Hills, CA 91301
Attention: Joe Teresi or Brian Wood
If to LICENSEE: NEWRIDERS INC.
5155 N. Blackstone
Fresno, CA 93705
Attn: Leon Hatcher
12. No Joint Venture
Nothing herein contained shall be construed to place the parties in the
relationship of partners, joint venturers or agents, and LICENSEE shall have
no power or right to obligate or bind PAISANO in any manner whatsoever.
13. Title to Property
(a) Cooperation: LICENSEE agrees to cooperate fully and in good faith
with PAISANO for the purpose of securing and preserving PAISANO's (or any
grantor of PAISANO) rights in and to the PROPERTY. LICENSEE shall, at
PAISANO's request and expense, register or cooperate with PAISANO to register
in all states and countries, a copyright, trademark and/or service mark in
the appropriate class(es), all in the name of PAISANO or, if PAISANO so
requests, in LICENSEE's own name. However, it is agreed that nothing
contained in this AGREEMENT shall be construed as an assignment or grant to
LICENSEE of any right, title or interest in or to the PROPERTY, or any
registration or application therefore referred to above, it being understood
dig all rights relating thereto are reserved by PAISANO, except for the
LICENSEE's right to use the PROPERTY as expressly provided in this AGREEMENT.
LICENSEE hereby agrees that it will, at any time upon request of PAISANO,
assign, transfer and convey to PAISANO any trade rights, trademarks, service
marks or copyright equities and registrations, goodwill, title and all other
rights in and to the same which may be obtained by LICENSEE or which are
contemplated hereby. LICENSEE shall execute any instruments presented to it by
PAISANO to accomplish or confirm the foregoing. Any such assignment, transfer
or conveyance shall be without other consideration, other than the mutual
covenants set forth in this AGREEMENT. LICENSEE hereby agrees that it shall
not at any time acquire any rights in the PROPERTY by virtue of any use it may
make of the PROPERTY. In furtherance of the foregoing, LICENSEE hereby grants
to PAISANO an irrevocable power of attorney to sign, on behalf of LICENSEE,
any and all applications and other documents relating to copyright and/or
trademark protection and registration of the property in order to insure
ownership thereof in PAISANO.
(b) Ownership: Any rights, including worldwide copyright, in all marks,
names, literary, pictorial, graphic, sculptural, audio- visual works, designs,
logos, characters, symbols, likenesses, visual representations, and/or other
works (hereinafter called WORKS) conceived or created by LICENSEE and used in
association with any LICENSED ARTICLE, its trade dress, its containers, or its
advertising, shall become the sole and exclusive property of PAISANO.
Immediately upon usage of these WORKS on any LICENSED ARTICLE, its trade
dress, its containers, or its advertising, all right, title and interest vests
in PAISANO. LICENSEE shall affix to all LICENSED ARTICLES, its trade dress,
containers, and advertising all copyright and trademark notice(s) as provided
for by PAISANO in order to maintain, protect and enforce such rights under the
appropriate laws. With respect to all copyrightable works, LICENSEE will upon
request from PAISANO cause its employees or other persons or entities creating
same to transfer all ownership therein to PAISANO by assignment or as a "work-
made-for-hire" and furnish proof thereof to PAISANO.
14. Protection of Property
(a) LICENSEE recognizes the great value of the goodwill associated with
the PROPERTY, and acknowledges that the PROPERTY and all rights therein and
goodwill pertaining thereto belong exclusively to PAISANO, and that the
PROPERTY has a secondary meaning in the minds of the public. Accordingly,
LICENSEE agrees that it will not, during the term of the AGREEMENT or
thereafter, attack the title or any rights of PAISANO in and to the PROPERTY
or attack the validity of this AGREEMENT.
(b) In furtherance of the protection of the PROPERTY, to prevent dilution
of the value of the PROPERTY, to eliminate the likelihood of confusion and to
prevent deception to the public, LICENSEE agrees that it will not sell
LICENSED ARTICLES in territories, channels of trade, or fields of use not
expressly authorized by this AGREEMENT.
(c) LICENSEE agrees to assist PAISANO, at PAISANO's expense (except as
otherwise provided herein), to the extent necessary in the procurement of any
protection of PAISANO's rights to the PROPERTY, in the protection and defense
of the PROPERTY, the filing and prosecution of any trademark or copyright
application or other applications the recording of this AGREEMENT or any other
AGREEMENTS, and the publication of any notices or the doing of any other act
with respect to the PROPERTY, including the prevention of the use thereof by
any unauthorized person, firm or corporation, that in the judgment of PAISANO
may be necessary or desirable under any law, regulation or decree of the
LICENSED TERRITORY. If PAISANO so desires, at its expense, it may commence or
prosecute any claims or suits in its own name or in the name of LICENSEE, or
join LICENSEE as a party thereto. LICENSEE shall notify PAISANO in writing of
any infringements, possible infringements or any imitations by others of the
PROPERTY or the LICENSED ARTICLES which may come to LICENSEE's attention.
PAISANO shall have the sole right to determine whether or not any further
action shall be taken on account of any such infringements or imitations.
LICENSEE shall not institute any suit or take any action on account of any
such infringements or imitations without first obtaining the written consent
of PAISANO. LICENSEE shall not have any rights against PAISANO by reason of
PAISANO's failure to prosecute any such alleged infringements or imitations.
15. Government Approvals
LICENSEE agrees to obtain all necessary governmental approvals with
respect to LICENSEE's sale and advertising of LICENSED ARTICLES and LICENSEE's
rights to manufacture, promote, sell and distribute the LICENSED ARTICLES
throughout the LICENSED TERRITORY. LICENSEE shall promptly furnish copies of
all such approvals to PAISANO, if requested.
16. Combination and Premium Sales
LICENSEE warrants it will not use the LICENSED ARTICLES for combination
sales, PREMIUMS, giveaways or for any similar method of merchandising without
the prior written consent of PAISANO, and will refrain from distributing
LICENSED ARTICLES for purposes other than SALE without the prior written
consent of PAISANO.
17. Assignment
This AGREEMENT and all rights and duties herein are personal to LICENSEE
and shall not, without PAISANOs prior written approval, be assigned,
mortgaged, sublicensed or otherwise encumbered by LICENSEE or by operation of
law. Any attempt by LICENSEE to grant a sublicense or to assign or part with
possession or control of the AGREEMENT or any of LICENSEE's rights or duties
hereunder shall be void from the beginning and shall constitute a material
breach of this AGREEMENT. This AGREEMENT and all rights and duties may be
assigned by PAISANO without the consent of LICENSEE.
18. Miscellaneous
This AGREEMENT constitutes the entire agreement and understanding between
the parties hereto and terminates and supersedes any prior agreement or
understanding relating to the subject matter hereof between PAISANO and
LICENSEE. None of the provisions of the AGREEMENT can be waived or modified
except in a written document signed by both parties. There are no
representatives, promises, agreements, warranties, covenants or undertakings
other than those expressly contained herein. The headings on each paragraph
hereof are for convenience purposes only and shall not be used to construe the
terms of this AGREEMENT. This AGREEMENT shall be deemed to have been accepted
and signed in Agoura Hills, California and shall be construed in accordance
with the laws of the State of California. In the event of any dispute arising
from this AGREEMENT, LICENSEE consents and agrees to in personam jurisdiction
and venue exclusively in either the Superior Court for Los Angeles County, or
the United States District Court for the Central District of California,
located in Los Angeles, California.
19. Severability
The provisions of this AGREEMENT are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part, then
such invalidity or unenforceability shall affect only such clause or provision
or part thereof.
20. Survivorship of Provisions
Notwithstanding the expiration or termination of this AGREEMENT, all
rights, obligations and remedies which accrued prior to the termination or
expiration hereof shall survive such termination or expiration.
21. Confidentiality
LICENSEE shall at no time reveal, allow to be revealed, disclose, or
otherwise participate in the disclosure of the contents of this Agreement, or
the AGREEMENT itself without the express written consent of LICENSOR.
Furthermore, LICENSEE shall undertake at all times to maintain this AGREEMENT
in secrecy and take all reasonable efforts to insure this.
22. Costs
In any action to enforce this AGREEMENT, the prevailing party shall be
entitled to costs and reasonable attorney's fees incurred thereby.
IN WITNESS WHEREOF, the parties have executed this AGREEMENT through
authorized officers as of the date set forth above.
PAISANO PUBLICATIONS, INC.
----------------------
By /s/ Brian Wood By: /s/Leon Hatcher
Title: President Title: Chairman of the Board
Date: 1/15/97 Date: 1/15/98
Date
EXHIBIT A ( )Initials
PROPERTY
1. TRADEMARKS:
(a) EASYRIDERS <copyright symbol appears here>
(b)
(c)
(d)
(e)
2. TRADE NAMES:
(a) EASYRIDERS CAFE
(b)
(c)
(d)
3. Literary, Pictorial, Graphic, Sculptural, Audio-visual Works, Designs,
Logos, Characters, Symbols, Likenesses, Visual
Representatives:
(a)
(b)
(c)
(d)
(e)
4. OTHERS (eg. phrases, inscriptions):
(a)
(b)
EXHIBIT B ( )Initials
LICENSED ARTICLES
1. GOODS:
(a) AS AGREED
(b)
(c)
(d)
(e)
2. SERVICES:
(a)
(b)
3. SIZE, STYLE AND DESIGN LIMITS:
(a)
(b)
(c)
(d)
(e)
4. PRODUCT PURPOSE: For ways customary in the trade
5. OTHER SPECIFICATIONS: None
EXHIBIT C ( )Initials
LICENSED TERRITORY
1. COUNTRIES:
(a) UNITED STATES
(b)
(c)
(d)
2. STATES/REGIONS:
(a)
(b)
(c)
(d)
3. COUNTIES/CITIES/SMSA's:
(a)
(b)
(c)
4. LOCATIONS:
(a)
(b)
5. CLASS OF CUSTOMERS:
(a)
(b)
(c)
6. CHANNELS OF TRADE:
(a) WAYS CUSTOMARY IN TRADE
(b)
EXHIBIT D
ADDENDUM TO AGREEMENT
DATED JANUARY 15,1997
(page 6)
License Royalty rate shall apply only to the goods sold outside the
distribution activity of the Easyriders Cafe sites.
Exhibit 10.4.2
<Logo Newriders SM>
August 22, 1997
William R. Nordstrom
National Investors Council
1501 Westcliff Drive, Suite 305
Newport Beach, CA 92660
Dear Bill:
With the consent of the Board of Directors of Newriders, Inc. (the
"Company"), by this letter ("Letter Agreement"), I am formalizing the terms
and conditions pursuant to which you have agreed to become a member of the
Board and the Executive Vice President of Finance and Administration of the
Company.
We have agreed on the following terms and conditions:
1. Position: Director and Executive Vice President of Finance and
Administration.
2. Term: Effective as of July 8, 1997 (the "Effective Date") and
continuing until thirty days notice given by either party to the other. The
foregoing term of this agreement shall be subject to earlier termination by
the Company for "cause" (as defined below) and by you for "good reason" (as
defined below).
3. Base Salary: $150,000 annually, with the salary being initially
deferred until, in the judgment of the Executive Vice President of Finance and
Administration, the Company has sufficient cash flow to begin to pay your
salary and all other executive salaries that have been deferred, on a pro rata
basis. A list of the other deferred executive salaries as of the date hereof
and projected into the future has been provided to you.
1040 East Herndon Avenue, Suite 102 * Fresno, CA 93720
* (209) 447-4557 FAX: (209) 447-4553
<PAGE>
Mr. William R. Nordstrom
August 20, 1997
Page 2
4. Expense Reimbursement: While serving as Executive V.P. of Finance and
Administration you will be entitled to reimbursement on a current basis for
specific business expenses reasonably incurred on behalf of the Company.
5. Lack of Exclusivity: The Company recognizes that you are presently
involved in certain other business activities which you are in the process of
concluding in an orderly manner. The Company will expect you to devote a
sufficient percentage of your productive time as necessary to properly attend
to the Company's business during this interim period and full time thereafter,
subject to a reasonable amount of time devoted to acting as Chairman of the
Board of National Investor's Council.
6. Benefits: You shall be entitled to the same benefits package as and
when it becomes available to other executive officers.
7. Stock Options: Upon your execution of this Letter Agreement, the
Company agrees to issue to you options to purchase 500,000 shares of
Newriders, Inc. common stock for an option price of $2.50 per share (the
"Options"). The Options will vest in five increments of 100,000 shares each,
upon the date on which the Company's total market capitalization reaches the
following levels:
Total Market Capitalization Option Increment
- --------------------------- ----------------
$ 150,000,000 100,000
300,000,000 100,000
500,000,000 100,000
750,000,000 100,000
1,000,000,000 100,000
The Options shall be subject to the following additional terms:
a. Any vested Options will be exercisable by you (or your successors
by the laws of descent and distribution) in whole or in part for a period of
ten (10) years following the date on which they vest, whether or not you
remain as an officer or director of the Company.
b. Provided that you do not voluntarily terminate your position and
are not terminated for cause, for a period of three years from the effective
date of this Agreement, then whether or not you are still serving as Executive
Vice President of Finance and Administration of the Company, the Options will
vest in you upon attainment by the Company of the above stated market
capitalization levels. For example, if four years from the date hereof, having
completed three years as Executive V.P. of
<PAGE>
Mr. William R. Nordstrom
August 20, 1997
Page 3
Finance and Administration, the Company achieves a total market capitalization
of $500,000,000 your option to purchase an additional 100,000 shares (in
addition to 200,000 shares which previously would have vested) will become
fully vested and you will have ten years from that date within which to
exercise your option. If, prior to completion of three years of service as
Executive V.P. of Finance and Administration, you voluntarily terminate
(without "good reason") your position as Executive V.P. of Finance and
Administration or are terminated by the Company for "cause", any unvested
Options shall thereupon terminate and be of no further force or effect.
c. Unless prohibited by applicable securities laws, the Options
shall become subject to registration on the initial form S-8 filed by the
Company.
d. In the event the Company becomes a party to a "change in control
agreement" (as defined below), all of the unvested Options shall become
immediately vested; upon such vesting, the Company shall, at its election,
either (i) permit you to purchase any or all of the shares covered by the
Options concurrent with the consummation of the change in control agreement in
which you will be entitled to participate, (ii) purchase or cause the purchase
of the Options for an amount equal to the difference obtained by subtracting
the exercise price of the Options from the fair market value of the shares
which are the subject of the Options on the date of closing of such change in
control agreement, or (iii) if the other party to the change in control
agreement is a public corporation with a market capitalization of at least $1
billion, arrange for equivalent fully vested options (without restrictions on
the resale of shares obtained upon exercise of such Options) to be issued by
the other party to the change in control agreement. A "change in control
agreement" refers to an agreement which provides for a merger or consolidation
to which the Company is a party and following the consummation of which the
shareholders of the Company immediately prior to such transaction do not own a
majority of the outstanding shares of common stock of the Company, or any
other sale of the majority of the outstanding shares of the common stock of
the Company, or the transfer of all or substantially all of the assets of the
Company, or the Company's liquidation or dissolution. Consummation of the
transaction under discussion with Paisano Publications will not constitute a
change in control.
e. In addition to any other methods of exercise which may be
provided for generally in any stock option plan the Company may adopt and
subject to the foregoing, you will be entitled to exercise the Options in
whole or in part by either (i) using existing shares of the Company's common
stock, meaning that you may deliver common shares of the Company already owned
by you with an aggregate fair market value on
<PAGE>
Mr. William R. Nordstrom
August 20, 1997
Page 4
the date of exercise equal to the purchase price and/or (ii) effecting a
"cashless exercise," meaning that you may surrender the Options and receive a
number of shares of common stock equal to the full number of shares of common
stock subject to the surrendered Options less that number of shares having an
aggregate fair market value on the date of exercise equal to the purchase
price.
f. The Options shall be subject to standard anti-dilution provisions
which shall be the same as those contained in the Company's stock option plan
when adopted.
For purposes of this Letter Agreement, "good reason" shall mean any of
the following:
(1) Your failure to be re-elected to the Board of Directors or
removal from the Board of Directors by action of the shareholders of the
Company.
(2) Failure of the Company to implement and follow agreed upon
policies of corporate governance.
(3) Failure of the Company to make substantial progress in
implementing its business plan as set forth in the Form 10 filed with the
Securities and Exchange Commission or as otherwise modified by the Board of
Directors of the Company.
(4) There is internal discord among the members of the Board
of Directors and policies material to the conduct of business of the Company
are adopted by the Board which are opposed by you.
(5) There is a material adverse change in the business or
financial condition of the Company or its business prospects.
(6) The Company is sued or otherwise engages in business
activity which in your judgment exposes members of the Board of Directors to
personal liability not covered by insurance.
(7) The Company shall engage in activities in violation of
law.
<PAGE>
Mr. William R. Nordstrom
August 20, 1997
Page 5
(8) The Company shall fail to maintain in effect directors and
officers liability insurance in an amount of $20,000,000 (subject to a
retention of $250,000), and subject to other terms and conditions and
exclusions acceptable by you.
(9) The Company shall breach the terms of this Letter
Agreement.
For purposes of this Letter Agreement, "cause" shall mean:
(1) Your conviction of, or entry of a plea of guilty or nolo
contendere for any felony crime involving moral turpitude.
(2) Your commission of any act of dishonesty or fraud which is
materially detrimental to the Company's business or goodwill.
(3) Your willful failure or refusal to perform your duties as
required by this Letter Agreement.
Any dispute which may arise with respect to this Letter Agreement shall
be resolved by arbitration to be conducted in Orange County, California
pursuant to the provisions of California Civil Code of Procedure 1280 et seq.
The prevailing party in any such proceeding shall be entitled to recover its
attorneys fees, in addition to its costs in the proceeding.
Very truly yours,
/s/ John Martin
-------------------
JOHN MARTIN
Chairman and CEO
Newriders, Inc.
AGREED AND ACCEPTED THIS 26 DAY OF AUGUST, 1997:
/s/ William R. Nordstrom
- -------------------------
WILLIAM R. NORDSTROM
Exhibit 10.4.3
THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND
WILL BE OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THESE LAWS BY VIRTUE OF THE COMPANY'S INTENDED COMPLIANCE WITH
SECTIONS 3(b), 4(2) AND 4(6) OF THE SECURITIES ACT OF 1933, THE PROVISIONS OF
REGULATION D UNDER SUCH ACT AND SIMILAR EXEMPTIONS UNDER STATE LAW. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
STOCK PURCHASE AGREEMENT
FOR
RESTRICTED SHARES AND WARRANTS
(JOHN MARTIN)
THIS AGREEMENT is made and entered into to be effective for all purposes
as of April 21 1997, by and between Newriders, Inc., a Nevada corporation
("Company") and John Martin, an individual ("Buyer"). For convenience, Company
and Buyer are sometimes collectively referred to herein as the "Parties" and
individually as a "Party".
In consideration of the mutual covenants herein contained, the parties
hereby agree as follows:
1. Purchase and Sale of Shares. On the Closing Date, and subject to the
terms and on the conditions set forth herein and in reliance upon
representations, warranties and agreements contained herein, the Company will
sell to Buyer and Buyer will purchase from the Company 192,300 Shares of the
Company's common stock (the "Shares"), for a total cash consideration (the
"Purchase Price") in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00).
2. Warrants. In addition to the Shares, Company shall also issue to
Buyer in consideration of the Purchase Price as set forth in Paragraph 1
above, rights to purchase up to Two Hundred Fifty Thousand (250,000) Shares of
the Company's common stock (the "Warrants") at a price of $4.00 per share,
provided that such purchase is completed not later than the second anniversary
of the date of this Agreement. The Warrants may be exercised in increments of
not less than Ten Thousand Shares and on not less than three (3) business days
notice to the Company. In the event that before the Warrants are exercised,
the Company shall effect a split of outstanding stock, pay a stock dividend or
reclassify its shares, the number of Warrants and exercise price shall be
adjusted appropriately to prevent their dilution.
3. Closing Date. The sale and purchase of the Shares shall occur on April
18, 1997, (the "Closing Date"). On the Closing Date, the Company shall issue
and deliver the Shares and Buyer shall pay the Purchase Price in cash.
4. Company's Representation of the Warranties. The Company hereby
represents and Warrants to Buyer as follows:
A. The Company is validly existing in good standing under the laws
of its jurisdiction of incorporation and is qualified to transact business in
each jurisdiction in which its ownership of property or conduct of activities
requires such qualification, except where to failure to so qualify would not
materially adversely affect the operations of the Company. The Company has all
requisite corporate power and authority to enter into and carry out any
obligations required of it under this Agreement.
B. The execution and delivery of this Agreement and the issuance and
sale of the Shares and Warrants have been duly authorized and (and the shares
issued upon the exercise of the Warrants), the Shares will be validly issued
and fully paid nonassessable shares of the Company's common stock. Performance
by the Company of its obligations under this Agreement do not conflict with or
violate (i) the charter documents or bylaws of the Company (ii) any indenture,
loan agreement lease, mortgage or other material agreement binding on the
Company (iii) any order of court or administrative agency binding on the
Company or (iv) any applicable law or government regulation; except in the
case for any such conflicts or violations which would not have a material
affect on the Company and such performance does not and will not require the
permission or approval of any governmental agency and will not result in the
imposition or creation of any lien or charge against any assets of the
Company.
C. No material default on the part of the Company (including any
event which, with notice or passage of time would constitute default) exists
under any material indenture, loan agreement, lease, mortgage or other
material agreement to which the Company is a party.
D. To the best of Company's knowledge, all of the materials
delivered to Buyer in connection with the sale and purchase of the Shares,
including without limitation, the Form 10-SB (as defined below), are free of
material omissions or misstatements and accurately set forth the Company's
financial position.
E. Except with the consent of the Buyer which shall not be
unreasonably withheld, the Company will use the proceeds from the sale of the
Shares exclusively for costs and expenses directly related to the design,
planning, construction, development, completion, opening and operation of and
equipment and inventory for the Company's Easyrider Cafe and Apparel Store at
Broadway at the Beach in Myrtle Beach, South Carolina.
5. Buyer's Representations and Warranties. Buyer hereby makes the
following representations and warranties to the Company and agrees to
indemnify and bold harmless and pay any and all judgments and claims against
the Company, its officers, employees and agents from and against any liability
or injury, including, but not limited to, that arising under any
misrepresentation of the Buyer, or failure of any warranty made by the Buyer
as follows:
A. Buyer has all power and authority to enter into this Agreement
and carry out his obligations hereunder and is not purchasing the Shares for
the benefit or account of any other person or entity.
B. Buyer is an "accredited investor" as that term is defined in Rule
501 of Regulation D, promulgated by the Securities and Exchange Commission
under the Securities Act of 1933 (the "Act") and as such, Buyer is a natural
person, (i) whose net worth, including that of his spouse at the time of the
purchase of the Shares is at least One Million Dollars ($(1,000,000.00), or
(ii) who had individual income in excess of Two Hundred Thousand Dollars
($200,000.00) (Three Hundred Thousand Dollars ($300,000.00) if the income of
the Buyer's spouse is included) in each of the two most recent fiscal years
and reasonably expects income in excess of such amounts in the current year.
C. Buyer has received and reviewed the draft Form 10-SB Registration
Statement dated April 1997, together with the Company's unaudited financial
statements dated November 30, 1996 (the "Form 10-SB").
D. Buyer has agreed to become a member of the Company's Board of
Directors and has had an adequate opportunity to ask questions of the
Company's senior management concerning the Memorandum, the Form 10-SB, the
Company, its financial condition, assets, liabilities and business plan and
understands the risks associated with making an investment in the Company and
that there is no guaranty that the Shares will appreciate or even maintain the
value that they had on the date of the Stock Purchase Agreement. All documents
and information requested by Buyer in order for him to evaluate his investment
in the Company that are available, have been delivered or otherwise made
available to Buyer or his investment advisor.
E. Buyer's investment background and experience and/or that of his
investment advisors who are not affiliated with the Company, has given Buyer
the capacity to protect his interest in connection with his investment in the
Company and Buyer has the financial net worth to afford a complete loss of his
investment in the Shares.
F. Buyer's acquisition of the Shares was not effected through the
publication of any advertisement.
G. Buyer represents that he is acquiring the Shares for his own
account as an investment and not with a view to the resale or direct or
indirect distribution of them or any interest therein.
H. Buyer acknowledges that neither the Shares, nor the Warrants nor
the securities covered by the Warrants have been approved by the Securities
and Exchange Commission nor the Nevada or California Departments of
Corporations, nor has any been registered under the Act or any other federal
or state security laws and as such, their sale, assignment or transfer is
subject to restriction. In particular, Buyer is aware of the provisions of
Rule 144 promulgated under the Act and that the Shares, Warrants and
securities represented by the Warrants are restricted securities under Rule
144. Buyer further acknowledges that the Shares, Warrants and securities
represented by the Warrants may not be sold, assigned or otherwise transferred
until such time as they have been registered under applicable state and
federal securities laws or that in the opinion of securities counsel
acceptable to the Company, an exemption from such registration or
qualification is available for their sale, assignment or transfer.
I. Buyer acknowledges that certificates representing the Shares will
be delivered to Buyer with the following restrictive legend or restrictive
legend substantially similar thereto:
"The shares covered by this certificate have not been registered under the
U.S. Securities Act of 1933 or any state securities laws. They may not be sold
or offered for sale in the absence of an effective registration statement as
to the securities law or an opinion of counsel satisfactory to the Company
that such registration is not required."
6. Conditions Precedent to Obligations of the Company. The Company's
obligations to sell the Shares is subject to the fulfillment on or prior to
the Closing Date of each of the following conditions:
A. The representation and warranties made by Buyer shall be true and
correct in all material respects on the Closing Date.
B. The Company shall have concurrently received payment of the
Purchase Price for the Shares in the amounts and at the times as provided in
Paragraphs I and 3 above.
7. Conditions Precedent to Buyer's Obligations. Buyer's obligation to
purchase the Shares is subject to the fulfillment on or prior to the Closing
Date of each of the following conditions precedent:
A. The representations and warranties of the Company shall be true
and correct in all material respects on the Closing Date.
B. All corporate actions and proceedings in connection of the
transactions contemplated hereby and all documents and instruments of such
transaction shall be reasonably satisfactory in form and substance to Buyer
and its counsel.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9. Entire Agreement; Amendments. This Agreement constitutes the full and
entire understanding between the Parties with regard to the subject hereof.
Neither this Agreement or any terms hereof may be amended, waived, discharged
or terminated except by written instrument signed by both Parties.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized persons as of the day and year
first hereinabove written.
"Company" "Buyer"
NEWRIDERS, INC. /s/ John Martin
/s/ Michael Purcell JOHN MARTIN
- -------------------------
Michael Purcell, President
001\1
Exhibit 10.4.4
THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND
WILL BE OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THESE LAWS BY VIRTUE OF THE COMPANY'S INTENDED COMPLIANCE WITH
SECTIONS 3(b), 4(2) AND 4(6) OF THE SECURITIES ACT OF 1933, THE PROVISIONS OF
REGULATION D UNDER SUCH ACT AND SIMILAR EXEMPTIONS UNDER STATE LAW. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
STOCK PURCHASE AGREEMENT
FOR
RESTRICTED SHARES AND WARRANTS
(WILLIAM R. NORDSTROM)
THIS AGREEMENT is made and entered into to be effective for all purposes
as of April 21 1997, by and between Newriders, Inc., a Nevada corporation
("Company") and William R. Nordstrom, an individual ("Buyer"). For
convenience, Company and Buyer are sometimes collectively referred to herein
as the "Parties" and individually as a "Party".
In consideration of the mutual covenants herein contained, the parties
hereby agree as follows:
1. Purchase and Sale of Shares. On the Closing Date, and subject to the
terms and on the conditions set forth herein and in reliance upon
representations, warranties and agreements contained herein, the Company will
sell to Buyer and Buyer will purchase from the Company 192,300 Shares of the
Company's common stock (the "Shares"), for a total cash consideration (the
"Purchase Price") in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00).
2. Warrants. In addition to the Shares, Company shall also issue to
Buyer in consideration of the Purchase Price as set forth in Paragraph 1
above, rights to purchase up to Two Hundred Fifty Thousand (250,000) Shares of
the Company's common stock (the "Warrants") at a price of $4.00 per share,
provided that such purchase is completed not later than the second anniversary
of the date of this Agreement. The Warrants may be exercised in increments of
not less than Ten Thousand Shares and on not less than three (3) business days
notice to the Company. In the event that before the Warrants are exercised,
the Company shall effect a split of outstanding stock, pay a stock dividend or
reclassify its shares, the number of Warrants and exercise price shall be
adjusted appropriately to prevent their dilution.
3. Closing Date. The sale and purchase of the Shares shall occur on April
18, 1997, (the "Closing Date"). On the Closing Date, the Company shall issue
and deliver the Shares and Buyer shall pay the Purchase Price in cash.
4. Company's Representation of the Warranties. The Company hereby
represents and Warrants to Buyer as follows:
A. The Company is validly existing in good standing under the laws
of its jurisdiction of incorporation and is qualified to transact business in
each jurisdiction in which its ownership of property or conduct of activities
requires such qualification, except where to failure to so qualify would not
materially adversely affect the operations of the Company. The Company has all
requisite corporate power and authority to enter into and carry out any
obligations required of it under this Agreement.
B. The execution and delivery of this Agreement and the issuance and
sale of the Shares and Warrants have been duly authorized and (and the shares
issued upon the exercise of the Warrants), the Shares will be validly issued
and fully paid nonassessable shares of the Company's common stock. Performance
by the Company of its obligations under this Agreement do not conflict with or
violate (i) the charter documents or bylaws of the Company (ii) any indenture,
loan agreement lease, mortgage or other material agreement binding on the
Company (iii) any order of court or administrative agency binding on the
Company or (iv) any applicable law or government regulation; except in the
case for any such conflicts or violations which would not have a material
affect on the Company and such performance does not and will not require the
permission or approval of any governmental agency and will not result in the
imposition or creation of any lien or charge against any assets of the
Company.
C. No material default on the part of the Company (including any
event which, with notice or passage of time would constitute default) exists
under any material indenture, loan agreement, lease, mortgage or other
material agreement to which the Company is a party.
D. To the best of Company's knowledge, all of the materials
delivered to Buyer in connection with the sale and purchase of the Shares,
including without limitation, the Form 10-SB (as defined below), are free of
material omissions or misstatements and accurately set forth the Company's
financial position.
E. Except with the consent of the Buyer which shall not be
unreasonably withheld, the Company will use the proceeds from the sale of the
Shares exclusively for costs and expenses directly related to the design,
planning, construction, development, completion, opening and operation of and
equipment and inventory for the Company's Easyrider Cafe and Apparel Store at
Broadway at the Beach in Myrtle Beach, South Carolina.
5. Buyer's Representations and Warranties. Buyer hereby makes the
following representations and warranties to the Company and agrees to
indemnify and bold harmless and pay any and all judgments and claims against
the Company, its officers, employees and agents from and against any liability
or injury, including, but not limited to, that arising under any
misrepresentation of the Buyer, or failure of any warranty made by the Buyer
as follows:
A. Buyer has all power and authority to enter into this Agreement
and carry out his obligations hereunder and is not purchasing the Shares for
the benefit or account of any other person or entity.
B. Buyer is an "accredited investor" as that term is defined in Rule
501 of Regulation D, promulgated by the Securities and Exchange Commission
under the Securities Act of 1933 (the "Act") and as such, Buyer is a natural
person, (i) whose net worth, including that of his spouse at the time of the
purchase of the Shares is at least One Million Dollars ($(1,000,000.00), or
(ii) who had individual income in excess of Two Hundred Thousand Dollars
($200,000.00) (Three Hundred Thousand Dollars ($300,000.00) if the income of
the Buyer's spouse is included) in each of the two most recent fiscal years
and reasonably expects income in excess of such amounts in the current year.
C. Buyer has received and reviewed the draft Form 10-SB Registration
Statement dated April 1997, together with the Company's unaudited financial
statements dated November 30, 1996 (the "Form 10-SB").
D. Buyer has agreed to become a member of the Company's Board of
Directors and has had an adequate opportunity to ask questions of the
Company's senior management concerning the Memorandum, the Form 10-SB, the
Company, its financial condition, assets, liabilities and business plan and
understands the risks associated with making an investment in the Company and
that there is no guaranty that the Shares will appreciate or even maintain the
value that they had on the date of the Stock Purchase Agreement. All documents
and information requested by Buyer in order for him to evaluate his investment
in the Company that are available, have been delivered or otherwise made
available to Buyer or his investment advisor.
E. Buyer's investment background and experience and/or that of his
investment advisors who are not affiliated with the Company, has given Buyer
the capacity to protect his interest in connection with his investment in the
Company and Buyer has the financial net worth to afford a complete loss of his
investment in the Shares.
F. Buyer's acquisition of the Shares was not effected through the
publication of any advertisement.
G. Buyer represents that he is acquiring the Shares for his own
account as an investment and not with a view to the resale or direct or
indirect distribution of them or any interest therein.
H. Buyer acknowledges that neither the Shares, nor the Warrants nor
the securities covered by the Warrants have been approved by the Securities
and Exchange Commission nor the Nevada or California Departments of
Corporations, nor has any been registered under the Act or any other federal
or state security laws and as such, their sale, assignment or transfer is
subject to restriction. In particular, Buyer is aware of the provisions of
Rule 144 promulgated under the Act and that the Shares, Warrants and
securities represented by the Warrants are restricted securities under Rule
144. Buyer further acknowledges that the Shares, Warrants and securities
represented by the Warrants may not be sold, assigned or otherwise transferred
until such time as they have been registered under applicable state and
federal securities laws or that in the opinion of securities counsel
acceptable to the Company, an exemption from such registration or
qualification is available for their sale, assignment or transfer.
I. Buyer acknowledges that certificates representing the Shares will
be delivered to Buyer with the following restrictive legend or restrictive
legend substantially similar thereto:
"The shares covered by this certificate have not been registered under the
U.S. Securities Act of 1933 or any state securities laws. They may not be sold
or offered for sale in the absence of an effective registration statement as
to the securities law or an opinion of counsel satisfactory to the Company
that such registration is not required."
6. Conditions Precedent to Obligations of the Company. The Company's
obligations to sell the Shares is subject to the fulfillment on or prior to
the Closing Date of each of the following conditions:
A. The representation and warranties made by Buyer shall be true and
correct in all material respects on the Closing Date.
B. The Company shall have concurrently received payment of the
Purchase Price for the Shares in the amounts and at the times as provided in
Paragraphs I and 3 above.
7. Conditions Precedent to Buyer's Obligations. Buyer's obligation to
purchase the Shares is subject to the fulfillment on or prior to the Closing
Date of each of the following conditions precedent:
A. The representations and warranties of the Company shall be true
and correct in all material respects on the Closing Date.
B. All corporate actions and proceedings in connection of the
transactions contemplated hereby and all documents and instruments of such
transaction shall be reasonably satisfactory in form and substance to Buyer
and its counsel.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9. Entire Agreement; Amendments. This Agreement constitutes the full and
entire understanding between the Parties with regard to the subject hereof.
Neither this Agreement or any terms hereof may be amended, waived, discharged
or terminated except by written instrument signed by both Parties.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized persons as of the day and year
first hereinabove written.
"Company" "Buyer"
NEWRIDERS, INC. /s/ W. R. Nordstrom
/s/ Michael Purcell WILLIAM R. NORDSTROM
- -------------------------
Michael Purcell, President
Exhibit 10.5.1
NEWRIDERS, INC.
567 SAN NICOLAS DRIVE SUITE 400
NEWPORT BEACH, CALIFORNIA 92660
October 7, 1997
William Prather and Marna Prather
True Knowles c/o
M & B Restaurants, L.C.
2126 West Indian School Road
Phoenix Arizona 85015
Dear Bill, Mama and True,
This preliminary letter of intent will set forth the conditional
agreement between you collectively (the "Sellers") and Newriders, Inc.
("Newriders") for the sale and purchase of all of your shares (the "Shares"),
constituting all of the outstanding shares of capital stock of M & B
Restaurants, L.C., a Texas corporation, dba El Paso Barbeque Company (the
"Company"). This letter is not intended to be the definitive agreement between
the parties nor binding upon the parties, except with respect to paragraphs 6,
7 and 8 below dealing with the exclusive negotiating rights, confidentiality
and joint public disclosure which shall be binding. The parties' obligation
to sell or purchase the Shares is expressly conditioned on execution of a
definitive Purchase Agreement as described below, and each party's
satisfaction with the terms of the transaction after completion of normal and
customary due diligence investigations of the other. In addition, Newrider's
obligation to purchase the Shares is and in the Purchase Agreement will be,
further expressly conditioned on its receipt of an acceptable financing
commitment in an amount of not less then $3,000,000.00.
The basic terms of the purchase will be as follows:
1. Newriders will purchase the Shares from the Sellers, which at the
closing, will constitute all of the issued and outstanding capital stock of
the Company.
2. The Company's assets at closing will consist of all of the real,
personal and intangible property that it presently owns, subject to normal
business operations, including without limitation, all trademarks, service
marks, trade names, designs, logos, concepts, plans, rights to purchase or
lease future sites and the like.
3. At the closing, the Company's total debt other than ordinary course of
business payables, shall not exceed $2,500,000.00 (the "Existing Debt").
4. The consideration for the sale and purchase of the Shares will consist
of:
a. Newriders' assumption and payment of the Existing Debt;
b. 1,000,000 shares of restricted common stock of Newriders with
anti-dilution protections during the period from the execution of this
preliminary letter of intent through the closing; and
c. Newriders' promissory note in the principal amount of
$3,000,000.00 payable to the Sellers together with interest at the rate of
prime plus one percent, secured by a first lien on the Shares and all due and
payable within 90 days from the closing.
5. In addition to the foregoing, William Prather will become employed by
Newriders effective as of the Sellers' execution of this preliminary letter of
intent, for a period of five years, with the title and in the capacity of its
Chief Executive Officer, reporting to the Board of Directors and its Chairman,
for an annual salary of $200,000.00 per year. As additional compensation,
William Prather will be granted a ten year option to purchase 750,000 shares
of Newriders common stock at an exercise price of $2.50 per share with anti-
dilution protection. One-half of the options will become vested after one year
of continuous service in such capacity and the remainder vested after two
years of continuous service. Newriders will pay reasonable relocation costs to
move Mr. Prather's household from Phoenix to Newport Beach.
6. The Sellers agree that Newriders shall have the exclusive right to
negotiate for the purchase of the Shares for a sixty day period beginning on
the date of their execution of this preliminary letter of intent. During such
period, the Sellers will not solicit, entertain or negotiate any other offers
for the purchase of the Shares.
7. Both parties agree to maintain any information concerning the other
obtained during the due diligence investigation in confidence and have or will
execute and deliver formal confidentiality agreements.
8. Any public announcement or press release relating to the transaction
contemplated in this preliminary letter of intent shall be approved by Sellers
and Newriders in writing in advance of its publication.
9. The parties will use their reasonable best efforts to cause a
definitive Purchase and Sale Agreement (the "Purchase Agreement") containing
the terms set forth herein and such additional terms, provisions, agreements,
covenants, representations and warranties as are usual and customary in such
transactions to be prepared and executed within 20 days of the execution
of this preliminary letter of intent. The Purchase Agreement shall provide
that the due diligence period shall be concluded within 30 days of the
execution of this preliminary letter of intent and provided neither party has
elected to withdraw as provided therein, for the closing of the transaction
within 60 days of the execution of this preliminary letter of intent.
10. From the date hereof through closing, Newriders shall and the
Sellers shall cause the Company to operate in the normal course of their
respective businesses in order to maintain and preserve their respective
property, business and other assets, including the good will of customers,
suppliers and vendors and the stability of their respective labor forces.
11. Each party will beat its own legal, accounting and other fees and
expenses in connection with this transaction.
If the foregoing is acceptable to you, please indicate your acceptance by
executing the enclosed counterpart of this letter in the space provided below
and returning it to the undersigned.
Newriders, Inc.
By /s/John Martin
-----------------------
John Martin, Chairman
of the Board of Directors
The foregoing is accepted and agreed.
/s/ William Prather Dated: October 10,1997
- -----------------------------
William Prather
/s/ Marna Prather Dated: October 10, 1997
- ------------------------------
Marna Prather
/s/ True Knowles
- ------------------------------ Dated: October 9, 1997
True Knowles
Exhibit 10.5.2
<Logo Newriders appears here>
January 13, 1998
Mr. Joseph Teresi
Chairman of the Board of Directors
Paisano Publications. Inc.
28210 Dorothy Drive
Agoura Hills, California 91301
Dear Mr. Teresi:
This letter is intended to set forth the principal terms and conditions upon
which Newriders, Inc., a Nevada corporation ("Purchaser") will acquire all the
common stock of Paisano Publications, Inc. ("Paisano"), a California
corporation, Easyriders of Columbus. Inc., an Ohio corporation, Easyriders
Franchising. Inc., a California corporation, Teresi, Inc., a California
corporation (whose name will be changed prior to closing), Bros Club, Inc., a
California corporation and Associated Rodeo Riders On Wheels, a California
corporation from you ("Seller") as the sole shareholder of each of these
corporations. Paisano and the other above-listed corporations under common
ownership with Paisano are sometimes hereinafter referred to as The Paisano
Group.
This agreement contemplates a transaction in which Purchaser will purchase all
of the issued and outstanding stock of Paisano and all the above-named
corporations of The Paisano Group. It is contemplated that the closing of this
transaction will take place on or before February 27, 1998 or such other date
as we may mutually agree upon. On or before thirty days subsequent to the date
of this letter of intent, Purchaser will submit to Seller a definitive stock
purchase agreement ("Purchase Agreement") covering this transaction.
Once the Purchase Agreement has been executed, the transaction shall be
completed pursuant to the terms thereof. In the interim we would like to
confirm our agreement upon the following:
1. Consideration
The Seller will receive the following:
a. $30,000,000 in cash which will be paid by wire transfer to Seller at
closing.
b 7,500,000 shares of the common stock of Purchaser or 30% of the
authorized shares of Purchaser, whichever is greater, some or all of which
stock will be restricted for a period of one year. This stock is in addition
to the 1,000,000 shares of stock Seller had previously become entitled to
receive from the founding shareholders under a separate arrangement.
Newriders, Inc. 567 San Nicolas Drive, Suite 400, Newport Beach, CA 92660
* Phone: (714) 718-4630 * Fax: (714) 719-4999
<PAGE>
Mr. Joseph Teresi
Paisano Publications, Inc.
January 13, 1998
Page 2
c. A promissory note in the amount of $10,000,000, the form of which
will be attached to the Purchase Agreement as an exhibit and if necessary,
subordinate to the Senior Credit Facility. The term of this note will be for a
period of five years from the date of closing or such other term as shall be
required by the issuer of the Senior Credit Facility defined below. Such note
shall provide for the accrual of compound annual interest to Seller as
follows:
Year I - 6%
Year 2 - 7%
Year 3 - 8%
Year 4 - 9%
Year 5 - 10% and subsequent years if necessary
During the first two years of the note's term, Purchaser shall have the right
to defer interest payment and if Purchaser elects to do so, such deferred
interest will be added to the principal on the Note's anniversary date and
bear interest in the third and succeeding years at the rates above specified.
Commencing with the first full quarter following the completion of the first
two years of the note term, Purchaser will commence making quarterly interest
payments to Seller at the rates above provided including interest on the
capitalized interest payments attributable to the first two years of the note
term. At the end of the five-year note term, Purchaser shall have the right to
defer payment of the note's principal amount for two additional years and up
to three more years if necessary to conform to the requirements of the Senior
Credit Facility provided all interest payments, including any deferred
interest, are paid in full to Seller prior to such extension. If Purchaser
elects to exercise its right to defer payment of the note's principal for an
additional period, interest on the note's principal will be paid quarterly to
Seller at the rate of 10% per annum during such extended period. Payment of
the principal and interest on the said promissory note will be personally and
unconditionally guaranteed by John E. Martin, Chairman of the Board of
Directors of Purchaser. Payment by Mr. Martin pursuant to such personal
guarantee will be required if such note is presented for payment to Purchaser
and payment is not made either at the end of the initial five-year term, or
any extended term. If payment under this guarantee is required, it will be
made within seven business days of the date on which an unsuccessful
presentment for payment was made to Purchaser. Mr. Martin will receive
consideration for the guaranty that is mutually acceptable to the parties.
In the alternative, Seller shall receive 11,250,000 or 45% of the stock,
whichever is greater. In that event, Seller will give John E. Martin an
irrevocable proxy to vote 3,715,000 or 15% of the common stock of Purchaser.
whichever is greater, for a period of five years from the date of closing
allowing John E. Martin to vote these shares at his discretion. John E. Martin
will have the option to purchase all or any portion of said 3,750,000 shares
of stock during this five-year period at $2.67 per share. At the end of said
five-year period. Seller will have a "put" personally and unconditionally
guaranteed by John E. Martin to require him to purchase the aforesaid bloc of
3,750,000 shares of stock at $2.67 per share. This "put" will be exercised by
making presentment to John E. Martin at any time after the expiration of said
five-year period, and Mr. Martin will complete the payment required by the
"put" within seven business days of the date on which the presentment was
made.
Purchaser and Seller may mutually agree on the selection of either of the
above alternatives, or any other alternative prior to the finalization of the
contemplated Purchase Agreement based on legal and tax considerations of the
interested parties.
<PAGE>
Mr. Joseph Teresi
Paisano Publications, Inc.
January 13, 1998
Page 3
2. Proposed Financing
The Purchaser anticipates that it will fund the cash portion of the
consideration paid to the selling stockholder and the fees and expenses
associated with the transaction described herein with a $35,000,000 Senior
Credit Facility $33,000,000 drawn at close (the "Senior Credit Facility").
Based on further due diligence, the Purchaser with Seller's approval not to be
unreasonably withheld may choose to fund a portion of the cash consideration
with the private or public placement of securities consisting of common stock,
preferred stock and/or subordinated debt of the Purchaser (together with any
Senior Credit Facility, the "Financing").
3. Management Employment Contracts and Non-Compete Agreements
Seller will use its best efforts consistent with sound business practice to
cause Paisano to enter into employment contracts with key officers Brian Wood,
Robert Davis, Keith Ball, and Rick Busman, which in form and substance will be
reasonably acceptable to Purchaser. A copy of this agreement form will be
prepared by Seller and submitted to Purchaser prior to closing. Seller will
enter into an employment contract with Purchaser pursuant to which Seller will
continue as Chairman and Publisher of Paisano. In that capacity Seller agrees
to render a level of service generally comparable to that rendered by him
during the year 1997. The nature of such services and the place of their
performance will be consistent with Seller's desire to continue as a resident
of the State of Florida. Seller will continue to have the use of his present
office and secretarial support during the term of such agreement. During the
term of this agreement, Seller will receive a salary equal to that drawn by
John E. Martin, Chairman of the Board of Purchaser. In addition, Seller will
enter into an appropriate covenant not to compete with Paisano for a period of
five years in the publication or distribution of magazines primarily devoted
to automotive, motorcycle, and tattoo subject matter which the parties agree
has a value of $25,000.00. It is specifically agreed that Seller shall have
the right to own, invest in, or render services in connection with magazines
devoted to subject matter which is not competitive with the magazines
published by Paisano such as boating and/or fishing magazines or to own,
invest in, or render services in connection with motorcycle and or automotive
related projects of a non-publishing nature which are not competitive with or
antithetical to the business activities of Purchaser. Purchaser agrees to the
extent reasonably practicable it will cooperate with and assist Seller in the
development of any such projects.
4. Property Acquired
a. This agreement contemplates that Purchaser, by acquiring all of
the issued and outstanding stock of the companies in The Paisano Group; will
thereby acquire the businesses, assets, and properties of these companies as
going concerns. Without limiting the generality of the foregoing, Purchaser,
when it acquires the companies of The Paisano Group, will acquire all working
capital including but not limited to cash and cash equivalents, accounts and
notes receivable, and inventory. It will also acquire all pre-press and
magazine publishing computer hardware and related software magazine publishing
software and data bases incidental to the Seller's businesses as well as all
intangible property relating to the business of The Paisano Group companies
including copyrights, trademarks, goodwill, technology, and other intellectual
property or usage rights owned or processed by these companies. Purchaser
shall be responsible for the payment of any sales tax on all tangible personal
property acquired pursuant to this agreement. As a result of this transaction,
Purchaser will acquire all Seller's right, title, and interest in the
following magazine and calendar titles:
<PAGE>
Mr. Joseph Teresi
Paisano Publications, Inc.
January 13, 1998
Page 4
Easyriders Earlyriders American Rodder
Easyriders; V-Twin Quick Throttle American Rodder Calendar
In The Wind Tattoo Easyriders Calendar
Biker Tattoo Flash Tattoo Calendar
VQ Tattoo Savage The Eagle's Eye
Purchaser will also acquire all intellectual property relating to the above
titles anywhere in the world, including copyrights, service marks and
applications for the same and all tangible personal property such as
machinery, tools, computers, benches, cabinets, development, production and
administrative furniture and fixtures, office furniture and equipment except
for items of personal property specifically excluded below. Finally, Purchaser
will acquire all approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
government authorities as well as all books and records of The Paisano Group
companies or copies thereof.
b. Purchaser will not acquire any of the following (Excluded
Assets) when it purchases the stock of The Paisano Group companies:
1. All boats, certain automobiles, trucks and certain
motorcycles including the Streamliner and Buick motorcycles although Purchaser
shall continue to have the right to display these items in it's motorcycle
"theme" cafes at no cost to Purchaser until such time as Seller gives at least
90 days notice to deliver them to Seller.
2. Certain furniture, furnishings, fixtures, office equipment,
and memorabilia owned by Seller or his employees which are located at the
upper level executive area at 28210 Dorothy Drive, Agoura Hills, California
91301.
3. Certain machinery located on the upper floor of the
Columbus, Ohio motorcycle shop beyond that required for the reasonable on-
going operation of such shop.
4. Certain receivables not to exceed $1,455,000 that were
carried on the books of The Paisano Group as receivables as of December 31,
1997, provided that, The Paisano Group's payables to Joseph Teresi in the
amount of $3,136,000 as of December 31, 1997 are contributed to capital of
The Paisano Group.
A complete and accurate list of such Excluded Assets will be attached as an
exhibit to the Purchase Agreement.
5. Leases
Seller will terminate its existing leases for the building structures and real
estate located at 28210 Dorothy Drive and 28216 Dorothy Drive, Agoura Hills,
California, 605 Main Street, Daytona Beach, Florida, and 611 East Broad
Street, Columbus, Ohio. Seller will then offer Purchaser new leases for each
of these presently rented premises. The new leases will be standard triple net
leases with CPI adjustments for a five-year period with renewal options for
additional five-year periods after a review of comparable rents and
adjustments. Rent during the initial term would be the same as Paisano is
currently paying.
<PAGE>
Mr. Joseph Teresi
Paisano Publications. Inc
January 13. 1998
Page 5
6. Break-up Fee
To the extent that Seller accepts a bid from any group other than Purchaser,
Seller agrees to promptly pay to Purchaser a "Break-up" fee of $500,000.
Likewise, to the extent that the Purchaser does not consummate the transaction
on the terms and conditions herein, for reasons other than a failure, any of
the conditions precedent contained in paragraph 8 (except that no party shall
be relieved of liability for the Break-up fee if it fails to act diligently
under paragraph 8a below). Purchaser will pay to Seller at the Seller's option
either $500,000 in cash or a number of shares of Purchaser's common stock
equal to $500,000 divided by the then market price of Purchaser's common
stock. The Purchaser shall not owe Seller the fee under this paragraph if the
closing occurs on a date later than February 27, 1998 if Purchaser is
continuing to work in good faith toward a closing of this transaction;
provided, however, that if this transaction fails to close by February 27,
1998. Seller shall have the right to terminate this agreement without payment
of a "Break-up" fee.
7. The Purchase Agreement
a. The Purchase Agreement will contain customary representations and
warranties usually included in stock purchase agreements but the existence of
such representations and warranties are not intended by the parties to be in
lieu of its due diligence obligations which will be completed by both parties
on or before February 12, 1998.
b. Without limiting the generality of the foregoing Seller will
specifically warrant that the Seller will fully fund the unfunded portion, if
any, of any liability owed or owing or reasonably expected to be owed under
any employee benefit, pension or profit-sharing plan maintained by it prior to
the closing of the transactions contemplated hereby; and that all tax
obligations have been paid and reported when due, and that any unpaid taxes
relating to periods for which tax returns have not yet been filed have been
fully booked and properly accrued on the books of the Seller.
c. Seller will warrant that at the time of closing that no
corporation of The Paisano Group will have any debt other than ordinary
course-of-business payables and any indebtedness of these corporations from
Seller or to Seller or between corporations of The Paisano Group will be
extinguished prior to closing, which debt extinguishment shall not be a
failure of the condition contained in paragraph 8c below.
d. Nothing herein contained is to be construed as a commitment by
Purchaser that it will continue any specific pension or other employee benefit
plans it being understood however that employees of The Paisano Group will
receive credit for their Paisano Group service in connection with any employee
benefit plan of Purchaser which is now in effect or subsequently adopted.
e. If Seller agrees, Purchaser and Seller will each make the
election to treat the transaction as an asset purchase as provided in the
Internal Revenue Code Section 338(h)(10), and report the transaction
accordingly.
f. The Purchase Agreement shall provide that the purchase price may
be adjusted upward or downward, dollar for dollar, based the amount by which
The Paisano Group's working capital exceeds or is less than such working
capital as it was represented in the estimated, consolidated balance sheet as
of December 31, 1997 as prepared by Purchaser's financial advisors from
material provided by Seller. Such purchase price adjustment will be subject to
a customary audit by a national accounting firm acceptable to both parties;
provided however, that any price adjustment will be net of any future tax
benefits or obligations related to such adjustment.
<PAGE>
Mr. Joseph Teresi
Paisano Publications. In,
January 13, 1998
Page 6
8. Conditions
The closing of the contemplated transaction will be subject to satisfaction of
the following conditions:
a. Satisfactory completion of the due diligence examination by Seller
and Purchaser, including, among other things, review of tax returns,
evaluation of all aspects of each parties business and independent audits of
current and historical financial information;
b. prior to the closing, the business of both the Seller and the
Purchaser shall have been conducted in the ordinary course, and there shall
have been no material adverse change to the business of either party or their
prospects. In addition, there shall be no threatened or pending litigation
against either party which is material;
c. except for distribution of the Excluded Assets, there shall have
been no dividend, redemption or similar distribution, recapitalization or
stock issuance of any kind, by companies of The Paisano Group or Purchaser
since December 31, 1997.
d. all filings with and consents and approvals of third parties and
governmental agencies required for the consummation of the transactions
described herein and to be described in the Purchase Agreement will have been
obtained; and
e. consummation of the Financing.
9. Board of Directors
The Board of Directors of Purchaser will be increased to nine members and
subject to applicable corporate law, may not be increased beyond that number
without Seller's approval. Seller will, upon closing, become a member of
Purchaser's Board of Directors, and, in addition, Seller will have the right
to nominate himself and two outside individuals to become members of
Purchaser's said nine-member Board of Directors. John E. Martin agrees that
until payment in full of the portion of the purchase price described in
paragraph 1c above, (regardless of which alternative has been selected), he
will vote his shares of Purchaser's stock in favor of any person so nominated
by Seller. The outside directors designated by Seller will become members of
the Audit, Compensation and S8 Stock Committees of that Board. The Purchaser
represents that it presently has and will continue to maintain appropriate
officers and director's liability insurance.
10. Exclusivity
From the execution of this letter until February 27, 1998, Seller agrees that
it will use its best efforts consistent with sound business practice to cause
its officers, directors, employees, agents, and stockholders not to solicit or
encourage directly or indirectly, in any manner, any discussion with or
furnish or cause to be furnished any information to any person other than
Purchaser, in connection with, or negotiate for or otherwise pursue the sale
of the capital stock of any company of The Paisano Group, or all or
substantially all of the assets of any Paisano Group company or any business
combination or merger of any Paisano Group company with any other party.
Seller agrees to promptly inform Purchaser of any inquiries or proposals with
respect to the foregoing.
<PAGE>
Mr. Joseph Teresi
Paisano Publications. Inc.
January 13, 1998
Page 7
11. General
Neither party to this agreement shall disclose to the public or to any third
party, except financial information reasonably required by Purchaser's
financing sources and their financial or legal advisors, the existence of this
agreement or the proposed sale described herein other than with the express
prior written consent of the other party, except as may be required by law.
Any public announcement or press release relating to this transaction must be
approved by both Seller and Purchaser, in writing before being made or
released. Purchaser shall have the right to issue a press release without
Seller's written approval if in the opinion of Purchaser's counsel such a
release is necessary to comply with SEC Rules and Regulations provided Seller
receives a copy of such prepared release for purposes of review at least 48
hours before it is issued. This 48 hour period may be shortened if in the
opinion of Purchaser's counsel it is absolutely required, provided Seller
receives a copy of such release before issue.
From and after the date hereof, upon reasonable prior notice and during normal
business hours, the Seller will grant to Purchaser and its agents, employees
and designees, full and complete access to the books and records and personnel
of The Paisano Group. Purchaser will give similar rights to Seller, its
agents, employees, and designees. Except as may be required by law or court
order, all information so obtained, not otherwise already public, will be
held in confidence.
Each party will be responsible for its own expenses in connection with all
matters relating to the transaction herein proposed. If this proposed
transaction shall not be consummated for any reason other than a violation of
the agreement not to solicit other offers or negotiate with other purchasers,
neither party will be responsible for any of the other's expenses except as
provided in paragraph 6.
Each party will indemnify, defend and hold harmless the other against the
claims of any brokers or finders claiming by, through or under the
indemnifying party. Both parties acknowledge that the fees of Imperial
Capital, LLC, as set forth in the Agreement, dated January 13, 1998, will be
paid at closing out of the proceeds of the Financing. Subject to the
conditions contained herein, this Agreement constitutes a binding legal
obligation upon execution by the parties hereto. Please sign this letter in
the space provided below and return an executed copy to us at any time prior
to the close of business 5:00 p.m. P.S.T., January 13, 1998. Upon your
execution of this letter, we will promptly commence the remaining portion of
due diligence and analysis required by our financing sources, lawyers, and
accountants and will proceed with the transaction on an expedited timetable.
Notwithstanding anything to the contrary herein contained, although the
parties recognize that the time constraints set forth in this agreement are of
extreme importance to Seller, they also recognize that even if reasonable best
efforts are used by both parties, the anticipated closing date may be delayed
for reasons beyond the parties' control, such as necessary regulatory
approval. Seller therefore agrees that he will not exercise his right of
termination if the closing is delayed for a modest period of time beyond the
anticipated
<PAGE>
Mr. Joseph Teresi
Paisano Publications, Inc.
January 13, 1998
Page 8
closing date, if it reasonably appears that purchaser is acting in good faith
to expedite the closing, and that Imperial Capital, LLC has obtained an
expression of interest and term sheet from a lender offering a Senior Credit
Facility.
Very truly yours,
NEWRIDERS, INC.
By: /s/ William E. Prather
-----------------------------
William E. Prather
President & Chief Executive Officer
Accepted and agreed to:
JOSEPH TERESI
By: /s/ Joseph Teresi
--------------------------
Joseph Teresi
Exhibit 10.6.1
SECURED INSTALLMENT PROMISSORY NOTE
(Fixed Interest Rate)
$475,000.00 Loan # 11441-102
October 21, 1997
FOR VALUE RECEIVED, the undersigned, jointly and severally, if more than
one, ("Maker"), promises to pay to the order of FRANCHISE MORTGAGE ACCEPTANCE
COMPANY LLC, ("Lender") (Lender and all subsequent holders of this Note being
hereinafter referred to as "Holder") at Five Greenwich Office Park, Greenwich,
CT 06831, or at such other place as Holder may designate in writing, the
principal sum of Four Hundred Seventy-five Thousand Dollars ($475,000.00)
("Loan"), together with interest at the rate of thirteen and fifty one-
hundredths percent (13.50%) per annum ("Interest Rate") on the unpaid
principal balance of the Loan from time to time outstanding in sixty (60)
equal and consecutive payments of $10,929.75 (the "Monthly Payment")
commencing on January 1, 1998 ("First Payment Date") and continuing on the
first day of each and every month thereafter. In addition, on the day of
funding of the Note, Maker shall also pay Holder (i) interest at the Interest
Rate on the unpaid principal balance of the Loan from the date hereof to the
first day of the month following the funding date, and (ii) a loan origination
fee equal to one-half of one percent (.05%) of the Loan but not less than
$75.00 nor more than $500.00.
Interest shall be computed on the basis of a year consisting of three
hundred sixty (360) days and actual days elapsed (including the first day but
excluding the last) occurring in the period for which it is payable. All
payments of principal and interest on this Note and any other amounts due
hereunder shall be made in lawful money of the United States of America and
shall be credited first to costs and expenses, if any, incurred by Holder in
collecting amounts due hereunder, second, to any late payment fee; third, to
interest; and fourth to principal and any other amounts due hereunder or under
the Loan Documents.
The payment of this Note and all interest, fees and charges herein are
secured by the following ("Loan Documents"): (a) a Security Agreement relating
to certain personal property described more particularly in such Security
Agreement, and (b) such other instruments and documents which recite that they
have been given as security for this Note and the performance of the
obligations described in such documents.
If any payment of principal and interest is not paid within ten (10) days
of the due date thereof, in addition to any other permitted charges, Maker
shall pay Holder a late payment fee in the amount of ten percent (10%) of the
amount past due. Holder shall have no obligation to accept any payments
hereunder not accompanied by all outstanding late payment fees. This provision
is not intended to create any grace period by Holder with respect to the
punctual payment by Maker. Maker acknowledges that the late payment fee is not
imposed as a charge for the use of money, but to permit Holder to offset its
administrative expenses and other costs in dealing with loans not paid on
time. The late payment fee shall in no way be deemed an interest charge.
If any payment is not paid on or before its due date, whether or not by
reason of acceleration, or if a default occurs under any of the Loan Documents
which is not cured within the applicable notice and/or grace period, if any,
such failure shall constitute a default hereunder, and the Loan shall bear
interest from the data of, and during the continuance of the default at the
Interest Rate plus three percent (3%) per annum ("Default Rate") and not at
the Interest Rate; provided, however, the Default Rate shall not accrue on any
late payment fee. All interest at the Default Rate shall be paid at the time
of, and as a condition precedent to, the curing of any default should Holder,
in its sole discretion, allow such default to be cured.
The Loan may not be prepaid in whole or in part without the prior written
consent of Lender which Lender may withhold in Lender's absolute discretion.
In no event whatsoever, whether by reason of acceleration of the Loan or
otherwise, shall the amount paid or agreed to be paid by Maker to Holder for
the use, forbearance or detention of the money to be advanced hereunder exceed
the highest lawful rate under applicable usury laws.
The entire unpaid principal balance, together with all accrued and unpaid
interest thereon and all other sums which may be due hereunder, shall become
immediately due and payable at the option of Holder, if any of the following,
each an "Event of Default", shall occur:
(a) The failure to pay any installment of principal or interest when
due and payable, or the failure, after ten (10) days notice and opportunity to
cure, to pay any other sum when due and payable and required to be paid by
this Note or by any other Loan Document;
(b) The failure or default, after notice and an opportunity to cure
as provided therein, in the performance or observance of any other covenant,
obligation or agreement under the terms of the Loan Documents;
(c) Any representation or warranty made in any Loan Document or any
certificate, document, letter or opinion proves to be materially false or
misleading; or
(d) A final judgment in excess of Ten Thousand Dollars ($10,000) has
been entered for the payment of money against Maker, which is not discharged
within sixty (60) days from the entry thereof, or is not appealed or stayed
pending such appeal.
If interest, principal or any other sum owing under this Note is not paid
when due, whether at maturity or by acceleration, Maker will pay all costs of
collection including, but not limited to, reasonable attorneys' fees and all
expenses incurred by the Holder in connection with the protection or
realization of the collateral and enforcement of any guaranty, whether or not
suit is filed hereon.
Maker and all others liable for all or any part of this obligation,
severally waive presentment for payment, demand and protest and notice of
protest, acceleration or dishonor and non-payment of this Note, and expressly
consent to any extension of time or payment hereof or of any installment
hereof, to the release of any party liable for this obligation, to the
release, change or modification of any collateral posted as security for the
payment of this Note, and any such extension, modification or release may be
made without notice to any of said parties and without in any way affecting or
discharging this liability.
If any of the provisions of this Note are held to be invalid, illegal, or
unenforceable, such invalidity, illegality or unenforceability shall not
affect any other provision, but this Note shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
THIS NOTE IS INTENDED TO BE CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CONNECTICUT. ANY ACTION BROUGHT TO ENFORCE THIS
NOTE MAY BE BROUGHT IN CONNECTICUT. TO THE EXTENT ALLOWED BY LAW, MAKER HEREBY
CONSENTS To THE JURISDICTION OF ANY COURT LOCATED IN CONNECTICUT HAVING
SUBJECT MATTER JURISDICTION AND WAIVES ANY OBJECTIONS MAKER MAY HAVE TO THE
VENUE OR CONVENIENCE OF SUCH FORUM. MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY ACTION OR PROCEEDING RELATING TO THIS NOTE OR THE
LOAN DOCUMENTS.
This Note may not be waived, changed, modified or discharged orally,
except by an agreement in writing signed by the party against whom the
enforcement of waiver, change, modification or discharge is sought.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
voluntary by action of the parties or involuntary by operation of law.
Maker: Newriders, Inc.
BY: /S/ WR Nordstrom
-------------------
Tide: Exec. VP Finance & Admin.
Exhibit 10.6.2
SECURITY AGREEMENT # 11441-102
SECURITY AGREEMENT, dated as of October 21, 1997, between Newriders,
Inc., a Nevada corporation, having its principal office at 567 San Nicolas
Drive, Newport Beach, CA 92660 ("Borrower"), and FRANCHISE MORTGAGE ACCEPTANCE
COMPANY LLC, a California limited liability company, having its principal
office at Five Greenwich Office Park, Greenwich, Connecticut 06831 ("Lender").
WHEREAS, Lender has made available to Borrower a loan in the principal
amount of $475,000.00 Four Hundred Seventy-Five Thousand Dollars ($475,000.00)
("Lender");
WHEREAS, Borrower's obligations to repay the Loan with interest thereon
are evidenced by a promissory note made by Borrower, dated the date hereof
("Note");
WHEREAS, as a condition of making the Loan, Lender has requested that
Borrower grant to, and create in favor of, Lender a senior security interest
in certain collateral, as set forth in and pursuant to this Agreement; and
WHEREAS, it is the intent of the parties that this Agreement secure all
indebtedness, obligations and liabilities of Borrower to Lender from time to
time under the Note, and any other instruments which may be executed by
Borrower evidencing an obligation to Lender.
NOW, THEREFORE, in consideration of the making of the Loan and other good
and valuable consideration, receipt of which is hereby acknowledged by
Borrower, and in order to induce Lender to make the Loan, Borrower and Lender,
intending to be legally bound hereby, covenant and agree as follows:
1 . Definitions. Unless the context otherwise requires, all terms used
herein which are not defined herein and which are defined in the Uniform
Commercial Code ("UCC") shall have the meanings therein stated. In addition to
other terms defined elsewhere in, this Agreement, the following words and
terms shall have the following meanings, respectively, unless the context
hereof requires otherwise:
"Collateral" has the meaning set forth in Section 2 hereof.
"Proceeds" means whatever is received when Collateral or Proceeds
are sold, exchanged, collected or otherwise disposed of, both cash and non-
cash, including the proceeds of insurance paid or payable on Collateral or
Proceeds.
"Secured Obligations" means all indebtedness, obligations and
liabilities of Borrower to Lender from time to time arising including, but not
limited to, the Note, and all extensions and renewals thereof, whether such
indebtedness, obligations or liabilities are direct or indirect, otherwise
secured or unsecured, joint or several, absolute or contingent, due or to
become due, whether for payment or performance, now existing or hereafter
arising.
2. Grant of Security. As security for the full and timely payment of the
Secured Obligations, Borrower hereby assigns, pledges, transfers and sets over
to Lender, and hereby agrees that Lender shall have, and hereby grants to and
creates in favor of Lender, a first priority security interest under the UCC,
in and to all of Borrower's right, title and interest in, to and under the
following, in each case whether now existing or hereafter arising, now owned
or hereafter acquired, wherever located ("Collateral"):
(a) All of the goods, chattels and property of Borrower described on
Schedule A annexed hereto; and
(b) All Proceeds of and accessions and additions thereto
substitutions for, and all replacements of, any of the foregoing, cash and
non-cash.
3. Representations and Warranties. Borrower represents and warrants that:
(a) Borrower is duly organized, and validly existing and in good
standing under the laws of the State of its organization and Borrower is duly
licensed to do business wherever the ownership of its property or the conduct
of its business requires such licensing.
(b) Borrower has the power and authority to enter into, execute,
deliver and perform the Note, this Agreement and any other agreement or
instrument referred to herein, and this Agreement and all such other
agreements and instruments are valid and binding and enforceable against
Borrower in accordance with their respective terms. Borrower has taken all
action required to authorize the execution, delivery and performance of the
Note, this Agreement and all other agreements or documents required hereunder
and the transactions contemplated hereby.
(c) The execution, delivery and performance by Borrower of this
Agreement and any other agreement or instrument referred to herein shall not,
by the lapse of time, the giving of notice or otherwise, constitute a
violation of, or result in the breach of the terms of any applicable law, rule
or regulation of any governmental body, or any provision contained in
Borrower's Articles or Certificate of Incorporation or Bylaws or in any
agreement, instrument or document to which Borrower is now a party or by which
it or its assets are bound, or result in the creation of any claim, lien,
charge or encumbrance upon any of the property or assets of Borrower. No
consent, approval, authorization or declaration of, designation by, or filing
with, any governmental authority or other person or entity is required in
connection with the valid execution, delivery or performance of the Note or
this Agreement and the consummation of the transactions contemplated hereby,
except as are necessary to perfect Lender's security interest in the
Collateral.
(d) Borrower has good, indefeasible and merchantable title to, and
ownership of the Collateral, free and clear of all liens, claims, security
interests and encumbrances except those of Lender.
(e) Borrower is not in violation of any applicable statute,
regulation or ordinance of any governmental entity, including, without
limitation, the United States of America, any state, city, town, municipality,
county or of any other jurisdiction, or of any agency thereof, which could in
any respect materially and adversely affect the Collateral, or the business,
property, assets, operations or condition, financial or otherwise, of
Borrower.
(f) Borrower is not in default in any material respect with respect
to any indenture, loan agreement mortgage, lease, deed or other similar
agreement relating to the borrowing of monies to which it is a party, or by
which it or its assets may be bound.
(g) Borrower has delivered to Lender its financial statements as
part of its credit review ("Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied and fully and fairly present the assets, liabilities and
financial condition of Borrower as of the respective dates thereof and for the
periods covered thereby; there are no omissions of other facts or
circumstances which are or may be material and there has been no material
adverse change in the fimcial condition of Borrower since the date of such
Financial Statements. Borrower further agrees that during the term of this
Security Agreement, Borrower shall provide Secured Party, within 90 days of
Borrower's fiscal year-end, with annual financial statements certified by an
accountant or by Borrower's chief financial officer and quarterly financial
statements prepared by Borrower.
(h) There are no actions or proceedings which are threatened or
pending in any court or before any governmental agency or instrumentality
against Borrower, its assets, or the Collateral, which may materially
adversely affect Borrower.
(i) Borrower has filed or has obtained extensions for the filing of
all federal, state and local tax returns and other reports it is required by
law to file, and has paid all taxes, assessments and charges reflected thereon
that are due and payable, and has reserved funds or made adequate provision
for the payment of such taxes, assessments and charges accruing but not yet
payable.
(j) The security interest granted by Borrower to Lender in the
Collateral will, when perfected in accordance with the UCC, constitute a valid
first lien and security interest in the Collateral.
(k) Borrower has not, within the six (6) year period immediately
preceding the date of this Agreement, (i) changed its name, been the surviving
entity of a merger or consolidation, or acquired all or substantially all of
the assets of any person or entity, or (ii) been known as or used any other
corporate or fictitious name, trade name, division name or other name.
(l) No representation or warranty by Borrower contained herein or in
any certificate or other document furnished by Borrower pursuant hereto, in
connection with the transactions contemplated hereunder, contains any untrue
statement of material fact, or omits to state a material fact necessary to
make it not misleading or necessary to provide Lender with proper information
as to Borrower and its affairs.
4. Covenants Applicable to the Collateral. Borrower and Leader agree
that, at all times during the term of this Agreement, the following provisions
shall be applicable to the Collateral:
(a) Borrower will keep accurate and complete books and records
concerning the Collateral owned or acquired by it in accordance with generally
accepted accounting principles.
(b) Lender shall have the right to review the books and records of
Borrower pertaining to the Collateral and to copy them and to make excerpts
therefrom, all at such reasonable times upon reasonable notice and as often as
Lender may reasonably request.
(c) Borrower shall maintain and keep its principal place of business
and its chief executive office at the address set forth above, and at no other
location without giving Lender at least thirty (30) days prior written notice
of any move. Borrower shall maintain and keep its records concerning the
Collateral at that address and at no other location without giving Lender at
lean thirty (30) days prior written notice of any move. Borrower shall keep
any personal property comprising the Collateral only at the above address.
Borrower may change any such location only if it has given Lender thirty (30)
days prior written notice of the now location.
(d) Borrower shall not sell, lease, transfer or otherwise dispose of
any of the Collateral.
(e) Borrower shall cause the Collateral to be maintained and
preserved in the same condition, repair and working order as when new,
ordinary wear and tear excepted, and shall promptly make or cause to be made
all repairs, replacements and other improvements in connection therewith which
are necessary or desirable to that end.
(f) Borrower shall not affix or permit the Collateral to become
affixed to real estate or to any other goods.
(g) Borrower shall keep the title to all Collateral, in each case as
from time to time owned or acquired by it, free and clear of all liens or
encumbrances of any nature whatsoever, except in favor of Lender. Borrower
will defend such title against the claims and demands of all persons.
(h) Borrower will faithfully preserve and protect Lender's security
interest in the Collateral and will, at its own cost and expense, cause said
security interest to be perfected and continue to be perfected, and for
such purpose Borrower will, from time to time at the request of Leader and at
the expense of Borrower, make, execute, acknowledge and deliver, and file or
record, or cause to be filed or recorded, in the proper filing places, all
such instruments, documents and notices, including without limitation
financing statements and continuation statements, as Lender my deem necessary
or advisable from time to time in order to perfect and continue the perfection
of said security interest. Borrower will do all such other acts and things and
make, execute, acknowledge and deliver all such other instruments and
documents, including without limitation further security agreements, pledges,
endorsements, assignments and notices, as Lender my deem necessary or
advisable from time to time in order to perfect and preserve the priority of
said security interest as a first lien on and security interest in the
Collateral prior to the rights of a other persons therein or thereto. Borrower
hereby appoints Lender (and any of Lender's officers, employees, or agents
designated by Lender) as Borrower's attorney, coupled with an interest, to do
all things necessary to carry out this paragraph, including, but not limited
to, signing financing statements and other documents as Borrower's Attorney-
in-fact to preserve and protect the priority of Lender's lien and security
interest in any or all of the Collateral.
(i) Borrower will not, without the prior written consent of Lender,
(i) borrow or permit any person to borrow against any of the Collateral, (ii)
create, incur, assume or suffer to exist any lien with respect to any of the
Collateral, (iii) permit any levy or attachment to be made against any of the
Collateral, or (iv) permit any financing statement to be on file with respect
to any of the Collateral.
(j) Borrower shall bear the entire risk of loss of damage to, or
destruction of the Collateral. Borrower will insure the Collateral against all
risk of loss in an amount not less than the full replacement value thereof
with insurers acceptable to Lender. Lender shall be named as an additional
insured and the policies shall be endorsed in favor of Lender with such loss
payable riders as Lender may designate. The original or certified copies of
the polices or a certificate of insurance shall be delivered to Lender and
shall provide that they may not be cancelled without thirty (30) days prior
written notice to Lender. If Borrower fails to obtain and keep such insurance
in full force and effect, or fails to pay the premiums when due, Lender may do
so for the account of Borrower and add the cost thereof to the Secured
Obligations and the same shall be payable to Lender on demand. Borrower hereby
assigns to Lender all moneys which may become payable on account of such
insurance, including, without limitation, any return of unearned premiums
which may be due upon cancellation of any such insurance, and directs the
insurers to pay Lender any amount so due. Leader, its officers, employees,
authorized agents, successors and assigns, are hereby appointed attorneys-in-
fact of Borrower, for the purpose of endorsing any draft or check which may be
payable to Borrower in order to collect the proceeds of such insurance or any
return of unearned premiums. Such appointment is irrevocable and coupled with
an interest.
(k) Upon the occurrence and during the continuation or existence of
any Event of Default, Borrower shall Promptly upon demand by Lander assemble
the Collateral and make it available to Leader at the place or places to be
designated by Lender. The right of Lender to have the Collateral assembled and
made available to it is of the essence of this Agreement and Lender may, at
its election, enforce such right by an action for specific performance.
(l) Lender shall have no duty to collect or protect the Collateral
or any part thereof beyond exercising reasonable care in the custody of any
Collateral actually in the possession of Lender.
5. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default:"
(a) The failure to pay the Note or any installment thereunder on the
due date thereof;
(b) The failure to pay any other obligation or perform any other
agreement to Lender however arising;
(c) The failure to perform or observe any term, covenant, warranty
or representation contained in this Agreement or any document, instrument or
agreement referred to herein, which is required to be performed or observed by
Borrower and which failure is not cured to Lender's reasonable satisfaction
within ten (10) days after the giving of notice by Lander to Borrower of such
failure;
(d) The Collateral or a significant part of Borrower's other assets
are sold or attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors and the same is not released within
sixty (60) days thereafter;
(e) An application is made by Borrower or any person other than
Borrower for the appointment of a receiver, trustee or custodian for the
Collateral or any other of Borrower's assets and, in the case of an
application made by a third party, it is not dismissed within sixty (60) days
after the application therefor.
(f) A petition under any section or chapter of the Bankruptcy Code
or any similar law or regulation is filed by or against Borrower and, in the
case of any petition filed by any third party, such petition is not dismissed
within sixty (60) days of such filing; or Borrower makes an assignment for the
benefit of its creditors; or any case or proceeding is filed by or against
Borrower for its dissolution, liquidation, or termination; or
(g) Borrower ceases to conduct its business or is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business affairs.
Upon and after an Event of Default, all of the Secured Obligations may,
at the option of Lender and without demand, notice, or legal process of any
kind, be declared, and immediately shall become, due and payable.
6. Rights and Remedies. If one or more Events of Default shall occur and
be continuing or shall exist, then and in any such event, Lender shall have
such rights and remedies in respect of the Collateral or any part thereof as
are provided by the UCC as in effect in the jurisdiction or jurisdictions whom
the Collateral is located, and such other rights and remedies in respect
thereof which it may have at law or in equity or under this Agreement,
including, but not limited to, the right to (i) enter any premises where
Collateral is located and take possession of it without demand or notice and
without prior judicial hearing or legal proceedings, which Borrower hereby
expressly waives, and/or (ii) sell all or any portion of the Collateral at
public or private sale, with ten (10) days' prior written notice to Borrower,
at such time or times and in such manner and upon such terms, whether for cash
or on credit as Lender in its sole judgment reasonably exercised may
determine. Lender shall apply the Proceeds of any such sale and any Proceeds
received by Lander toward payment of the Secured Obligations.
7. PERSONAL -JURISDICTION AND SERVICE OF PROCESS. BORROWER HEREBY
IRREVOCABLY CONSENTS TO PERSONAL JURISDICTION AND VENUE IN ANY COURT OF THE
STATE OF CONNECTICUT OR ANY FEDERAL COURT SITTING IN THE STATE OF CONNECTICUT,
AND HEREBY WAIVES ANY CLAIM BORROWER MAY HAVE THAT SUCH COURT IS AN
INCONVENIENT FORUM FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF THIS AGREEMENT, THE NOTE, ANY OTHER INSTRUMENT OR ANY OF THE
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHICH IS BROUGHT
AGAINST BORROWER, AND HEREBY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
SUIT, ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN ANY SUCH COURT.
BORROWER FURTHER CONSENTS TO THE SERVICE OF PROCESS ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH ABOVE, SUCH SERVICE TO
BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING,
8. Severability. The Provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall,
as to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining Provisions
hereof in any jurisdiction.
9. Governing. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of Connecticut without regard to its conflict of
law provisions.
10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed and delivered by the parties, constituting an
original but all such counterparts together constituting but one and the same
instrument.
11. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Lender, Borrower and their respective successors
and assigns, except that Borrower may not assign of transfer any of its rights
or obligations hereunder or any interest herein without the consent of Lender.
Except to the extent otherwise required by its context, the word "Lender"
where used in this Agreement shall mean and include the holder of the Note
issued to Lender, and the holder of such Note shall be, bound by and have the
benefits of this Agreement the same as if such holder had been a signatory
hereto.
12. Miscellaneous. No delay or failure on the part of Lender in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver thereof
or of any other right, remedy, power or privilege of Lender hereunder or any
instrument or instruments now or hereafter evidencing the Secured Obligations;
nor shall any single or partial exercise of any such right, remedy, power or
privilege preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights and remedies of Lender
under this Agreement are cumulative and not exclusive of any rights or
remedies which it might otherwise have.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized and intending to be, legally bound hereby, have executed and
delivered this Security Agreement as of the date first above written.
FRANCHISE MORTGAGE ACCEPTANCE COMPANY LLC
By: /s/ <signature illegible>
------------------------------
Title:___________________________
NEWRIDERS, INC.
By: /s/ WR Nordstom
----------------------------
Title: Exec. VP Finance + Admin.
SCHEDULE A
To Security Agreement between
Franchise Mortgage Acceptance Company LLC as Lender
and
Newriders, Inc. as Borrower
Collateral Description:
ALL FURNITURE, FIXTURES AND EQUIPMENT NOW OR HEREAFTER OWNED, ACQUIRED, HELD
OR USED BY BORROWER IN ITS OPERATIONS OF EASYRIDERS CAFE RESTAURANT LOCATED AT
THE ADDRESSES LISTED BELOW, ALL ADDITIONS, ATTACHMENTS, ACCESSIONS THERETO,
SUBSTITUTIONS FOR, AND ALL REPLACEMENTS OF, ANY OF THE FOREGOING, CASH AND
NON-CASH, AND PROCEEDS OF THE FOREGOING COLLATERAL, INCLUDING GENERAL
INTANGIBLES.
Collateral Location:
5155 N. Blackstone
Fresno, CA 93710
Exhibit 10.6.3
GUARANTY
Guaranty made and delivered October 21, 1997 by the undersigned parties hereto
(individually and collectively, "Guarantor"), to Franchise Mortgage Acceptance
Company, LLC ("FMAC").
In order to induce FMAC, from time to time, to consider entering into lease
arrangements, loan agreements, financial accommodations or to extend credit in
any matter with or to Newriders, Inc. ("Obligor"), (said arrangements,
agreements or accommodations hereinafter referred to as the "Instruments"),
Guarantor (jointly and severally if more than one) guarantees to FMAC the
prompt payment of all moneys now due or hereafter becoming due by Obligor to
FMAC and the timely performance by Obligor of all Obligor's obligations to
FMAC, whether they arise pursuant to the Instruments or otherwise
("Obligations"). Obligations shall include, but not be limited to Secured
Installment Promissory Notes numbered 11441-100, 11441-101, 11441-102, 11441-
103, and 11441-104. This Guaranty is, and shall be construed to be, an
absolute unlimited and continuing guaranty of payment and performance and the
liability of Guarantor hereunder shall not be affected, impaired or
discharged, in whole or in part, by reason of any matter whatsoever, including
(a) an extension or discharge that may be granted to Obligor by any Court and
any proceedings under the Bankruptcy Code, or any amendments thereof, or under
any state or other federal statutes; or (b) any irregularity in any of the
Instruments or this Guaranty; or (c) any other agreement or circumstance
whatsoever which might otherwise constitute a defense to this Guaranty or to
Guarantor's obligations hereunder.
FMAC shall have the right to proceed against Guarantor,(or if more than one,
any of them), immediately upon any default by Obligor in payment or
performance of any Obligations and shall not be required to take any action or
proceedings of any kind against Obligor or any other party liable for
Obligor's debts or Obligations or any security which FMAC may hold. No payment
by Guarantor except payment in full of all Obligations shall entitle Guarantor
to be subrogated to the rights of FMAC. Guarantor expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution or
any other claim which it may now or hereafter have against Obligor or any
person directly or contingently liable for the Obligations guaranteed
hereunder, or against or with respect to Obligor's property (including,
without limitation, property collateralizing the Obligations guaranteed
hereunder), arising from the existence or performance of this Guaranty. Any
and all present and future indebtedness of Obligor to Guarantor is hereby
postponed in favor of, and subordinated to the full payment and performance
of, all present and future Obligations of Obligor to FMAC.
The Guarantor hereby waives (a) notice of acceptance of this Guaranty and all
other notices of any kind to which Guarantor may be entitled, and (b) trial by
jury and the tight thereto in any action or proceeding of any kind arising on,
out of, under or by reason of this Guaranty. FMAC shall have the right, from
time to time and at anytime, in its sole discretion and without any notice to,
or consent from, Guarantor (which are hereby waived by Guarantor), and without
affecting, impairing or discharging, in whole or in part, the liability of
Guarantor hereunder, to modify, or change or supplement in any respect
whatsoever, the Instruments or any other agreement or transaction between
Obligor and FMAC, or any portion or provisions thereof, to grant extensions of
time and other indulgences of any kind to Obligor, and to compromise, release,
substitute, exercise, enforce or fail or refuse to exercise or enforce any
claims, rights or remedies of any kind which FMAC may have, at any time,
against Obligor or Guarantor, any endorser or other party liable for Obligor's
Obligations or any collateral therefor, whether under the Instruments or this
Guaranty or otherwise. The obligations of Guarantor hereunder shall not be
affected, modified or impaired in the event any provision of the Instruments
shall be unenforceable. Guarantor hereby absolutely, unconditionally and
irrevocably waives any right to assert any defense, set-off counterclaim or
loss claim of any nature whatsoever with respect to this Guaranty,Guarantor's
obligations hereunder or the Obligations.
If Guarantor or Obligor should at any time become insolvent or make a general
assignment for the benefit of creditors, or if a proceeding shall be commenced
by, against or in respect of Guarantor or Obligor under the Bankruptcy Code or
any State insolvency law, or any individual Guarantor dies, any and all of
Guarantor's obligations under this Guaranty shall, at FMAC's option, forthwith
become due and payable without notice.
This Guaranty shall be binding upon Guarantor and its successors and assigns,
executors and administrators, and shall inure to the benefit of the
distributees, executors, administrators, successors and assigns of FMAC.
Obligor may not delegate any of its obligations under this Guaranty. FMAC
shall have the right to assign and transfer this Guaranty to any assignee of
the Obligations or Instruments. FMAC's successors and assigns shall have the
rights, elections, remedies and privileges, discretions and powers granted
hereunder to FMAC and shall have the right to rely upon this Guaranty and to
enter into and continue other and additional transactions with the Obligor in
reliance hereon, in the same manner and with the same force and effect as if
they were specifically named as FMAC herein.
The term of this Guaranty shall commence on the date hereof and shall continue
until all Obligations and the Instruments, absolute or contingent, have been
fully paid, satisfied and discharged. This Guaranty is delivered in the State
of Connecticut and shall be governed, construed and interpreted, as to
validity, enforcement and in other respects, by the law of the State of
Connecticut. Guarantor consents and agrees that if FMAC so elects, the state
and federal courts in the State of Connecticut shall have exclusive
jurisdiction of all controversies and disputes arising hereunder. Guarantor
hereby consents and submits to the personal jurisdiction of such courts and
waives any objection Guarantor may have to the venue or the convenience of
such forums. This Guaranty cannot be terminated orally and no provision hereof
may be modified or waived except by FMAC in writing.
Guarantor hereby agrees to provide to FMAC such information as to the business
affairs and financial condition of Guarantor as FMAC may, from time to time,
reasonably request and to notify FMAC of any change of address of Guarantor
within ten (10) days.
IN WITNESS WHEREOF, this Guaranty has been duly sealed and executed by
Guarantor as of the date first above written.
(Signature for Individual) Signature: /s/ Leon Hatcher
------------------------------
Type name: Leon Hatcher
Social Security No.: ###-##-####
Residence Address: 8117 North Fowler
Clovis, CA 93612
Signature: /s/ Sandra Hatcher
--------------------------------
Type Name: Sandra Hatcher
Social Security No.: ###-##-####
Residence Address: 8117 North Fowler
Clovis, CA 93612
ACKNOWLEDGMENT
STATE OF CA ) <Notary Stamp of Diane Hayes
)ss: Appears here>
COUNTY OF FRESNO )
On this 3rd day of November, 1997, before me personally came
Leon Hatcher and Sandra Hatcher proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) are subscribed to the within
instrument and acknowledged to be that they executed the same in their
authorized capacity, and that by their signature on the foregoing instrument
the persons or the entity upon behalf of which the person(s) acted, executed
the instrument.
Witness my hand and official seal.
/s/ Diane Hayes
--------------------
Notary Public
ACKNOWLEDGMENT
STATE OF CA )
)ss:
COUNTY of Fresno ) <Notary Seal of Diane Hayes
Appears here>
On this 3rd day of November 1997, before me personally came Leon
Hatcher and Sandra Hatcher to me personally known and known to me to be the
same persons described in and who executed the foregoing instrument, and each
acknowledged to me that each executed the same.
RIDER A TO GUARANTY (CALIFORNIA)
THIS RIDER "A" TO GUARANTY (this "RIDER") is executed as of the 21st day
of October, 1997, by the undersigned ("Guarantor"), in favor of Franchise
Mortgage Acceptance Company, LLC (the "Lender"), and is made a part of and
incorporated into that certain Guaranty, of even date herewith (the
"Guaranty"), executed by Guarantor in favor of the Lender. This Rider is
executed by Guarantor in light of the following facts:
WHEREAS, in order to induce Lender to lend Newriders, Inc. ("Borrower")
such sum as may be evidenced by a promissory note of Borrower in favor of
Lender dated of even date herewith (the "Note") or otherwise extend financial
accommodations in favor of Borrower secured by a Deed of Trust and Security
Agreement or other instruments (collectively called the "Loan Documents"),
Guarantor has agreed to guaranty the obligations of Borrower owing to Lender
to the extent provided for in the Guaranty;
WHEREAS, Lender has required, and Guarantor has agreed to add certain
additional terms and provisions to the Guaranty pursuant to this Rider; and
WHEREAS, all capitalized terms utilized herein and not defined herein
shall have the meaning set forth in the Guaranty;
NOW, THEREFORE, Guarantor agrees as follows:
1. Guarantor hereby waives any defense arising by reason of and any and
all right to assert against Lender any claim or defense based upon an election
of remedies by Lender which in any manner impairs, affects, reduces, releases,
destroys and/or extinguishes Guarantor's subrogation rights, rights to proceed
against Borrower or any other guarantor for reimbursement or contribution,
and/or any other rights of the Guarantor to proceed against Borrower, against
any other guarantor, or against any other person or security, including, but
not limited to, any defense based upon an election of remedies by Lender under
the provisions of Section 580d and 726 of the California Code of Civil
Procedure, and/or any similar law of California or of any other jurisdiction.
2. Guarantor is presently informed of the financial condition of Borrower
and of all other circumstances which diligent inquiry would reveal and which
bar upon the risk of nonpayment of the Obligations. Guarantor hereby covenants
that it will make its own investigation and will continue to keep itself
informed of Borrower's financial condition, the status of other guarantors, if
any, of all other circumstances which bear upon the risk of nonpayment and
that it will continue to rely upon sources other than the Lender for such
information and will not rely upon Lender for any such information absent a
written request for such information by Guarantor to Lender, Guarantor hereby
waives its right if any, to require Lender to disclose to Guarantor any
information which Lender may now or hereafter acquire concerning such
condition or circumstances including, but not limited to, the release of or
revocation by any other guarantor.
3. Guarantor hereby acknowledges, represents and warrants to Lender: that
this Guaranty and Guarantor's execution hereof was and has been solicited by
Borrower and not by Lender; to furnish to Lender all facts known to and/or
hereafter discovered by Guarantor, relating to Borrower's ability to pay and
perform the Obligations and relating to Guarantor's ability to pay and perform
Guarantor's obligations under the Guaranty; that Lender is and will continue
to rely upon the facts and information to be furnished to it by Guarantor as
aforesaid; that Guarantor has independently reviewed the Instruments and has
made an independent determination as to the validity and enforceability
thereof; and that in executing and delivering this Guaranty to Lender,
Guarantor is not in any manner relying upon the validity, and/or
enforceability, and/or attachment and/or perfection of any liens or security
interest of any kind of nature granted by Borrower to Lender, now, or at any
time and from time to time in the future.
4. In the event that all or any part of the Obligations at any time are
secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interest in real property, Guarantor
authorizes Lender, at its sole option, without notice or demand and without
affecting any obligations of Guarantor under the Guaranty, the enforceability
of this Guaranty, or the validity or enforceability of any liens of Lender on
any collateral, to foreclose any or all of such deeds of trust or mortgages or
other instruments by judicial or nonjudicial sale. Guarantor expressly waives
any defenses to the enforcement of this Guaranty or any rights of Lender
created or granted hereby or to the recovery by Lender against Borrower or
Guarantor or any other person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though such a foreclosure or
sale may impair the subrogation rights of Guarantor and may preclude Guarantor
from obtaining reimbursement or contribution from Borrower or any other
guarantors. Guarantor expressly waives any defenses or benefits that may be
derived from California Code or Civil Procedure 580a, 580b or 726, or
comparable provisions of the laws of any other jurisdiction, and all other
suretyship defenses it otherwise might or would have under California law or
other applicable law. Guarantor expressly waives any right to receive notice
of any judicial or nonjudicial foreclosure or sale of any real property or
interest therein subject to any such deeds of trust or mortgages or other
instruments and Guarantor's failure to receive any such notice shall not
impair or affect Guarantor's obligations under the Guaranty or the
enforceability of this Guaranty or any rights of Lender created or granted
hereby.
5. Guarantor waives any and all right to assert against Lender any claim or
defense based upon or arising under Sections 2809, 2810, 2919, 2920, 2921,
2922, 2923, 2924, 2825, 2839, 2845, 2948, 2949, and 2850 of the Civil Code of
the State of California, and/or any similar laws of California, New York or of
any State, or of the United States.
6. Except as specifically modified by this Rider, the Guaranty has not
been modified and shall remain in fall force and effect.
IN WITNESS WHEREOF, Guarantor has cause this Rider to be executed as of
the date first hereinabove written.
Signature: /s/ Leon Hatcher Signature: /s/ Sandra Hatcher
--------------------------- ------------------------
Name: Leon Hatcher Name: Sandra Hatcher
8117 North Fowler 8117 North Fowler
Clovis, CA 93612 Clovis, CA 93612
Exhibit 23.1.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-40859 on Form S-8 of our report dated March 17, 1998 (which includes an
explanatory paragraph relating to substantial doubt about the Company's
ability to continue as a going concern), appearing in this Annual Report on
Form 10-KSB of Newriders, Inc. for the year ended December 31, 1997.
/s/ Deloitte & Touche LLP
Costa Mesa, California
April 7, 1998
Exhibit 23.1.2
<Letterhead of Jones, Jensen & Company>
Certified Public Accountants
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement No.
333-40859 on Form S-8 of our report dated June 3, 1997 (which includes an
explanatory paragraph relating to substantial doubt about the Company's
ability to continue as a going concern) appearing in this Annual Report on
Form 10-KSB of Newriders, Inc. for the year ended December 31, 1997.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
April 8, 1998
50 South Main Street, Suite 1450, Salt Lake City, Utah 84144
Telephone (801) 328-4408 * Facsimile (801)328-4461
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Newriders, Inc. for the year ended December
31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,262,633
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 285,622
<CURRENT-ASSETS> 1,563,993
<PP&E> 1,630,890
<DEPRECIATION> 143,242
<TOTAL-ASSETS> 3,462,355
<CURRENT-LIABILITIES> 1,343,639
<BONDS> 1,687,871
0
0
<COMMON> 17,181
<OTHER-SE> 285,661
<TOTAL-LIABILITY-AND-EQUITY> 3,462,355
<SALES> 2,932,708
<TOTAL-REVENUES> 2,932,708
<CGS> 1,670,146
<TOTAL-COSTS> 7,377,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338,419
<INCOME-PRETAX> (4,776,874)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,776,874)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,776,874)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
