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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE HAVANA REPUBLIC, INC.
(Name of small business issuer in its charter)
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FLORIDA 5995 84-1346897
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
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1360 WESTON ROAD,
WESTON, FLORIDA, 33326
(954) 384-6333
(Address and telephone number of principal executive office and principal place
of business)
STEPHEN SCHATZMAN, PRESIDENT,
THE HAVANA REPUBLIC, INC.,
1360 WESTON ROAD,
WESTON, FLORIDA 33326
(954) 384-6333
(Name, address and telephone number of agent for service)
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WITH A COPY TO:
SHAPO, FREEDMAN & BLOOM, P.A.,
200 SOUTH BISCAYNE BLVD.,
SUITE 4750,
MIAMI, FLORIDA 33131
ATTENTION: LEONARD H. BLOOM
(305) 358-4440
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] -- [Added in Release
No. 33-7168 (para.85,620), effective June 7, 1995, 60 F.R. 26604.]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] -- [Added in Release No. 33-7168 (para.85,620),
effective June 7, 1995, 60 F.R. 26604.]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ] -- [Added in Release No. 33-7168
(para.85,620), effective June 7, 1995, 60 F.R. 26604.]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
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Common Stock....................... 4,800,000 $1.25 $6,000,000 $1,980
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION ON
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1993 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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THE HAVANA REPUBLIC
CROSS-REFERENCE SHEET SHOWING LOCATION OR
CAPTION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM SB-2
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REGISTRATION STATEMENT ITEM NUMBER AND HEADING LOCATION OR CAPTION IN PROSPECTUS
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1. Front of Registration Statement and Outside
Front Cover Page of Prospectus........... Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors....... Prospectus Summary; the Company; Risk
Factors
4. Use of Proceeds............................ Not Applicable
5. Determination of Offering Price............ The Offering
6. Dilution................................... Dilution
7. Selling Security Holders................... Selling Security Holders
8. Plan of Distribution....................... Outside Front Cover Page; Plan of
Distribution
9. Legal Proceedings.......................... Business
10. Directors, Executive Officers Promoters and
Control Persons.......................... Management
11. Security Ownership of Certain Beneficial
Owners and Management.................... Principal Stockholders
12. Description of Securities.................. Description of Securities
13. Interest of Named Experts and Counsel...... Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
15. Organization Within Last Five Years........ Not Applicable
16. Description of Business.................... The Company; Business
17. Management's Discussion and Analysis or
Plan of Operation........................ Management's Discussions and Analysis
18. Description of Property.................... Business
19. Certain Relationships and Related
Transactions............................. Not Applicable
20. Market for Common Equity and Related
Stockholder Matters...................... Market Price of the Common Stock
21. Executive Compensation..................... Management
22. Financial Statements....................... Report of Independent Certified Public
Accountants
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ii
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PROSPECTUS
THE HAVANA REPUBLIC, INC.
________ SHARES OF COMMON STOCK OFFERED BY THE COMPANY
PURSUANT TO OUTSTANDING SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
---------------------
________ SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS UPON EXERCISE OF
OUTSTANDING SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
---------------------
This Prospectus relates to an offering by The Havana Republic, Inc. (the
"Company") of shares of common stock, no par value per share (the
"Common Stock"), issuable upon the conversion of 2,100 outstanding shares of
Series A Convertible Preferred Stock, par value $1,000 per share (the "Preferred
Stock").
This Prospectus also relates to the sale of shares of Common
Stock following the conversion of the Preferred Stock, all of which are offered
by the holders thereof identified as "Selling Security Holders" in this
Prospectus. See "SELLING SECURITY HOLDERS."
Each Share of Preferred Stock entitles the holder to that number of shares
of Common Stock equal to $1,000 divided by the lesser of (i) seventy percent of
the average market price of the Common Stock for the five trading days
immediately prior to conversion or (ii) $1.46. See "DESCRIPTION OF SECURITIES."
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. Sales of shares of Common Stock may be
made from time to time (in transactions which may include block transactions) by
or for the account of the Selling Security Holders in the over-the-counter
market or in negotiated transactions, or otherwise, at market prices prevailing
at the time of sale or at negotiated prices. The Company has informed the
Selling Security Holders that the anti-manipulative rules under the Securities
Exchange Act of 1934, Regulation M, may apply to their sales and has furnished
each of the Selling Stockholders with a copy of these Rules. The Company has
also informed the Selling Security Holders of the need for delivery of copies of
this Prospectus. See "SELLING SECURITY HOLDERS" and "PLAN OF DISTRIBUTION."
---------------------
THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AND "DILUTION."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO THE SELLING
CLASS OF SECURITY SECURITY HOLDERS DISCOUNTS THE COMPANY SECURITY HOLDERS
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Shares of Common Stock(1)..... $ N/A $0 N/A
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Shares of Common Stock(2)..... $ N/A $0 $ (3)
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(1) Represents shares of Common Stock which may be issued upon conversion of the
Preferred Stock.
(2) Represents the anticipated sale by the Selling Security Holders of shares of
Common Stock issuable upon conversion of the Preferred Stock, at
$ , the high bid price on . There can be no assurances,
however, that the Selling Security Holders will be able to sell their shares
of Common Stock at this price, or that a liquid market will exist for the
Company's Common Stock.
(3) Does not give effect to ordinary brokerage commissions or other costs of
sale that will be borne solely by the Selling Security Holders.
The Common Stock is traded in the over-the-counter market and is quoted on
The OTC Bulletin Board under the symbol "HVAR".
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The date of this Prospectus is , 1997
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AVAILABLE INFORMATION
The Company is not subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide a report to stockholders, at least annually, which
will include audited financial statements of the Company.
The Company will provide, without charge, to each person who receives a
Prospectus, upon the written or oral request of such person, a copy of any of
the information that was incorporated by reference in the Prospectus (not
including exhibits to the information that was incorporated by reference unless
the exhibits are themselves specifically incorporated by reference). Requests
should be directed to the President, The Havana Republic, Inc., 1360 Weston
Road, Weston, Florida 33326 (Telephone No. 954-384-6333).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
THE COMPANY
The Havana Republic, Inc., a Florida corporation (the "Company") was formed
on March 10, 1996. In June 1996 it was acquired by and became the wholly owned
subsidiary of The Havana Republic, Inc., a Colorado corporation ("Havana
Colorado"). On November , 1997, Havana Colorado merged with and into the
Company (the "Merger"). Unless the context otherwise requires, references to the
"Company" throughout this Prospectus refer to the operations of the Company as a
wholly owned subsidiary of Havana Colorado before the Merger, and the Company
thereafter. The Company is engaged in the business of owning and operating
upscale cigar emporiums devoted to the sale of premium cigars and cigar related
merchandise. The Company opened its first emporium in January 1997 in Weston,
Florida and intends to open an additional emporium late in 1997 in Fort
Lauderdale, Florida and is in negotiations for two stores in 1998 in high
profile projects in South Florida.
The Company also intends to distribute premium cigars purchased from
Tabanica, S.A. ("Tabanica"), a Nicaraguan corporation of which it owns a 50%
equity interest. Tabanica operates a factory located in Jalapa, Nicaragua
modeled after a traditional Cuban cigar factory, utilizing a hand-made
manufacturing process, which affects the manner in which tobacco leaves are
processed, aged and made into cigars. The factory currently has the capacity to
produce premium hand-rolled cigars at the rate of approximately 3 million cigars
per year, which capacity can be further expanded.
Premium cigars are generally defined according to three criteria: (i) the
cigars are made completely by hand; (ii) the cigars consist of long-filler
tobacco; and (iii) the cigars retail at a price range from $1 to more than $20
each. The Company sells cigars that are hand produced, using fine aged tobacco
and traditional rolling techniques.
The Company is seeking to capitalize on the recent growth of the premium
cigar market. In the United States, based on reports by the Cigar Association of
America, following several decades of declines in such sales, premium cigar
sales increased by 14% in 1994, 28% in 1995, and 61% in 1996. The Company's
strategy involves the establishment and operation of emporiums in selected
markets across the United States, through Company owned and franchised stores,
and the distribution of its private labeled cigars in the United States.
The corporate offices of the Company are located at 1360 Weston Road,
Weston, Florida 33326 and its telephone number is (954) 384-6333.
THE OFFERING
Securities Being Offered: This Prospectus relates to an offering by the
Company of shares of common stock, no par
value per share (the "Common Stock"), issuable upon
the conversion of 2100 shares of Series A
Convertible Preferred Stock (the "Preferred Stock")
previously issued by the Company.
This Prospectus also relates to the sale of
shares of Common Stock following the
conversion of the outstanding shares of Preferred
Stock, by the holders thereof, identified as
"Selling Security Holders" in this Prospectus. See
"SELLING SECURITY HOLDERS."
The shares of Common Stock offered by the Selling
Security Holders may be offered for sale from time
to time by the holders in regular brokerage
transactions, either directly or through brokers or
to dealers, in
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private sales or negotiated transactions, or
otherwise, at prices related to then prevailing
market prices.
The Company will not receive any proceeds from the
sale of shares of Common Stock by the Selling
Security Holders. All expenses of the registration
of such securities are, however, being borne by the
Company.
The Selling Security Holders, and not the Company,
will pay or assume such brokerage commissions as
may be incurred in the sale of their securities.
The Common Stock is traded on The OTC Bulletin
Board under the symbol "HVAR". On the
high bid price was $ .
Total number of shares of
Common Stock
outstanding.............. 9,159,460
Total number of shares of
Common Stock offered by
the Company pursuant to
the conversion of
outstanding shares of
Preferred Stock..........
Total number of shares of
Common Stock outstanding
upon conversion of the
outstanding shares of
Preferred Stock..........
Total number of shares of
Common Stock being
offered by Selling
Security Holders.........
Risk Factors:.............. The Common Stock offered hereby involves a high
degree of risk and prospective investors should
consider carefully the factors specified under
"Risk Factors" before electing to invest. See "RISK
FACTORS."
Trading Symbol:............ Common Stock -- "HVAR"
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SELECTED FINANCIAL INFORMATION
Set forth below is the historical selected financial information with
respect to the Company for the period from inception (March 10, 1996) through
June 30, 1996, and for the fiscal year ended June 30, 1997 and for the three
month period ended September 30, 1997.
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THREE MONTHS ENDED FISCAL YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1996
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(UNAUDITED)
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INCOME STATEMENT INFORMATION
Revenue.......................................... $ 162,390 $ 357,138 $ --
Net Loss......................................... (85,253) (226,062) (500)
Net Loss per Share............................... (.01) (.03) --
Weighted Average Shares Outstanding.............. 9,139,812 8,835,586 2,968,554
BALANCE SHEET INFORMATION (SEPTEMBER 30, 1997)
Working Capital.................................. $1,940,774
Total Assets..................................... 2,810,450
Total Liabilities................................ 360,745
Accumulated Deficit.............................. (911,815)
Stockholders' Equity............................. 2,449,705
Net Tangible Book Value Per Common Share......... 10,180
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RISK FACTORS
Prospective investors should consider carefully the following risk factors,
together with the other information contained in this Prospectus, in evaluating
an investment in the shares of common stock offered hereby.
LIMITED OPERATING HISTORY; OPERATING LOSSES
The Company has a limited operating history upon which an evaluation of its
performance and prospects can be made. The Company's prospects must be
considered in light of the numerous risks, expenses, delays, problems and
difficulties frequently encountered in the establishment of a new enterprise.
The Company's operations to date have been directed to (i) establishing and
operating its first emporium, which opened in January, 1997, (ii) building a
cigar supply base in Nicaragua, and (iii) formulating plans to open three
additional emporiums in South Florida. Through September 30, 1997, the Company
has suffered a cumulative operating loss of $311,815. The ability of the Company
to operate profitability is dependent upon the opening and profitability of
additional emporiums, and its ability to develop and distribute private label
brand cigars. No assurance can be given that these goals can be attained and
that the Company can become profitable. See "Financial Statements".
ADDITIONAL FINANCING REQUIREMENTS OF THE COMPANY
At September 30, 1997, the Company had working capital of approximately
$1,940,774. The Company requires significant additional capital for the
continued expansion of its retail operations and to develop and distribute its
private label brand name cigars.
The Company anticipates that it will have sufficient funds to open a second
and a third emporium by the end of 1998. However, thereafter the Company will
require significant funds to open additional emporiums and to continue to
develop its brand name cigars, and may also require additional funds to cover
operating deficits if the new emporiums' revenues do not meet expectations. No
assurance can be given that additional funds will not be required prior to the
expiration of 1998, or that any funds which may be required will be available,
if at all, on acceptable terms. If additional funds are required, the inability
of the Company to raise such funds will have an adverse effect upon its
operations. To the extent that additional funds are obtained by the sale of
equity securities, the stockholders may sustain significant dilution. If
adequate capital is not available, the Company will be required to reduce or
eliminate its planned expansion activities.
Finally, the Company has agreed with certain of the holders of the
Preferred Stock that without their prior written consent it will not raise more
than $2.5 million in equity until August 14, 1998.
GOVERNMENT REGULATION
The tobacco industry in general has been subject to regulation by Federal,
state and local governments, and recent trends have been toward increased
regulation. Such regulations include labeling requirements, limitations on
advertising and prohibition of sales to minors, laws restricting smoking from
both public places and in offices, office buildings and restaurants and other
eating establishments. Certain states have required cigar vendors to label
cigars with health warnings. In addition, cigars have been subject to excise
taxation at the Federal, state and local level, and such taxation may increase
in the future. Tobacco products are especially likely to be subject to increases
in excise taxation because of the detrimental effects of tobacco on the health
of both smokers and others who inhale secondary smoke. No assurance can be given
that future regulations, tax policies or tobacco litigation will not have a
material adverse affect upon the ability of cigar companies, including the
Company, to generate revenue and profits. In June 1997 the tobacco industry
entered into a settlement with most of the states and class action plaintiffs.
The settlement, which is subject to approval by Congress and the President, will
impose significant limits on the tobacco industry. Further, the settlement will
be subject to additional modifications which could further impact the tobacco
industry. The effects of any settlement, if one were to occur, on the tobacco
industry, are impossible to predict. See "BUSINESS -- GOVERNMENT REGULATION;
TOBACCO INDUSTRY LITIGATION"
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EFFECTS OF FLUCTUATIONS IN TOBACCO COSTS AND AVAILABILITY
One of the principal costs of the Company's cigars is the tobacco used in
both the cigars and the cigar wrappers. The Company seeks to purchase name brand
cigars made from only premium grade tobacco. Such name brands include Padron,
Macanudo, Partagas, H. Upman, A. Fuente, and many others. However, numerous
factors not within the Company's control, including weather conditions, foreign
government policies, potential trade restrictions and the overall demand for the
tobacco will affect its availability and price and therefore the availability
and price of premium cigars. In addition, larger tobacco companies, with greater
resources and buying power than the Company, have the resources to purchase
large quantities of tobacco which could both increase the cost and decrease the
availability of the premium cigars to the Company. The inability of the Company
to purchase cigars in sufficient quantities for its emporiums would have a
material adverse affect on the Company's operations and financial condition. See
"BUSINESS -- THIRD PARTY SUPPLIERS."
TOBACCO INDUSTRY RISKS
During the past decades the tobacco industry has been the subject of
advertising and public service campaigns against smoking in general.
Furthermore, most states and many individuals have brought lawsuits against
tobacco and cigarette companies for damages resulting from cancer caused by
smoking. Although the Company was organized in 1996 and all of its cigars have
been sold after both the risks of smoking and the addictive nature of nicotine
are generally known, no assurance can be given that the Company will not be
adversely affected by such factors. Recent proposed settlements with the tobacco
industry may also have an effect upon the Company. See "BUSINESS -- GOVERNMENT
REGULATION; TOBACCO INDUSTRY LITIGATION."
DECLINING MARKET FOR CIGARS THROUGH 1993
The cigar industry has, until recent years, been in substantial decline.
From the 1963 level of industry sales of approximately 9 billion cigars, the
estimated domestic market for cigars declined at a compound average rate of 5%
per year. According to a domestic industry source, the estimated domestic market
for cigars declined from approximately 4 billion cigars in 1980 to approximately
2.1 billion cigars in 1993. The decrease in cigar sales as well as the general
decline in smoking followed the 1964 report of the United States Surgeon
General, which study was followed by numerous other studies stressing the link
between smoking, including secondary smoke and cancer, heart, respiratory and
other diseases and medical problems. Furthermore, "no smoking" laws, ordinances
and prohibitions on cigar smoking in certain cases have adversely affected the
sale of cigar products. Although premium cigar sales have increased during the
past three years, this increase may be temporary, and it is possible that
declines may resume. See "BUSINESS -- THE MARKET."
COMPETITION
The tobacco industry in general, including the cigar industry, is dominated
by a few companies which are well known to the public. The Company believes
that, as a retailer and distributor of premium cigars, it will compete with
certain domestic and foreign companies that specialize in premium cigars and
certain larger companies that maintain premium cigar lines, including
Consolidated Cigar Company, Davidoff, Lane Ltd., and General Cigar Company. The
Company believes that smokers of premium cigars purchase cigars based on the
perceived quality of the tobacco. The process of producing premium cigars is not
patented, but is based on the know-how and experience of master craftsmen who
can identify, purchase, and roll the tobacco into premium cigars. The principal
characteristics that differentiate one premium cigar from another are the
quality of the tobacco in the cigar, the quality of the tobacco used as a cigar
wrapper, the blend of tobacco and the quality of the rolling. Further, the
Company's emporiums compete with other retail cigar stores in the South Florida
area, as well as liquor stores, supermarkets and convenience stores. The
Company's success depends upon the size and quality of its emporiums' inventory,
the maintenance of such inventory, the size and quality of the inventory of
cigar accessories, such as humidors, cigar cutters, cigar cases, lighters,
ashtrays, etc., and the quality of its employees, particularly their knowledge
of the inventory and attitude. No assurance can be given as to the ability of
the Company to compete successfully in any market in which it conducts, or
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may conduct, operations. The Company's ability to compete as a distributor of
its brand name cigars depends upon the efficiency and continued operation of its
Nicaraguan factory, the quality of the cigars manufactured, advertising and
marketing strategies, and price. No assurances can be given that the Company can
successfully compete with major manufacturers and distributors. See
"BUSINESS -- COMPETITION."
TRADE NAME PROTECTION
The trademark Havana Republic, owned by the Company, has been registered in
the State of Florida. The Company filed to register the trademark with the U.S.
Patent and Trademark Office. However, in September, 1997, the Patent and
Trademark Office refused registration on the basis that the trademark is
primarily geographic and therefore is misdescriptive, because the Company's
products do not come from Havana. The Company intends to request a
reconsideration of this position. However, no assurance can be given that the
Company will be successful in obtaining such federal trademark registration. In
the event that such federal registration is not obtained, the Company's
expansion strategy outside the State of Florida could be adversely affected.
Further, the Company has been notified by Gap, Inc., that in its view, the
Company's trade name infringes its trademark "Banana Republic"(TM). Although the
Company believes its tradename does not infringe, no assurances can be given
that this issue will be resolved without litigation, or that the Company would
be successful in any such litigation.
DEPENDENCE ON MANAGEMENT AND OTHERS
The Company's business is largely dependent upon its president, Mr.
Schatzman, and Mr. Gimelstein its vice president. The Company has five year
employment agreements with Mr. Schatzman and Mr. Gimelstein terminating in 2002.
The loss of the services of Mr. Schatzman or Mr. Gimelstein would have a
material adverse effect upon the Company's business and prospects.
The ability of the Nicaraguan factory to operate is dependent upon its
ability to hire and retain trained hand rollers, and process tobacco. The
Company is totally dependent upon the managing principal of Tabanica, Merardo
Padron, for the hiring of employees and the operation of the factory. Mr.
Padron, who is 62, has been engaged in the tobacco business for over 40 years.
However, no assurances can be given that he will continue to operate the
factory. The loss of Mr. Padron could have a material adverse effect on the
Company's plan to develop a brand name cigar. See "MANAGEMENT."
NICARAGUAN FACTORY AND DISTRIBUTION
The Company purchased for $50,000 a 50% interest in Tabanica, a Nicaraguan
corporation, which owns a manufacturing facility in Jalapa, Nicaragua. The
Company purchased 625,000 cigars from Tabanica for delivery beginning in
January, 1998 for $616,000. The Company also has the right to purchase
additional cigars from Tabanica at cost plus 50% through October 31, 2001. The
Company believes that this arrangement will provide it with a continuous source
of premium cigars and an ability to develop its own private label brand cigars.
However, the operation of manufacturing facilities outside of the United States,
especially in less developed countries such as Nicaragua, is subject to numerous
risks, including political and currency instability, currency controls and
exchange regulations, and import and export regulations, any of which could have
a material adverse effect upon the Company's cigar supply. Therefore it is not
possible to predict whether the Company's investment in and agreement with
Tabanica will result in a stable and long-term supply of premium cigars.
Further, although the Company intends to establish business relationships with
national distributors, no assurances can be given that it will be successful.
See "BUSINESS -- COMPANY BRAND CIGARS."
LIMITED INSURANCE COVERAGE
Although the Company carries general liability insurance with an aggregate
limit of $2,000,000, it has no health hazard policy. There can be no assurance
that the Company will not be subject to liability which is not covered by its
general liability insurance, and such liability could have a material adverse
effect upon its
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business. See "BUSINESS -- GOVERNMENT REGULATION; TOBACCO INDUSTRY LITIGATIONS."
POSSIBLE VOLATILITY OF STOCK PRICES
As of October 31, 1997, the Company had outstanding 9,159,460 shares of
Common Stock, of which approximately 2,104,000, are eligible for public trading.
The remaining shares are subject to sale pursuant to Rule 144. Taking into
account the sale of shares held by Selling Security Holders, assuming all of the
Preferred Stock is converted at $ per share, the Company will have
shares of Common Stock outstanding of which will be eligible
for public trading through Rule 144 or otherwise. Although it is impossible to
predict market influences and prospective values for securities, it is possible
that, in and of itself, the substantial increase in the number of shares
available for sale could have a depressive effect upon the market value of the
Company's Common Stock.
Furthermore, although the Company's Common Stock trades in the
over-the-counter market, there can be no assurances that a regular trading
market will develop, or, if developed, will continue, or that the prices of the
Common Stock will continue to exceed the conversion price of the Preferred
Stock. There has been a history of significant volatility in the market prices
for shares of companies in a similar stage of development. Because of the
factors described above and elsewhere in this Prospectus, the market prices of
the Company's Common Stock following the date of this Prospectus may be highly
volatile.
POSSIBLE LIMITATIONS UPON TRADING ACTIVITIES; RESTRICTIONS IMPOSED UPON
BROKER-DEALERS EFFECTING TRANSACTIONS IN CERTAIN SECURITIES
Trading of the Company's securities may be subject to material limitations
as a consequence of certain provisions of the Securities Exchange Act of 1934
(the "Exchange Act") which limit the activities of broker-dealers effecting
transactions in "penny stocks".
Rules 15g-2 through 15g-6 promulgated under the Exchange Act provide a
series of rules requiring broker-dealers engaging in transactions in low-priced
over-the-counter securities defined as "penny stocks," to first provide to their
customers a series of disclosures and documents, including: (i) a standardized
risk disclosure document identifying the risks inherent in investing in "penny
stocks"; (ii) all compensation received by the broker-dealer in connection with
the transaction; (iii) current quotation prices and other relevant market data;
and (iv) monthly account statements reflecting the fair market value of the
securities.
"Penny stocks" are defined as any equity securities other than a security
that is registered on a national exchange; included for quotation in the NASDAQ
system; or whose issuer has net tangible assets of more than $2,000,000 and has
been in continuous operation for greater than three (3) years. Issuers who have
been in operation less than three (3) years must have net tangible assets of at
least $5,000,000.
Until such time that the Company can meet the listing requirements for
NASDAQ, its Common Stock will constitute "penny stock." Accordingly, trading
activities for the Company's Common Stock will be made more difficult for
broker-dealers than in the case of securities not defined as "penny stock." This
may have the result of depressing the market for the Company's securities and an
investor may find it difficult to dispose of such securities.
In addition, under the Exchange Act, and the regulations thereunder, any
person engaged in a distribution of the shares of Common Stock of the Company
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the Common Stock of the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, each Selling Security Holder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Rule 15c2-6, and
Regulation M, which provisions may limit the timing of purchases and sales of
Common Stock by the Selling Security Holder.
9
<PAGE> 12
CONVERSION PRICE
The conversion price of the Preferred Stock does not bear any relationship
to the assets, book value, operating results or net worth of the Company.
POSSIBLE STATE AND FEDERAL RESTRICTIONS ON CONVERSION OF PREFERRED STOCK
Holders of Preferred Stock will be able to sell the underlying Common Stock
issuable upon exercise thereof only if a current registration statement relating
to such underlying Common Stock is then in effect and on file with the
Securities and Exchange Commission and only if such Common Stock is qualified
for sale or exempt from qualification under the applicable state securities
laws. The Company has agreed to file for, and endeavor to secure, current and
effective registration of the shares of Common Stock issuable upon conversion of
the Preferred Stock. Although the Company has undertaken to use its best efforts
to maintain the effectiveness of this Prospectus covering the securities
underlying the Preferred Stock, there can be no assurances that the Company will
be able to do so. The value of the Preferred Stock may be greatly reduced if a
current prospectus covering the securities issuable upon the conversion of
Preferred Stock is not kept effective or if such securities are not qualified or
exempt from qualification in the applicable states. See "DESCRIPTION OF
SECURITIES."
EFFECT OF OUTSTANDING PREFERRED STOCK
As of October 31 1997, the Company had outstanding 2,100 Shares of
Preferred Stock convertible into shares of Common Stock. To the extent
that these shares enter the market, the price of the Common Stock in the market
may be substantially reduced. Moreover, the holders of the Preferred Stock were
given an opportunity to profit from a rise in the market price of the Company's
Common Stock, with resulting dilution in the interest of the other stockholders.
Further, the terms on which the Company may obtain additional financing during
that period may be adversely affected by the existence of such Preferred Stock.
The holders of such Preferred Stock may exercise them at a time when the Company
might be able to obtain additional capital through a new offering of securities
on terms more favorable than those provided by therein. The Company has
undertaken to file this Prospectus with the Securities and Exchange Commission
pursuant to certain registration rights enjoyed by holders of Preferred Stock.
The expense of registration of this Prospectus shall be borne by the Company,
which expense may be significant.
CONTINUED CONTROL BY MANAGEMENT
The present officers and directors of the Company own approximately 59% of
the issued and outstanding shares of Common Stock. Assuming the conversion of
the Preferred Stock at $ , the officers and directors would still own
% of the issued and outstanding shares of Common Stock, thereby maintaining
effective control over the Company.
DIVIDENDS NOT LIKELY
The Company does not intend to declare or pay cash dividends in the
foreseeable future. Earnings, if any, are expected to be retained to finance and
develop its business. See "DESCRIPTION OF SECURITIES."
DILUTION
As of September 30, 1997 , the Company had 9,159,460 shares of Common Stock
outstanding. As of that date, the Company had a net tangible book value per
common share of $10,180 or $0 per share. Net tangible book value per common
share represents the Company's tangible assets, minus its liabilities and
aggregate liquidation preference of outstanding Preferred Stock, divided by the
number of shares of Common Stock outstanding.
In accordance with the table provided below, purchasers of the shares of
Common Stock through conversion of the Preferred Stock may incur an immediate
dilution in net tangible book value from the noted conversion prices.
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<PAGE> 13
The comparison of net tangible book value to conversion price will,
however, provide no useful information to purchasers of the Company's Common
Stock in the secondary market.
The following table illustrates the number of shares of Common Stock that
would be outstanding, and the corresponding pro forma net tangible book value
and pro forma net tangible book value per common share, assuming all of the
Preferred Stock is converted at $ per share.
<TABLE>
<S> <C>
Shares of Common Stock outstanding before conversion of the
Preferred Stock........................................... 9,159,460(1)(2)
Shares of Common Stock outstanding after conversion of the
Preferred Stock........................................... (1)(2)
Pro forma of net tangible book value after conversion....... $
Net tangible book value after conversion.................... $
Pro forma net tangible book value per common share after
conversion................................................ $
Dilution to Preferred Stockholders..........................
</TABLE>
Officers and directors paid less than $.001 per share for the Common Stock
as compared to a conversion price of $ .
- ---------------
(1) Does not include shares of Common Stock or 300 shares of Preferred Stock
issued after September 30, 1997.
(2) Does not include an aggregate of 200,000 shares of Common Stock subject to
outstanding options exercisable at $1.92 per share, or an aggregate of
200,000 shares of common stock subject to outstanding options exercisable at
$2.88 per share.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. See "SELLING SECURITY HOLDERS."
MARKET PRICE OF THE COMMON STOCK
The Company's Common Stock has been traded in the over-the-counter market
through the NASD OTC Electronic Bulletin Board under the symbol "HVAR" since
March 14, 1997. The table set forth below reflects the reported high and low bid
prices of the Common Stock for each quarter since March 1997, for the period
indicated. Such prices are inter-dealer prices without retail mark-ups,
mark-downs or commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------- ------ -------
<S> <C> <C>
March 31, 1997.............................................. $ 5.50 $2.0625
June 30, 1997............................................... $5.375 $ 3.00
September 30, 1997.......................................... $ 3.25 $ 0.96
</TABLE>
Records of the Company's stock transfer agent indicate that as of October
15, 1997 the Company had 80 record holders of its Common Stock.
The Company has not paid any cash dividends to date, and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for working
capital of the Company.
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<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis should be read in conjunction
with the Company's Consolidated Financial Statements, including the notes
thereto. This Prospectus contains certain forward-looking information which
involves risks and uncertainties. The actual could differ from the results
anticipated herein.
RESULTS OF OPERATIONS
The Company was founded in March 1996. The results of operations for the
year ended June 30, 1997 are not readily comparable with the results of
operations for the period from inception (March 10, 1996) to June 30, 1996.
During the period from inception to June 30, 1996, the Company did not have any
emporiums in operation. Commencing in January 1997, the Company's sole business
was the operation of one emporium in Weston, Florida.
The Company's sales for fiscal 1997 were approximately $357,000
attributable solely to sales from its first emporium beginning in January 1997.
There were no sales in 1996.
Gross profit amounted to $192,000 or approximately 54% of sales in fiscal
1997.
Store expenses for the year ended June 30, 1997 were approximately
$188,000. This amount is due to the expanded retail operations of the Company
and increase in marketing efforts to promote the Company's products. These
expenses consist primarily of advertising and promotional expenses of $60,000,
rents for its emporium of $19,000, salary and salary related expenses of $58,000
and other related expenses of operation.
General and administrative expenses for the year ended June 30, 1997 were
approximately $108,000. This amount reflects the expanded nature of the
Company's business, including $27,000 for salaries and related costs, $10,000
for consulting fees, $22,000 for travel and entertainment costs and $49,000 for
other general and administrative costs.
Professional fees for the year ended June 30, 1997 were approximately
$100,000.
The Company incurred interest expense in 1997 of approximately $16,000.
As a result of the foregoing factors, the Company sustained losses of
approximately $226,062, or $.03 per share for the fiscal year ended June 30,
1997, as compared to a loss of approximately $500 or $0 per share in fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of approximately
$1,941,000. Since its inception, it has sustained losses of approximately
$312,000. The Company's operations and growth has been funded by loans from
third parties, the sale of common stock through September 1997 with gross
proceeds of approximately $1,000,000 and the issuance of Series A Convertible
Preferred Stock which resulted in net proceeds to the Company of approximately
$1,613,000 after expenses. These funds have been used for working capital,
capital expenditures, information systems development and other corporate
purposes.
In April of 1996, the Company entered into an agreement with Tabanica for
future purchases of premium cigars and has paid $617,000. The Company
anticipates receiving the premium cigars in monthly shipments of 50,000
commencing in January, 1998. The market acceptance of these premium cigars will
determine whether and to what extent the Company's financial resources will be
committed to the distribution of its brand name cigars.
The Company also anticipates opening two additional emporiums within the
next 12 months. The first, in Ft. Lauderdale, Florida, is scheduled to open in
January, 1998, and the second, in South Miami, Florida is expected to open in
late 1998. Leasehold improvements in both emporiums are expected to cost
approximately $600,000.
The Company has no other material commitments for capital expenditures. The
Company believes that it has sufficient liquidity to meet all of its cash
requirements for the next 12 months. The Company believes, however, that
additional funding will be necessary to expand into markets outside of South
Florida.
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<PAGE> 15
BUSINESS
INTRODUCTION
The Havana Republic, Inc., a Florida corporation (the "Company") was formed
on March 10, 1996. In June 1996 it was acquired by and became the wholly owned
subsidiary of The Havana Republic, Inc., a Colorado corporation ("Havana
Colorado"). On November , 1997, Havana Colorado merged with and into the
Company (the "Merger"). Unless the context otherwise requires, references to the
"Company" throughout this Prospectus refer to the operations of the Company as a
wholly owned subsidiary of Havana Colorado before the Merger, and the Company
thereafter. The Company is engaged in the business of owning and operating
upscale cigar emporiums devoted to the sale of premium cigars and cigar related
merchandise. The Company opened its first emporium in January 1997 in Weston,
Florida and intends to open an additional emporium late in 1997 in Fort
Lauderdale, Florida and is in negotiations for two stores in 1998 in high
profile projects in South Florida.
The Company also intends to distribute premium cigars purchased from
Tabanica, S.A. ("Tabanica"), a Nicaraguan corporation of which it owns a 50%
equity interest. Tabanica operates a factory located in Jalapa, Nicaragua
modeled after a traditional Cuban cigar factory, utilizing a hand-made
manufacturing process, which affects the manner in which tobacco leaves are
processed, aged and made into cigars. The factory currently has the capacity to
produce premium hand-rolled cigars at the rate of approximately 3 million cigars
per year, which capacity can be further expanded.
Premium cigars are generally defined according to three criteria: (i) the
cigars are made completely by hand; (ii) the cigars consist of long-filler
tobacco; and (iii) the cigars retail at a price range from $1 to more than $20
each. Hand-rolled cigars consist of three different categories of tobacco -- the
filler is the tobacco in the cigar, the binder is the leaf that binds the filler
together and the wrapper is the tobacco leaf that wraps around the rolled
tobacco and finishes the cigar. A premium cigar uses only long-filler tobacco,
binders and wrappers that are composed solely of tobacco leaf. Long-filler
tobacco consists of half tobacco leaves rolled up, whereas short-filler tobacco
consists of smaller pieces of tobacco, including the portions of the long-filler
tobacco which are cut and discarded in producing premium cigars. The quality of
a premium cigar is based on the quality of the tobacco used for the filler,
binder and wrapper. Cigars that are not premium cigars typically use
short-filler, and may be wholly or partially manufactured by machine. The
Company has developed and markets a full line of premium cigars, which are sold
under the brand name of Havana Republic, at prices ranging from $5.00 to $8.00
per cigar, and in addition sells over 100 brands from other manufacturers, at
its emporiums.
THE MARKET
The Company believes that there is an increasing market for cigars.
Industry reports show that worldwide cigar sales increased in 1994 for the first
time since 1970. Cigar sales in 1970 amounted to just under 8 billion cigars.
The number of cigars sold decreased significantly and, in 1994, cigar sales were
approximately 2.3 billion cigars. Although sales in the United States are still
much lower than they were in the 1970s and 1980s (due, in significant part, to a
well-developed anti-smoking movement and smoking restrictions), sales in 1995
increased approximately 28% from 1994 to nearly 2.6 billion cigars, and
increased again in 1996 to 4.5 billion cigars. It is estimated that cigar sales
in the United States amount to more than $1 billion at the retail level. The
Company believes, based on estimates from the Cigar Association of America, that
the market for premium cigars is currently growing. According to industry
statistics, sales of premium cigars account for approximately 6.5% of the United
States cigar market. The number of premium cigars sold has increased each year
since 1991, and sales of premium cigars in 1996 represented a 62% increase over
the number sold in 1995. Further, statistics for the current year reflect that
the volume of premium cigars will again increase when compared to last year. The
Company is seeking to take advantage of this trend; however, no assurance can be
given that the trend will continue in the future or that the Company will
benefit from any further growth in the premium cigar market.
13
<PAGE> 16
THE EMPORIUMS
The Company's first emporium is located in Weston, Florida. Since January
1997, it has generated revenues of approximately $519,000 for nine months. Cost
of sales were approximately $237,000. The emporium consists of an upscale retail
cigar emporium and private club section covering a total of 2,000 square feet.
The private club section is designed for leisurely smoking complemented by
satellite television, coffee, expresso and soft drinks. Individual humidors (in
excess of 100) are leased to patrons for storing their cigars. Sales of cigars
amount to approximately 70% of total sales and sales of accessories, such as
humidors, lighters, cigar cutters, etc., account for the balance. The emporium
is open seven days per week, (from 10:00 A.M. to 9:00 P.M. on weekdays and until
11:00 P.M. on weekends, with the exception of Sunday). The club's decor is
luxurious and upscale with generous utilization of mahogany and marble. A
minimum of two to five employees are required on the premises. The cost of the
furniture, fixtures and equipment required to open a single emporium/club is
approximately $300,000. Initial inventory at an emporium costs approximately
$200,000.
The Company intends to expand its retail operations through the opening of
additional emporiums in South Florida and in other cities in the United States
in which it believes there is a local market for premium cigars. In particular,
the Company intends to open one store in December, 1997 in Fort Lauderdale,
Florida and two additional stores by the end of 1998 in Dade County, Florida.
Thereafter, depending upon the availability of financing, the Company intends to
open additional emporiums in other markets throughout the United States. This
expansion could also include the use of franchising. However, there can be no
assurances that the Company will be able to successfully obtain locations or
financing.
THIRD-PARTY SUPPLIERS
Havana Republic is presently able to purchase premium cigars directly from
almost all manufacturers such as La Gloria Cubana, Padron, Mike's and Dunhill,
and is not dependent upon any one supplier for cigars. However, there are no
assurances that any or all of the suppliers will continue to have available
product. Since 1992, name brand cigars have been on back order. The Company
intends to continue to purchase directly from manufacturers in increasing
quantities and supplement its inventory with cigars from the Tabanica factory.
COMPANY BRAND CIGARS
In 1997 the Company entered into a contract with Tabanica, a cigar
manufacturer in Nicaragua, for the purchase of 625,000 cigars. The purchase
price was $616,000, all of which has been paid. Tabanica will manufacture the
cigars, and box them for the Company in Nicaragua and deliver the cigars, F.O.B
Managua, Nicaragua for transport to the U.S. in lots of 50,000 cigars per month,
commencing in January, 1998. The Company also has the right to purchase
additional cigars at cost plus 50%. The Company must provide, at its own cost,
all boxes, labels and binders. The Company also owns a 50% equity interest in
Tabanica. The Company intends to sell the cigars manufactured by Tabanica in its
emporiums and to distributors for resale. The number of additional cigars that
the Company will purchase from Tabanica and the extent of its further financial
commitment will depend upon the market acceptance of these cigars during 1998.
The acquisition of a 50% interest in Tabanica, gives the Company the
opportunity to purchase premium cigars at favorable prices and maintain
consistency in their blend and quality. Tabanica's factory consists of two
buildings of approximately 27,000 square feet. Tabanica also leases
approximately 170 acres within five miles of the factory. Tabanica employs sixty
people engaged primarily in the manufacturing process which takes place in one
of the two factory buildings. Tabanica's other shareholder is Merardo Padron,
its president, who is in charge of its day to day operations. The manufacturing
capacity of the factory is presently 3 million cigars per year, which can be
expanded through the utilization of the factory's second building and the hiring
of additional employees.
The manufacturing process for premium cigars includes the selection,
purchase and aging of the tobacco and the hand rolling of the cigars. The
tobacco will be selected by Tabanica upon consultation with the Company based
upon its flavor and quality. The availability and quality of tobacco varies from
season to
14
<PAGE> 17
season as a result of such factors as weather conditions and the demand for the
tobacco. As a result of the difference in taste between different lots, the
Company will be required to continuously reformulate the tobaccos in its premium
cigars in order to maintain a consistent taste.
The particular tobacco blend for each of the Company's cigars will be
formulated from different tobaccos. The Company's premium cigars will use
long-filler tobacco primarily from Nicaragua. The Company will also obtain
tobacco from the Dominican Republic, Indonesia, Ecuador and Mexico, to be used
as binders, fillers and as wrappers for the cigars.
COMPETITION
Competition affecting the Company's emporiums will arise from other retail
tobacco and cigar stores, liquor stores, convenience stores and mail order. In
South Florida, the largest retailer of premium cigars is Mikes' Cigars in Bal
Harbour. Competition is based upon diversity of brands and price. The location
of the Company's emporiums is also a major factor. Accordingly, the Company
intends to locate its emporiums in high-profile, high traffic sites in populated
areas.
The Company believes that as a distributor of premium cigars it will
compete with a smaller number of domestic and foreign companies that specialize
in premium cigars and certain larger companies that maintain premium cigar
lines, including Consolidated Cigar, General Cigar Corporation, Caribbean Cigar,
Lane Ltd., and General Cigar Company. The market for premium cigars constitutes
a small portion of the cigar market in general. The Company believes that
smokers of premium cigars purchase cigars based on the perceived quality of the
tobacco and the taste profile of the cigar. The process of producing premium
cigars is not patented, but is based on the know-how and experience of master
craftsmen who can identify and purchase the tobacco and roll the tobacco into
premium cigars. The principal characteristics that differentiate one premium
cigar from another are the quality of the tobacco in the cigar, the quality of
the tobacco used as a cigar wrapper, the quality of the rolling and the blending
of all the tobacco. Cigars are a natural product, therefore the taste profile of
cigars is not uniform and tastes are subject to change. No assurance can be
given as to the market for the Company's cigars in the future or the ability of
the Company to compete successfully or market its cigars successfully.
GOVERNMENT REGULATION; TOBACCO INDUSTRY LITIGATION
The tobacco industry, in general, has been subject to regulation by
Federal, state and local governments, and recent trends have been toward
increased regulation. Such regulations include labeling requirements,
limitations on advertising and prohibition of sales to minors, laws restricting
smoking in public places including offices, office buildings, restaurants and
other eating establishments. Due to health concerns, the cigar industry could
become subject to increased regulation under Federal and state health and safety
regulations. In addition, cigars have been subject to excise taxation at the
Federal, state and local level, and such taxation may increase in the future.
Tobacco products are especially likely to be subject to increases in excise
taxation because of the detrimental effects of tobacco on the health of both
smokers and others who inhale secondary smoke.
Excise Taxes. Effective January 1, 1991, the federal excise tax rate on
large cigars (weighing more than three pounds per thousand cigars) was increased
to 10.625%, capped at $25.00 per thousand cigars, and again increased to 12.75%,
capped at $30.00 per thousand cigars, effective January 1, 1993. However, the
base on which the federal excise tax is calculated was lowered effective January
1, 1991 to the manufacturer's selling price, net of the federal excise tax and
certain other exclusions. The federal excise tax on little cigars (weighing less
than three pounds per thousand cigars) increased from $0.75 per thousand cigars
to $0.9375 per thousand cigars effective January 1, 1991. The excise tax on
little cigars increased to $1.125 per thousand cigars effective January 1, 1993.
The Company does not believe that the current level of excise taxes will have a
material adverse effect on the Company's business, but there are no assurances
that additional increases will not have a material adverse effect on the
Company's business.
Cigars and pipe tobacco are also subject to certain state and local taxes.
Deficit concerns at the state level continue to exert pressure to increase
tobacco taxes. Since 1964, the number of states that tax cigars has risen
15
<PAGE> 18
from six to forty-one. Since 1988, the following eleven states have enacted
excise taxes on cigars, where no prior tax had been in effect: California,
Connecticut, New Jersey, New York, North Carolina, Ohio, Rhode Island, Illinois,
Missouri, Michigan and South Dakota. State excise taxes generally range from 2%
to 75% of the wholesale purchase price. In addition, the following seven states
have increased existing taxes on large cigars since 1988: Arkansas, Idaho, Iowa,
Maine, New York, North Dakota and Washington. The following five states tax
little cigars at the same rates as cigarettes: California, Connecticut, Iowa,
Oregon and Tennessee. Except for Tennessee, all of these states have increased
their cigarette taxes since 1988.
State cigar excise taxes are not subject to caps similar to the federal
cigar excise tax. Therefore, there are no assurances that increases in such
state excise taxes or new state excise taxes will not in the future have a
material adverse effect on the Company's business.
Health Regulations. Cigar manufacturers, like other producers of tobacco
products, are subject to regulation in the U.S. at the federal, state and local
levels. Together with changing public attitudes toward smoking, a constant
expansion of smoking regulations since the early 1970s has been a major cause
for the decline in consumption. Moreover, the trend is toward increased
regulation of the tobacco industry.
In recent years, a variety of bills relating to tobacco issues have been
introduced in the Congress of the United States, including bills that would have
prohibited the advertising and promotion of all tobacco products and/or
restricted or eliminated the deductibility of such advertising expenses; set a
federal minimum age of 18 years for use of tobacco products; increased labeling
requirements on tobacco products to include, among other things, addiction
warnings and lists of additives and toxins; modified federal preemption of state
laws to allow state courts to hold tobacco manufacturers liable under common law
or state statutes; and shifted regulatory control of tobacco products and
advertisements from the Federal Trade Commission to the U.S. Food and Drug
Administration (the "FDA"). In addition, in recent years, there have been
proposals to increase tobacco excise taxes. In some cases, hearings were held,
but only one of these proposals was enacted, namely, that states, in order to
receive full funding for federal substance abuse block grants, establish a
minimum age of 18 years for the sale of tobacco products along with an
appropriate enforcement program. The law requires that states report on their
enforcement efforts. Future enactment of the other bills may have an adverse
effect on the sales or operations of the Company.
In addition, the majority of states restrict or prohibit smoking in certain
public places and restrict the sale of tobacco products to minors. Such places
where the majority of states have prohibited smoking include: any public
building designated as non-smoking; elevators; public transportation;
educational facilities; health care facilities; restaurants and workplaces.
Local legislative and regulatory bodies have also increasingly moved to curtail
smoking by prohibiting smoking in certain buildings or areas or by requiring
designated "smoking" areas. In a few states, legislation has been introduced,
but has not passed, which would require all little cigars sold in those states
to be "fire-safe" little cigars, i.e., cigars which extinguish themselves if not
continuously smoked. Passage of this type of legislation and any other related
legislation could have a materially adverse effect on the Company's cigar
business because of the technological difficulties in complying with such
legislation. There is currently an effort by the federal Consumer Product Safety
Commission to establish such standards for cigarettes. The enabling legislation,
as originally proposed, included little cigars. However, little cigars were
deleted due to the lack of information on fires caused by these products.
Although federal law has required health warnings on cigarettes since 1965,
there is no federal law requiring that cigars carry such warnings. However,
California requires "clear and reasonable" warnings to consumers who are exposed
to chemicals known to the state to cause cancer or reproductive toxicity,
including tobacco smoke and several of its constituent chemicals. Violations of
this law, Proposition 65, can result in a civil penalty not to exceed $2,500 per
day for each violation. Although similar legislation has been introduced in
other states, no action has been taken.
During 1988, 26 manufacturers of tobacco products, including the largest
mass-marketers of cigars, entered into a settlement of legal proceedings filed
against them pursuant to Proposition 65. Under the terms of the settlement, the
defendants agreed to label retail packages or containers of cigars, pipe
tobaccos and other smoking tobaccos other than cigarettes manufactured or
imported for sale in California with the following specified warning label:
"This Product Contains/Produces Chemicals Known To The State of
16
<PAGE> 19
California To Cause Cancer, And Birth Defects or Other Reproductive Harm."
Although the settlement of the Proposition 65 litigation by its terms only
impacts California, it is not practical for national cigar manufacturers to
confine their warning labels to cigars earmarked for sale in California.
Consequently, since 1988, most cigars sold in the United States carry cancer
warning labels.
The U.S. Environmental Protection Agency (the "EPA") has recently published
a report with respect to the respiratory health effects of passive smoking,
which report concluded that widespread exposure to environmental tobacco smoke
presents a serious and substantial public health impact. In June 1993, Philip
Morris and five other representatives of the tobacco manufacturing and
distribution industries filed suit against the EPA seeking a declaration that
the EPA does not have the statutory authority to regulate environmental tobacco
smoke, and that, in view of the available scientific evidence and the EPA's
failure to follow its own guidelines in making the determination, the EPA's
final risk assessment was arbitrary and capricious. This litigation is still
pending.
The FDA has proposed rules to regulate cigarettes and smokeless tobacco in
order to protect minors. Although the FDA has defined cigarettes in such a way
as to include little cigars, the ruling does not directly impact large cigars.
However, once the FDA has successfully exerted authority over any one tobacco
product, the practical impact would be felt by manufacturers of any tobacco
product. If the FDA is successful, this may have long-term repercussions on the
large cigar industry.
Tobacco Industry Litigation. Historically, the cigar industry has not
experienced material health-related litigation, and, to date, the Company has
not been the subject of any material health-related litigation. However,
litigation against leading United States cigarette manufacturers seeking
compensatory and, in some cases, punitive damages for cancer and other health
effects alleged to have resulted from cigarette smoking is pending.
Forty states have become plaintiffs in lawsuits against tobacco companies
seeking to recover the monetary benefits paid under Medicaid to treat residents
allegedly suffering from tobacco-related illnesses. Florida and Massachusetts
have enacted statutes permitting suit against the tobacco companies to recoup
such Medicaid costs, and recently, one defendant has entered into a settlement
with such plaintiff states, which provides that the settling defendant will,
among other things, pay a portion of its profits in the future to the plaintiff.
Under the Florida statute, many of the tobacco companies' traditional defenses,
such as assumption of risk, are vitiated. The statute also permits the state to
establish causation (that smoking causes cancer, heart disease and other
ailments) through the use of purely statistical evidence. The tobacco companies
have filed suit challenging the Florida law as unconstitutional. The states and
the tobacco companies have recently entered into a settlement. See "Recent
Settlement" below.
A class action suit, Castano v. American Tobacco, et al. has been filed in
federal district court in New Orleans against the entire cigarette industry. On
February 17, 1995, the district court granted plaintiffs' motion for class
certification with regard to the liability issues of fraud, breach of warranty
(express or implied), intentional tort, negligence and strict liability as well
as the issues of consumer protection and punitive damages. The court defined the
class as "all nicotine-dependent persons in the United States," "the estates,
representatives, and administrators of these nicotine-dependent cigarette
smokers," and "the spouses, children, relatives and 'significant others' of
these nicotine-dependent cigarette smokers as their heirs or survivors." The
court defined "nicotine-dependent" to mean "all cigarette smokers who have been
diagnosed by a medical practitioner as nicotine-dependent; and/or all regular
cigarette smokers who were or have been advised by a medical practitioner that
smoking has had or will have adverse health consequences who thereafter do not
or have not quit smoking." In May 1996, the Fifth Circuit Court of Appeals
reversed a Louisiana district court's certification of a nationwide class
consisting essentially of nicotine dependent cigarette smokers. Notwithstanding
the dismissal, new class actions asserting claims similar to those in Castano
have recently been filed in certain states. To date, two pending class actions
in Florida against major cigarette manufacturers have been certified and
settled. The first case was limited to Florida citizens allegedly injured by
their addiction to cigarettes; the other is limited to flight attendants
allegedly injured through exposure to secondhand smoke.
17
<PAGE> 20
In another decision, Cipollone v. Liggett Group, Inc., 112 S. Ct. 2608
(1992), the United States Supreme Court held that certain federal legislation
applicable specifically to cigarette manufacturers preempts claims based on
failure to warn consumers about the health hazards of smoking, but does not
preempt claims based on express warranty, misrepresentation and fraud, or
conspiracy. Although the Company believes that the effect of the Cipollone
decision, which involved cigarette smoking, will not have a material adverse
effect on the operations of the Company, there can be no assurance of what the
ultimate effect, if any, of the Cipollone decision or the pending cigarette
industry litigation, or cigarette and tobacco regulation, will be on the cigar
industry or the Company. Although there are numerous differences between the
cigar industry and the cigarette industry, the outcome of pending and future
cigarette litigation may encourage various parties to bring suits on various
grounds against cigar industry participants. While it is impossible to quantify
what effect, if any, any such litigation may have on the Company, the Company
can give no assurance that such litigation would not have a material adverse
effect on its operations.
RECENT SETTLEMENT. ON JUNE 20, 1997 FORTY STATES, SEVENTEEN CLASS-ACTION
PLAINTIFFS AND THE TOBACCO INDUSTRY ENTERED INTO A SETTLEMENT, SUBJECT TO THE
APPROVAL OF CONGRESS. THE SETTLEMENT REQUIRES THE TOBACCO INDUSTRY TO PAY $368.5
BILLION INTO A FUND OVER 25 YEARS, AND $15 MILLION A YEAR INTO THE FUND
THEREAFTER. THESE FUNDS WOULD BE USED FOR HEALTH CARE, SMOKER EDUCATION,
MEDICAID REIMBURSEMENT FOR STATES AND STATE STINGS ON RETAILERS. THE FDA WOULD
HAVE THE AUTHORITY TO REGULATE TOBACCO ADDITIVES AND TO BAN NICOTINE AFTER 2009.
INDIVIDUAL LAWSUITS AGAINST TOBACCO COMPANIES WOULD BE LIMITED AND PUNITIVE
DAMAGES FOR PAST MISCONDUCT WOULD BE WAIVED, WITH A SPECIAL FUND OF $5 MILLION
PER YEAR TO COVER DAMAGES FOR LOST WAGES, MEDICAL BILLS OR OTHER ACTUAL DAMAGES
ESTABLISHED BY PLAINTIFFS. FINALLY, STATES WILL BE REQUIRED TO REDUCE ILLEGAL
SALES TO MINORS BY 75% IN FIVE YEARS AND 85% IN SEVEN YEARS, AND THE TOBACCO
INDUSTRY WOULD BE REQUIRED TO PAY FINES IF YOUTH SMOKING FAILS TO DROP BY 30% IN
FIVE YEARS, 50% IN SEVEN YEARS AND 60% IN TEN YEARS. THE SETTLEMENT IS SUBJECT
TO APPROVAL BY, AND WILL LIKELY BE MODIFIED BY, BOTH CONGRESS, AND THE PRESIDENT
BEFORE IT BECOMES LAW. IT IS UNCLEAR WHAT AFFECT THE SETTLEMENT AND FUTURE
REGULATIONS COULD HAVE UPON THE FUTURE GROWTH AND FINANCIAL CONDITION OF THE
COMPANY.
OSHA Regulations. The federal Occupational Safety and Health
Administration (OSHA) has proposed an indoor air quality regulation covering the
workplace that seeks to eliminate nonsmoker exposure to environmental tobacco
smoke. Under the proposed regulation, smoking must be banned entirely from the
workplace or restricted to designated areas of the workplace that meet certain
criteria. The proposed regulation covers all indoor workplaces under OSHA
jurisdiction, including, for example, private residences used as workplaces,
hotels and motels, private offices, restaurants, bars and vehicles used as
workplaces. The tobacco industry is challenging the proposed OSHA regulation on
legal, scientific and practical grounds. It also contends that the proposed
regulation ignores reasonable alternatives. There is no guaranty, however, that
this challenge will be successful. Although the Company does not believe that
the proposed OSHA regulation would have a material adverse effect on the cigar
industry or the Company, there are no assurances that such regulation would not
adversely impact the Company, particularly the "club" sections of the Company's
emporiums.
EMPLOYEES
The Company has six full-time employees and three part-time employees, none
of which are parties to a collective bargaining agreement. The Company believes
its relationship with its employees is good.
18
<PAGE> 21
FACILITIES
The Company maintains its corporate offices at its emporium located in
Weston, Florida pursuant to a lease covering 2,000P square feet which expires in
2001. This lease is subject to two five year renewal options. The present annual
rent exclusive of taxes, insurance and common area charges, is approximately
$54,000. The Company's Ft. Lauderdale emporium consists of approximately
1780 + square feet and is subject to a lease expiring in 2004, with a five year
renewal option. The annual rent, including pass-throughs, is approximately
$91,000. The Company intends to establish additional retail stores through lease
arrangements. The Company believes that additional space will be available at
commercially reasonable rents. The Company's facilities, at this time, are
adequate; however, expansion of the Company's business may require additional
administrative offices.
LITIGATION
The Company is not involved in any litigation.
19
<PAGE> 22
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The present members of the Board of Directors, all executive officers,
their ages and positions with the Company are set forth below:
<TABLE>
<CAPTION>
NAMES AGE POSITION
- ----- --- --------
<S> <C> <C>
Stephen Schatzman................................ 45 President, Secretary and Director
Alex Gimelstein.................................. 45 Vice President, Treasurer and
Director
</TABLE>
Stephen Schatzman has been President, Secretary and Director of the Company
since inception. From 1972 to 1990, he was the General Manager of Superior
Stores, a six-store chain of 30,000 square foot, high volume discount drug
stores. From 1990 to 1996, he was President of Villa Deli, a 160-seat restaurant
on Miami Beach. Mr. Schatzman devotes his full time to the Company. He is
responsible for purchasing for all locations, inventory, warehousing, and
developing and implementing merchandising and other Company policies, and for
all day to day operations.
Alex Gimelstein has been Vice President, Treasurer and Director of the
Company since inception. He is also Vice President of Zelick's Tobacco Corp. on
Miami Beach for over 25 years. Zelick's is a retail and wholesale tobacco and
sundries operation owned by Mr. Gimelstein's family. Mr. Gimelstein has also had
extensive experience in the tobacco industry, having owned and operated several
cigar factories in foreign countries. Mr. Gimelstein devotes approximately half
of his working time to the Company. He is responsible for the procurement of
cigars, the development of a distribution network and the Company's relationship
with Tabanica.
The officers of the Company are elected by the Board of Directors to serve
until their successors are elected and qualified. The directors of the Company
are elected at the annual meeting of the stockholders. The By-laws provide for a
Board of Directors to be comprised of between two and seven persons.
The Company's Certificate of Incorporation and Bylaws provide for the
indemnification of, and advancement of expenses to, directors and officers of
the Company. The Company has also entered into agreements to provide
indemnification for its directors and executive officers.
In May 1997, the Company entered into employment agreements with Stephen
Schatzman, the President and Secretary of the Company and Alex Gimelstein, the
Vice President and Treasurer of the Company. The terms of the two employment
agreements, except for the position held with the Company, are identical. The
agreements, which expire on December 31, 2001, provide for initial annual base
salaries of $80,000 with additional increases, bonuses and compensation to be
decided by the Board of Directors. The employment agreements also provide that,
upon mutual agreement between the Company and the employee, all or any part of
the salary due the employee may be deferred for an indefinite period of the time
and/or paid in shares of the Common Stock of the Company.
DIRECTOR COMPENSATION
The Company does not provide additional compensation for employee
directors. In the event non-employees are appointed as directors, compensation
may be paid on an annual or per meeting basis to be determined.
In addition, all directors will receive on an annual basis mandatory stock
option grants under the Stock Option Plan for serving on the Board. Five-year
options to purchase 5,000 shares of Common Stock will be automatically granted
to each director on December 31 of each year, starting December 31, 1998, at an
option exercise price equal to the closing bid or sales price of the Common
Stock on such date. Additionally, directors appointed to the Board in the future
will be granted option to purchase 10,000 shares of Common Stock at an option
exercise price equal to the closing bid or sales price of the Common Stock on
the date of their appointment to the Board.
20
<PAGE> 23
STOCK OPTION PLAN
On November 7, 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan"). This Plan provides for the grant of Incentive Stock Options and
Non-qualified Stock Options to employees selected by the Board of Directors or
Compensation Committee. The Plan also sets forth applicable rules and
regulations for Stock Options granted to non-employee directors. To date 135,000
options have been granted to Mr. Schatzman and 135,000 options have been granted
to Mr. Gimelstein at the market price on the date of grant. The Plan is subject
to stockholder approval and will be submitted to the stockholders at the
Company's annual meeting in 1998.
PRINCIPAL STOCKHOLDERS
The following table sets forth information relating to the beneficial
ownership of Company Common Stock as of October 15, 1997 by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock (ii) each of the Company's directors, and
(iii) all of the Company's directors and executive officers as a group. The
"Percentage After Offering" assumes the conversion of all the outstanding shares
of Preferred Stock into Common Stock at the rate of $ per share.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME COMMON STOCK BEFORE OFFERING(1) AFTER OFFERING(1)
- ---- ------------ ------------------ -----------------
<S> <C> <C> <C>
Stephen Schatzman........................... 2,700,500(2) % %
2101 N.E. 212th Street
Miami, Florida 33179
Alex Gimelstein............................. 2,700,500(3) % %
21160 N.E. 22nd Court
Miami, Florida 33179
All Directors and Executive Officers as a
Group (2 persons)......................... 5,401,000 % %
</TABLE>
- ---------------
(1) Based on the conversion of the Preferred Stock at $ per share.
(2) Includes 200,000 shares of Common Stock held by Mr. Schatzman as custodian
for his minor children, as to which shares he disclaims any beneficial
interest.
(3) Includes 100,000 shares of Common Stock held by Mr. Gimelstein's adult son
and 150,000 shares of Common Stock held by Mr. Gimelstein as custodian for
his three minor children, as to all of which shares Mr. Gimelstein disclaims
any beneficial interest.
21
<PAGE> 24
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, no par value per share, of which 9,159,460
shares were outstanding as of October 15, 1997. Holders of shares of Common
Stock are entitled to one vote for each share on all matters to be voted on by
the stockholders. Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably in dividends, if
any, as may be declared, from time to time by the Board of Directors in its
discretion, from funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of shares of
Common Stock are entitled to share pro rata in all assets remaining after
payment in full of all liabilities. Holders of Common Stock have no preemptive
rights to purchase the Company's Common Stock. All of the outstanding shares of
Common Stock are, and the shares of Common Stock will be, when issued and
delivered upon conversion of the Preferred Stock, fully paid and non-assessable.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of 5,000,000
shares of preferred stock, of which 2,100 shares of Series A Convertible
Preferred Stock are outstanding. The Series A Preferred Stock is convertible, at
the option of the holder, into that number of shares of common stock equal to
$1,000 divided by the lower of (i) Seventy Percent (70%) of the average Market
Price of the Common Stock for the five trading days immediately prior to the
Conversion Date or (ii) $1.46, increased proportionally for any reverse stock
split and decreased proportionally for any forward stock split or stock
dividend. Market Price shall be the closing bid price of the Common Stock on
such date, as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or the closing bid price in the
over-the-counter market, if other than Nasdaq. The Series A Preferred Stock is
mandatorily convertible into Common Stock beginning August 14, 1998, provided
that the Company is a reporting issuer under the Exchange Act and is then
current in its filings. The holders of Series A Preferred Stock have no voting
rights, the shares are redeemable at a price of $1,350 per share upon notice of
conversion, and have a liquidation preference of $1,350 per share.
The Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the remaining authorized but
unissued preferred stock in one or more series and to determine the voting
rights, preferences as to dividends and liquidation, conversion rights, and
other rights of such series.
The Company considers it desirable to have preferred stock available to
provide increased flexibility in structuring possible future acquisitions and
financings and in meeting corporate needs which may arise. If opportunities
arise that would make desirable the issuance of preferred stock through either
public offering or private placements, the provisions for preferred stock in the
Company's Articles of Incorporation would avoid the possible delay and expense
of a shareholder's meeting, except as may be required by law or regulatory
authorities. Issuance of the preferred stock could result, however, in a series
of securities outstanding that will have certain preferences with respect to
dividends and liquidation over the Common Stock which would result in dilution
of the income per share and net book value of the Common Stock. Issuance of
additional Common Stock pursuant to any conversion right which may be attached
to the terms of any series of preferred stock may also result in dilution of the
net income per share and the net book value of the Common Stock. The specific
terms of any series of preferred stock will depend primarily on market
conditions, terms of a proposed acquisition or financing, and other factors
existing at the time of issuance. Therefore, it is not possible at this time to
determine in what respect a particular series of preferred stock will be
superior to the Company's Common Stock or any other series of preferred stock
which the Company may issue. The Board of Directors may issue additional
preferred stock in future financings.
The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company.
22
<PAGE> 25
TRANSFER AGENT
The Company's transfer agent is Liberty Transfer Co., 191 New York Avenue,
Huntington, N.Y., 11743-2711, telephone number (516) 385-1616.
SELLING SECURITY HOLDERS
The shares of Common Stock of the Company offered by this Prospectus are
being sold for the account of the selling security holders identified in the
following table (the "Selling Security Holders").
The Selling Security Holders are offering for sale an aggregate of
shares of Common Stock issuable upon conversion of the Preferred Stock.
The following table sets forth the number of Shares being held of record or
beneficially (to the extent known by the Company) by such Selling Security
Holders and provides (by footnote reference) any material relationship between
the Company and such Selling Security Holder, all of which is based upon
information currently available to the Company.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES OF NUMBER OF
SHARES OF PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
COMMON STOCK BEFORE TO BE SOLD IN COMMON STOCK AFTER
NAME BEFORE OFFERING(1) OFFERING OFFERING(1) AFTER OFFERING(1) OFFERING
- ---- ------------------ ---------- ------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Balmore Funds, S.A.(3)......... 200,000 --
Austos Anstalt Schaar(4)....... 200,000 --
Dora Fried..................... --
Lampton, Inc. ................. --
</TABLE>
- ---------------
(1) Includes shares issued upon conversion of the Preferred Stock, based upon
the conversion price of $ .
(2) Includes options for 400,000 shares presently issued and outstanding.
(3) Shares subject to outstanding options.
(4) Shares subject to outstanding options.
PLAN OF DISTRIBUTION
CONVERSION OF PREFERRED STOCK
The Company is offering shares of Common Stock issuable upon conversion of
shares of Preferred Stock that were previously issued to the holders thereof.
The Preferred Stock is exercisable by tendering to the Company the
Preferred Stock Certificates with the "Notice of Conversion" section properly
filled out. Upon receipt, the Company will issue such fully paid and
non-assessable shares of Common Stock as are required pursuant to the conversion
formula. The Preferred Stock is subject to redemption by the Company. See
"DESCRIPTION OF SECURITIES."
SELLING SECURITY HOLDERS
The Selling Security Holders are offering shares of Common Stock for their
own account and not for the account of the Company. The Company will not receive
any proceeds from the sale of the shares of Common Stock by the Selling Security
Holders.
Each Selling Security Holder will, prior to any sales, agree (a) not to
effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Regulation M under the
Exchange Act.
23
<PAGE> 26
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Security Holders acting as principals for their
own accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person engaged
in a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rule 15c2-6, and Regulation M, which
provisions may limit the timing of purchases and sales of Common Stock by the
Selling Security Holder. There are possible limitations upon trading activities
and restrictions upon broker-dealers effecting transactions in certain
securities which may also materially affect the value of, and an investor's
ability to dispose of, the Company's securities. See "RISK FACTORS."
The Company will use its best efforts to file, during any period in which
offers or sales are being made, one or more post-effective amendments to the
Registration Statement, of which this Prospectus is a part, to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shapo, Freedman & Bloom, P.A., 200 South Biscayne Blvd., Suite 4750,
Miami, Florida 33131.
EXPERTS
The financial statements of the Company for the fiscal year ended June 30,
1996 and 1997 included in this Prospectus have been audited by Millward & Co.,
P.A., certified public accountants, and are included herein in reliance upon the
authority of said firm as experts on accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, a
Registration Statement on Form SB-2 with respect to the Common Stock being
registered hereby. This Prospectus does not contain all the information
contained in such Registration Statement, as permitted by the Rules and
Regulations of the Securities and Exchange Commission. The Registration
Statement, including exhibits thereto, may be inspected without charge and
copies of all or any part thereof may be obtained from the Commission's
principal office in Washington, D.C. at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 75 Park
Place, 14th Floor, New York, New York 10007 and at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained upon written request addressed to the Commission,
Public Reference Section 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. For further information with respect to the Company, the
Common Stock being registered hereby and the contents of any contract or
document referred to herein, reference is made to the Registration Statement and
the exhibits filed as a part thereof.
24
<PAGE> 27
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Changes in Shareholders'
Equity................................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 28
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
The Havana Republic, Inc. and Subsidiaries
Weston, Florida
We have audited the accompanying consolidated balance sheet of The Havana
Republic, Inc. (a Colorado corporation) and Subsidiaries as of June 30, 1997 and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the period from inception (March 10, 1996) to June
30, 1996 and for the year ended June 30, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the 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
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Havana Republic, Inc. and Subsidiaries as of June 30, 1997, and the
consolidated results of their operations and their cash flows for the period
from inception (March 10, 1996) to June 30, 1996 and for the year ended June 30,
1997, in conformity with generally accepted accounting principles.
Millward & Co. CPAs
Fort Lauderdale, Florida
August 8, 1997 (October 18, 1997 as to Note 9)
F-2
<PAGE> 29
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1997
---------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents................................. $ 219,294 1,174,253
Accounts Receivable....................................... 1,668 1,668
Inventory................................................. 477,854 665,598
Prepaid Expenses.......................................... -- 10,000
Deposits on Inventory Purchases........................... 300,000 450,000
---------- ----------
Total Current Assets.............................. 998,816 2,301,519
---------- ----------
PROPERTY AND EQUIPMENT, at Cost
(Net of Accumulated Depreciation and Amortization of
$13,907 and $23,907 at June 30, 1997 and September 30,
1997, respectively).................................... 204,811 277,453
---------- ----------
OTHER ASSETS:
Intangible Assets (Net of Accumulated Amortization of
$1,598 and $2,131 at June 30, 1997 and September 30,
1997, respectively).................................... 10,058 9,525
Deposits.................................................. 25,253 5,253
Deposits on Inventory Purchases........................... 141,700 166,700
Investment in 50% Owned Factory........................... 50,000 50,000
---------- ----------
Total Other Assets................................ 227,011 231,478
---------- ----------
Total Assets...................................... $1,430,638 $2,810,450
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable.......................................... $ 97,797 $ 98,269
Accrued Expenses.......................................... 41,441 48,120
Due to Related Party...................................... 750 --
Deferred Membership Revenue............................... 19,142 14,356
Note Payable.............................................. 400,000 200,000
---------- ----------
Total Current Liabilities......................... 559,130 360,745
---------- ----------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, No Par Value, Authorized 50,000,000 Shares;
Issued and Outstanding 9,121,000 and 9,159,460 Shares
at June 30, 1997 and September 30, 1997,
respectively).......................................... 1,098,070 1,148,070
Preferred Stock, No Par Value, Non-Voting, Authorized
5,000,000 Shares; Convertible Preferred Stock -- Series
A, Authorized 2,500 Shares:
Issued and Outstanding 1,800 Shares at September 30,
1997 (Aggregate Liquidation Preference of $2,430,000
at September 30, 1997)................................ -- 2,213,450
Accumulated Deficit....................................... (226,562) (911,815)
---------- ----------
Total Shareholders' Equity........................ 871,508 2,449,705
---------- ----------
Total Liabilities and Shareholders' Equity........ $1,430,638 $2,810,450
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 30
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM FOR THE THREE FOR THE THREE
FOR THE INCEPTION MONTHS ENDED MONTHS ENDED
YEAR ENDED (MARCH 10, 1996) SEPTEMBER 30, SEPTEMBER 30,
JUNE 30, 1997 TO JUNE 30, 1996 1997 1996
------------- ---------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES
Retail Sales........................... $ 345,330 $ -- $ 157,604 $ --
Memberships............................ 11,808 -- 4,786 --
---------- ---------- ---------- ----------
Net Sales...................... 357,138 162,390 --
COST OF SALES............................ 164,667 -- 72,561 --
---------- ---------- ---------- ----------
GROSS PROFIT............................. 192,471 -- 89,829 --
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Store Expenses......................... 187,559 -- 59,681 --
General and Administrative............. 108,061 500 81,978 14,747
Depreciation and Amortization.......... 15,505 -- 10,533 --
Professional Fees...................... 100,492 -- 16,756 10,301
---------- ---------- ---------- ----------
Total Operating Expenses....... 411,617 500 168,948 25,048
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS..................... (219,146) (500) (79,119) (25,048)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest Income........................ 9,467 -- 3,866 3,014
Interest Expense....................... (16,383) -- (10,000) (9,161)
---------- ---------- ---------- ----------
(6,916) -- (6,134) (6,147)
---------- ---------- ---------- ----------
LOSS BEFORE PROVISION FOR INCOME TAXES... (226,062) (500) (85,253) (31,195)
PROVISION FOR INCOME TAXES............... -- -- -- --
---------- ---------- ---------- ----------
NET LOSS................................. $ (226,062) $ (500) $ (85,253) $ (31,195)
========== ========== ========== ==========
NET LOSS PER COMMON SHARE................ $ (0.03) $ -- $ (0.07) $ --
========== ========== ========== ==========
NUMBER OF WEIGHTED COMMON SHARES
OUTSTANDING............................ 8,835,586 2,968,554 9,139,812 8,333,783
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 31
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------- ----------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
------ ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- March 10, 1996
(Date of inception)........ -- $ -- -- $ -- -- $ --
Shares issued in connection
with initial
capitalization............. -- -- 5,500,000 1,000 -- 1,000
Shares issued in connection
with offering.............. -- -- 1,574,000 -- -- --
Net loss for the period from
inception (March 10, 1996)
to June 30, 1996........... -- -- -- -- (500) (500)
------ ---------- ---------- ---------- --------- ----------
BALANCE -- June 30, 1996..... -- -- 7,074,000 1,000 (500) 500
Shares issued in connection
with offering.............. -- -- 1,900,000 950,000 -- 950,000
Issuance of common stock for
services................... -- -- 147,000 147,000 -- 147,070
Net loss for the year ended
June 30, 1997.............. -- -- -- -- (226,062) (226,062)
------ ---------- ---------- ---------- --------- ----------
BALANCE -- June 30, 1997..... -- -- 9,121,000 1,098,070 (226,562) 871,508
Issuance of preferred stock
series A................... 1,800 1,613,450 -- -- -- 1,613,450
Shares issued in connection
with offering.............. -- -- 38,460 50,000 -- 50,000
Recognition of preferred
stock dividend on
beneficial conversion...... 600,000 (600,000) --
Net loss for the three months
ended September 30, 1997... -- -- -- -- (85,253) (85,253)
------ ---------- ---------- ---------- --------- ----------
BALANCE -- September 30, 1997
(Unaudited)................ 1,800 $2,213,450 9,159,460 $1,148,070 $(911,815) $2,449,705
====== ========== ========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 32
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM FOR THE THREE FOR THE THREE
YEAR ENDED INCEPTION MONTHS ENDED MONTHS ENDED
JUNE 30, (MARCH 10, 1996) SEPTEMBER 30, SEPTEMBER 30,
1997 TO JUNE 30, 1996 1997 1996
---------- ---------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss..................................... $ (226,062) $ (500) $ (85,253) $ (31,195)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization.............. 15,505 -- 10,533 --
Common Stock Issued in Exchange for
Services................................. 10,000 -- -- --
(Increase) Decrease in:
Accounts Receivable...................... (1,668) -- -- --
Inventory................................ (477,854) -- (187,744) (54,067)
Prepaid Expenses......................... -- -- (10,000) --
Deposits on Inventory Purchases.......... (441,700) -- (175,000) --
Deposits................................. (25,253) -- 20,000 (20,000)
Increase (Decrease) in:
Accounts Payable......................... 97,797 -- 472 --
Accrued Expenses......................... 41,441 -- 6,679 4,904
Deferred Membership Revenue.............. 19,142 -- (4,786) --
Due to Related Party..................... 750 -- (750) --
---------- -------- ---------- ---------
Net Cash (Used in) Provided by Operating
Activities................................... (987,902) (500) (425,849) (100,358)
---------- -------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment........ (81,648) -- (82,642) (20,335)
Increase in Intangible Assets................ (11,656) -- -- (7,681)
Investment in 50% Owned Factory.............. (50,000) -- -- --
---------- -------- ---------- ---------
Net Cash Used in Investing Activities.......... (143,304) -- (82,642) (28,016)
---------- -------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock....... 950,000 1,000 50,000 950,000
Proceeds from Issuance of Preferred Stock
Series A................................... -- -- 1,613,450 --
Repayment of Note Borrowings................. -- -- (200,000) (250,000)
Proceeds from Note Borrowings................ 150,000 250,000 -- --
---------- -------- ---------- ---------
Net Cash Provided by Financing Activities...... 1,100,000 251,000 1,463,450 700,000
---------- -------- ---------- ---------
Net (Decrease) Increase in Cash................ (31,206) 250,500 954,959 571,626
Cash and Cash Equivalents -- Beginning of
Period....................................... 250,500 -- 219,294 250,500
---------- -------- ---------- ---------
Cash and Cash Equivalents -- End of Period..... $ 219,294 $250,500 $1,174,253 $ 822,126
========== ======== ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash Paid During the Year for Interest..... $ 9,161 $ -- $ -- $ 9,161
========== ======== ========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Common Stock for Services........ $ 137,070 $ -- $ -- $ --
========== ======== ========== =========
Recognition of Preferred Stock Dividend on
Beneficial Conversion...................... $ -- $ -- $ 600,000 $ --
========== ======== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 33
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, CAPITALIZATION AND REVERSE ACQUISITION
The Havana Republic, Inc. (Colorado) (The "Colorado Company") was organized
under the laws of the State of Colorado on May 31, 1996. The Colorado Company is
authorized to issue 50,000,000 shares of its no par common stock and 5,000,000
shares of its no par value preferred stock.
The Havana Republic, Inc. (Florida) (The "Florida Company") was organized
under the law of the State of Florida on March 10, 1996. The Florida Company's
articles of incorporation provide for the issuance of 1,000 shares of its no par
value common stock.
On June 17, 1996 all of the issued and outstanding stock of the Florida
Company was exchanged for 5,500,000 shares of common stock of the Colorado
Company. The Colorado Company and the Florida Company are hereinafter referred
to collectively as the Company. As a result of the exchange of stock, the former
stockholders of the Florida Company owned approximately 79% of the common stock
of the Company. Accordingly, this transaction has been treated, for financial
reporting purposes, as a reverse acquisition in which the Florida Company was
recapitalized by providing 5,500,000 shares of the Colorado Company to its
existing shareholders. The 1,574,000 shares held by the Colorado Company
shareholders before the acquisition were issued in June 1996 pursuant to an
offering in accordance with Rule 504 of Regulation D pursuant to Securities Act
of 1933.
BUSINESS
The Company is engaged in the business of owning and operating upscale
cigar emporiums devoted to the sale of premium cigars and cigar related
merchandise. In addition, the Company intends to engage as a distributor of
premium cigars.
INTERIM FINANCIAL STATEMENTS
Information in the accompanying consolidated financial statements and notes
to the consolidated financial statements for the interim period as of September
30, 1997 and for the three month period ended September 30, 1997 and 1996, is
unaudited. The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and
Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended September 30,
1997 and 1996 are not necessarily indicative of the results that may be expected
for the years ending June 30, 1998 and 1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of The Havana
Republic, Inc. and its wholly owned Subsidiaries. All significant intercompany
transactions and balances have been eliminated from these consolidated financial
statements.
FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the consolidated balance sheet for cash and
cash equivalents, note payable, accounts payable and accrued liabilities
approximates fair market value due to the immediate or short-term maturity of
these financial instruments.
F-7
<PAGE> 34
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates and assumptions.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk, consists principally of cash and cash equivalents.
The Company places its cash in money market funds with high credit quality
institutions. As of June 30, 1997, the Company had $196,815 in one financial
institution with the excess over $100,000 not covered by FDIC insurance and
which, therefore, did not limit the Company's amount of credit risk. The Company
has not experienced any losses in such account and believes that it is not
exposed to any significant credit risk on the account.
INVENTORY
Inventory consisting principally of cigars and accessories, is valued at
the lower of cost (first-in, first-out) or market.
DEPOSITS ON INVENTORY PURCHASES
Deposits on inventory purchases consists of payments to the Company's 50%
owned affiliate to secure the purchase of cigar inventory. Shipments are
scheduled to commence January 1998 at a rate of approximately $50,000 worth of
cigars per month. All transactions are in U.S. dollars.
INTANGIBLE ASSETS
Intangible assets, which consist of organization and trademark costs, are
amortized over a 5 to 15 year period, respectively. Amortization expense for the
period ended June 30, 1997 and 1996 amounted to $1,598 and $0, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the respective assets using the straight-line
method for financial reporting purposes and the accelerated method for income
tax purposes. Maintenance, repairs, and minor renewals are charged to expense as
incurred while expenditures that materially increase values, change capacities,
or extend useful lives are capitalized. Upon sale or retirement of property and
equipment, the cost and the related accumulated depreciation are eliminated from
the respective accounts and the resulting gain or loss is included in
operations.
INCOME TAXES
Income taxes are accounted for under the asset and liability method of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities or a change in tax rate is recognized
F-8
<PAGE> 35
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in income in the period that includes the enactment date. Deferred tax assets
are reduced to estimated amounts to be realized by use of a valuation allowance.
The principal types of temporary differences between assets and liabilities
for financial statement and tax return purposes are net operating loss
carryforwards.
CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
LOSS PER COMMON SHARE
Primary loss per common share is calculated by dividing net loss by the
weighted average number of common shares outstanding during each period
presented. For the three months ended September 30, 1997, net loss has been
adjusted for dividends on the convertible preferred stock (see note 14). Fully
diluted loss per common share is not presented because they are anti-dilutive.
The Company does not have any common stock equivalents.
REVENUE RECOGNITION
Revenues from product sales are recognized when the customer purchases the
product. The Company also sells three types of annual smoking club memberships
ranging in price from $250 to $1,000. Revenue from membership is recognized over
a 12-month period from purchase date. The Company has deferred membership
revenue amounting to $19,142 and $14,356 as of June 30, 1997 and September 30,
1997, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued Statement No. 128 "Earnings Per Share"
("SFAS 128"). FAS 128 is effective for financial statements for periods ending
after December 31, 1997 and early adoption is not permitted. This statement
establishes standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential common stock.
The adoption of FAS 128 is not expected to have a material impact on the
Company's financial statements.
In February 1997, the FASB issued Statement No. 129, "Disclosure of
Information About Capital Structure" ("FAS 129"). Since the Company has only one
class of shares, which is adequately disclosed on the face of the balance sheet,
the adoption of FAS 129 will have no impact on the Company's financial
statements.
In June 1997, the FASB issued Statement of Financial Accounting Standard
No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 is effective for
financial statements of periods beginning subsequent to December 15, 1997, but
early adoption is permitted. The Company presents adequately all components of
comprehensive income in the statement of shareholders' equity.
In June 1997, FASB issued Statement of Financial Accounting Standard No.
131, "Disclosure About Segments of an Enterprise and Related Information" ("FAS
131"). The statement establishes standards for the way that public business
enterprises report selected information about reportable operating segments,
products and services, geographic areas and major customers, for which discrete
financial information is available, in annual and interim financial statements.
This statement shall be effective for fiscal years beginning after December 15,
1997.
F-9
<PAGE> 36
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- RELATED PARTY
A related party sold cigars to the Company aggregating $750 for which the
related party was not reimbursed during the period.
NOTE 3 -- NOTES PAYABLE
The Company entered into a financing agreement with a third party. This
agreement consists of two term loans with principal balances of $200,000 and
$200,000, respectively at June 30, 1997. Interest shall accrue at a rate equal
to ten percent (10%) simple interest per annum. The total unpaid balance of
principal and accrued interest shall be due and payable on April 1, 1998 and May
20, 1998, respectively. In August 1997, the Company repaid $200,000.
NOTE 4 -- INVESTMENT IN 50% OWNED FACTORY
The Company invested $50,000 in January 1997 for a 50% interest in a
company owning a factory located in Jalapa, Nicaragua. The investment is being
carried at cost, which based on the limited information available, the Company
believes that the financial statements would not be materially different than if
carried on the equity method.
NOTE 5 -- PROPERTY AND EQUIPMENT
The major classifications of property and equipment at June 30, 1997 and
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1997
-------- -------------
(UNAUDITED)
<S> <C> <C>
Computers................................................... $ 11,287 $ 11,287
Furniture and fixtures...................................... 53,194 60,186
Office equipment............................................ 2,120 2,120
Leasehold improvements...................................... 152,117 227,767
-------- --------
218,718 301,360
Accumulated depreciation.................................... (13,907) (23,907)
-------- --------
$204,811 $277,453
======== ========
</TABLE>
Depreciation expense amounted to $13,907, $0, $10,000 and $0 for the period
ended June 30, 1997 and 1996 and for the three months ended September 30, 1997
and 1996, respectively.
NOTE 6 -- INVENTORY
The major classes of inventory at June 30, 1997 and September 30, 1997 are
as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1997
-------- -------------
(UNAUDITED)
<S> <C> <C>
Cigars...................................................... $305,840 $372,589
Accessories................................................. 172,014 293,009
-------- --------
$477,854 $665,598
======== ========
</TABLE>
F-10
<PAGE> 37
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INCOME TAXES
To date, the Company has incurred tax operating losses and therefore, has
generated no income tax liabilities. As of June 30, 1997 and September 30, 1997,
the Company has generated net operating loss carryforwards totaling $226,562 and
$312,000, respectively, which are available to offset future taxable income, if
any, through 2011. As utilization of such an operating loss for tax purposes is
not assured, the deferred tax asset has been fully reserved through the
recording of a 100% valuation allowance.
As of June 30, 1997 and September 30, 1997, the components of the net
deferred tax asset are as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1997
-------- -------------
(UNAUDITED)
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforward........................... $ 86,094 $ 118,500
Valuation allowance......................................... (86,094) (118,500)
-------- ---------
Net deferred tax............................................ $ -- $ --
======== =========
</TABLE>
NOTE 8 -- COMMITMENTS
OPERATING LEASES
The Company has operating leases for store facilities expiring through 2002
to 2004. The lease agreements require the Company to pay real estate taxes,
maintenance and other operating expenses associated with the space leased. The
store leases also provide for additional contingent rentals based upon a
percentage of sales in excess of certain minimum amounts, as well as increases
in the consumer price index. Total rent expense for the year ended June 30, 1997
and for the period March 10, 1996 (date of inception) to June 30, 1996 amounted
to $18,564 and $0, respectively.
Future minimum rental commitments as of June 30, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 87,816
1999........................................................ 112,628
2000........................................................ 113,627
2001........................................................ 114,625
2002........................................................ 104,391
Thereafter.................................................. 166,693
--------
$699,780
========
</TABLE>
EMPLOYMENT AGREEMENTS
In May 1997, the Company entered into employment agreements with officers
of the Company. The terms of the two employment, which expire on December 31,
2001, provide for initial annual base salary of $80,000 with additional
increases, bonuses and compensation to be decided by the Board of Directors.
NOTE 9 -- STOCKHOLDERS' EQUITY
STOCK ISSUANCE
In August 1996, the Company sold 1,900,000 shares at $.50 per share
pursuant to an offering in accordance with Rule 504 of Regulation D pursuant to
Securities Act of 1933.
F-11
<PAGE> 38
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, the Company issued 137,070 shares valued at a fair market
value of $1 per share for construction services rendered in connection with the
construction of leased premises housing the Company's Weston, Florida store and
had a related charge to property and equipment.
In May 1997, the Company issued 10,000 shares valued at a fair market value
of $1 per share to employees of the Company in consideration for services
rendered to the Company and had a related charge to operations.
See Note 1 for initial stock issuances.
In August 1997, the Company sold 38,460 shares at $1.30 per share pursuant
to an offering in accordance with Rule 504 of Regulation D pursuant to
Securities Act of 1933.
PREFERRED STOCK
The Company's articles of incorporation authorize the issuance of 5,000,000
shares of preferred stock. The Company's Board of Directors has authority,
without action by the shareholders, to issue all or any portion of the
authorized but unissued preferred stock in one or more series and to determine
the voting rights, preferences as to dividends and liquidation, conversion
rights, and other rights of such series.
On August 1, 1997, the Board of Directors of the Company created a series
of preferred stock consisting of 2,500 shares and designated it as the Series A
Convertible Preferred Stock -- no par value. The Series A Preferred Stock is
convertible, at the holders option, into that number of shares of common stock
equal to $1,000 divided by the lower of (i) seventy percent (70%) of the average
market price of the common stock for the five trading days immediately prior to
the conversion date or (ii) $1.46, increased proportionally for any reverse
stock splits and decreased proportionally for any forward stock split or stock
dividend. The holders of Series A Preferred Stock have no voting rights, the
shares are redeemable at a price of $1,350 per share upon notice of conversion,
and have a liquidation preference of $1,350 per share. As of September 30, 1997,
the Company has issued 1,800 shares of the Series A Convertible Preferred Stock
for a net amount of $1,613,450. Subsequent to September 30, 1997, the Company
issued 300 additional shares of the Series A Convertible Preferred Stock for an
aggregate amount of $300,000. For the three months ended September 30, 1997, the
Company recognized a preferred stock dividend amounting to $600,000 calculated
as the difference between the conversion price ($1.46 per share) and the fair
value of the common stock into which the shares are convertible, multiplied by
the number of common shares into which the preferred stock is convertible.
Certain holders of the Series A Convertible Preferred Stock were issued (i) an
option to purchase an aggregate of 200,000 shares of common stock for two years
at an exercise price of $1.92 per common share and (ii) an option to purchase an
aggregate of 200,000 shares of common stock for two years an exercise price of
$2.88 per common share.
F-12
<PAGE> 39
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 3
The Offering.......................... 3
Selected Financial Information........ 5
Risk Factors.......................... 6
Dilution.............................. 10
Use of Proceeds....................... 11
Market Price of the Common Stock...... 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 13
Management............................ 20
Principal Stockholders................ 21
Description of Securities............. 22
Selling Security Holders.............. 23
Plan of Distribution.................. 23
Legal Matters......................... 24
Experts............................... 24
Additional Information................ 24
Financial Statements.................. F-1
</TABLE>
---------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
======================================================
======================================================
SHARES OF COMMON STOCK
OFFERED BY THE COMPANY
PURSUANT TO OUTSTANDING SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK.
---------------------
SHARES OF COMMON STOCK
OFFERED BY CERTAIN
SELLING SECURITY HOLDERS UPON
CONVERSION OF OUTSTANDING SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
---------------------
THE HAVANA
REPUBLIC, INC.
---------------------------
PROSPECTUS
---------------------------
, 1997
======================================================
<PAGE> 40
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Pursuant to Section 607.0850 of the Florida Business Corporations Act, the
Company has the power to indemnify directors, officers, employees or agents. The
Company's Articles of Incorporation and Bylaws provide for indemnification of
officers and directors. In addition, the Company's officers and directors have
entered into agreements which also indemnify them from certain acts and
omissions.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 1,980
Printing Expenses........................................... 15,000
Accounting Fees and Expenses................................ 10,000
Legal Fees and Expenses..................................... 25,000
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees and Expenses.............. 5,000
Miscellaneous............................................... 10,000
-------
Total....................................................... $71,980
</TABLE>
- ---------------
All amounts, except the SEC registration fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following table sets forth the Company's sales of unregistered
securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK DATE SOLD PURCHASER CONSIDERATION
- ------------------- --------- --------- -------------
<C> <C> <S> <C>
2,700,500 3/10/96 Gimelstein, Alex(1) $ 491.00
2,700,500 3/10/96 Schatzman, Stephen(1) 491.00
99,000 3/10/96 LaTorre, Roseanna(1) 18.00
60,000 6/10/96 Borer, Debora J.(3) 30.00
55,000 6/10/96 Burch, Clark(3) 27.50
65,000 6/10/96 Clark, Gary(3) 32.50
65,000 6/10/96 Conley, Walter(3) 32.50
50,000 6/10/96 Crumm, Michael(3) 25.00
64,000 6/10/96 EDR Financial, Inc.(3) 32.00
100,000 6/10/96 EDR Financial, Inc.(3) exchange of
300,000
shares of
Preferred
Stock
65,000 6/10/96 Hawkins, Edward H.(3) 32.50
60,000 6/10/96 Hawkins, Edward H. As Trustee for Jeffrey Dean(3) 30.00
60,000 6/10/96 Hawkins, Edward H. As Trustee for Cody Hawkins(3) 30.00
60,000 6/10/96 Hawkins, Edward H. Trustee for Molly Hawkins(3) 30.00
55,000 6/10/96 Lawrence, Susan(3) 27.50
55,000 6/10/96 Reitsema, David R.(3) 27.50
60,000 6/10/96 Reitsema, David R. As Trustee For Joshua Reitsema(3) 30.00
55,000 6/10/96 Reitsema, James D.(3) 27.50
60,000 6/10/96 Reitsema, Jeremy(3) 30.00
60,000 6/10/96 Reitsema, Matthew(3) 30.00
</TABLE>
II-1
<PAGE> 41
<TABLE>
<C> <C> <S> <C>
65,000 6/10/96 Rennekamp, Daniel T.(3) $ 32.50
65,000 6/10/96 Sicola, Michael V.(3) 32.50
50,000 6/10/96 Sliva, Linda(3) 25.00
55,000 6/10/96 Spykstra, Carol(3) 27.50
60,000 6/10/96 Swickard, Don L.(3) 30.00
60,000 6/10/96 Swickard, Sharon(3) 30.00
65,000 6/10/96 Tudor Trading Limited(3) 32.50
55,000 6/10/96 Turner, Robert R.(3) 27.50
50,000 6/10/96 Vanderryst, Derek(3) 25.00
20,000 8/30/96 Aronoff, Len(3) 10,000.00
100,000 8/30/96 Azucar, Ltd.(3) 50,000.00
20,000 8/30/96 Baby Shoes, Inc.(3) 10,000.00
330,000 8/30/96 C.A. Oportunidad, S.A.(3) 165,000.00
100,000 8/30/96 Cile Investments Ltd.(3) 50,000.00
20,000 8/30/96 CJL Corp. Money Purchase Pension Plan(3) 10,000.00
20,000 8/30/96 Dog in a Manger Productions, Inc./G. Patrick Charuhas, 10,000.00
President(3)
40,000 8/30/96 Dowda, Jimmy Dean(3) 20,000.00
600,000 8/30/96 Fondo de Acquisiciones E Inversiones Internacionales(3) 300,000.00
200,000 8/30/96 King, Bryan(3) 100,000.00
100,000 8/30/96 Klarious Capital Ltd.(3) 50,000.00
40,000 8/30/96 Knox, Bruce R.(3) 20,000.00
40,000 8/30/96 Lenz, Frederick(3) 20,000.00
20,000 8/30/96 Pow Wow, Inc.(3) 10,000.00
250,000 8/30/96 Seidman, Barry(3) 125,000.00
137,070 5/01/97 RCC Associates(2) services
10,000 5/01/97 Employees(2) services
38,460 8/30/97 USH Endowment Ltd.(3) 50,000.00
36,000 11/13/97 Broad and Cassel(3) services
200,000 11/13/97 RCC Associates(3) services
400,000 11/13/97 RCC Associates(2) services
99,000 11/13/97 Daniel C. Marino, Jr.(2) services
44,025 11/20/97 Richard L. Jacobs(3) services
90,000 11/20/97 Skarco Press, Inc.(2) services
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
CLASS A CONVERTIBLE
PREFERRED STOCK
- -------------------
<C> <C> <S> <C>
700 8/14/97 Austost Anstalt Schaar(2) $700,000.00
800 8/14/97 Balmore Funds, S.A.(2) 800,000.00
300 8/25/97 Lampton, Inc.(2) 300,000.00
300 10/22/97 Fried, Dora(2) 300,000.00
</TABLE>
- ---------------
(1) Founder Shares
(2) Sold in reliance upon Section 4(2) of the Act
(3) Sold in reliance upon Rule 504/Regulation D
II-2
<PAGE> 42
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <C> <S>
2.1 -- Plan of Merger dated November 6, 1997
2.2 -- Articles of Merger
3.1 -- Amended and Restated Articles of Incorporation
3.2 -- By-Laws
4.1 -- Certificate of Designation/Class A Convertible Preferred
Stock
5.1 -- Opinion of Shapo, Freedman & Bloom, P.A. (to be provided by
amendment)
10.1 -- Employment Agreement with Stephen Schatzman
10.2 -- Employment Agreement with Alex Gimelstein
10.3 -- Lease/Weston
10.4 -- Lease/Fort Lauderdale
10.5 -- Amended and Restated Contract for Sale of Tobacco and Cigars
10.6 -- Stock Option Plan
10.8 -- Form of Indemnification Agreement with directors
23.1 -- Consent of Shapo, Freedman & Bloom, P.A. (included in 5.1)
23.2 -- Consent of Millward & Co., P.A., independent certified
public accountants, contained in Part II of the registration
statement.
</TABLE>
Subsidiaries -- Havana Republic W.H., Inc. (Florida)
Havana Republic Brickell Station, Inc. (Florida)
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation form the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in the
aggregate, the changes in the volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling person of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that in the opinion of the
Securities and
II-3
<PAGE> 43
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the undersigned of expenses incurred or paid by a director, officer or
controlling person of the undersigned in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
undersigned will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form SB-2 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Weston,
State of Florida, on the 20th day of November, 1997.
THE HAVANA REPUBLIC, INC.
By: /s/ STEPHEN SCHATZMAN
------------------------------------
Stephen Schatzman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEPHEN SCHATZMAN President and Chief November 20, 1997
- ----------------------------------------------------- Executive Officer,
Stephen Schatzman Director
/s/ ALEX GIMELSTEIN Vice President and Chief November 20, 1997
- ----------------------------------------------------- Financial Officer,
Alex Gimelstein Director
</TABLE>
II-5
<PAGE> 1
EXHIBIT 2.1
PLAN OF MERGER
This Plan of Merger between The Havana Republic, Inc. a Colorado
Corporation, (the "Disappearing Corporation") and The Havana Republic, Inc., a
Florida corporation, (the "Surviving Corporation") and collectively said
corporations hereinafter referred to as the "Constituent Corporation."
1. PLAN TO MERGE.
The Disappearing Corporation shall be merged into the
Surviving Corporation.
2. NAME OF MERGED CORPORATION.
The name of the Surviving Corporation shall be The Havana
Republic, Inc.
3. PLACE OF OFFICE OF SURVIVING CORPORATION.
The place in Florida where the principal office of the
Surviving Corporation is to be located is 1360 Weston road, Weston, FL 33324.
4. PURPOSES OF SURVIVING CORPORATION.
The purposes of the surviving corporation are to engage in any
lawful act or activity for which corporations may be formed in accordance with
the Florida Business Corporation Act.
5. AUTHORIZED SHARES OF SURVIVING CORPORATION.
The present number of shares which the Disappearing
Corporation is authorized to issue is 50,000,000 shares of no par value Common
Stock, of which 9,159,460 shares are now issued and outstanding and 2500 shares
of $1,000 par value Series A Convertible Preferred Stock of which 2,100 shares
are now issued and outstanding. The present number of shares which the Surviving
Corporation is authorized to issue is 1,000 shares of no par value Common Stock
of which 1,000
1
<PAGE> 2
shares are now issued and outstanding, all of which are owned by the
Disappearing Corporation. The total number of shares of capital stock which
Surviving Corporation is authorized to issue from and after the effective date
of the merger is 50,000,000 shares of Common Stock of no par value and 2,500
shares of $1,000 par value Series A Convertible Preferred Stock. The authorized
shares of Common Stock of the Surviving Corporation shall have the same rights
and privileges as the common stock of the Disappearing Corporation. The
authorized convertible preferred shares of the Surviving Corporation shall have
the same rights and privileges as the Series A Convertible Preferred Stock of
the Disappearing Corporation.
6. FIRST DIRECTORS AND OFFICERS.
The present directors and officers of the Surviving
Corporation shall continue as such until their successors are duly elected or
designated after the effective date of the merger.
7. NAME AND ADDRESS OF AGENT OF CORPORATION.
Leonard H. Bloom, Esq. at 1101 Brickell Avenue, Suite 1400, in
the City of Miami, Dade County, Florida 33131, shall be, and is hereby,
appointed as the person on whom process, tax notices, and demands against said
Surviving Corporation, or either of the said Constituent Corporations, may be
served.
8. PLAN OF MERGER.
The plan of carrying said merger into effect, and the manner
and basis of converting the shares of the Disappearing Corporation into shares
of the Surviving Corporation shall be as follows:
Each shareholder of the Disappearing Corporation shall
surrender his certificate or certificates to the Surviving Corporation or to its
transfer agent, on the date of filing of Articles of
2
<PAGE> 3
Merger which shall be the "Effective Date" or thereafter. Upon surrender to the
Surviving Corporation or its transfer agent of the respective certificates for
outstanding shares of the Disappearing Corporation, there shall be issued to the
respective holders thereof, in substitution therefor, certificates for fully
paid and nonassessable shares of the Surviving Corporation in the ratio of one
common share of the Surviving Corporation for each common share of the
Disappearing Corporation and one Series A Convertible Preferred Share of the
Disappearing Corporation for each Series A Convertible Preferred Share of the
Disappearing Corporation.
9. REPORTING OF ASSETS AT BOOK VALUE IN ACCOUNTS OF SURVIVING
CORPORATION; POOLING OF INTEREST.
The assets of the Disappearing Corporation shall be reported
in the accounts of the Surviving Corporation at their book value as of the
effective date. The aggregate stated capital, capital surplus, and earned
surplus of the Constituent Corporations shall be, respectively, the stated
capital, capital surplus, and earned surplus of the Surviving Corporation.
10. ARTICLES OF INCORPORATION.
The Articles of Incorporation of the Disappearing Corporation
shall become the Articles of Incorporation of the Surviving Corporation, until
amended as provided by law.
11. BYLAWS.
The Bylaws of the Disappearing Corporation shall become the
Bylaws of the Surviving Corporation.
12. EFFECTIVE DATE OF MERGER.
This Plan of Merger shall become effective on the Effective
Date.
3
<PAGE> 4
13. DIRECTORS' RIGHT TO ABANDON MERGER.
The Board of Directors of each of the Constituent Corporations
shall have the power in its discretion to abandon the merger provided for herein
prior to the filing of the Articles of Merger.
4
<PAGE> 1
EXHIBIT 2.2
ARTICLES OF MERGER
OF
THE HAVANA REPUBLIC, INC.
A COLORADO CORPORATION
INTO
THE HAVANA REPUBLIC, INC.
A FLORIDA CORPORATION
-------------------------
ARTICLE I
PARTIES. The Havana Republic, Inc., a Colorado corporation, (the
"Disappearing Corporation") and The Havana Republic, Inc. a Florida Corporation
(the "Surviving Corporation") are the parties to an Agreement of Merger whereby
The Disappearing Corporation will merge into The Surviving Corporation and the
shareholders of The Disappearing Corporation will receive shares of the
Surviving Corporation.
ARTICLE I
ADOPTION. A. The Agreement of Merger was adopted by all directors of the
Surviving Corporation on October 14, 1997. Shareholder's approval of the
Surviving Corporation was not required pursuant to F.S. ss. 607.1104.
B. The Agreement of Merger was adopted by all directors on
October 14, 1997 of the Disappearing Corporation and by a majority of the
shareholders of the Disappearing Corporation on November 6, 1997.
ARTICLE II
EFFECTIVE DATE. The merger will become effective on the date of filing of
these Articles of Merger with the Secretary of State of the State of Florida.
1
<PAGE> 2
ARTICLE III
PLAN OF MERGER. The Plan of Merger provides for an exchange of shares in
the corporations party to the merger effected in the following manner: All of
the shares of the Disappearing Corporation will be surrendered to the Surviving
Corporation and all shares so acquired shall be extinguished by virtue of the
merger. Thereupon, there shall be issued to the shareholders of the Disappearing
Corporation shares of the Surviving Corporation, one share of the Surviving
Corporation's Common Stock for each share of the Disappearing Corporation's
Common Stock and One Share of the Surviving Corporation's Preferred Stock for
each share of the Disappearing Corporation's Preferred Stock . The Plan of
Merger is attached as Exhibit "A" hereto.
ARTICLE IV
The Articles of Incorporation of the Surviving Corporation shall be
amended and restated in the manner as attached hereto as Exhibit "B". The
Designation of Series A Convertible Preferred Stock attached as Exhibit "C" is
hereby adopted as an amendment to the Articles of Incorporation.
DATED: this 6 day of November, 1997.
Attest: THE HAVANA REPUBLIC, INC.
a Colorado corporation
By:/s/ By: /s/
------------------------------ ----------------------------------
Secretary President
Attest: THE HAVANA REPUBLIC, INC.
a Florida corporation
By:/s/ By: /s/
------------------------------ ----------------------------------
Secretary President
2
<PAGE> 3
STATE OF FLORIDA )
)SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 6 day of
November, 1997, by Stephen Schatzman, as President and Secretary of THE HAVANA
REPUBLIC, INC. a Colorado corporation, on behalf of the Corporation.
/s/
---------------------------------
Notary Public, State of Florida at Large
My Commission Expires:
[SEAL]
STATE OF FLORIDA )
)SS:
COUNT OF DADE )
The foregoing instrument was acknowledged before me this 6 day of
November, 1997, by Stephen Schatzman, as President and Secretary of THE HAVANA
REPUBLIC, INC., a Florida corporation, on behalf of the Corporation.
/s/
--------------------------------------
Notary Public, State of Florida at Large
My Commission Expires:
[SEAL]
3
<PAGE> 4
13. DIRECTORS' RIGHT TO ABANDON MERGER.
The Board of Directors of each of the Constituent
Corporations shall have the power in its discretion to abandon the merger
provided for herein prior to the filing of the Articles of Merger.
4
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE HAVANA REPUBLIC, INC.
ARTICLE I
NAME
The name of the Corporation is THE HAVANA REPUBLIC, INC.
ARTICLE II
PURPOSES
This Corporation is organized for the purpose of transacting any and
all lawful activities or business for which corporations may be formed under the
laws of the State of Florida, including but not limited to the sale of premium
cigars, wine, microbeers and coffee in connection with the operation of
combination retail premises and private clubs. The existence of the Corporation
shall be perpetual.
ARTICLE III
CAPITAL STRUCTURE
The maximum number of shares of stock which this Corporation is
authorized to issue or to have outstanding at any time shall be 55,000,000
shares, of which 50,000,000 shares shall be common stock, no par value per
share, and of which 5,000,000 shares shall be preferred stock, no par value per
share.
The holders of common stock shall have one vote for each share of such
stock held.
The holders of record of the preferred stock shall be entitled to cash
dividends when, as and if declared by the Board of Directors at the time, in the
manner and at the rate per share determined by the Board of Directors in the
resolution authorizing each series of preferred stock. Dividends payable on the
preferred stock must be paid or set apart for payment before any dividends may
be declared and paid on the common stock with respect to the same time period.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of this Corporation, the holders of record of the outstanding
preferred stock shall be entitled to the amount payable upon their shares as
determined by the Board of Directors in the resolution authorizing each series
of preferred stock. After payment to the holders of the preferred stock of the
amount payable to them as above set forth, the remaining assets of this
Corporation shall be payable to, and distributed ratably among, the holders of
record of the common stock.
-1-
<PAGE> 2
The common stock may also be subject to other rights and preferences
that the Board of Directors may give to any series of the preferred stock.
The Board of Directors is hereby expressly authorized to issue the
preferred stock of this Corporation in one or more series as it may determine by
resolution from time to time. In the resolution establishing a series, the Board
of Directors shall give to the series a distinctive designation so as to
distinguish it from all other series and classes of stock, shall determine the
number of shares in such series and shall fix the preferences, limitations and
relative rights thereof All of the shares of any one series shall be alike in
every particular. Except to the extent otherwise provided in the description of
each series, all of the shares of all series of preferred stock shall be alike
in every particular.
No holder of shares of any class of this Corporation shall have (1) any
preemptive right to subscribe for or acquire additional shares of this
Corporation of the same or any other class, whether such shares shall be hereby
or hereafter authorized, or (2) any right to acquire any shares which may be
held in the treasury of this Corporation. All such additional or treasury shares
may be issued or reissued for such consideration, at such time, and to such
persons as the Board of Directors may from time to time determine.
ARTICLE IV
NO CUMULATIVE VOTING BY SHAREHOLDERS
Cumulative voting shall not be allowed in the election of Directors of
this Corporation and every shareholder entitled to vote at such election shall
have the right to vote the number of shares owned by him for as many persons as
there are Directors to be elected, and for whose election he has a right to
vote.
ARTICLE V
REGISTERED AND PRINCIPAL OFFICE AND REGISTERED AGENT
The registered office and principal office of the Corporation is
located at 1360 Weston Road, Weston, FL 33326, and the name of the registered
agent of the Corporation at such address is Stephen Schatzman.
ARTICLE VI
BOARD OF DIRECTORS
The number of individuals to serve on the Board of Directors shall be
set forth in the Bylaws of the Corporation; provided, however, that the Initial
Board of Directors shall consist of two persons below-named:
-2-
<PAGE> 3
Name of Director Address
Stephen Schatzman 1360 Weston Road
Weston, FL 33326
Alex Gimelstein 1360 Weston Road
Weston, FL 33326
ARTICLE VII
CORPORATE OPPORTUNITY
The Directors, officers and other member of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
Board of Directors as evidenced by resolutions appearing in this Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
Directors, officers and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter any
Director, officer or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its Board of
Directors, has designated an area of interest, the Directors, officers and other
members of management of this Corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the right of any
Director, officer or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than a Director, an officer or member of
management) from any duties which he may have to this Corporation.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
This Corporation shall:
A. Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe
-3-
<PAGE> 4
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that such person did not meet the
foregoing standard of conduct.
B. Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of the Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the Corporation; but no indemnification shall be made in
respect of any claim, issue or matter as to which such person has been adjudged
liable to the Corporation.
C. Indemnify a Director, officer, employee or agent of the Corporation
who has been wholly successful, on the merits or otherwise, in defense of any
action, suit or proceeding referred to in Subparagraph A or B of this Article
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
D. Authorize payment of expenses (including attorney's fees) incurred
in defending a civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding as authorized in
Subparagraph E of this Article if.
1. The Director, officer, employee or agent furnishes to this
Corporation a written affirmation of such person's good faith
belief that he has met the applicable standard of conduct
required to receive indemnification;
2. Such person furnishes to this Corporation an undertaking,
executed personally or on behalf of such person to repay such
amount if it is ultimately determined that he did not meet the
applicable standard of conduct; and
3. A determination is made that the facts then known to those
making the determination would not preclude indemnification
pursuant to this Article.
E. Authorize indemnification under Subparagraph A or B of this Article
(unless ordered by a court) in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Subparagraph A or B. Such determination shall be made:
1. By the Board of Directors by a majority vote of those present
at a meeting at which a quorum is present, and only those
Directors not parties to such action, suit or proceeding shall
be counted in satisfying the quorum requirement; or
-4-
<PAGE> 5
2. If such a quorum cannot be obtained, by a majority vote of a
committee of the Board of Directors designated by the Board of
Directors, which committee shall consist of two or more
Directors not parties to such action, suit or proceeding;
except that Directors who are parties to such action, suit or
proceeding may participate in the designation of Directors for
the committee, or
3. If such a quorum cannot be obtained, and such a committee
cannot be established, or even if such quorum is obtained or
such a committee is designated, if a majority of the Directors
constituting such quorum or such committee so directs, either:
(a) By independent legal counsel selected by a vote of the
Board of Directors or such committee in the manner
specified in Subparagraph E. 1. or E.2. of this Article
or, if a quorum of the full Board of Directors cannot be
obtained and such a committee cannot be established, by
independent legal counsel selected by a majority vote of
the full Board of Directors; or
(b) By the shareholders.
Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if such determination is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
F. Purchase and maintain insurance, if economically feasible for the
Corporation to do so in the sole judgment of the Corporation's Board of
Directors, on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him, incurred by him in any such capacity or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provision of this Article.
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these Articles of Incorporation, the Bylaws, or any agreement, vote of
shareholders or disinterested directors or otherwise, and any procedure provided
for by any of the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of heirs, executors and administrators of such a
person.
-5-
<PAGE> 6
ARTICLE IX
AMENDMENT
This Corporation reserves the right to amend or repeal any provision
contained in these Articles of Incorporation or any amendment to them, and all
right and privileges conferred upon the shareholders, directors and officers are
subject to this reservation. The Articles of Incorporation may be amended in
accordance with the provisions of the laws of the State of Florida, as amended
from time to time, unless more specific provisions for amendments are adopted by
this Corporation pursuant to law.
ARTICLE X
ADOPTION
These amended and restated Articles of Incorporation were
adopted by the Shareholders on November 6, 1997 pursuant to a Plan of Merger
between The Havana Republic, Inc., a Colorado corporation and The Havana
Republic, Inc. a Florida corporation.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this
6 day of November, 1997.
/s/ Steven Schatzman
------------------------------
Steven Schatzman, President
CONSENT OF REGISTERED AGENT
The undersigned hereby consents to the appointment as registered agent
for the above named corporation under Section 48.091 of the Florida Statutes,
until such time as he resigns such position.
/s/Steven Schatzman
-------------------------------
Steven Schatzman, President
-6-
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
THE HAVANA REPUBLIC, INC.
ARTICLE I
OFFICES
-------
The principal office of the Corporation in Florida shall initially be
located in Weston, Florida. The Corporation may have such other offices, either
within or outside the State of Florida, as the Board of Directors may designate,
or as the business of the Corporation may require from time to time.
The registered office of the Corporation required by the Florida
Business Corporation Act to be maintained in the State of Florida may be, but
need not be, identical with the principal office, and the address of the
registered office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
------------
Section 1. ANNUAL MEETING.
The annual meeting of the shareholders shall be held pursuant to notice
given by the Board of Directors for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose, unless otherwise
prescribed by statute, may be called by the President or by the Board of
Directors, and shall be called by the President at the request of the holders of
not less than ten (10%) percent of all the outstanding shares of the Corporation
entitled to vote at the meeting. Such request shall state the purposes of the
proposed meeting.
Section 3. ADJOURNMENT.
a. When the annual meeting is convened, or when any special meeting is
convened, the presiding officer may adjourn it for such period of time as may be
reasonably necessary to reconvene the meeting at another place and another time.
b. The presiding officer shall have the power to adjourn any meeting of
the shareholders for any proper purpose, including, but not limited to, lack of
a quorum, to secure a more adequate meeting place, to elect officials to count
and tabulate votes, to review any shareholder proposals or to pass upon any
challenge which may properly come before the meeting.
c. When a meeting is adjourned to another time or place, it shall not
be necessary to give any notice of the adjourned meeting if the time and place
to which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after the adjournment the Board fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given in
compliance with Subsection (4)(a) of this Article II to each shareholder of
record on the new record date entitled to vote at such meeting.
<PAGE> 2
Section 4. NOTICE OF MEETING; PURPOSE OF MEETING; WAIVER.
a. Each shareholder of record entitled to vote at any meeting shall be
given in person, or by first class mail, postage prepaid, written notice of such
meeting which, in the case of a special meeting, shall set forth the purpose(s)
for which the meeting is called, not less than ten (10) or more then fifty (50)
days before the date of such meeting. If mailed, such notice is to be sent to
the shareholder's address as it appears on the stock transfer books of the
Corporation unless the shareholder shall have requested of the Secretary in
writing at least fifteen (15) days prior to the distribution of any required
notice that any notice intended for him to be sent to some other address, in
which case the notice may be sent to the address so designated. Notwithstanding
any such request by a shareholder, notice sent to a shareholder's address as it
appears on the stock transfer books of this Corporation as of the record date
shall be deemed properly given. Any notice of a meeting sent by the United
States mail shall be deemed delivered when deposited with proper postage thereon
with the United States Postal Service or in any mail receptacle under its
control.
b. A shareholder waives notice of any meeting by attendance, either in
person or by proxy, at such meeting or by waiving notice in writing either
before, during or after such meeting. Attendance at a meeting for the express
purpose of objecting that the meeting was not lawfully called or convened,
however, will not constitute a waiver of notice by a shareholder stating at the
beginning of the meeting, his objection that the meeting is not lawfully called
or convened.
c. Whenever the holders of at least eighty (80%) percent of the capital
stock of the Corporation having the right to vote shall be present at any annual
or special meeting of shareholders, however called or notified, and shall sign a
written consent thereto on the minutes of such meeting, the meeting shall be
valid for all purposes.
d. A Waiver of Notice signed by all shareholders entitled to vote at a
meeting of shareholders may also be used for any other proper purpose including,
but not limited to, designating any place within or without the State of Florida
as the place for holding such a meeting.
e. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of shareholders need be specified in any written
Waiver of Notice.
Section 5. CLOSING OF TRANSFER BOOKS; RECORD DATE; SHAREHOLDERS' LIST.
a. In order to determine the holders of record of the capital stock of
the Corporation who are entitled to notice of meetings, to vote at a meeting or
adjournment thereof, or to receive payment of any dividend, or for any other
purpose, the Board of Directors may fix a date not more than fifty (50) days
prior to the date set for any of the above mentioned activities for such
determination of shareholders.
b. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
c. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the date for such determination of shareholders,
such date in any case to be not more than fifty (50) days and, in case of a
meeting of shareholders, not less than ten (10) days prior to the date on which
the particular action, requiring such determination of shareholders, is to be
taken.
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d. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice or to vote at a
meeting of shareholders, or to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders.
e. When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date under this section for the adjourned meeting.
f. The officer or agent having charge of the stock transfer books of
the Corporation shall make, as of a date at least ten (10) days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting or any adjournment thereof, with the address of each shareholder
and the number and class and series, if any, of shares held by each shareholder.
Such list shall be kept on file at the registered office of the Corporation or
at the office of the transfer agent or registrar of the Corporation for a period
of ten (10) days prior to such meeting and shall be available for inspection by
any shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of any meeting of shareholders and
shall be subject to inspection by any shareholder at any time during the
meeting.
g. The original stock transfer books shall be prima facie evidence as
to the shareholders entitled to examine such list or stock transfer books or to
vote at any meeting of shareholders.
h. If the requirements of Subsection 5(f) of this Article II have not
been substantially complied with then, on the demand of any shareholder in
person or by proxy, the meeting shall be adjourned until such requirements are
complied with.
i. If no demand pursuant to Section 5(h) is made, failure to comply
with the requirements of this Section shall not affect the validity of any
action taken at such meeting.
j. Subsection 5(g) of this Article II shall be operative only at such
time(s) as the Corporation shall have six (6) or more shareholders.
Section 6. QUORUM.
a. At any meeting of the shareholders of the Corporation, the presence,
in person or by proxy, of shareholders owning a majority of the issued and
outstanding shares of the capital stock of the Corporation entitled to vote
thereat shall be necessary to constitute a quorum for the transaction of any
business. If a quorum is present the affirmative vote of a majority of the
shares represented at such meeting and entitled to vote on the subject matter
shall be the act of the shareholders. If there shall not be a quorum at any
meeting of the shareholders of the Corporation, then the holders of a majority
of the shares of the capital stock of the Corporation who shall be present at
such meeting, in person or by proxy, may adjourn such meeting from time to time
until holders of a majority of the shares of the capital stock shall attend. At
any such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as originally
scheduled.
b. The shareholders at a duly organized meeting having a quorum may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
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Section 7. PRESIDING OFFICER; ORDER OF BUSINESS.
a. Meetings of the shareholders shall be presided over by the Chairman
of the Board, or, if he is not present, by the President or, if he is not
present, by a Vice President or, if none of the Chairman of the Board, the
President, or a Vice President is present, the meeting shall be presided over
by a Chairman to be chosen by a plurality of the shareholders entitled to vote
at the meeting who are present, in person or by proxy. The presiding officer of
any meeting of the shareholders may delegate the duties and obligations of the
presiding officer of the meeting as he sees fit.
b. The Secretary of the Corporation, or, in his absence, an Assistant
Secretary shall act as Secretary of every meeting of shareholders, but if
neither the Secretary nor an Assistant Secretary is present, the presiding
officer of the meeting shall choose any person present to act as Secretary of
the meeting.
c. The order of business shall be as follows:
1. Call of meeting to order.
2. Proof of notice of meeting.
3. Reading of minutes of last previous shareholders meeting or a
Waiver thereof.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Regular and miscellaneous business.
8. Special matters.
9. Adjournment.
d. Notwithstanding the provisions of Article II, Section 7, Subsection
c, the order and topics of business to be transacted at any meeting shall be
determined by the presiding officer of the meeting in his sole discretion. In no
event shall any variation in the order of business or additions and deletions
from the order of business as specified in Article II, Section 7, Subsection c,
invalidate any actions properly taken at any meeting.
Section 8. VOTING.
a. Unless otherwise provided for in the Certificate of Incorporation,
each shareholder shall be entitled, at each meeting and upon each proposal to be
voted upon, to one vote for each share of voting stock recorded in his name on
the books of the Corporation on the record date fixed as provided for in Article
11, Section 5.
b. The presiding officer at any meeting of the shareholders shall have
the power to determine the method and means of voting when any matter is to be
voted upon. The method and means of voting may include, but shall not be limited
to, vote by ballot, vote by hand or vote by voice. However, no method of voting
may be adopted which fails to take account of any shareholder's right to vote by
proxy as provided for in Section 10 of this Article II. In no event may any
method of voting be adopted which would prejudice the outcome of the vote.
Section 9. ACTION WITHOUT MEETING.
a. Any action required to be taken at any annual or special meeting of
shareholders of the
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Corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote if the action is taken by the holders of outstanding stock of
each voting group entitled to vote thereon having not less than the minimum
number of votes with respect to each voting group that would be necessary to
authorize or take such action at a meeting at which all voting groups and shares
entitled to vote thereon were present and voted. The action, to be effective,
must be evidenced by one or more written consents setting forth the action so
taken, dated and signed by approving shareholders having the requisite number of
votes of each voting group entitled to vote thereon, and delivered to the
corporation by delivery to its principal office in this state. No written
consent shall be effective unless, within 60 days of the date of the earliest
dated consent delivered in the manner required herein, written consents signed
by the number of holders required to take action are delivered to the
corporation by delivery as set forth herein.
b. Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets- for which dissenters' rights are provided under the Florida
Business Corporation Act, the notice shall contain a clear statement of the
right of the shareholders dissenting therefrom to be paid the fair value of
their shares upon compliance with further provisions of the Florida Business
Corporation Act regarding the rights of dissenting shareholders.
c. In the event that the action to which the shareholders' consent is
such as would have required the filing of a certificate under the Florida
Business Corporation Act if such action had been voted on by shareholders at a
meeting thereof, the certificate filed under such other section shall state that
written consent has been given in accordance with the provisions of this Article
II, Section 9.
Section 10. PROXIES.
a. Every shareholder entitled to vote at a meeting of shareholders or
to express consent or dissent without a meeting, or his duly authorized
attorney-in-fact may authorize another person or persons to act for him by
proxy.
b. Every proxy must be signed by the shareholder or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it, except as
otherwise provided in this Article II, Section 10.
c. The authority of the holder of a proxy to act shall not be revoked
by the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
d. Except when other provisions shall have been made by written
agreement between the parties, the record holder of shares held as pledges or
otherwise as security or which belong to another, shall issue to the pledgor or
to such owner of such shares, upon demand therefor and payment of necessary
expenses thereof, a proxy to vote or take other action thereon.
e. A proxy which states that it is irrevocable is irrevocable when it
is held by any of the following or a nominee of any of the following: (i) a
pledgee; (ii) a person who has purchased or agreed to
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purchase the shares; (iii) a creditor or creditors of the Corporation who extend
or continue to extend credit to the Corporation in consideration of the proxy,
if the proxy states that it was given in consideration of such extension or
continuation of credit, the amount thereof, and the name of the person extending
or continuing credit; (iv) a person who has contracted to perform services as an
officer of the Corporation, if a proxy is required by the contract of
employment, if the proxy states that it was given in consideration of such
contract of employment and states the name of the employee and the period of
employment contracted for; and (v) a person designated by or under an agreement
as provided in Article XI hereof.
f. Notwithstanding a provision in a proxy stating that it is
irrevocable, the proxy becomes revocable after the pledge is redeemed, or the
debt of the Corporation is paid, or the period of employment provided for in the
contract of employment has terminated, or the agreement under Article XII
hereof, has terminated and, in a case provided for in Subsection 10(e)(iii) or
Subsection 10(e)(iv) of this Article II becomes irrevocable three years after
the date of the proxy or at the end of the period, if any, specified therein,
whichever period is less, unless the period of irrevocability is renewed from
time to time by the execution of a new irrevocable proxy as provided in this
Article II, Section 10. This Subsection 10(f) does not affect the duration of a
proxy under Subsection 10(b) of this Article II.
g. A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
h. If a proxy for the same shares confers authority upon two (2) or
more persons and does not otherwise provide a majority of such persons present
at the meeting, or if only one is present, then that one may exercise all the
powers conferred by the proxy. If the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case,
the voting of such shares shall be prorated.
i. If a proxy expressly so provides, any proxy holder may appoint in
writing a substitute to act in his place.
Section 11. VOTING OF SHARES BY SHAREHOLDERS.
a. Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the Bylaws
of the corporate shareholder; or, in the absence of any applicable Bylaw, by
such person as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the Bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate shareholder, the Chairman of the Board, President, any vice president,
secretary and treasurer of the corporate shareholder, in that order shall be
presumed to possess authority to vote such shares.
b. Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
c. Shares standing in the name of a receiver may be voted by such
receiver. Shares held by or under the control of a receiver but not standing in
the name of such receiver, may be voted by such receiver without the transfer
thereof into his name if authority to do so is contained in an appropriate order
of the court
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by which such receiver was appointed.
d. A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee.
e. Shares of the capital stock of the Corporation belonging to the
Corporation or held by it in a fiduciary capacity shall not be voted, directly
or indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares.
ARTICLE III
DIRECTORS
---------
Section 1. BOARD OF DIRECTORS; EXERCISE OF CORPORATE POWERS.
a. All corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of the Board of Directors except as may be otherwise provided in the
Articles of Incorporation. If any such provision is made in the Articles of
Incorporation, the powers and duties conferred or imposed upon the Board of
Directors shall be exercised or performed to such extent and by such person or
persons as shall be provided in the Articles of Incorporation.
b. Directors need not be residents of the state of incorporation unless
the Articles of Incorporation so require.
c. The Board of Directors shall have authority to fix the compensation
of Directors unless otherwise provided in the Articles of Incorporation.
d. A Director shall perform his duties as a Director, including his
duties as a member of any committee of the Board upon which he may serve, in
good faith, in a manner he reasonably believes to be in the best interests of
the Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
e. In performing his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial data, in each
case prepared or presented by: (i) one or more officers or employees of the
Corporation whom the Director reasonably believes to be reliable and competent
in the matters presented; (ii) counsel, public accountants or other persons as
to matters which the Director reasonably believes to be within such persons'
professional or expert competence; or (iii) a committee of the Board upon which
he does not serve, duly designated in accordance with a provision of the
Articles of Incorporation or the Bylaws, as to matters within its designated
authority, which committee the Director reasonably believes to merit confidence.
f. A Director shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
described in Subsection 1(e) of this Article III to be unwarranted.
g. A person who performs his duties in compliance with this Article
III, Section 1 shall have no liability by reason of being or having been a
Director of the Corporation.
h. A Director of the Corporation who is present at a meeting of the
Board of Directors at
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which action on any corporate matter is taken consents thereto unless he votes
against such action or abstains from voting in respect thereto because of an
asserted conflict of interest.
Section 2. NUMBER; ELECTION; CLASSIFICATION OF DIRECTORS; VACANCIES.
a. The Board of Directors of this Corporation shall consist of not less
than two (2) nor more than seven (7) members, unless the number of shareholders
is less than two, in which case the Corporation shall consist of one director
until such time as the number of shareholders increase to two or more. The
number of directors shall be fixed by the initial Board of Directors. The number
of directors constituting the initial Board of Directors shall be fixed by the
Articles of Incorporation. The number of directors may be increased from time to
time by the Board of Directors, but no decrease shall have the effect of
shortening the term of any incumbent director.
b. Each person named in the Articles of Incorporation as a member of
the initial Board of Directors, shall hold office until the first annual meeting
of shareholders, and until his successor shall have been elected and qualified
or until his earlier resignation, removal from office or death.
c. At the first annual meeting of shareholders and at each annual
meeting thereafter the shareholders shall elect directors to hold office until
the next succeeding annual meeting, except in case of the classification of
directors as permitted by the Florida Business Corporation Act. Each director
shall hold office for the term for which he is elected and until his successor
shall have been elected and qualified or until his earlier resignation, removal
from office or death.
d. The shareholders, by amendment to these Bylaws, may provide that the
directors be divided into not more than three classes, as nearly equal in number
as possible, whose terms of office shall respectively expire at different times,
but no such term shall continue longer than three (3) years, and at least
one-fourth (1/4) in number of the directors shall be elected annually
e. If directors are classified and the number of directors is
thereafter changed, any increase or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in number
as possible.
f. Any vacancy occurring in the Board of Directors including any
vacancy created by reason of an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall hold office only until the next election of directors by the
shareholders.
Section 3. REMOVAL OF DIRECTORS.
a. At a meeting of shareholders called expressly for that purpose,
directors may be removed in the mariner provided in this Article III, Section 3.
Any director or the entire Board of Directors may be removed, with or without
cause, by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors.
b. If the Corporation has cumulative voting, if less than the entire
Board is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors, or, if there be classes of
directors, at an election of the class of directors of which he is a member.
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Section 4. DIRECTOR QUORUM AND VOTING.
a. A majority of the number of directors fixed in the manner provided
in these Bylaws shall constitute a quorum for the transaction of business unless
a greater number is required elsewhere in these Bylaws.
b. A majority of the members of an Executive Committee or other
committee shall constitute a quorum for the transaction of business at any
meeting of such Executive Committee or other committee.
c. The act of the majority of the directors present at a Board meeting
at which a quorum is present shall be the act of the Board of Directors.
d. The act of a majority of the members of an Executive Committee
present at an Executive Committee meeting at which a quorum is present shall be
the act of the Executive Committee.
e. The act of a majority of the members of any other committee present
at a committee meeting at which a quorum is present shall be the act of the
committee.
Section 5. DIRECTOR CONFLICTS OF INTEREST.
a. No contract or other transaction between this Corporation and one or
more of its directors or any other Corporation, firm, association or entity in
which one or more of its directors are directors or officers or are financially
interested, shall be either void or voidable because of a relationship or
interest or because such director or directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction or because his or their votes are counted for such
purpose, if:
(i) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors; or
(ii) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent, or
(iii) The contract or transaction is fair and reasonable as to
the Corporation at the time it is authorized by the Board, a committee, or the
shareholders.
b. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Section 6. EXECUTIVE AND OTHER COMMITTEES; DESIGNATION; AUTHORITY.
a. The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members an Executive
Committee and one or more other committees each of which, to the extent provided
in such resolution or in the Articles of Incorporation or these Bylaws, shall
have and may exercise all the authority of the Board of Directors, except that
no such committee shall have the
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authority to: (i) approve or recommend to shareholders actions or proposals
required by the Florida Business Corporation Act to be approved by shareholders;
(ii) designate candidates for the office of director for purposes of proxy
solicitation or otherwise; (iii) fill vacancies on the Board of Directors or any
committee thereof; (iv) amend the Bylaws; or (v) authorize or approve the
issuance or sale of, or any contract to issue or sell, shares or designate the
terms of a series or class of shares, unless the Board of Directors, having
acted regarding general authorization for the issuance or sale of shares, or any
contract therefor, and, in the case of a series, the designation thereof, has
specified a general formula or method by resolution or by adoption of a stock
option or other plan, authorized a committee to fix the terms upon which such
shares may be issued or sold, including, without limitation, the price, the rate
or manner of payment of dividends, provisions for redemption, sinking fund,
conversion, and voting preferential rights, and provisions for other features of
a class of shares, or a series of classes of shares, with full power in such
committee to adopt any final resolution setting forth all the terms thereof and
to authorize the statement of the terms of a series for filing with the
Secretary of State under the Florida Business Corporation Act.
b. The Board, by resolution adopted in accordance with Article III,
Subsection 6(a) may designate one or more directors as alternate members of any
such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
c. Neither the designation of any such committee, the delegation
thereto of authority nor action by such committee pursuant to such authority
shall alone constitute compliance by any member of the Board of Directors, not a
member of the committee in question, with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
Section 7. PLACE, TIME, NOTICE AND CALL OF DIRECTORS' MEETINGS.
a. Meetings of the Board of Directors, regular or special, may be held
either within or without this state.
b. A regular meeting of the Board of Directors of the Corporation shall
be held for the election of officers of the Corporation and for the transaction
of such other business as may come before such meeting as promptly as
practicable after the annual meeting of the shareholders of this Corporation
without the necessity of other notice than this Bylaw. Other regular meetings of
the Board of Directors of the Corporation may be held at such times and at such
places as the Board of Directors of the Corporation may from time to time
resolve without other notice than such resolution. Special meetings of the Board
of Directors may be held at any time upon call of the Chairman of the Board or
the President or a majority of the Directors of the Corporation, at such time
and at such place as shall be specified in the call thereof. Notice of any
special meeting of the Board of Directors must be given at least two (2) days
prior thereto, if by written notice delivered personally; or at least five (5)
days prior thereto, if mailed; or at least two (2) days prior thereto, if by
telegram; or at least two (2) days prior thereto, if by telephone. If such
notice is given by mail, such notice shall be deemed to have been delivered when
deposited with the United States Postal Service addressed to the business
address of such director with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed delivered when the telegram is delivered
to the telegraph company. If notice is given by telephone, such notice shall be
deemed delivered when the call is completed.
c. Notice of a meeting of the Board of Directors need not be given to
any director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of
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the meeting, or the manner in which it has been called or convened, except when
a director states, at the beginning of the meeting, any objection to the
transaction of business because the meeting is not lawfully called or convened.
d. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
e. A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
f. Members of the Board of Directors may participate in a meeting of
such Board by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Section 8. ACTION BY DIRECTORS WITHOUT A MEETING.
Any action required by the Florida Business Corporation Act to be taken
at a meeting of the directors of the Corporation, or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so to
be taken, signed by all of the directors, or all of the members of the
committee, as the case may be, is filed in the minutes of the proceedings of the
Board or of the committee. Such consent shall have the same effect as a
unanimous vote.
Section 9. COMPENSATION.
The directors and members of the Executive and any other committee of
the Board of Directors shall be entitled to such reasonable compensation for
their services and on such basis as shall be fixed from time to time by
resolution of the Board of Directors. The Board of Directors and members of any
committee of the Board of Directors shall be entitled to reimbursement for any
reasonable expenses incurred in attending any Board or committee meeting. Any
director receiving compensation under this section shall not be prevented from
serving the Corporation in any other capacity and shall not be prohibited from
receiving reasonable compensation for such other services.
Section 10. RESIGNATION.
Any Director of the Corporation may resign at any time without
acceptance by the Corporation. Such resignation shall be in writing and may
provide that such resignation shall take effect immediately or on any future
date stated in such notice.
Section 11. REMOVAL.
Any Director of the Corporation may be removed for cause by a majority
vote of the other members of the Board of Directors as then constituted or with
or without cause by the vote of the holders of a majority of the outstanding
shares of capital stork shareholders of the Corporation called for such purpose.
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Section 12. VACANCIES.
In the event that a vacancy shall occur on the Board of Directors of
the Corporation whether because of death, resignation, removal, an increase in
the number of directors or any other reason, such vacancy may be filled by the
vote of a majority of the remaining directors of the Corporation even though
such remaining directors represent less than a quorum. An increase in the number
of directors shall create vacancies for the purpose of this section. A director
of the Corporation elected to fill a vacancy shall hold office for the unexpired
term of his predecessor, or in the case of an increase in the number of
directors, until the election and qualification of directors at the next annual
meeting of the shareholders.
ARTICLE IV
OFFICERS
--------
Section 1. ELECTION; NUMBER; TERMS OF OFFICE.
a. The officers of the Corporation shall consist of a Chairman of the
Board, a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors at such time and in such manner as may be prescribed
by these Bylaws. Such other officers and assistant officers and agents as may be
deemed necessary may be elected or appointed by the Board of Directors.
b. All officers and agents, as between themselves and the Corporation,
shall have such authority and perform such duties in the management of the
Corporation as are provided in these Bylaws, or as may be determined by
resolution of the Board of Directors not inconsistent with these Bylaws.
c. Any two (2) or more offices may be held by the same person.
d. A failure to elect a Chairman of the Board, President, a Secretary
and a Treasurer shall not affect the existence of the Corporation.
Section 2. REMOVAL.
An officer of the Corporation shall hold office until the election and
qualification of his successor, however, any officer of the Corporation may be
removed from office by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of any officer shall not of itself create any contract
right to employment or compensation.
Section 3. VACANCIES.
Any vacancy in any office from any cause may be filled for the
unexpired portion of the term of such office by the Board of Directors.
Section 4. POWERS AND DUTIES.
a. The Chairman of the Board shall be the Chief Executive Officer of
the Corporation. The Chairman of the Board shall preside at all meetings of the
shareholders and of the Board of Directors. Except where by law the signature of
the President is required or unless the Board of Directors shall rule otherwise,
the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts and other instruments of the Corporation which may
be authorized by the Board of Directors. Unless a Chairman of the Board is
specifically elected, the President shall be deemed to be the Chairman of the
Board.
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b. The President shall be the Chief Operating Officer of the
Corporation. He shall be responsible for the general day-to-day supervision of
the business and affairs of the Corporation. He shall sign or countersign all
certificates, contracts or other instrument of the Corporation as authorized by
the Board of Directors. He may, but need not, be a member of the Board of
Directors. In the absence of the Chairman of the Board, the President shall be
the Chief Executive Officer of the Corporation and shall preside at all meetings
of the shareholders and the Board of Directors. He shall make reports to the
Board of Directors and shareholders. He shall perform such other duties as are
incident to his office or are properly required of him by the Board of
Directors. The Board of Directors will at all times retain the power to
expressly delegate the duties of the President to any other officer of the
Corporation.
c. The Vice-President(s), if any, in the order designated by the Board
of Directors, shall exercise the functions of the President during the absence,
disability, death, or refusal to act of the President During the time that any
Vice-President is properly exercising the functions of the President, such Vice-
President shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice-President shall have such other duties as are
assigned to him from time to time by the Board of Directors or by the President
of the Corporation.
d. The Secretary of the Corporation shall keep the minutes of the
meetings of the shareholders of the Corporation and, if so requested, the
Secretary shall keep the minutes of the meetings of the Board of Directors of
the Corporation. The Secretary shall be the custodian of the minute books of the
Corporation and such other books and records of the Corporation as the Board of
Directors of the Corporation may direct. The Secretary shall make or cause to be
made all proper entries in all corporate books that the Board of Directors of
the Corporation may direct. The Secretary shall have the general responsibility
for maintaining the stock transfer books of the Corporation, or of supervising
the maintenance of the stock transfer books of the Corporation by the transfer
agent, if any, of the Corporation. The Secretary shall be the custodian of the
corporate seal of the Corporation and shall affix the corporate seal of the
Corporation on contracts and other instruments as the Board of Directors of the
Corporation may direct. The Secretary shall perform such other duties as are
assigned to him from time to time by the Board of Directors or the President of
the Corporation.
e. The Treasurer of the Corporation shall have custody of all funds and
securities owned by the Corporation. The Treasurer shall cause to be entered
regularly in the proper books of account of the Corporation full and accurate
accounts of the receipts and disbursements of the Corporation. The Treasurer of
the Corporation shall render a statement of cash, financial and other accounts
of the Corporation whenever he is directed to render such a statement by the
Board of Directors or by the President of the Corporation. The Treasurer shall
at all reasonable times make available the Corporation's books and financial
accounts to any Director of the Corporation during normal business hours. The
Treasurer shall perform all other acts incident to the office of the Treasurer
of the Corporation, and he shall have such other duties as are assigned to him
from time to time by the Board of Directors or the President of the Corporation.
f. Other subordinate or assistant officers appointed by the Board of
Directors or by the President, if such authority is delegated to him by the
Board of Directors, shall exercise such powers and perform such duties as may be
delegated to them by the Board of Directors or by the President, as the case may
be.
g. In case of the absence or disability of any officer of the
Corporation and of any person authorized to act in his place during such period
of absence or disability, the Board of Directors may from time to time delegate
the powers and duties of such officer to any other officer or any director or
any other person whom it may select.
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Section 5. SALARIES.
The salaries of all Officers of the Corporation shall be fixed by the
Board of Directors. No officer shall be ineligible to receive such salary by
reason of the fact that he is also a Director of the Corporation and receiving
compensation therefor.
ARTICLE V
LOANS TO EMPLOYEES AND OFFICERS:
--------------------------------
GUARANTY OF OBLIGATIONS OF EMPLOYEES AND OFFICERS
-------------------------------------------------
This Corporation may lend money to, guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of a
subsidiary, including any officer or employee who is a Director of the
Corporation or of a subsidiary, whenever, in the judgment of the Directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest, and may be unsecured, or secured in such manner as the Board of
Directors shall approve including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Article shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of this Corporation at common law
or under any statute.
ARTICLE VI
STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS
--------------------------------------------
Section 1. CERTIFICATES REPRESENTING SHARES.
a. Every holder of shares in this Corporation shall be entitled to one
or more certificates, representing all shares to which he is entitled and such
certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary of the Corporation and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
President or Vice President and the Secretary or Assistant Secretary may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar, other than the Corporation itself or an employee of the
Corporation. In case any officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be used by the Corporation with the same
effect as if he were such officer at the date of its issuance,
b. Each certificate representing shares shall state upon the face
thereof: (i) the name of the Corporation; (ii) that the Corporation is organized
under the laws of this state; (iii) the name of the person or persons to whom
issued; (iv) the number and class of shares, and the designation of the series,
if any, which such certificate represents; and (v) the par value of each share
represented by such certificate, or a statement that the shares are without par
value.
c. No certificate shall be issued for any shares until such shares are
fully paid.
Section 2. TRANSFER BOOK.
The Corporation shall keep at its registered office or principal place
of business or in the office of its transfer agent or registrar, a book (or
books where more than one kind, class, or series of stock is outstanding) to be
known as the Stock Book, containing the names, alphabetically arranged,
addresses and Social Security numbers of every shareholder, and the number of
shares of each kind, class or series of stock
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held of record. Where the Stock Transfer Book is kept in the office of the
transfer agent, the Corporation shall keep at its office in the State of Florida
copies of the stock lists prepared from said Stock Transfer Book and sent to it
from time to time by said transfer agent The Stock Transfer Book or stock lists
shall show the current status of the ownership of shares of the Corporation
provided, if the transfer agent of the Corporation be located elsewhere, a
reasonable time shall be allowed for transit or mail.
Section 3. TRANSFER OF SHARES.
a. The name(s) and address(s) of the person(s) to whom shares of stock
of this Corporation are issued, shall be entered on the Stock Transfer Book of
the Corporation, with the number of shares and date of issuance.
b. Transfer of shares of the Corporation shall be made on the Stock
Transfer Books of the Corporation by the Secretary or the transfer agent, only
when the holder of record thereof or the legal representative of such holder of
record or the attorney-in-fact of such holder of record, authorized by power of
attorney duly executed and filed with the Secretary or transfer agent of the
Corporation, shall surrender the Certificate representing such shares for
cancellation. Lost, destroyed or stolen Stock Certificates shall be replaced
pursuant to Section 5 of this Article VI.
c. The person or persons in whose names shares stand on the books of
the Corporation shall be deemed by the Corporation to be the owner of such sham
for all purposes, except as otherwise provided pursuant to Section 10 and 11 of
Article II, or Section 4 of this Article VI.
Section 4. VOTING TRUSTS.
a. Any number of shareholders of the Corporation may create a voting
trust for the purpose of conferring upon a trustee or trustees the right to vote
or otherwise represent their shares, for a period not to exceed ten (10) years,
by: (i) entering into a written voting trust; (ii) depositing a counterpart of
the agreement with the Corporation at its registered office; and (iii)
transferring their shares to such trustee or trustees for the purposes of this
Agreement. Prior to the recording of the Agreement, the shareholder concerned
shall tender the stock certificate(s) described therein to the corporate
secretary who shall note on each certificate:
"This Certificate is subject to the provisions of a voting trust
agreement dated _______________, recorded in Minute Book
___________________, of the Corporation.
----------------------------
Secretary"
b. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their share
in trust. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders and the number and class of
the shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
c. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their shares
in trust. Such trustee or trustees shall keep a record of
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the holders of the voting trust certificates evidencing a beneficial interest in
the voting trust, giving the names and addresses of all such holders and the
number and class of the shares in respect of which the voting trust certificates
held by each are issued, and shall deposit a copy of such record with the
Corporation at its registered office.
d. The counterpart of the voting trust agreement and the copy of such
record so deposited with the Corporation shall be subject to the same right of
examination by a shareholder of the Corporation, in person or by agent or
attorney, as are the books and records of the Corporation, and such counterpart
and such copy of such record shall be subject to examination by any holder of
record of voting trust certificates either in person or by agent or attorney, at
any reasonable time for any proper purpose.
e. At any time before the expiration of a voting trust agreement as
originally fixed or as extended one or more times under this Article VI,
Subsection 4(d) one or more holders of voting trust certificates may, by
agreement in writing extend the duration of such voting mist agreement,
nominating the same or substitute trustee or trustees, for an additional period
not exceeding ten (10) years. Such extension agreement shall not affect the
rights or obligations of persons not parties to the agreement, and such persons
shall be entitled to remove their shares from the trust and promptly to have
their stock certificates reissued upon the expiration date of the original term
of the voting trust agreement The extension agreement shall in every respect
comply with and be subject to all the provisions of this Article VI, Section 4
applicable to the original voting trust agreement except that the ten (10) year
maximum period of duration shall commence on the date of adoption of the
extension agreement.
f. The trustees under the term of the agreements entered into under the
provisions of this Article VI, Section 4 shall not acquire the legal title to
the shares but shall be vested only with the legal right and title to the voting
power which is incident to the ownership of the shares.
Section 5. LOST, DESTROYED OR STOLEN CERTIFICATES.
No certificate representing shares of the stock in the Corporation
shall be issued in place of any Certificate alleged to have been lost,
destroyed, or stolen except on production of evidence, satisfactory to the Board
of Directors, of such loss, destruction or theft, and, if the Board of Directors
so requires, upon the furnishing of an indemnity bond in such amount (but not to
exceed twice the fair market value of the shares represented by the Certificate)
and with such terms and with such surety as the Board of Directors may, in its
discretion, require.
ARTICLE VII
BOOKS AND RECORDS
-----------------
a. The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees of Directors.
b. Any books, records and minutes may be in written form or in any
other form capable of being converted into written form within a reasonable
time.
c. Any person who shall have been a holder of record of one quarter of
one percent of all shares or of voting trust certificates therefor at least six
months immediately preceding his demand or shall be the holder of record of, or
the holder of record of voting trust certificates for, at least five (5%)
percent of the outstanding shares of any class or series of the Corporation,
upon written demand stating the purpose thereof,
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shall have the right to examine, in person or by agent or attorney, at any
reasonable time or times, for any proper purpose, its relevant books and records
of account, minutes and record of shareholders and to make extracts therefrom.
d. No shareholder who within two (2) years has sold or offered for sale
any list of shareholders or of holders of voting trust certificates for shares
of this Corporation or any other Corporation; has aided or abetted any person in
procuring any list of shareholders or of holders of voting trust certificates
for any such purpose; or has improperly used any information secured through any
prior examination of the books and records of account, minutes, or record of
shareholders or of holders of voting trust certificates for shares of the
Corporation or any other Corporation, shall be entitled to examine the documents
and records of the Corporation as provided in Subsection (c) of this Article
VII. No shareholder who does not act in good faith or for a proper purpose in
making his demand shall be entitled to examine the documents and records of the
Corporation as provided in Subsection (c) of this Article VII.
e. Unless modified by resolution of the shareholders, this Corporation
shall prepare not later than four (4) months after the close of each fiscal
year.
(i) A balance sheet showing in reasonable detail the financial
conditions of the Corporation as of the date of its fiscal year.
(ii) A profit and loss statement showing the results of its
operation during its fiscal year.
f. Upon the written request of any shareholder or holder of voting
trust certificates for shares of the Corporation, the Corporation shall mail to
such shareholder or holder of voting trust certificates a copy of its most
recent balance sheet and profit and loss statement
g. Such balance sheets and profit and loss statements shall be filed
and kept for at least five (5) years in the registered office of the Corporation
in this state and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates.
ARTICLE VIII
DIVIDENDS
---------
The Board of Directors of the Corporation may, from time to time,
declare and the Corporation may pay dividends on its shares in cash, property or
its own shares, except when the Corporation is insolvent or when the payment
thereof would render the Corporation insolvent subject to the following
provisions:
a. Dividends in cash or property may be declared and paid, except as
otherwise provided in this Article VIII, only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital surplus,
however arising, but each dividend paid out of capital surplus shall be
identified as a distribution of capital surplus, and the amount per share paid
from such capital surplus shall be disclosed to the shareholders receiving the
same concurrently with the distribution.
b. Dividends may be declared and paid in the Corporation's treasury
shares.
c. Dividends may be declared and paid in the Corporation's authorized
but unissued shares out of any unreserved and unrestricted surplus of the
Corporation upon the following conditions:
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(i) if a dividend is payable in the Corporation's own shares
having a par value, such shares shall be issued at not less than the par value
thereof and there shall be transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the aggregate par value of the
shares to be issued as a dividend.
(ii) If a dividend is payable in the Corporation's own shares
without par value, such shares shall be issued at such stated value as shall be
fixed by the Board of Directors by resolution adopted at the time such dividend
is declared, and there shall be transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the aggregate stated value so
fixed in respect of such shares; and the amount per share so transferred to
stated capital shall be disclosed to the shareholders receiving such dividend
concurrently with the payment thereof.
d. No dividend payable in shares of any class shall be paid to the
holders of shares of any other class unless the Articles of Incorporation so
provide or such payment is authorized by the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the class in
which the payment is to be made.
e. A split up or division of the issued shares of any class into a
greater number of shares of the same class without increasing the stated capital
of the Corporation shall not be construed to be a stock dividend within the
meaning of this Article VIII.
ARTICLE IX
INDEMNIFICATION
---------------
Section 1. ACTION. ETC. OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or administrative,
and whether external or internal to the Corporation, (other than a judicial
action or suit brought by or in the right of the Corporation) by reason of the
fact that he is or was a director officer, employee or agent of the Corporation,
or that, being or having been such a director, officer, employee or agent, he is
or was serving at the request of the Corporation as a director, officer,
employee, or trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise (all such persons being referred to hereafter
as an "Agent"), against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, or any appeal therein, if such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding. had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit or proceeding -- whether by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent -- shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that such person had reasonable cause to believe
that his conduct was unlawful.
Section 2. ACTION. ETC., BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed judicial
action or suit brought by or in the right of the Corporation to
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procure a judgment in its favor by reason of the fact that he is or was an Agent
(as defined above) against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense, settlement or appeal
of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. DETERMINATION OF RIGHT OF INDEMNIFICATION.
Any indemnification under Section 1 or 2 (unless ordered by a court)
shall be made by the Corporation unless a determination is reasonably and
promptly made (i) by the Board by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders, that such person acted in bad faith and
in a manner that such person did not believe to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal proceeding, that
such person believed or had reasonable cause to believe that his conduct was
unlawful.
Section 4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent
that an Agent has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice or the settlement of an
action without admission of liability in defense of any proceeding or in defense
of any claim, issue or matter therein, or on appeal from any such proceeding,
action, claim or matter, such Agent shall be indemnified against all expenses
incurred in connection therewith.
Section 5. ADVANCES OF EXPENSES.
Except as limited by Section 6 of this Article, costs, charges and
expenses (including attorneys' fees) incurred in any action, suit, proceeding or
investigation or any appeal therefrom shall be paid by the Corporation in
advance of the final disposition of such matter, if the Agent shall undertake to
repay such amount in the event that it is ultimately determined, as provided
herein, that such person is not entitled to indemnification. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board of Directors or if a majority vote of
a quorum of disinterested directors cannot be obtained, then by independent
legal counsel in a written opinion, that, based upon the facts known to the
Board or counsel at the time such determination is made, such person acted in
bad faith and in a manner that such person did not believe to be in or not
opposed to the best interest of the Corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Board or independent legal counsel reasonably determines
that such person deliberately breached his duty to the Corporation or its
shareholders.
Section 6. RIGHT OF AGENT TO INDEMNIFICATION UPON APPLICATION;
PROCEDURE UPON APPLICATION.
Any indemnification under Sections 1, 2 and 4 or advance under Section
5 of this Article, shall be
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made promptly, and in any event within ninety (90) days, upon the written
request of the Agent unless with respect to applications under Sections 1, 2 or
5, a determination is reasonably and promptly made by the Board of Directors by
a majority vote of a quorum of disinterested directors that such Agent acted in
a manner set forth in such Sections as to justify the Corporation's not
indemnifying or making an advance to the Agent. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
direct that independent legal counsel shall decide whether the Agent acted in
the manner set forth in such Sections as to justify the Corporation's not
indemnifying or making an advance to the Agent. The right to indemnification or
advances as granted by this Article shall be enforceable by the Agent in any
court of competent jurisdiction, if the Board or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such claim is
made within ninety (90) days. The Agents costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 7. CONTRIBUTION.
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article is held
by a court of competent jurisdiction to be unavailable to an indemnitee in whole
or part, the Corporation shall, in such an event, after taking into account,
among other things, contributions by other directors and officers of the
Corporation pursuant to indemnification agreements or otherwise, and, in the
absence of personal enrichment, acts of intentional fraud or dishonesty or
criminal conduct on the part of the Agent, contribute to the payment of Agents
losses to the extent that, after other contributions are taken into account,
such losses exceed: (i) in the case of a director of the Corporation or any of
its subsidiaries who is not an officer of the Corporation or any of such
subsidiaries, the amount of fees paid to him for serving as a director during
the 12 months preceding the commencement of the suit, proceeding or
investigation; or (ii) in the case of a director of the Corporation or any of
its subsidiaries who is also an officer of the Corporation or any of such
subsidiaries, the amount set forth in clause (i) plus 5% of the aggregate cash
compensation paid to said director for service in such office(s) during the 12
months preceding the commencement of the suit, proceeding or investigation; or
(iii) in the case of an officer of the Corporation or any of its subsidiaries,
5% of the aggregate cash compensation paid to such officer for service in such
office(s) during the 12 months preceding the commencement of such suit,
proceeding or investigation.
Section 8. OTHER RIGHTS AND REMEDIES.
The indemnification provided by this Article shall not be deemed
exclusive of, and shall not affect, any other rights to which an Agent seeking
indemnification may be entitled under any law, Bylaw, or charter provision,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be an
Agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. All rights to indemnification under this Article shall be
deemed to be provided by a contract between the Corporation and the Agent who
serves in such capacity at any time while these Bylaws and other relevant
provisions of the general corporation law and other applicable law, if any are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
Section 9. INSURANCE.
Upon resolution passed by the Board, the Corporation may purchase and
maintain insurance on behalf of any person who is or was an Agent against any
liability asserted against such person and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
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the power to indemnify such person against such liability under the provisions
of this Article. The Corporation may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Section 10. CONSTITUENT CORPORATION.
For the purposes of this Article, references to the "Corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee, agent or trustee of such a constituent
corporation or who, being or having been such a director, officer, employee or
trustee, is or was serving at the request of such constituent corporation as a
director, officer, employee, agent or trustee of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would if he had served the resulting or
surviving corporation in the same capacity.
Section 11. OTHER ENTERPRISES. FINES AND SERVING AT CORPORATION'S
REQUEST.
For purposes of this Article, references to "other enterprise" in
Sections 1 and 10 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service by Agent as director, officer, employee, trustee or
agent of the Corporation which imposes duties on, or involves services by, such
Agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
Section 12. SAVINGS CLAUSE.
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Agent as to expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, appeal, proceeding or investigation, whether civil, criminal or
administrative, and whether internal or external, including a grand jury
proceeding and an action or suit brought by or in the night of the Corporation,
to the full extent permitted by any applicable portion of this Article that
shall not have been invalidated, or by any other applicable law.
ARTICLE X
AMENDMENT OF BYLAWS
-------------------
a. The Board of Directors shall have the power to amend, alter, or
repeal these Bylaws, and to adopt new Bylaws, from time to time.
b. The shareholders of the Corporation, may, at any annual meeting of
the shareholders of the Corporation or at any special meeting of the
shareholders of the Corporation called for the purpose of amending these Bylaws,
amend, alter, or repeal these Bylaws, and adopt new Bylaws, from time to time.
c. The Board of Directors shall not have the authority to adopt or
amend any Bylaw if such
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new Bylaw of such amendment would be inconsistent with any Bylaw previously
adopted by the shareholders of the Corporation. The shareholders may prescribe
in any Bylaw made by them that such Bylaw shall not be altered, amended or
repealed by the Board of Directors.
ARTICLE XI
FISCAL YEAR
-----------
The Fiscal Year of this Corporation shall be determined by the Board of
Directors.
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
THE HAVANA REPUBLIC, INC.
OF SERIES A CONVERTIBLE PREFERRED STOCK
Stephen Schatzman certifies that he is the President and Secretary of The
Havana Republic, Inc., a Florida corporation (hereinafter referred to as the
"Corporation" or the "Company"); that, pursuant to the Articles of
Incorporation, as amended and restated, and Section 607.0602 of the Florida
Business Corporation Act, the Board of Directors of the Corporation duly adopted
the following Designation of Series A Convertible Preferred Stock on November
6, 1997 and that shareholder action was not required.
1. Creation of Series A Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 2,500 shares and designated as
the Series A Convertible Preferred Stock, no par value, having the voting
powers, preferences, relative, participating, limitations, qualifications
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth below.
2. Dividend Provisions. In the event a dividend is declared with respect
to the Company's Common Stock prior to Conversion of the Series A Convertible
Preferred Stock, upon such conversion, such dividend shall be paid with respect
to the Shares of Common Stock into which the Series A Convertible Preferred
Stock were converted. Each share of Series A Convertible Preferred Stock shall
rank on a parity with each other share of Series A Convertible Preferred Stock
with respect to dividends.
3. Redemption Provisions. Each share of the Series A Convertible Preferred
Stock is redeemable on the following manner, at a price of $1,350.00 per Share
(the "Redemption Price"). The Corporation shall have the right to redeem each
Share within twenty-four hours after the Notice of Conversion (as defined in
Section 5(a)) is given by a Holder with respect to such Shares. The Corporation
shall effect such redemption by payment to the Holder by wire transfer or
certified check payable to the Holder on or before the Redemption Date, which
shall be the later of (i) the tenth calendar after the Notice of Conversion or
(ii) the date on which the Holder has delivered the certificates representing
the Preferred Stock proposed to be converted pursuant to Section 5(a)(1). In the
event the Corporation shall not make such payment it shall be deemed to have
waived its right to redemption as to those Shares. The Corporation shall have
the right to redeem less than all of the Shares which are the subject of the
Notice of Conversion.
4. Liquidation Provisions. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the Series A
Convertible Preferred Stock shall be entitled to receive an amount equal to
$1,350.00 per share. After the full preferential liquidation amount has been
paid to, or determined and set apart for the Series A Convertible Preferred
Stock and all other series of Preferred Stock hereafter authorized and issued,
if any, the remaining assets of the Corporation available for distribution to
shareholders shall be distributed ratably to the holders of the common stock. In
the event the assets of the Corporation available for distribution to its
shareholders are insufficient to pay the full preferential liquidation amount
per share required to be paid the Corporation's Series A Convertible Preferred
Stock, the entire amount of assets of the
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Corporation available for distribution to shareholders shall be paid up to their
respective full liquidation amounts first to the Series A Convertible Preferred
Stock, then to any other series of Preferred Stock hereafter authorized and
issued, all of which amounts shall be distributed ratably among holders of each
such series of Preferred Stock, and the common stock shall receive nothing. A
reorganization or any other consolidation or merger of the Corporation with or
into any other corporation, or any other sale of all or substantially all of the
assets of the Corporation, shall not be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 4, and the
Series A Convertible Preferred Stock shall be entitled only to (i) the right
provided in any agreement or plan governing the reorganization or other
consolidation, merger or sale of assets transaction, (ii) the rights contained
in the Florida Business Corporation Act and (iii) the rights contained in other
Sections hereof.
5. Conversion Provisions. The holders of shares of Series A Convertible
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT - OPTION OF HOLDER. Subject to Section 5(h) hereof,
each share of Series A Convertible Preferred Stock (the "Preferred
Shares") shall be convertible, at the option of its holder, at any time,
into a number of shares of common stock of the Company (the "Common
Stock") at the initial conversion rate (the "Conversion Rate") defined
below. The initial Conversion Rate, subject to the adjustments described
below, shall be a number of shares of Common Stock equal to $1,000,
divided by the lower of (i) Seventy Percent (70%) of the average Market
Price of the Common Stock for the five trading days immediately prior to
the Conversion Date (defined below) or (ii) 75% of Market Price on date of
first closing ("Closing Date"), increased proportionally for any reverse
stock split and decreased proportionally for any forward stock split or
stock dividend. For purposes of this Section 5(a), Market Price for any
date shall be the closing bid price of the Common Stock on such date, as
reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or the closing bid price in the
over-the-counter market if other than Nasdaq.
(b) No fractional shares of Common Stock shall be issued upon conversion
of the Preferred Shares, and in lieu thereof the number of shares of
Common Stock issuable for each Preferred Share converted shall be rounded
to the nearest whole number. Such number of whole shares of Common Stock
issuable upon the conversion of one Preferred Share shall be multiplied by
the number of Preferred Shares submitted for conversion pursuant to the
Notice of Conversion (defined below) to determine the total number of
shares of Common Stock issuable in connection with any conversion.
(c) In order to convert the Preferred Shares into shares of Common Stock,
the holder of the Preferred Shares shall: (i) complete, execute and
deliver to the Corporation the conversion certificate set forth in Section
5 (f) hereto (the "Notice of Conversion"); and (ii) surrender the
certificate or certificates representing the Preferred Shares being
converted (the "Converted Certificate") to the Corporation. The Notice of
Conversion shall be effective and
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in full force and effect if delivered to the Corporation by facsimile
transmission at (954) 349- 7025. Provided that a copy of the Notice of
Conversion is delivered to the Corporation on such date by facsimile
transmission or otherwise, and provided that the original Notice of
Conversion and the Converted Certificate are delivered to the Corporation
within three (3) business days thereafter at the Corporation's principal
place of business which is presently at 1360 Weston Road, Weston, Florida
33326, the date on which notice of conversion is given (the "Conversion
Date") shall be deemed to be the date set forth therefor in the Notice of
Conversion; and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of the
Conversion Date. If the original Notice of Conversion and the Converted
Certificate are not delivered to the Corporation within three (3) business
days following the Conversion Date, the Notice of Conversion shall become
null and void as if it were never given and the Corporation shall, within
two (2) business days thereafter, return to the holder by overnight
courier any Converted Certificate that may have been submitted in
connection with any such conversion. In the event that any Converted
Certificate submitted represents a number of Preferred Shares that is
greater than the number of such shares that is being converted pursuant to
the Notice of Conversion delivered in connection therewith, the
Corporation shall deliver, together with the certificates for the shares
of Common Stock issuable upon such conversion as provided herein, a
certificate representing the remaining number of Preferred Shares not
converted.
(d) Upon receipt of a Notice of Conversion, the Corporation shall
absolutely and unconditionally be obligated to cause a certificate or
certificates representing the number of shares of Common Stock to which a
converting holder of Preferred Shares shall be entitled as provided
herein, which shares shall constitute fully paid and nonassessable shares
of Common Stock to be issued to, delivered by overnight courier to, and
received by such holder by the fifth (5th) calendar day following the
Conversion Date unless the Company has duly redeemed the Preferred Shares
which are the subject of the Notice of Conversion in accordance with
Section 3 hereof. Such delivery shall be made at such address as such
holder may designate therefor in its Notice of Conversion or in its
written instructions submitted together therewith. In the event that
delivery is not made by the fifteenth (15th) calendar day following the
Conversion Date, an additional number of shares of Common Stock equal to
1/2% of the Common Stock to be delivered shall be issued and delivered to
the holder for each day until receipt.
(e) No less than 50 shares of Series A Convertible Preferred Stock may be
converted at any one time, unless the holder then holds less than 50
shares and converts all shares at that time.
(f) The Notice of Conversion shall be in substantially the following form:
"The undersigned holder ( the "Holder") is surrendering to The
Havana Republic, Inc., a Florida corporation (the "Company"), one or
more certificates
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representing shares of Series A Convertible Preferred Stock of the
Company (the "Preferred Stock") in connection with the conversion of
all or a portion of the Preferred Stock into shares of Common Stock,
no par value per share, of the Company (the "Common Stock") as set
forth below.
1. The Holder understands that the Preferred Stock were issued by
the Company pursuant to the exemption from registration under the
United States Securities Act of 1933, as amended (the "Securities
Act"), provided by Regulation D and/or Section 4(2) thereunder
promulgated thereunder.
2. The Holder represents and warrants that all offers and sales of
the Common Stock issued to the Holder upon such conversion of the
Preferred Stock shall be made (a) pursuant to an effective
registration statement under the Securities Act, (in which case a
prospectus has been delivered to the purchaser) (b) in compliance
with Rule 144, or (c) pursuant to some other exemption from
registration.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Conversion Date:
Number of Dividend Shares:
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
NAME OF HOLDER:
------------------------------
(Signature of Holder)
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<PAGE> 5
(b) ADJUSTMENTS TO CONVERSION RATE. (1) RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable on conversion of the Series A
Convertible Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, reverse stock split or forward
stock split or stock dividend or otherwise (other than a subdivision or
combination of shares provided for above), the holders of the Series A
Convertible Preferred Stock shall, upon its conversion, be entitled to
receive, in lieu of the Common Stock which the holders would have become
entitled to receive but for such change, a number of shares of such other
class or classes of stock that would have been subject to receipt by the
holders if they had exercised their rights of conversion of the Series A
Convertible Preferred Stock immediately before that change.
(2) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If at any
time there shall be a capital reorganization of the Corporation's common
stock (other than a sub division, combination, reclassification or
exchange of shares provided for elsewhere in this Section (5) or merger of
the Corporation into another corporation, or the sale of the
Corporation's properties and assets as, or substantially as, an entirety
to any other person, then, as a part of such reorganization, merger or
sale, lawful provision shall be made so that the holders of the Series A
Convertible Preferred Stock shall thereafter be entitled to receive upon
con version of the Series A Convertible Preferred Stock, the number of
shares of stock or other securities or property of the Corporation, or of
the successor corporation resulting from such merger, to which holders of
the Common Stock deliverable upon conversion of the Series A Convertible
Preferred Stock would have been entitled on such capital reorganization,
merger or sale if the Series A Convertible Preferred Stock had been
converted immediately before that capital reorganization, merger or sale
to the end that the provisions of this paragraph (b)(2) (including
adjustment of the Conversion Rate then in effect and number of shares
purchasable upon conversion of the Series A Convertible Preferred Stock)
shall be applicable after that event as nearly equivalently as may be
practicable.
(c) NO IMPAIRMENT. The Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer
of assets, merger, dis solution, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times
in good faith assist in the carrying out of all the provision of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
the Series A Convertible Preferred Stock against impairment.
(d) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Conversion Rate for any shares of Series A
Convertible Preferred Stock, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A Convertible
Preferred Stock effected thereby a certificate setting forth such
adjustment or
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<PAGE> 6
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at
any time of any holder of Series A Convertible Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Rate at the time
in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of such holder's shares of Series A Convertible Preferred
Stock.
(e) NOTICES OF RECORD DATE. In the event of the establishment by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the
Corporation shall mail to each holder of Series A Preferred Stock at least
twenty (20) days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution and the amount and character of such dividend or
distribution.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion
of the shares of the Series A Convertible Preferred Stock such number of
its shares of Common Stock as shall from time to time be sufficient, based
on the Conversion Rate then in effect, to effect the conversion of all
then outstanding shares of the Series A Preferred Stock. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, then, in addition to all rights, claims and damages to
which the holders of the Series A Convertible Preferred Stock shall be
entitled to receive at law or in equity as a result of such failure by the
Corporation to fulfill its obligations to the holders hereunder, the
Corporation will take any and all corporate or other action as may, in the
opinion of its counsel, be helpful, appropriate or necessary to increase
its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(g) NOTICES. Any notices required by the provisions hereof to be given to
the holders of shares of Series A Convertible Preferred Stock shall be
deemed given if deposited in the Uni ted States mail, postage prepaid and
return receipt requested, and addressed to each holder of record at its
address appearing on the books of the Corporation or to such other address
of such holder or its representative as such holder may direct.
(h) MANDATORY CONVERSION. All outstanding shares of Series A Convertible
Preferred Stock (not sooner converted into Common Stock) shall be
mandatorily convertible into Common Stock one year from the Closing Date,
provided that the Company is at such time a reporting issuer under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or at
such time that the Company becomes a reporting issuer if subsequent to one
year
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<PAGE> 7
from the Closing Date, and in either case, if the Company is the current
in its filings under the Exchange Act.
6. VOTING PROVISIONS. Except as otherwise expressly provided or required
by law, the Series A Convertible Preferred Stock shall have no voting rights.
IN WITNESS WHEREOF, the Company has caused this Designation of Series A
Convertible Preferred Stock to be duly executed by its President and attested
to by its Secretary this 6 day of November, 1997 who, by signing their names
hereto, acknowledge that this Designation of Series A Convertible Preferred
Stock is the act of the Corporation and state to the best of their knowledge
information and belief, under the penalties of perjury, that the above matters
and facts are true in all material respects.
THE HAVANA REPUBLIC, INC.
/s/ Stephen Schatzman
------------------------------------------
Stephen Schatzman, President
ATTEST:
/s/ Stephen Schatzman
------------------------------------------
Stephen Schatzman, Secretary
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of January, 1997, (the "Effective Date"), between THE HAVANA
REPUBLIC, INC., a Colorado corporation (the "Company"), whose address is 1360
Weston Road, Weston, Florida 33326, and STEPHEN SCHATZMAN (the "Employee"),
whose address is 2101 N.E. 212th Street, Miami, Florida 33179.
WHEREAS, the Employee is willing to be employed by the Company
on the terms, covenants and conditions of this Agreement; and
WHEREAS, the Company is willing to employ the Employee on the
terms, covenants and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the
following definitions will be applicable:
(a) Cause - (1) The willful and continued failure
substantially to perform duties for the Company (other than any such failure
resulting from incapacity due to physical or mental illness), after a demand for
substantial performance is delivered by the Board of Directors of the Company
that specifically identifies the manner in which there has been a failure to
substantially perform duties; (2) the willful engagement in misconduct that is
materially injurious to the Company, monetarily or otherwise; (3) an act or acts
constituting a felony under the laws of the United States or the State of
Florida; (4) an act or acts that result or are intended to result in improper
personal enrichment at the expense of the Company; or (5) the embezzlement of
funds or misappropriation of other property.
(b) DATE OF TERMINATION - (1) If employment is terminated for
Cause, the date specified in the Notice of Termination; or (2) if employment is
terminated for any other reason, the date on which~ a Notice of Termination is
given; provided that, if within 30 days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, whether by mutual
written agreement of the parties or by final judgment, order or decree of a
court of competent jurisdiction, with the time or appeal therefrom having
expired and no appeal having been perfected.
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<PAGE> 2
(c) GOOD REASON - (1) Without the Employee's express written
consent, the assignment to him of any duties inconsistent with his positions,
duties, responsibilities and status with the Company upon the beginning of
employment pursuant hereto, or a change in his reporting responsibilities,
titles or offices as in effect upon the beginning of employment pursuant hereto,
or his removal from or any failure to re-elect him to any of such positions,
except in connection with the termination of his employment for Cause or as a
result of his death or by him other than for Good Reason; (2) a reduction in his
base salary as in effect upon the beginning of employment pursuant hereto, or as
the same may be increased from time to time; (3) without his written consent, a
failure by the Company to continue any incentive compensation plans in which he
is entitled to participate (the "Incentive Plans") upon the beginning of
employment pursuant hereto, as the same may be modified from time to time but
substantially in the forms currently in effect, or a failure by the Company to
continue him as a participant in the Incentive Plans on at least the same basis
as he participates in accordance with the Incentive Plans upon the beginning of
employment pursuant hereto or upon the later implementation of any such
Incentive Plan during the term of this Agreement; (4) without his written
consent, his reassignment to a different location than his present office
location where practicality dictates a change in his residence, except for
required travel on business to an extent substantially consistent with his
business travel obligations upon the beginning of employment pursuant hereto or
except as otherwise specifically provided in this Agreement; (5) without his
written consent, the failure by the Company to continue in effect any benefit or
compensation, life insurance, health and accident, or disability plan in which
the Employee is participating upon the beginning of employment pursuant hereto
or upon the later implementation of any such plan during the term of this
Agreement (or plans providing him with substantially similar benefits), the
taking of any action by the Company that would adversely affect his
participation in or materially reduce his benefits pursuant to any such plans or
deprive him of any material fringe benefit enjoyed by him pursuant to such plan,
or the failure of the Company to provide him with a number of paid vacation days
to which he is then entitled in accordance with the normal vacation policy in
effect on the date thereof; or (6) any purported termination of his employment
that is not effected pursuant to a Notice of Termination as defined herein,
which purported termination shall not he effective for purposes of this
Agreement.
(d) NOTICE OF TERMINATION - Notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis fcr
termination of employment pursuant to the provision so indicated.
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<PAGE> 3
(e) WILLFUL - Not in good faith and without reasonable belief
that the action or omission to act was in the best interest of the Company.
2. EMPLOYMENT. The Company hereby employs the Employee, and
the Employee hereby accepts employment, as the President of the
Company, upon the terms and conditions of this Agreement.
3. AUTHORITY AND POWER DURING EMIOLOVMENT PERIOD. The duties
of the Employee shall be subject to the direction of the Company
and the Employee shall perform all duties as may be mutually agreed
upon between the Employee and the Company.
4. TERM. The term of employment hereunder will commence on the
Effective Date as set forth above and end on December 31, 2001,
unless sooner terminated by the Company for Cause.
5. CCMPENSATION AND BENEFITS.
a. COMPENSATION. For all services rendered by the Employee
pursuant to the terms of this Agreement and in consideration of the execution of
this Agreement by the Employee, the Company shall pay the Employee at an annual
rate of compensation in the initial amount of $80,00O, payable in accordance
with the Company's normal payroll procedures. On January 1 of each year of the
term of this Agreement beginning January 1, 1998, the annual rate of
compensation shall be increased if so determined by the Company's Board of
Directors.
If the Employee and the Company both agree, payment or all or any part
of the Employee's salary may be deferred until such time as both agree that the
Company can financially afford to pay such deferred salary in cash. In addition,
any such deferred salarv may, at the sole option of the Employee, be paid at any
time to the Employee in shares of the Ccmpany's common stock based on the "fair
market value" of such stock on the date of such election by the Employee. For
purposes of the foregoing sentence, "fair market value" shall mean if the common
stock is traded in a market in which actual transactions are reported, the mean
of the high and low prices at which the common stock is reported to have traded
on the relevant date in all markets on which trading in the common stock is
reported or, if there is no reported sale of the common stock on the relevant
date, the mean of the highest reported bid price and lowest reported asked price
for the common stock on the relevant date; or (ii) if the Common Stock is traded
only in markets in which there is no reporting of actual transactions, the
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<PAGE> 4
mean of the highest reported bid price and the lowest reported asked price for
the common stock on the relevant date.
b. EMPLOVEE BENEFITS. The Employee shall be entitled to all
fringe benefits that are currently or hereafter given during the term of this
Agreement to employees in comparable positions, including but not limited to
life insurance, medical and dental, health and accident, disability, and pension
or profit-sharing plans, programs or arrangements. In addition, the Employee
shall be entitled to an automobile allowance from the Company of $750 per month
and payment by the Company of the automobile insurance for the Employee's
automobile.
c. TAX WITHHOLDING. The Company may withhold from any
compensation or benefits payable pursuant to this Agreement all
taxes required to be withheld by any law, regulation or governmental ruling.
6. TERMINATION. Any termination of the Employee's employment pursuant
to this Agreement by the Company, other than for Cause, or by the Employee for
Good Reason shall constitute a breach by the Company of this Agreement. Any
purported termination by the Company for Cause or by the Employee for Good
Reason shall be communicated by written Notice of Termination to the other party
to this Agreement. Notwithstanding anything else contained in this Agreement,
the Employee will not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a Notice of Termination
from the Board of Directors of the Company, after reasonable notice to the
Employee and his counsel and an opportunity to be heard before the Board of
Directors of the Company, in which Notice of Termination the Board of Directors
makes a finding in good falth that the Employee committed one of the types of
conduct set forth in the definition of Cause contained in this Agreement and
specifies the particulars thereof in detail.
7. NOTICES. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; bv overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee last place of business or residence as shown on the records of the
Company, or in the case of the Company to its principal office at 1360 Weston
Road, Weston, Florida 33326, or such other place as it may designate.
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<PAGE> 5
8. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time, each party
will execute such additional instruments and take such action as may be
reasonably requested by the other party to carry out the intent and purposes of
this Agreement.
(b) TIME. Time is of the essence.
(c) ENTIRE ACRREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. It
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(d) AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(e) CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to the application of the principles pertaining to conflicts of laws.
(f) HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) PRONOUNS. All pronouns and any variations thereof shall he deemed
to refer to the masculine, feminine, neuter, singular or plural as the context
may require.
(h) CONSTRUCTION. This Agreement shal1 be construed neither against nor
in favor of any of the parties hereto, but rather in accordance with the fair
meaning thereof.
(i) EFFECT OF WAIVER. The failure of any party at any time or times to
require performance of any provision of this Agreement will in no manner affect
the right to enforce the same. The waiver by any party of any breach of any
provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of anv other provision.
(j) SEVERABILITY. The invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of this
Agreement affect the balance of such provision. In the event
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<PAGE> 6
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(k) ENFORCEMENT. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs. Any suit, action or proceeding with
respect to this Agreement shall be brought in the courts of Dade County in the
State of Florida or in the U.S. District Court for the Southern District of
Florida. The parties hereto hereby accepts the exclusive jurisdiction of those
courts for the purpose of any such suit, action or proceeding.
Venue for any such action, in addition to any other venue
permitted by statute, will be Dade County, Florida. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in Dade County, Florida, and
hereby further irrevocably waive any claim that any suit, action or proceeding
brought in Dade County, Florida, has been brought in an inconvenient forum.
The parties hereto acknowledge and agree that any party's
remedy at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach or threatened breach shall be per
se deemed as causing irreparable harm to such party. Therefore, in the event of
such breach or threatened breach, the parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offending party agrees not to oppose the aggrieved party's request for,
equitable relief in the form of specific enforcement, temporary restraining
order, temporary or permanent injunction, or any other equitable remedy that may
then be available to the aggrieved party.
(1) BINDING NATURE. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties hereto.
(m) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Witnesses: THE HAVANA REPUBLIC, INC.
a Colorado corporation
By:
------------------------------
Alex Gimelstein
Vice-President
--------------------------------
STEPHEN SCHATZMAN
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of January, 1997, (the "Effective Date"), between THE HAVANA
REPUBLIC, INC., a Colorado corporation (the "Company"), whose address is 1360
Weston Road, Weston, Florida 33326, and ALEX GIMELSTEIN (the "Employee"), whose
address is 21160 N.E. 22nd Court, Miami, Florida 33179.
WHEREAS, the Employee is willing to be employed by the Company
on the terms, covenants and conditions of this Agreement; and
WHEREAS, the Company is willing to employ the Employee on the
terms, covenants and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the
following definitions will be applicable:
(a) Cause - (1) The willful and continued failure
substantially to perform duties for the Company (other than any such failure
resulting from incapacity due to physical or mental illness), after a demand for
substantial performance is delivered by the Board of Directors of the Company
that specifically identifies the manner in which there has been a failure to
substantially perform duties; (2) the willful engagement in misconduct that is
materially injurious to the Company, monetarily or otherwise; (3) an act or acts
constituting a felony under the laws of the United States or the State of
Florida; (4) an act or acts that result or are intended to result in improper
personal enrichment at the expense of the Company; or (5) the embezzlement of
funds or misappropriation of other property.
(b) DATE OF TERMINATION - (1) If employment is terminated for
Cause, the date specified in the Notice of Termination; or (2) if employment is
terminated for any other reason, the date on which~ a Notice of Termination is
given; provided that, if within 30 days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination snall
be the date on which the dispute is final1v determined, whether by mutual
written agreement of the parties or by final judgment, order or decree of a
court of competent jurisdiction, with the time or appeal therefrom having
expired and no appeal having been perfected.
- 1 -
<PAGE> 2
(c) GOOD REASON - (1) Without the Employee's express written
consent, the assignment to him of any duties inconsistent with his positions,
duties, responsibilities and status with the Company upon the beginning of
employment pursuant hereto, or a change in his reporting responsibilities,
titles or offices as in effect upon the beginning of employment pursuant hereto,
or his removal from or any failure to re-elect him to any of such positions,
except in connection with the termination of his employment for Cause or as a
result of his death or by him other than for Good Reason; (2) a reduction in his
base salary as in effect upon the beginning of employment pursuant hereto, or as
the same may be increased from time to time; (3) without his written consent, a
failure by the Company to continue any incentive compensation plans in which he
is entitled to participate (the "Incentive Plans") upon the beginning of
employment pursuant hereto, as the same may be modified from time to time but
substantially in the forms currently in effect, or a failure by the Company to
continue him as a participant in the Incentive Plans on at least the same basis
as he participates in accordance with the Incentive Plans upon the beginning of
employment pursuant hereto or upon the later implementation of any such
Incentive Plan during the term of this Agreement; (4) without his written
consent, his reassignment to a different location than his present office
location where practicality dictates a change in his residence, except for
required travel on business to an extent substantially consistent with his
business travel obligations upon the beginning of employment pursuant hereto or
except as otherwise specifically provided in this Agreement; (5) without his
written consent, the failure by the Company to continue in effect any benefit or
compensation, life insurance, health and accident, or disability plan in which
the Employee is participating upon the beginning of employment pursuant hereto
or upon the later implementation of any such plan during the term of this
Agreement (or plans providing him with substantially similar benefits), the
taking of any action by the Company that would adversely affect his
participation in or materially reduce his benefits pursuant to any such plans or
deprive him of any material fringe benefit enjoyed by him pursuant to such plan,
or the failure of the Company to provide him with a number of paid vacation days
to which he is then entitled in accordance with the normal vacation policy in
effect on the date thereof; or (6) any purported termination of his employment
that is not effected pursuant to a Notice of Termination as defined herein,
which purported termination shall not he effective for purposes of this
Agreement.
(d) NOTICE OF TERMINATION - Notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis fcr
termination of employment pursuant to the provision so indicated.
- 2 -
<PAGE> 3
(e) WILLFUL - Not in good faith and without reasonable belief
that the action or omission to act was in the best interest of the Company.
2. EMPLOYMENT. The Company hereby employs the Employee, and
the Employee hereby accepts employment, as the Vice President of
the Company, upon the terms and conditions of this Agreement.
3. AUTHORITY AND POWER DURING EMIOLOVMENT PERIOD. The duties of the
Employee shall be subject to the direction of the Company and the Employee shall
perform all duties as may be mutually agreed upon between the Employee and the
Company. The Company recognizes that the Employee is a part-owner and primary
operator of Zelick's Tobacco, a family-owned retail and wholesale cigar business
with its principal place of business in Miami Beach, Florida. The Company
acknowledges that the Employee must devote time to the operation of Zelick's
Tobacco and agrees that the Employee's time commitment to the business affairs
of the Company must take the Employee's time commitment to Zelick's Tobacco into
consideration.
4. TERM. The term of employment hereunder will commence on the
Effective Date as set forth above and end on December 31, 2001,
unless sooner terminated by the Company for Cause.
5. CCMPENSATION AND BENEFITS.
a. COMPENSATION. For all services rendered by the Employee
pursuant to the terms of this Agreement and in consideration of the execution of
this Agreement by the Employee, the Company shall pay the Employee at an annual
rate of compensation in the initial amount of $80,00O, payable in accordance
with the Company's normal payroll procedures. On January 1 of each year of the
term of this Agreement beginning January 1, 1998, the annual rate of
compensation shall be increased if so determined by the Company's Board of
Directors.
If the Employee and the Company both agree, payment or all or any part
of the Employee's salary may be deferred until such time as both agree that the
Company can financially afford to pay such deferred salary in cash. In addition,
any such deferred salarv may, at the sole option of the Employee, be paid at any
time to the Employee in shares of the Ccmpany's common stock based on the "fair
market value" of such stock on the date of such election by the Employee. For
purposes of the foregoing sentence, "fair market value" shall mean if the common
stock is traded in a market in which actual transactions are reported, the mean
of the high and low prices at which the common stock is reported to have traded
on
- 3 -
<PAGE> 4
the relevant date in all markets on which trading in the common stock is
reported or, if there is no reported sale of the common stock on the relevant
date, the mean of the highest reported bid price and lowest reported asked price
for the common stock on the relevant date; or (ii) if the Common Stock is traded
only in markets in which there is no reporting of actual transactions, the mean
of the highest reported bid price and the lowest reported asked price for the
common stock on the relevant date.
b. EMPLOVEE BENEFITS. The Employee shall be entitled to all
fringe benefits that are currently or hereafter given during the term of this
Agreement to employees in comparable positions, including but not limited to
life insurance, medical and dental, health and accident, disability, and pension
or profit-sharing plans, programs or arrangements. In addition, the Employee
shall be entitled to an automobile allowance from the Company of $750 per month
and payment by the Company of the automobile insurance for the Employee's
automobile.
c. TAX WITHHOLDING. The Company may withhold from any
compensation or benefits payable pursuant to this Agreement all
taxes required to be withheld by any law, regulation or governmental
ruling.Severance Benefits.
6. TERMINATION. Any termination of the Employee's employment pursuant
to this Agreement by the Company, other than for Cause, or by the Employee for
Good Reason shall constitute a breach by the Company of this Agreement. Any
purported termination by the Company for Cause or by the Employee for Good
Reason shall be communicated by written Notice of Termination to the other party
to this Agreement. Notwithstanding anything else contained in this Agreement,
the Employee will not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a Notice of Termination
from the Board of Directors of the Company, after reasonable notice to the
Employee and his counsel and an opportunity to be heard before the Board of
Directors of the Company, in which Notice of Termination the Board of Directors
makes a finding in good falth that the Employee committed one of the types of
conduct set forth in the definition of Cause contained in this Agreement and
specifies the particulars thereof in detail.
7. NOTICES. Any notice required or permitted to be given
under the terms of this Agreement shall be sufficient if in writing
and if sent postage prepaid by registered or certified mail, return
receipt requested; bv overnight delivery; by courier; or by
confirmed telecopy, in the case of the Employee to the Employee
last place of business or residence as shown on the records of the
- 4 -
<PAGE> 5
Company, or in the case of the Company to its principal office at 1360 Weston
Road, Weston, Florida 33326, or such other place as it may designate.
8. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time, each party
will execute such additional instruments and take such action as may be
reasonably requested by the other party to carry out the intent and purposes of
this Agreement.
(b) TIME. Time is of the essence.
(c) ENTIRE ACRREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. It
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(d) AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(e) CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to the application of the principles pertaining to conflicts of laws.
(f) HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) PRONOUNS. All pronouns and any variations thereof shall he deemed
to refer to the masculine, feminine, neuter, singular or plural as the context
may require.
(h) CONSTRUCTION. This Agreement shal1 be construed neither against nor
in favor of any of the parties hereto, but rather in accordance with the fair
meaning thereof.
(i) EFFECT OF WAIVER. The failure of any party at any time or times to
require performance of any provision of this Agreement will in no manner affect
the right to enforce the same. The waiver by any party of any breach of any
provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of anv other provision.
- 5 -
<PAGE> 6
(j) SEVERABILITY. The invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of this
Agreement affect the balance of such provision. In the event that any one or
more of the provisions contained in this Agreement or any portion thereof shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.
(k) ENFORCEMENT. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs. Any suit, action or proceeding with
respect to this Agreement shall be brought in the courts of Dade County in the
State of Florida or in the U.S. District Court for the Southern District of
Florida. The parties hereto hereby accepts the exclusive jurisdiction of those
courts for the purpose of any such suit, action or proceeding.
Venue for any such action, in addition to any other venue
permitted by statute, will be Dade County, Florida. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in Dade County, Florida, and
hereby further irrevocably waive any claim that any suit, action or proceeding
brought in Dade County, Florida, has been brought in an inconvenient forum.
The parties hereto acknowledge and agree that any party's
remedy at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach or threatened breach shall be per
se deemed as causing irreparable harm to such party. Therefore, in the event of
such breach or threatened breach, the parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offending party agrees not to oppose the aggrieved party's request for,
equitable relief in the form of specific enforcement, temporary restraining
order, temporary or permanent injunction, or any other equitable remedy that may
then be available to the aggrieved party.
(1) BINDING NATURE. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties hereto.
- 6 -
<PAGE> 7
(m) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Witnesses: THE HAVANA REPUBLIC, INC.
a Colorado corporation
By:
-----------------------------
Stephen Schatzman,
President
--------------------------------
ALEX GIMELSTEIN
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<PAGE> 1
Exhibit 10.3
CENTER: COUNTRY ISLES PLAZA JMB 301 7/92
TENANT: HAVANA REPUBLIC W.H., INC.
SPACE: #1360
DATE: AS OF 11/1/96
SHOPPING CENTER LEASE
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article 1 Basic Provisions.................................................. 1
Article 2 Premises, Term and Commencement Date.............................. 3
Article 3 Minimum Rent and Percentage Rent.................................. 3
Article 4 Payment of Rent, Rent Taxes and Prorations........................ 4
Article 5 Taxes and Center Expenses......................................... 5
Article 6 Condition of Premises; Opening for Business....................... 6
Article 7 Trade Fixtures, Alterations and Liens............................. 6
Article 8 Use and Operating Requirements.................................... 7
Article 9 Promotion of Center and Tenant's Business......................... 8
Article 10 Utilities......................................................... 9
Article 11 Maintenance and Repair of Premises................................ 10
Article 12 Common Areas...................................................... 10
Article 13 Insurance, Subrogation, and Waiver of Claims...................... 11
Article 14 Casualty Damage................................................... 12
Article 15 Condemnation...................................................... 13
Article 16 Return of Possession.............................................. 13
Article 17 Holding Over...................................................... 13
Article 18 Subordination, Attornment and Mortgagee Protection................ 14
Article 19 Estoppel Certificate.............................................. 14
Article 20 Assignment and Subletting......................................... 14
Article 21 Rights Reserved by Landlord....................................... 15
Article 22 Landlord's Remedies............................................... 17
Article 23 Landlord's Right to Cure.......................................... 19
Article 24 Indemnification................................................... 19
Article 25 Safety and Security Devices, Services and Programs................ 20
Article 26 Hazardous Materials............................................... 20
Article 27 Captions and Severability......................................... 21
Article 28 Definitions....................................................... 21
Article 29 Rules............................................................. 24
Article 30 No Waiver......................................................... 24
Article 31 Attorneys' Fees, Counterclaims, Venue and Jury Trial.............. 24
Article 32 Personal Property Taxes........................................... 25
Article 33 Conveyance by Landlord and Liability.............................. 25
Article 34 Notices........................................................... 25
Article 35 Real Estate Brokers............................................... 25
Article 36 Security Deposit and Landlord's Lien.............................. 26
Article 37 Miscellaneous..................................................... 26
Article 38 Offer............................................................. 27
Article 39 Americans With Disabilities Act................................... 27
Article 40 Entire Agreement.................................................. 28
Exhibit A: The Premises
Exhibit B: Tenant's Work
Exhibit C: Sign Criteria
Exhibit D: Guaranty
</TABLE>
<PAGE> 2
SHOPPING CENTER LEASE
THIS LEASE made as of the 1st day of November, 1996, between COUNTRY
ISLES ASSOCIATES ("Landlord"), an Illinois general partnership, having a place
of business at 900 North Michigan Avenue, Chicago, Illinois 60611-1957 and
HAVANA REPUBLIC W.H., INC. ("Tenant"), a Florida corporation, whose principal
place of business is located at 2101 North East 212th Street, North Miami
Beach, Florida 33179.
ARTICLE 1
BASIC PROVISIONS
A. TENANT'S TRADE NAME: "HAVANA REPUBLIC"
B. CENTER: COUNTRY ISLES PLAZA
ADDRESS: 1360 Weston Road
Fort Lauderdale, Florida 33326
C. PREMISES: Space No. 1360 at the Center, consisting of approximately
1,997 rentable square feet, the approximate location of which is shown
cross-hatched on Exhibit A hereto
D. COMMENCEMENT DATE: The earlier to occur of: (i) January 1, 1997; or
(ii) the date that Tenant opens the Premises for business.
E. EXPIRATION DATE: The fifth (5th) anniversary of the Commencement Date,
plus the number of days, if any, required to have the term of this
Lease end on the last day of the calendar month in which the fifth
(5th) anniversary of the Commencement Date occurs.
F. PERMITTED USE: For the use as an upscale cigar emporium with private
smoking lounge, which may include the sale at retail of beer, wine and
liquor for consumption on the Premises and the sale at retail of
cigars and related products and for no other purpose whatsoever.
G. MINIMUM RENT:
<TABLE>
<CAPTION>
PERIOD MONTHLY AMOUNT ANNUAL AMOUNT
------ -------------- -------------
<S> <C> <C> <C> <C>
Ninety (90) days after through 1st Anniversary of the $3,328.33 $39,940.00
- ---------------------- ---------------------- --------- ----------
the Commencement Date Commencement Date
- --------------------- -----------------
1st Anniversary of the through 2nd Anniversary of the $3,411.54 $40,398.50
- ---------------------- ---------------------- --------- ----------
the Commencement Date Commencement Date
- --------------------- -----------------
2nd Anniversary of the through 3rd Anniversary of the $3,494.75 $41,937.00
- ---------------------- ---------------------- --------- ----------
the Commencement Date Commencement Date
- --------------------- -----------------
3rd Anniversary of the through 4th Anniversary of the $3,577.96 $42,935.50
- ---------------------- ---------------------- --------- ----------
the Commencement Date Commencement Date
- --------------------- -----------------
4th Anniversary of the through 5th Anniversary of the $3,661.17 $43,934.00
- ---------------------- ---------------------- --------- ----------
the Commencement Date Commencement Date
</TABLE>
<PAGE> 3
H. PERCENTAGE RENT:
<TABLE>
<CAPTION>
PERIOD AMOUNT EACH LEASE YEAR
------ ----------------------
<S> <C> <C>
Ninety (90) days after through 1st Anniversary of the Four percent (4%) of Gross Sales
the Commencement Date Commencement Date exceeding a Breakpoint of $1,125,000.00
1st Anniversary of the through 2nd Anniversary of the Four percent (4%) of Gross Sales
Commencement Date Commencement Date exceeding a Breakpoint of $1,170,000.00
2nd Anniversary of the through 3rd Anniversary of the Four percent (4%) of Gross Sales
Commencement Date Commencement Date exceeding a Breakpoint of $1,216,800.00
3rd Anniversary of the through 4th Anniversary of the Four percent (4%) of Gross Sales
Commencement Date Commencement Date exceeding a Breakpoint of $1,265,472.00
4th Anniversary of the through 5th Anniversary of the Four percent (4%) of Gross Sales
Commencement Date Commencement Date exceeding a Breakpoint of $1,316,090.80
</TABLE>
Prorations of Breakpoints for Partial Lease Years, and
prorations for Lease Years containing two different
Breakpoints for different periods, shall be as described in
Article 3.
I. INITIAL ESTIMATED MONTHLY CENTER EXPENSES: $780.49
J. INITIAL ESTIMATED MONTHLY TAXES: $474.29
K. INITIAL MONTHLY PROMOTION FUND CHARGE: $N/A
together with a non-recurring initial payment equal to 12
times such monthly amount
L. INITIAL MONTHLY MEDIA FUND CHARGE: $ N/A
M. OTHER INITIAL MONTHLY CHARGES:
<TABLE>
<CAPTION>
LEASE SECTION/
CHARGE AMOUNT RIDER/EXHIBIT
------ ------ -------------
<S> <C> <C>
$
--------------------- -------------- -------------------
$
--------------------- -------------- -------------------
$
--------------------- -------------- -------------------
$
--------------------- -------------- -------------------
$
--------------------- -------------- -------------------
</TABLE>
N. SECURITY DEPOSIT: $ 4.583.11
O. RADIUS RESTRICTION: Three (3) miles from the Center
P. GUARANTOR: Stephen and Francine Schatzman and Alex
and Toby Gimelstein
Q. RENT PAYMENT ADDRESS: Tenant shall forward all Rent, insurance
certificates and Gross Sales reports to Landlord at the
following address, or such other address or addresses as to
which Landlord shall provide advance notice: Country Isles
Plaza, File #32104, P.O. Box 99011, Chicago, Illinois
60693-2104
R. RENT SHALL BE PAYABLE TO: Country Isles Associates or such
other entity as Landlord shall designate from time to time in
writing.
The foregoing provisions shall be interpreted and applied in
accordance with the other provisions of this Lease set forth below.
The terms in this Article, and the terms defined in Article 28, shall
have the meanings specified therefor, herein or therein, when used as
capitalized terms in other provisions of this Lease.
2
<PAGE> 4
ARTICLE 2
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises for a term ("Term") commencing on the Commencement Date
and ending on the Expiration Date set forth in Article 1, unless sooner
terminated as provided herein, subject to the provisions herein contained. The
Commencement Date set forth in Article 1 shall be advanced to such earlier date
as Tenant opens the Premises for business. If Landlord delays delivering
possession of the Premises or substantial completion of any Landlord's Work
under Exhibit B, this Lease shall not be void or voidable and Landlord shall
have no liability for loss or damage resulting therefrom. In such case, the
Commencement Date shall be postponed for a period equal to the delay, except to
the extent that such delays arise from the acts or omissions of Tenant or
Tenant's employees, agents or contractors. If the Commencement Date is advanced
or postponed, the Rent and other obligations of Tenant, and the Term and
initial Lease Year hereunder, shall all commence on the Commencement Date as
advanced or postponed. However, the Expiration Date set forth in Article 1
shall not be changed. Landlord and Tenant shall confirm in writing any
adjustment to the Commencement Date hereunder upon written request by either
party. In the event of any dispute concerning such adjustment, Tenant shall pay
Rent commencing on the Commencement Date set forth in Article 1, subject to
adjustment between the parties after such dispute is resolved. Notwithstanding
the foregoing to the contrary, Landlord may delay delivery of the Premises and
performance of any Landlord's Work until this Lease has been mutually signed
and delivered, and such delays shall not postpone the Commencement Date set
forth in Article 1 or the commencement of Rent hereunder, except as the parties
may expressly agree otherwise in writing.
ARTICLE 3
MINIMUM RENT AND PERCENTAGE RENT
A. MINIMUM RENT. Tenant shall pay Landlord the monthly Minimum
Rent set forth in Article 1 in advance on or before the first day of each
calendar month during the Term, except that Minimum Rent for the first full and
any initial partial calendar month shall be paid when Tenant executes this
Lease.
B. PERCENTAGE RENT. Tenant shall pay Landlord Percentage Rent
each Lease Year equal to the applicable percentage of the amount by which Gross
Sales exceed the applicable Breakpoint for such Lease Year set forth in Article
1. Percentage Rent for each Lease Year shall be paid on a monthly basis
commencing with the first month in each Lease Year in which Tenant's Gross
Sales for such Lease Year exceed the applicable Breakpoint. Such payments shall
be made on or before the fifteenth (15th) day of each calendar month with
respect to Gross Sales made during each preceding month. The term "Lease Year"
shall have the meaning specified therefor in Article 28.
C. BREAKPOINT PRORATIONS. The Breakpoint for any Partial Lease
Year shall be prorated on a per diem basis. If Minimum Rent is abated or
reduced for any reason during any Lease Year, the Breakpoint for such period
shall be reduced proportionately. If two Breakpoint amounts are in effect
during different portions of a given Lease Year under Article 1, the Breakpoint
for such Lease Year shall be the weighted average of both Breakpoint amounts,
determined as follows: (a) each Breakpoint amount shall be multiplied by the
number of days during which it is in effect, and then divided by 365, and (b)
the amounts so computed shall be added to obtain the weighted average
Breakpoint for such Lease Year.
D. ADJUSTMENTS. If the Center is expanded during the Term by the
addition of one or more Majors, the Minimum Rent and the Breakpoint, including
each subsequent level thereof if either is scheduled to increase during the
Term under Article 1, shall be increased by ten percent (10%) as of the date
each such additional Major opens for business. Commencing with the fourth full
Lease Year, and each Lease Year thereafter, Landlord reserves the right to
increase the monthly Minimum Rent to an amount equal to eighty-five percent
(85%) of the average total monthly Minimum Rent and Percentage Rent payable by
Tenant during the three Lease Years prior thereto, with a proportionate
adjustment of the Breakpoint; provided, in no event shall the Minimum Rent ever
be reduced below the rate of Minimum Rent then in effect or otherwise payable
under this Lease.
E. GROSS SALES RECORDS. Tenant shall ensure that the business of
Tenant and of any subtenant, licensee or concessionaire in, at or from the
Premises is operated such that the following books and records (collectively,
"Tenant's Records") are prepared, preserved and maintained in accordance with
generally accepted accounting principles: (i) daily dated sealed, continuous,
cash register tapes, (ii) serially numbered sales slips, (iii) settlement
report sheets of transactions with subtenants, concessionaires and licensees,
(iv) bank statements, (v) general ledger or summary record of all receipts and
disbursements from operations in, at or from the Premises, (vi) state and local
sales and use tax returns, and (vii) such other records that would normally be
kept pursuant to generally accepted accounting principles, or as the Landlord
may reasonably require in order to determine Gross Sales hereunder. A separate
bank account shall be maintained for all revenue from the Premises and no funds
from any other source shall be deposited in such account. Tenant shall retain
Tenant's Records at the Premises or at the home or regional office of Tenant
for at least three (3) years from the end of the Lease Year to which they are
applicable or, if any audit is required or a controversy should arise between
the parties regarding Percentage Rent, until such audit or controversy is
terminated, even though such retention period may be after the expiration of 3
3
<PAGE> 5
the Term or earlier termination of this Lease.
F. GROSS SALES STATEMENTS. Tenant shall provide Landlord with a
monthly statement of Gross Sales within fifteen (15) days after the end of each
calendar month, signed by an authorized representative, which shall show Gross
Sales and an itemization of any exclusions or deductions therefrom for such
month, as well as year-to-date amounts for the current Lease Year. If any
Percentage Rent is due for such month, the payment shall accompany such
statement. In addition to such regular monthly statements, Tenant shall provide
an annual statement within sixty (60) days after the end of each Lease Year,
which shall show the total amount of Gross Sales for such Lease Year, and shall
be certified to be true, complete and correct by an independent certified
public accountant reasonably satisfactory to Landlord, or at Tenant's option by
Tenant's chief financial officer. If such annual statement shows that Tenant
underpaid Percentage Rent for such Lease Year, Tenant shall include the
additional amount with such statement, and if such statement shows that Tenant
overpaid Percentage Rent, Landlord shall provide a credit or refund. Tenant
shall require that any subtenant, licensee or concessionaire furnish similar
statements.
G. AUDITS. Landlord may from time to time (but not more
frequently than once each calendar year), upon at least ten (10) days' notice
to Tenant, cause a complete audit or examination to be made of Tenant's Records
and such books and records of any subtenant, licensee or concessionaire for all
or any part of the three Lease Years immediately preceding such notice. During
such audit, Landlord or its authorized representatives shall have full and free
access to Tenant's Records and the right to require that Tenant, its agents and
employees furnish such information or explanation with respect to such items as
may be necessary for a proper examination and audit thereof. If such audit or
examination discloses that any of Tenant's statements of Gross Sales
understates Gross Sales made during any Lease Year by one percent (1%) or
more, or if Tenant shall have failed to furnish Landlord any monthly Gross
Sales statements during any Lease Year or shall have failed to prepare and
maintain Tenant's Records as required herein, Tenant shall pay Landlord the
cost of such audit or examination, including travel and related expenses, and
any deficiency in Percentage Rent, with interest at the Default Rate. If such
audit or examination shall disclose an understatement of more than five percent
(5%), Landlord shall also have the right to cancel this Lease by written notice
given to Tenant within six (6) months after such audit. Landlord's acceptance
of Percentage Rent shall be without prejudice to the Landlord's examination,
audit and other rights hereunder.
H. GROSS SALES DEFINED. "Gross Sales" shall mean the entire
amount of the actual sale price, whether for cash, credit or otherwise, of all
sales of goods and services and all other income and receipts whatsoever of all
business conducted at, on or from the Premises, including, without limitation:
(i) mail, telephone, facsimile and other orders received or filled at the
Premises, including but not limited to catalogue sales, (ii) deposits not
refunded to purchasers, (iii) orders taken at the Premises although filled
elsewhere, (iv) gross receipts from vending and game machines (not to be
construed to authorize vending or game machines unless specifically set forth
in Article 1), (v) sale price of gift and merchandise certificates, (vi)
payments from other parties for shelf or advertising space at or respecting the
Premises, (vii) the full value of all consideration other than money received,
(viii) all other gross income or receipts from any business or operation at, on
or from the Premises, and (ix) Gross Sales by any sublessee, concessionaire or
licensee. However, Gross Sales shall not include (but Tenant shall keep
separate records therefor as part of Tenant's Records): (a) returns to shippers
or manufacturers, (b) proceeds from the sale of used trade fixtures, (c) any
cash or credit refunds made upon any sale in or from the Premises where the
merchandise is returned by the purchaser, (d) any sales or excise tax imposed
by any duly constituted governmental authority (provided that no income or
franchise tax, capital stock tax, tax based upon gross receipts, assets or net
worth, or similar tax shall be deducted from Gross Sales), and (e) the exchange
of merchandise between the stores and warehouses of Tenant, if any, where such
exchange of merchandise is made solely for the convenient operation of the
business of Tenant and not for the purpose of consummating a sale that has
theretofore been made in or from the Premises or for the purpose of depriving
Landlord of the benefit of a sale that otherwise would be made in or from the
Premises. No deduction shall be allowed for any uncollected or uncollectible
amounts or reserves therefor, nor for cost of products or services sold, or
other costs, charges or expenses of purchasing, financing, selling,
transportation, overhead or taxes except as expressly provided herein.
Trade-ins shall not reduce the sale price of the item sold for purposes hereof.
Layaway, credit and installment sales shall be included in the month in which
the goods or services are delivered or provided, or in which any portion of the
payment is received, whichever first occurs, regardless of when or whether full
payment is received.
ARTICLE 4
PAYMENT OF RENT, RENT TAXES AND PRORATIONS
A. RENT AND RENT TAXES. Minimum Rent, Percentage Rent, Taxes,
Center Expenses, Promotion Fund Charges, Media Fund Charges and any other
amounts which Tenant is or becomes obligated to pay Landlord under this Lease
are sometimes herein referred to collectively as "Rent", and all remedies
applicable to the non-payment of Rent shall be applicable thereto. Rent shall
be paid without any prior demand or notice therefor, and shall in all events be
paid without any deduction, recoupment, set-off or counterclaim, and without
relief from any valuation or appraisement laws. Tenant shall pay any rent tax,
sales tax, service tax, transfer tax, value added tax, or any other applicable
tax on the Rent, utilities or services herein or otherwise respecting this
Lease or any other document entered in connection herewith. Landlord may apply
payments received from Tenant to any obligations of Tenant then accrued, without
regard to such obligations as may be designated by Tenant.
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B. PRORATIONS. If the Term commences on a day other than the
first day of a calendar month or ends on a day other than the last day of a
calendar month, the Minimum Rent, monthly payments of estimated Taxes and
Center Expenses, Promotion Fund Charge, Media Fund Charge and any other amounts
payable on a monthly basis shall be prorated on a per diem basis for such
partial calendar months. If the Minimum Rent is scheduled to increase under
Article 1 other than on the first day of a calendar month, the amount for such
month shall be prorated on a per diem basis to reflect the number of days of
such month at the then current and increased rates, respectively. If the Term
commences other than on January 1, or ends other than on December 31, Tenant's
obligations to pay amounts towards actual Taxes and Center Expenses for such
first or final calendar years shall be prorated on a per diem basis to reflect
the portion of such years included in the Term. Prorations of Breakpoints for
Partial Lease Years, and prorations for Lease Years containing two different
Breakpoints for different periods, shall be as described in Article 3.
ARTICLE 5
TAXES AND CENTER EXPENSES
A. TAXES. Tenant shall pay Landlord an amount equal to Tenant's
Proportionate Share of Taxes in the manner described below.
B. CENTER EXPENSES. Tenant shall pay Landlord an amount equal to
Tenant's Proportionate Share of Center Expenses in the manner described below.
C. MANNER OF PAYMENT. Taxes and Center Expenses shall be paid in
the following manner:
(i) Landlord may reasonably estimate in advance the
amounts Tenant shall owe for Taxes and Center Expenses for any full or
partial calendar year of the Term. In such event, Tenant shall pay
such estimated amounts, on a monthly basis, on or before the first day
of each calendar month, together with Tenant's payment of Minimum
Rent. Tenant shall pay initially and until further notice by Landlord
the estimated amounts set forth in Article 1. Landlord may reasonably
adjust the estimated amounts, including the initial estimated amounts
set forth in Article 1, from time to time prior to the Commencement
Date and during the Term.
(ii) Within 180 days after the end of each calendar year,
or as soon thereafter as practicable, Landlord shall provide a
statement (the "Statement") to Tenant showing: (a) the amount of
actual Taxes and Center Expenses for such calendar year, with a
listing of amounts for major categories of Center Expenses, (b) any
amount paid by Tenant towards Taxes and Center Expenses during such
calendar year on an estimated basis, and (c) any revised estimate of
Tenant's obligations for Taxes and Center Expenses for the current
calendar year.
(iii) If the Statement shows that Tenant's estimated
payments were less than Tenant's actual obligations for Taxes and
Center Expenses for such year, Tenant shall pay the difference. If the
Statement shows an increase in Tenant's estimated payments for the
current calendar year, Tenant shall pay the difference between the new
and former estimates for the period from January 1 of the current
calendar year through the month in which the Statement is sent. Tenant
shall make such payments within ten (10) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated
payments exceeded Tenant's actual obligations for Taxes and Center
Expenses, Tenant shall receive a credit for the difference against
payments of Rent next due. If the Term shall have expired and no
further Rent shall be due, Landlord shall refund such difference when
Landlord sends the Statement.
D. Tax Refunds, Supplemental Billings and Fiscal Tax Years. Tax
refunds shall be deducted from Taxes in the year they are received by Landlord.
If Taxes for any period during the Term or any extension thereof shall be
increased after payment thereof by Landlord for any reason, including without
limitation error, reassessment, or supplemental billing by applicable
governmental or municipal authorities, Tenant shall pay Landlord within ten
(10) days after notice Tenant's Proportionate Share of such increased Taxes. If
any Taxes shall be paid based on assessments or bills by a governmental or
municipal authority using a fiscal year other than a calendar year, Landlord
may elect from time to time to bill Tenant and make adjustments: (i) based on
such fiscal year, or (ii) based on tax payments becoming due during the subject
calendar year without regard to such fiscal year.
E. FINALITY OF STATEMENTS. Unless Tenant takes exception to any
Statement by written notice to Landlord within thirty (30) days after Landlord
provides such Statement to Tenant, such Statement shall be considered final and
binding on Tenant. Tenant acknowledges that Landlord's ability to budget and
incur expenses depends on the finality of such Statement, and accordingly
agrees that time is of the essence of this Paragraph. If Tenant takes exception
to any matter contained in any Statement as provided herein, Landlord may refer
the matter to an independent certified public accountant, whose certification
as to the proper amount shall be final and binding as between Landlord and
Tenant. Tenant shall promptly pay the cost of such certification unless such
certification determines that Tenant was overbilled by more than 2%. Pending
resolution of any such
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exceptions, Tenant shall continue paying Tenant's Proportionate Share of Taxes
and Center Expenses in the amounts determined by Landlord, subject to
adjustment between the parties after any such exceptions are resolved.
F. GENERAL MATTERS. So long as Tenant's obligations hereunder
are not materially adversely affected thereby, Landlord reserves the right to
reasonably change, from time to time, the manner or timing of the foregoing
payments. Although this Lease contemplates the computation of Taxes and Center
Expenses on a cash basis, Landlord may make reasonable and appropriate accrual
adjustments and Landlord reserves the right to change to a full accrual system
of accounting. In lieu of providing one Statement covering Taxes and Center
Expenses, Landlord may provide separate statements at the same or different
times. No delay by Landlord in providing the Statement (or separate statements)
shall be deemed a default by Landlord or a waiver of Landlord's right to
require payment of Tenant's obligations for actual or estimated Taxes or Center
Expenses.
ARTICLE 6
CONDITION OF PREMISES; OPENING FOR BUSINESS
Tenant agrees to accept the Premises, Center, and any Systems and
Equipment serving the Premises "as is," without any agreements,
representations, understandings or obligations on the part of Landlord to
perform any alterations, repairs or improvements except as may be expressly
provided in Exhibit B hereto or elsewhere in this Lease ("Landlord's Work").
Tenant shall on or before the Commencement Date: (i) completely remodel the
Premises and install a new storefront, storefront sign and trade fixtures in
and for the same in accordance with the other provisions of this Lease,
including, without limitation, Article 7, Exhibits B and C and the Rules
("Tenant's Initial Work"), and (ii) open the Premises for business to the
public, fully stocked and staffed and in compliance with all provisions of this
Lease, including, without limitation, Article 8. Landlord may require that
Tenant accept possession of the Premises and proceed with Tenant's Initial Work
and/or the preparation and submission of plans therefor prior to the
Commencement Date upon ten (10) days' advance notice. During any period that
Tenant shall be permitted or required to enter the Premises prior to the
Commencement Date (to plan or perform Tenant's Initial Work), Tenant shall
comply with all terms and provisions of this Lease, except those provisions
requiring the payment of Rent (other than such charges as Landlord may impose
under Article 7 or Exhibit B). The parties agree that Tenant's obligations
under this Article go to the essence of the parties' agreement hereunder, and
that any failure to perform such obligations will result in damages to Landlord
that are extremely difficult and impractical to determine and for which
Landlord's remedies at law will not be adequate. Accordingly, as a fair and
reasonable estimate and liquidation of Landlord's damages and not a penalty, if
Tenant fails to complete Tenant's Initial Work and open the Premises for
business in the manner required herein by the Commencement Date, Tenant shall
pay Landlord as additional Rent an amount equal to 50% of the Minimum Rent then
in effect prorated on a per diem basis until Tenant completes Tenant's Initial
Work and so opens for business. Acceptance by Landlord of such liquidated
damages shall not be deemed permission for Tenant to continue such violation,
and shall not preclude Landlord from seeking any other remedy [other than
damages) for such violation including, without limitation, specific performance
or termination of this Lease or Tenant's right to possession as described in
Article 22.
ARTICLE 7
TRADE FIXTURES, ALTERATIONS AND LIENS
A. Approval. Tenant shall not attach any fixtures, equipment or
other items to the Premises or make any additions, changes, alterations or
improvements to the Premises or the Systems and Equipment serving the Premises,
including without limitation Tenant's Initial Work described in Article 6 and
Exhibit B hereto (all such work referred to collectively herein as the "Work"),
without the prior written consent of Landlord. Landlord shall not unreasonably
withhold consent, except that Landlord reserves the right to withhold consent
in Landlord's sole discretion for Tenant's Initial Work, and Work affecting the
structure, safety or security of the Center or Premises, the Systems and
Equipment, or the appearance of the Premises from any Common Areas.
B. CONDITIONS. Landlord reserves the right to impose
requirements as a condition of such consent or otherwise in connection with the
Work, including without limitation, requirements that Tenant: (i) submit for
Landlord's prior written approval detailed plans and specifications prepared by
licensed and competent architects and engineers, (ii) submit for Landlord's
prior written approval the names, addresses and background information
concerning all contractors, subcontractors and suppliers, (iii) obtain and post
permits, bonds, and additional insurance, (iv) submit contractor, subcontractor
and supplier lien waivers, (v) use union labor, and (vi) comply with such other
requirements as Landlord may impose concerning the manner and times in which
such Work shall be done and other aspects of the Work. Landlord may require
that all Work be performed under Landlord's supervision. If Landlord consents
or supervises, or recommends any suppliers, contractors, architects, or
engineers, the same shall not be deemed a warranty as to the adequacy of the
design, workmanship or quality of materials, or compliance of the Work with any
Laws.
C. PERFORMANCE OF WORK. All Work shall be performed: (i) in a
thoroughly first class, professional and workmanlike manner, (ii) only with
materials that are new, high quality, and free of material defects, (iii)
strictly in accordance with plans and specifications
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approved by Landlord in advance in writing, (iv) not to adversely affect the
Systems and Equipment or the structure of the Center, (v) diligently to
completion and so as to cause the least possible interference with other
tenants and the operation of the Center, and (vi) in compliance with all Laws
and other provisions of this Lease, including without limitation, Exhibit B and
the Rules attached hereto as Rider One. If Tenant fails to perform the Work as
required herein or the materials supplied fail to comply herewith or with the
specifications approved by Landlord, and Tenant fails to cure such failure
within 48 hours after notice by Landlord (except that notice shall not be
required in emergencies), Landlord shall have the right to stop the Work until
such failure is cured (which shall not be in limitation of Landlord's other
remedies and shall not serve to abate the Rent or Tenant's other obligations
under this Lease).
D. LIENS. Tenant shall keep the Center, Premises and this Lease
free from any mechanic's, materialman's or similar liens or encumbrances, and
any claims therefor, in connection with any Work. Tenant shall give Landlord
notice at least ten (10) days prior to the commencement of any Work (or such
additional time as may be necessary under applicable Laws), to afford Landlord
the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such claim, lien or encumbrance by
bond or otherwise within twenty {20) days after notice by Landlord. If Tenant
fails to do so, Landlord may pay the amount or take such other action as
Landlord deems necessary to remove such claim, lien or encumbrance, without
being responsible for investigating the validity thereof. The amount so paid
and costs incurred by Landlord shall be deemed additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord. Nothing contained in this Lease shall authorize Tenant to do any act
which shall subject Landlord's title to the Center or Premises to any such
notices, liens or encumbrances whether claimed by operation of statute or other
Law or express or implied contract. Any claim to a lien or encumbrance upon the
Center or Premises arising in connection with any Work shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Center and Premises.
E. LANDLORD'S FEES AND COSTS. Tenant shall pay Landlord a
reasonable fee to cover Landlord's overhead and out-of-pocket costs, including
the cost of any outside engineer, architect or consultant, in reviewing
Tenant's plans and specifications and performing any supervision of the Work,
and such fees as Landlord may reasonably impose for utilities, trash removal,
temporary barricades and other matters in connection with the Work, or such
fees therefor (if any) set forth in Exhibit B hereto.
ARTICLE 8
USE AND OPERATING REQUIREMENTS
A. USE; COMPLIANCE WITH LAWS. Tenant shall use the Premises for
the purposes specified in Article 1 (and Tenant shall use the Premises for all
the purposes specified therein), and for no other purpose whatsoever, subject
to and in compliance with all other provisions of this Lease, including without
limitation the Rules attached as Rider One hereto. Tenant shall comply with all
Laws relating to the Premises and Tenant's use thereof, including without
limitation, Laws requiring the Premises to be closed on Sundays or any other
days or hours, health, safety and building codes, and any permit or license
requirements. Landlord makes no representation that the Premises are suitable
for Tenant's purposes.
B. REQUIRED HOURS. Tenant agrees to continuously operate and
conduct its business in one hundred percent (100%} of the Premises during the
Required Hours. "Required Hours" herein shall mean those hours established from
time to time by Landlord for the Center in general, in Landlord's sole
discretion; provided, Landlord shall not require that Tenant open for business
before 9:00 a.m. or remain open after 10:00 p.m., except: (i} for holiday,
seasonal or other special sales or promotions, or (ii) when at least one Major
or a majority of the tenants at the Center will be open. If Tenant desires to
operate the Premises during additional hours beyond those required by Landlord
hereunder, Tenant shall first obtain Landlord's written approval (which may be
withheld in Landlord's sole discretion), and Tenant shall pay all additional
costs and expenses and Landlord's reasonable charges in connection therewith,
including, without limitation, any additional utilities, security services,
cleaning and trash removal. Without limiting the generality of the foregoing,
Landlord reserves the right to close the Center on holidays or certain hours of
holidays, including without limitation, New Year's Day, Easter, Thanksgiving
and Christmas.
C. REQUIRED OPERATIONS. Tenant shall conduct its business at all
times in a first-class, professional and businesslike manner consistent with
reputable business standards and practices, and such that a high reputation of
the Center is developed and enhanced. Tenant shall operate the Premises
continuously, actively and diligently in a good faith manner designed to
maximize Gross Sales. Tenant shall keep the Premises adequately staffed with
well-trained personnel for efficient first class service, and adequately
stocked with new "in season" merchandise in good condition and displayed in a
professional and tasteful manner. Tenant agrees that storage and office space
in the Premises shall be limited to that necessary for, and used in conjunction
with, the business provided in Article 1 to be conducted in the Premises. Sales
and services permitted under Article 1 shall be provided only on a retail basis
to the general public. Tenant shall not use the Premises for catalogue sales.
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D. TRADE NAME AND RADIUS RESTRICTIONS. Tenant shall conduct
Tenant's business only under the trade name set forth in Article 1. Tenant and
Tenant's affiliates, owners and subsidiaries shall not directly or indirectly
own, operate, control, engage or have a financial interest in any business
similar to that authorized to be conducted hereunder (including a department or
concession in another store), or use or permit the use of the same or similar
trade names, within the area set forth in Article 1, provided, however, that
nothing herein shall prevent the operation of any of Tenant's existing stores
under their present trade names, or require that Tenant violate any Law.
E. VIOLATION OF REQUIREMENTS. The parties agree that Tenant's
obligations under this Article go to the essence of the parties' agreement
hereunder, and that any failure to perform such obligations will result in
damages to Landlord that are extremely difficult and impractical to determine
and for which Landlord's remedies at law will not be adequate. Accordingly, as
a fair and reasonable estimate and liquidation of Landlord's damages and not a
penalty, if Tenant fails to perform any obligations under this Article during
any portion of any day of the Term, Tenant shall pay Landlord as additional
Rent an amount equal to 50% of the Minimum Rent then in effect prorated on a
per diem basis. Acceptance by Landlord of such liquidated damages shall not be
deemed permission for Tenant to continue such violation, and shall not
preclude Landlord from seeking any other remedy (other than damages) for such
violation including, without limitation, specific performance or termination of
this Lease or Tenant's right to possession as described in Article 22.
ARTICLE 9
PROMOTION OF CENTER AND TENANT'S BUSINESS
A. PROMOTION FUND. Tenant shall pay Landlord the monthly
Promotion Fund Charge set forth in Article 1, subject to increases as described
below (the fund created by such charges and any similar charges paid by other
tenants or parties shall be referred to herein as the "Promotion Fund").
Landlord shall use the Promotion Fund to promote, advertise and market the
Center through television, radio, newspaper or other media, or through other
non-media promotions or events. Although Landlord may appoint a committee of
representatives from one or more tenants or Majors to advise Landlord
concerning the use of the Promotion Fund, Landlord reserves the right to use
the Promotion Fund for the foregoing purposes in Landlord's sole discretion.
Tenant shall also pay a non-recurring supplemental Promotion Fund Charge equal
to twelve (12) times the monthly amount: (i) upon Tenant's execution of this
Lease, and (ii) each time Landlord spends at least $1,000,000 expanding or
renovating the Center from time to time during the Term upon ten (10) days'
written request by Landlord.
B. MERCHANTS' ASSOCIATION. Landlord may, from time to time in
Landlord's sole discretion, require that Tenant participate in a merchants'
association for the Center sponsored or designated by Landlord. In such case:
(a) Tenant shall participate as an active member in such association, (b)
Tenant shall continue to pay the Promotion Fund Charge to Landlord, and such
Promotion Fund Charge shall be deemed to satisfy any obligations of Tenant to
pay regular monthly dues to such association, (c) Landlord shall turn over such
Promotion Fund Charge to the association, or at Landlord's option shall
continue to use the same or a portion thereof in conjunction with or on behalf
of the association for the purpose of promoting, advertising and marketing the
Center, and (d) Tenant shall pay any special assessments and participate in any
joint advertising or promotional events sponsored by such association, and
shall comply with all other requirements of such association.
C. MEDIA FUND; JOINT ADVERTISING. Tenant shall pay Landlord the
monthly Media Fund Charge set forth in Article 1, subject to increases as
described below (the fund created by such charges and any similar charges paid
by other tenants or parties shall be referred to herein as the "Media Fund").
Landlord shall use the Media Fund to supplement any Promotion Fund or in order
to promote, advertise and market the Center through television, radio,
newspaper or other electronic or print media, in Landlord's sole discretion.
Landlord may, from time to time in Landlord's sole discretion and until further
notice, reduce the Media Fund Charge and in lieu thereof require that Tenant
spend an amount not exceeding such reduction on joint advertising prepared,
established, sponsored or required for the Center by Landlord (with such design
and content as Landlord shall reasonably approve in advance).
D. PAYMENTS, INCREASES, AND UNUSED FUNDS. Tenant shall pay the
Promotion Fund Charge and Media Fund Charge in advance on or before the first
day of each calendar month during the Term. The Promotion Fund Charge and Media
Fund Charge shall be subject to increases effective each January 1 during the
Term or at such other times as Landlord may reasonably determine. Landlord
shall determine each increase based on the percentage increase in the CPI from
the Commencement Date through the latest date for which a current index is
available prior to the scheduled increase. Notwithstanding the foregoing, in
the case of the Media Fund Charge, Landlord may use the percentage increase in
the electronic, print and outdoor advertising rates of the media utilized by
Landlord over such rates for the preceding year in the media market in which
the Center is located. In no event shall the Promotion Fund Charge or Media
Fund Charge ever be reduced, even if the CPI or advertising rates decrease for
any given period. Any amounts of the respective Funds remaining after the end
of any calendar year shall be used by Landlord in subsequent years, and
Landlord shall have no obligation to refund any unused amounts to Tenant after
expiration of this Lease or otherwise whatsoever.
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E. TENANT ADVERTISING. In order to help maximize Gross Sales,
Tenant agrees to spend an amount equal to at least two percent (2%) of Tenant's
Gross Sales to advertise Tenant's business in the Premises in the market area
in which the Center is located during each Lease Year. Such amount shall be in
addition to the Promotion Fund Charge and Media Fund Charge. Tenant shall
provide Landlord with evidence of such advertising costs as Landlord shall
reasonably request from time to time. In any of Tenant's advertising and
publicity programs in the market area in which the Center is located, Tenant
shall include the Premises so as to receive at least as much publicity as other
stores owned or operated by Tenant in such market area. All references to
Landlord or the Center in such programs shall be in good taste and shall
identify the Center by the name designated by Landlord from time to time.
F. LANDLORD'S EXPENSES. Landlord shall be reimbursed out of the
Promotion Fund or by any merchants' association for all costs and expenses
incurred by Landlord in administering such Funds or in providing services to
such association, including without limitation, costs for performing or
procuring services for audits, tax filings and bookkeeping, and the
compensation, benefits and related expenses for a marketing director and staff,
rental value of space in the Center used by the same, all office equipment,
utilities and supplies, postage and travel expenses in connection therewith,
and the cost of all Center advertisements and promotional and marketing
activities and events.
ARTICLE 10
UTILITIES
A. UTILITIES PROVIDED BY TENANT. Tenant shall: (i) make
application in Tenant's own name for all utilities not provided by Landlord,
(ii) comply with all utility company regulations for such utilities, including
requirements for the installation of meters, and (iii) obtain such utilities
directly from, and pay for the same when due directly to, the applicable
utility company. The term "utilities" for purposes hereof shall include but not
be limited to electricity, gas, water, sewer, steam, fire protection, telephone
and other communication and alarm services, HVAC, and all taxes or other
charges thereon. Tenant shall install and connect all equipment and lines
required to supply such utilities to the extent not already available at or
serving the Premises, or at Landlord's option shall repair, alter or replace
any such existing items (or Tenant shall share the costs thereof for any HVAC
unit or hot water heater shared with other tenants as described in Article 11).
Tenant shall maintain, repair and replace all such items, operate the same, and
keep the same in good working order and condition, as further provided in
Article 11. Tenant shall not install any equipment or fixtures, or use the
same, so as to exceed the safe and lawful capacity of any utility equipment or
lines serving the same. The installation, alteration, replacement or connection
of any utility equipment and lines shall be subject to the requirements for
alterations of the Premises set forth in Article 7. Tenant shall ensure that
all HVAC equipment is installed and operated at all times in a manner to
prevent roof leaks, damage, or noise due to vibrations or improper
installation, maintenance or operation. Tenant shall at all times keep the
Premises sufficiently heated or air-conditioned such that heated or chilled air
is not drawn to or from the Premises.
B. UTILITIES PROVIDED BY LANDLORD. Landlord reserves the right
from time to time to provide any or all utilities to the Premises. In such
case, Tenant shall pay such charges as Landlord may establish from time to
time, which Landlord may determine on a per square foot basis applicable to the
square footage of the Premises as a monthly charge, or which Landlord may
determine based on the quantity of utilities used or consumed at the Premises
on a monthly or other regular basis. Such charges shall not exceed the rates,
if any, that Landlord is permitted to charge pursuant to applicable Law. In
addition, if Landlord establishes charges based on consumption or use: (i) such
charges shall not be in excess of the rate that Tenant would be charged
directly by the utility company serving the general area in which the Center is
located, (ii) if the Premises are separately metered for such utilities, Tenant
shall pay for amounts of such utilities based on such meters, and (iii) if the
Premises are not separately metered for such utilities, Tenant shall pay for
amounts of such utilities based on the reasonable estimates of Landlord's
engineer or consultant, or at Landlord's election, shall pay Landlord's cost
for installing separate meters, and shall thereafter pay based on such meters.
If no such charges are established by Landlord, then the cost of such
utilities shall be included as part of Center Expenses. Except to the extent
prohibited by applicable Law, Landlord may also impose a reasonable
administrative charge to cover meter-reading and other overhead expenses. All
such charges shall be payable as additional Rent ten (10) days after billed by
Landlord. Landlord may discontinue providing any utilities then being provided
by Landlord upon ten (10) days' advance written notice to Tenant (in which case
Tenant shall obtain such utilities directly from the applicable utility
company}. If Landlord supplies ventilated air or chilled or heated air or water
for air-conditioning or heating of the Premises, Landlord may nevertheless
require that Tenant at Tenant's expense maintain, repair and replace any
portion of the systems and equipment therefor exclusively serving the Premises,
including without limitation any air handling equipment, ductwork and lines.
C. INTERRUPTIONS. Landlord does not warrant that any utilities
provided by Landlord will be free from shortages, failures, variations, or
interruptions caused by repairs, maintenance, replacements, improvements,
alterations, changes of service, strikes, lockouts, labor controversies,
accidents, inability to obtain services, fuel, steam, water or supplies,
governmental requirements or requests, or other causes beyond Landlord's
reasonable control. None of the same shall be deemed an eviction or disturbance
of Tenant's use and possession of the Premises or any part thereof, or render
Landlord liable to Tenant for abatement of Rent, or relieve Tenant from
performance of Tenant's obligations under this Lease. Landlord in no event
shall be liable for damages by reason of such shortage, failure, variation, or
interruption, including without limitation, loss of profits, business
interruption or other incidental or
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ARTICLE 11
MAINTENANCE AND REPAIR OF PREMISES
A. TENANT MAINTENANCE AND REPAIRS. Tenant shall keep the Premises in
good working order, repair and condition (which condition shall also be clean,
sanitary, sightly and free of pests and rodents, and which repairs shall include
necessary replacements and capital expenditures and compliance with all Laws now
or hereafter adopted), except to the extent provided to the contrary in Article
14 respecting casualty damage. Tenant's obligations hereunder shall include but
not be limited to Tenant's trade fixtures and equipment, security gates,
ceilings, walls, storefront, entrances, signs, interior decorations,
floor-coverings, wallcoverings, entry and interior doors, exterior and interior
glass, plumbing fixtures, light fixtures and bulbs, keys and locks, fire
extinguishers and fire protection systems, and equipment and lines for water,
sewer (including free flow up to the common sewer line), HVAC, electrical, gas,
steam, sprinkler and mechanical facilities, and other systems and equipment
which serve the Premises exclusively whether located within or outside
the Premises, and all alterations and improvements to the Premises whether
installed by Landlord or Tenant. Tenant shall also at Landlord's option perform
or reimburse Landlord for any repairs, maintenance and replacements to areas of
the Center outside the Premises caused as a result of moving any furniture,
fixtures, or other property to or from the Premises, or otherwise caused by
Tenant or any other occupant of the Premises, or any of their employees, agents,
invitees or contractors. Any repairs or other work by Tenant hereunder shall be
deemed "Work" under Article 7, and shall be subject to ail of the requirements
thereunder, including Landlord's prior written approval. Tenant shall provide
Landlord with evidence that any Work required hereunder has been performed from
time to time within five (5) days after Landlord's request therefor.
B. HVAC MAINTENANCE. If the Premises are served exclusively by any HVAC
units or other systems or equipment, Tenant shall enter annual, written
maintenance contracts with competent, licensed contractors reasonably approved
or designated by Landlord. Such contracts shall include, and Tenant shall
require that such contractors provide: (i) inspection, cleaning and testing at
least monthly for HVAC units and semi-annually for other systems and equipment
(or more frequently if required by applicable Law or if reasonably required by
Landlord), (ii) any servicing, maintenance, repairs and replacements of filters,
belts or other items determined to be necessary or appropriate as a result of
such inspections and tests, or by the manufacturers' warranty, service manual or
technical bulletins, or otherwise required to ensure proper and efficient
operation, including emergency work, (iii) all other work as shall be reasonably
required by Tenant, Landlord or Landlord's insurance carriers, (iv) a detailed
record of all services performed, and (v) an annual service report at the end of
each calendar year (Tenant shall provide Landlord with a copy of such annual
reports promptly upon Tenant's receipt thereof). Not later than thirty (30) days
prior to the Commencement Date and annually thereafter, Tenant shall provide
Landlord with a copy of all maintenance contracts required hereunder, and
written evidence reasonably satisfactory to Landlord that the annual fees
therefor have been paid. Such maintenance contracts represent part of Tenant's
obligations under this Article, and shall not be deemed to limit Tenant's
general obligations to keep any HVAC equipment and other systems and equipment
hereunder in good working order, repair and condition as further described in
Paragraph A, above.
C. SHARED EQUIPMENT. If the Premises are served by one or more HVAC
units or other such systems or equipment that also serve one or more other
tenants, Tenant shall at Landlord's option made by Landlord from time to time in
writing either: (a) make arrangements directly with such tenant or tenants to
reasonably share responsibility and expenses for inspection, maintenance,
repairs, operation and replacements of such items, or (b) reimburse Landlord
for Tenant's reasonable share of all costs incurred by Landlord in making such
arrangements or performing such work (such share to be based on the ratio of
the square footage of the Premises to the square footage of the areas leased to
such other tenant or tenants, or at Landlord's option such other factors as
Landlord shall deem reasonable).
D. LANDLORD MAINTENANCE AND REPAIRS. Landlord shall keep the roof
above, foundation, exterior walls other than storefront, common utility lines to
the point of connection for Tenant, and structural portions of the Premises in
good working order and repair (the cost of which shall be included in Center
Expenses, to the extent described in Article 28), provided that Tenant shall
give Landlord reasonable prior notice of the necessity for such repairs, and
further provided that any damage thereto shall not have been caused by any act
or omission of, or violation of this Lease by, Tenant or any other occupant of
the Premises, or any of their employees, agents, invitees or contractors, in
which event Landlord may perform or require that Tenant perform such repairs as
provided above (without limiting Landlord's other remedies therefor).
ARTICLE 12
COMMON AREAS
A. USE OF COMMON AREAS. Tenant may use the Common Areas to which, and
for the purposes for which, other tenants at the Center are given access during
the Term,
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(1) The Common Areas shall be used by Tenant and Tenant's employees
and invitees on a non-exclusive basis in common with employees and invitees of
Landlord and other tenants and parties to whom the right to use the Common
Areas has been or is hereafter granted.
(2) Tenant shall not directly or indirectly conduct business in the
Common Areas or make any use of the Common Areas which interferes in any way
with the use of the Common Areas by other parties.
(3) Tenant's use of the Common Areas shall be subject to the other
provisions of this Lease, including without limitation, the Rules attached as
Rider One hereto.
(4) Tenant's right to use the Common Areas shall terminate upon the
expiration or earlier termination of this Lease or Tenant's right to possession
of the Premises.
B. COMMON AREA MAINTENANCE AND CONTROL. Landlord shall administer,
operate, clean, maintain and repair the Common Areas, and Tenant shall pay
Tenant's Proportionate Share of Landlord's costs therefor as part of Center
Expenses. Landlord reserves the right at all times to determine the nature and
extent of all Common Areas, and shall have exclusive control and management
thereof (except to the extent that Majors or other parties own or control
portions thereof). Landlord shall have the right to close all or a portion of
the Common Areas to discourage non-customer parking or prevent a dedication
thereof to public use or otherwise prevent the acquisition of public rights in
such areas, and shall have the right to take such other actions as are further
described in Article 21. Landlord reserves the right to use, permit or deny the
use of the Common Areas for any purpose which in Landlord's sole opinion may be
in the best interests of the Center, including without limitation promotions,
events, exhibits, displays, shows and other activities.
C. INTERRUPTION OF SERVICES OR USE. Landlord does not warrant that any
services to, or any use of, the Common Areas will be free from shortages,
failures, variations, or interruptions caused by repairs, maintenance,
replacements, improvements, alterations, changes of service, strikes, lockouts,
labor controversies, accidents, inability to obtain services, fuel, steam, water
or other utilities or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed an
eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of such shortages,
failures, variations or interruptions, including without limitation loss of
profits, business interruption or other incidental or consequential damages.
D. DEFINITION OF COMMON AREAS. The term "Common Areas" herein means
all areas of the Center which are now or hereafter made available by Landlord
from time to time for the general use or benefit of Landlord, any Majors, other
tenants at the Center, other parties to whom the right to use the Common Areas
has been or is hereafter granted, and their employees and invitees, as such
areas currently exist and as they may be changed from time to time. The Common
Areas may, at Landlord's election, include areas in adjoining properties which
are or become available to Landlord, tenants, employees and invitees of the
Center and which are maintained with the Common Areas under any reciprocal
easement agreement, operating agreement or other such agreement now or hereafter
in effect. Without limiting the generality of the foregoing, the Common Areas
may include, as designated by Landlord from time to time, any parking areas and
structures (whether in tiers or at, above or below grade), mall enclosures and
roofs covering Center buildings, entrances, sidewalks, streets or roadways,
passageways, concourses, courts, arcades, service corridors, loading platforms
and truck docks, delivery areas, escalators and elevators, ramps, stairs,
landscaped and vacant areas, public bathrooms, information and telephone booths,
directory signs and equipment, common lighting facilities, drainage areas,
lounges and shelters, package pick-up stations, drinking fountains, public
comfort and first aid stations, public meeting rooms, auditoriums, bus stops,
taxi stands, and all furniture, decorations, fixtures, improvements, Systems and
Equipment, and other facilities, located in or serving any of the foregoing,
except to the extent reserved for use by one or more designated tenants.
ARTICLE 13
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
A. REQUIRED INSURANCE. Tenant shall maintain during the Term: (i)
commercial general liability insurance, with a contractual liability
endorsement covering Tenant's indemnity obligations under this Lease, and
with limits of not less than $2,000,000 combined single limit for personal
injury, bodily injury or death, or property damage or destruction (including
loss of use thereof) per occurrence, (ii) workers' compensation insurance as
required by statute, and employer's liability insurance in the amount of at
least $500,000 per occurrence, (iii) plate glass insurance covering all plate
glass in the Premises and the storefront therefor, and (iv) "all-risk" property
damage insurance covering Tenant's inventory, personal property, business
records, furniture, floor coverings, fixtures and equipment, and all Work
installed by Tenant for damage or other loss caused by fire or other casualty
or cause including, but not limited to, vandalism and malicious mischief,
theft, explosion, business interruption, and water damage of any type,
including sprinkler leakage, bursting and stoppage of pipes. All insurance
required hereunder shall be provided by responsible insurers rated at least A
and 10 in the then current edition of Best's Insurance Guide and shall be
licensed in the State in which the Center is located. Tenant's property damage
insurance
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shall include full replacement cost coverage and the amount shall satisfy any
coinsurance requirements under the applicable policy. Tenant's insurance shall
be primary, and any insurance maintained by Landlord or any other additional
insureds hereunder shall be excess and noncontributory. Landlord shall have the
right to reasonably increase the amount or expand the scope of insurance to be
maintained by Tenant hereunder from time to time.
B. CERTIFICATES, SUBROGATION AND OTHER MATTERS. Tenant shall provide
Landlord with certificates evidencing the coverage required hereunder (and,
with respect to liability coverage showing Landlord and Landlord's managing
agent for the Center and others designated by Landlord as additional insureds,
and with respect to leasehold improvements showing Landlord as an additional
named insured). Tenant shall provide such certificates prior to the
Commencement Date or Tenant's possession of the Premises or construction of
improvements therein (whichever first occurs). Tenant shall provide renewal
certificates to Landlord at least thirty (30) days prior to expiration of such
policies. Such certificates shall state that the coverage may not be changed or
canceled without at least thirty (30) days' prior written notice to Landlord.
The parties mutually hereby waive all rights and claims against each other for
all losses covered by their respective insurance policies, and waive all rights
of subrogation of their respective insurers. The parties agree that their
respective insurance policies are now, or shall be, endorsed so that such
waivers of subrogation shall not affect their respective rights to recover
thereunder.
C. WAIVER OF CLAIMS. Except for claims arising from Landlord's
intentional or grossly negligent acts that are not covered by Tenant's
insurance hereunder, Tenant waives all claims against Landlord for injury or
death to persons, damage to property or to any other interest of Tenant
sustained by Tenant or any party claiming through Tenant resulting from: (i)
any occurrence in or upon the Premises, (ii) leaking of roofs, bursting,
stoppage or leaking of water, gas, sewer or steam pipes or equipment, including
sprinklers, (iii) wind, rain, snow, ice, flooding, freezing, fire, explosion,
earthquake, excessive heat or cold, fire or other casualty, (iv) the Center,
Premises, Systems or Equipment being defective, out of repair, or failing, and
(v) vandalism, malicious mischief, theft or other acts or omissions of any
other parties including without limitation, other tenants, contractors and
invitees at the Center. To the extent that Tenant is required to or does carry
insurance hereunder, Tenant agrees that Tenant's property loss risks shall be
borne by such insurance, and Tenant agrees to look solely to and seek recovery
only from its insurance carriers in the event of such losses; for purposes
hereof, any deductible amount shall be treated as though it were recoverable
under such policies.
ARTICLE 14
CASUALTY DAMAGE
A. RESTORATION BY LANDLORD. If the Premises shall be damaged by fire
or other casualty, Landlord shall use available insurance proceeds to repair
the Premises, except that Landlord shall not be required to repair or replace
any of Tenant's furniture, furnishings, fixtures or equipment, or any
alterations or improvements in excess of any Landlord's Work under Exhibit B
hereto, and Landlord's obligations shall be subject to any governmental
requirements or requirements of any Lender and such Lender's right to control,
apply or withhold such insurance proceeds. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof.
B. RESTORATION BY TENANT. If Landlord repairs the Premises as provided
herein, Tenant shall repair and replace Tenant's Work, all items required to be
insured by Tenant hereunder, and all other items required to restore the
Premises to the condition required under Article 11 of this Lease. Tenant shall
commence such work within ten (10) days following substantial completion by
Landlord of any repairs required by Landlord hereunder and shall proceed
diligently therewith to completion. Tenant's work hereunder shall constitute
"Work" under Article 7 and shall be subject to all of the provisions thereof.
Tenant may close the Premises for business to the extent reasonably required in
connection with such Work.
C. ABATEMENT OF RENT. Landlord shall allow Tenant a proportionate
abatement of Minimum Rent from the date of the casualty through the date that
Landlord substantially completes Landlord's repair obligations hereunder (or
the date that Landlord would have substantially completed such repairs, but for
delays by Tenant, its agents, employees, invitees, Transferees and
contractors), provided such abatement: (i) shall apply only to the extent the
Premises are untenantable for the purposes permitted under this Lease and not
used by Tenant as a result thereof, based proportionately on the square footage
of the Premises so affected and not used, and (ii) shall not apply if Tenant or
any other occupant of the Premises, or any of their employees, agents, invitees
or contractors cause the damage.
D. TERMINATION OF LEASE. Notwithstanding the foregoing to the
contrary, Landlord may elect to terminate this Lease, if the Center is
materially damaged by Tenant or any other occupant of the Premises, or any of
their agents, employees, invitees or contractors, or if the Center is damaged
by fire or other casualty or cause such that: (a) more than 25% of the
Premises is affected by the damage, (b) the damage occurs less than one year
prior to the end of the Term, (c) any Lender requires that the insurance
proceeds or any portion thereof be applied to the Mortgage debt (or terminates
the ground lease, as the case may be), or the damage is not fully covered by
Landlord's insurance policies, or (d) in Landlord's reasonable opinion, the
cost of the repairs, alterations, restoration or improvement work would exceed
25% of the replacement value of the Center or of the portion thereof owned or
ground leased by Landlord [whether or not the Premises are affected). In any
such case, Landlord may
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terminate this Lease by notice to Tenant within 120 days after the date of
damage (such termination notice to include a termination date providing at
least thirty (30) days for Tenant to vacate the Premises). Tenant agrees that
Landlord's obligation to restore, and the abatement of Rent provided herein,
shall be Tenant's sole recourse in the event of such damage, and waives any
other rights Tenant may have under any applicable Law to terminate this Lease
by reason of damage to the Premises or Center.
ARTICLE 15
CONDEMNATION
If at least 25% of the rentable area of the Premises shall be taken by
power of eminent domain or condemned by a competent authority or by conveyance
in lieu thereof for public or quasi-public use ("Condemnation"), including any
temporary taking for a period of one year or longer, this Lease shall terminate
on the date possession for such use is so taken. If: (i) less than 25% of the
Premises is taken, but the taking includes a material portion of the Center or
of the portion thereof owned or ground leased by Landlord, or (ii) the taking
is temporary and will be in effect for less than one year but more than thirty
(30) days, then in either such event, Landlord may elect to terminate this
Lease upon at least thirty (30) days' prior written notice to Tenant. The
parties further agree that: (a) if this Lease is terminated, all Rent shall be
apportioned as of the date of such termination or the date of such taking,
whichever shall first occur, (b) if the taking is temporary, Rent shall be
abated for the period of the taking (but the Term shall not be extended
thereby), and (c) if this Lease is not terminated but any part of the Premises
is taken, the Minimum Rent, Breakpoint, Taxes, Center Expenses, and Promotion
Fund Charge shall be proportionately abated based on the square footage of the
Premises so taken. Landlord shall be entitled to receive the entire award or
payment in connection with such Condemnation and Tenant hereby assigns to
Landlord any interest therein for the value of Tenant's unexpired leasehold
estate or any other claim and waives any right to participate therein, except
that Tenant shall have the right to file any separate claim available to Tenant
for moving expenses and any taking of Tenant's personal property, provided such
award is separately payable to Tenant and does not diminish the award available
to Landlord or any Lender.
ARTICLE 16
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's
right of possession, Tenant shall surrender possession of the Premises in
broom-clean condition and good repair, free of debris, and otherwise in the
condition required under Article 11, and shall ensure that all signs, vaults,
safes, shelving, showcases, mirrors, and movable trade fixtures and personal
property have been removed therefrom (subject to Article 36) and that any
damage caused thereby has been repaired. All leasehold improvements and other
fixtures, such as light fixtures and HVAC equipment, plumbing fixtures, hot
water heaters, fire suppression and sprinkler systems, wall coverings,
carpeting and drapes, in or serving the Premises, whether installed by Tenant
or Landlord, shall be Landlord's property and shall remain, all without
compensation, allowance or credit to Tenant. However, if prior to such
termination or within thirty (30) days thereafter Landlord so directs by
notice, Tenant shall promptly remove such of the foregoing items as are
designated in such notice and repair any damage to the Premises caused by such
removal. If Tenant shall fail to perform any repairs or restoration, or fail to
remove any items from the Premises as required hereunder, Landlord may do so,
and Tenant shall pay Landlord the cost thereof upon demand. All property
removed from the Premises by Landlord hereunder may be handled, discarded or
stored by Landlord at Tenant's expense, and Landlord shall in no event be
responsible for the value, preservation or safekeeping thereof. All such
property shall at Landlord's option be conclusively deemed to have been
conveyed by Tenant to Landlord as if by bill of sale without payment by
Landlord. If Landlord arranges for storage of any such property, Landlord shall
have a lien against such property for costs incurred in removing and storing
the same.
ARTICLE 17
HOLDING OVER
Tenant shall pay Landlord 200% of the amount of Rent then applicable
prorated on a per diem basis for each day Tenant shall retain possession of the
Premises or any part thereof after expiration or earlier termination of this
Lease, together with all damages sustained by Landlord on account thereof. The
foregoing provisions shall not serve as permission for Tenant to hold-over, nor
serve to extend the Term (although Tenant shall remain a tenant at sufferance,
bound to comply with all provisions of this Lease until Tenant vacates the
Premises). Landlord shall have the right, at any time after expiration or
earlier termination of this Lease or Tenant's right to possession, to reenter
and possess the Premises and remove all property and persons therefrom, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable Laws.
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ARTICLE 18
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or
hereafter placed upon the Center, and all other encumbrances and matters of
public record applicable to the Center, including without limitation, any
reciprocal easement or operating agreements, covenants, conditions and
restrictions (and Tenant shall not act or permit the Premises to be operated in
violation thereof). If any foreclosure or power of sale proceedings are
initiated by any Lender or a deed in lieu is granted (or if any ground lease is
terminated), Tenant agrees, upon written request of any such Lender or any
purchaser at such sale, to attorn and pay Rent to such party and to execute and
deliver any instruments necessary or appropriate to evidence or effectuate such
attornment. In the event of attornment, no Lender shall be: (i) liable for any
act or omission of Landlord, or subject to any offsets or defenses which Tenant
might have against Landlord (prior to such Lender becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Lender, or (iii) bound by any future modification
of this Lease not consented to by such Lender. Any Lender may elect to make
this Lease prior to the lien of its Mortgage, and if the Lender under any prior
Mortgage shall require, this Lease shall be prior to any subordinate Mortgage;
such elections shall be effective upon written notice to Tenant. Tenant agrees
to give any Lender by certified mail, return receipt requested, a copy of any
notice of default served by Tenant upon Landlord, provided that prior to such
notice Tenant has been notified in writing (by way of service on Tenant of a
copy of an assignment of leases, or otherwise) of the name and address of such
Lender. Tenant further agrees that if Landlord shall have failed to cure such
default within the time permitted Landlord for cure under this Lease, any such
Lender whose address has been so provided to Tenant shall have an additional
period of thirty (30) days in which to cure (or such additional time as may be
required due to causes beyond such Lender's control, including time to obtain
possession of the Center by power of sale or judicial action). The provisions
of this Article shall be self-operative; however, Tenant shall execute such
documentation as Landlord or any Lender may request from time to time in order
to confirm the matters set forth in this Article in recordable form. To the
extent not expressly prohibited by Law, Tenant waives the provisions of any Law
now or hereafter adopted which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease or Tenant's
obligations hereunder if such foreclosure or power of sale proceedings are
initiated, prosecuted or completed.
ARTICLE 19
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within fifteen (15) days after written
request from Landlord, execute, acknowledge and deliver a statement: (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this
Lease as so modified, is in full force and effect (or if this Lease is claimed
not to be in force and effect, specifying the ground therefor) and the dates to
which the Minimum Rent, Percentage Rent and other charges hereunder have been
paid, and the amount of any Security Deposit, (ii) acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (iii) certifying
such other matters as Landlord may reasonably request, or as may be requested
by Landlord's current or prospective Lenders, insurance carriers, auditors, and
prospective purchasers. Any such statement may be relied upon by any such
parties. If Tenant shall fail to execute and return such statement within the
time required herein, Tenant shall be deemed to have agreed with the matters
set forth therein, and Landlord acting in good faith shall be authorized as
Tenant's attorney-in-fact to execute such statement on behalf of Tenant (which
shall not be in limitation of Landlord's other remedies therefor).
ARTICLE 20
ASSIGNMENT AND SUBLETTING
A. TRANSFERS. Tenant acknowledges that Landlord has entered this Lease
in order to obtain the unique attraction of Tenant's trade name, the unique
services and/or merchandising mix and product lines associated with Tenant's
business and the unique combination of Tenant's apparent operating expertise
and financial integrity. Tenant shall not, without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion: (i)
assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to,
or otherwise transfer, this Lease or any interest hereunder, by operation of
law or otherwise, (ii) sublet the Premises or any part thereof, or extend,
renew or modify any sublease, or (iii) permit the use of the Premises by any
parties other than Tenant and its employees, whether as licensee,
concessionaire, franchisee or otherwise (all of the foregoing are hereinafter
referred to collectively as "Transfers" and any party to whom any Transfer is
made or sought to be made is hereinafter referred to as a "Transferee"). Any
Transfer made without complying with this Article shall, at Landlord's option,
be null, void and of no effect (which shall not be in limitation of Landlord's
other remedies). Whether or not Landlord grants consent, Tenant shall pay
$750.00 towards Landlord's review and processing expenses, as well as any
reasonable legal fees incurred by Landlord in connection therewith.
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B. PROCEDURE. If Tenant shall desire Landlord's consent to any
Transfer, Tenant shall notify Landlord, which notice shall include: (a) a
reference to the Center, Premises and this Lease, (b) the name and address of
the proposed Transferee and a detailed description of the business operation
proposed to be conducted in the Premises, (c) the proposed effective date
(which shall not be less than 45 nor more than 180 days after Tenant's notice),
(d) the terms of the proposed Transfer, a copy of all documentation pertaining
thereto, and a detailed description of any alterations to the Premises required
in connection with the Transfer, (e) current financial statements of the
proposed Transferee certified by an officer, partner or owner thereof, (f)
names, addresses, periods of ownership and operation, and reasonable
description of all other businesses owned and operated by the Transferee then
or within the three (3) previous years, and (g) business and character
references and any other information to enable Landlord to determine the retail
business experience, financial responsibility, character, and reputation of the
proposed Transferee, nature of such Transferee's business, and such other
information as Landlord may reasonably require.
C. CONSENT. If Landlord consents to a Transfer: (a) the terms and
conditions of this Lease shall in no way be deemed to have been waived or
modified, including without limitation, the purposes for which the Premises
shall be used under Article 1, (b) Tenant shall remain fully liable for all
obligations under this Lease, including without limitation, those obligations
arising before and after the Transfer, and any assignee shall expressly assume
all of Tenant's obligations, (c) such consent shall not be deemed consent to
any further Transfer by either Tenant or a Transferee, and (d) Tenant shall
deliver to Landlord promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord. Any sublease hereunder shall be subordinate and subject to the
provisions of this Lease, and if this Lease shall be terminated during the term
of any sublease, Landlord shall have the right to: (i) treat such sublease as
canceled and repossess the Premises by any lawful means, or (ii) require that
such subtenant attorn to and recognize Landlord as its landlord under any such
sublease. If Tenant shall Default hereunder, Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant's obligations under this Lease).
D. RECAPTURE. Notwithstanding anything to the contrary contained in
this Article, Landlord shall have the option, by giving notice to Tenant within
thirty (30) days after receipt of Tenant's notice of any proposed Transfer, to
recapture the Premises. Such recapture notice shall cancel and terminate this
Lease as of the date stated in Tenant's notice as the effective date of the
proposed Transfer, unless Tenant revokes Tenant's notice of proposed Transfer
by notice to Landlord within ten (10) days after Landlord's notice of
recapture.
E. INCREASE IN MINIMUM RENT. If Landlord consents to a Transfer, the
monthly Minimum Rent shall be increased on the effective date of the Transfer
to the greater of: (i) an amount equal to the average total monthly Minimum
Rent and Percentage Rent payable by Tenant during the thirty-six (36) months
prior thereto (or such shorter period as may have occurred since the
Commencement Date), or (ii) an amount equal to the Minimum Rent then in effect
multiplied by a fraction, the numerator of which is the CPI then in effect and
the denominator of which is the CPI in effect on the Commencement Date;
provided, in no event shall the Minimum Rent ever be reduced below the rate of
Minimum Rent then in effect or otherwise payable under this Lease. If the
Minimum Rent is increased hereunder, there shall be a proportionate adjustment
to the Breakpoint.
F. CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include the following, whether accomplished directly or indirectly:
(a) if Tenant is a partnership, the withdrawal or change, voluntary,
involuntary or by operation of law, of a majority of the partners, or a
transfer of a majority of partnership interests, in the aggregate on a
cumulative basis, or the dissolution of the partnership, and (b) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), the: (i) dissolution, merger,
consolidation or other reorganization of Tenant, (ii) sale or other transfer of
more than a cumulative aggregate of 50% of the voting shares of Tenant (other
than to immediate family members by reason of gift or death) or (iii) sale,
mortgage, hypothecation or pledge of more than a cumulative aggregate of 50% of
Tenant's net assets.
ARTICLE 21
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Center (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including more particularly, but without limitation,
the following rights:
A. ACCESS TO PREMISES. Landlord and its authorized
representatives may: (i) inspect the Premises, (ii) exhibit the Premises to
current and prospective tenants, purchasers, lenders, insurers, governmental
authorities, and brokers, (iii) place in and upon the Premises or such other
places as may be determined by Landlord "For Rent" signs or notices if Tenant
shall abandon or vacate the Premises, or at any time during the last 120 days
of the Term, (iv) enter or permit entry to the Premises in emergencies or for
any other reasonable purpose, or for the purpose of exercising any other rights
or remedies expressly granted or reserved to Landlord under this Lease or
applicable Law, or to make any repairs, maintenance, improvements or
alterations, or other work in or about the Center, and (v) in connection
therewith, erect scaffolding and temporary barricades and take into, upon or
through the Premises, materials required to perform the same, and if reasonably
required, move Tenant's leasehold improvements, fixtures, property and
equipment. However, in connection with
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entering the Premises to exercise any of the foregoing rights, Landlord shall
take reasonable steps to minimize any interference with Tenant's business, and
following completion of the work, return Tenant's leasehold improvements,
fixtures, property and equipment to the original locations and condition to the
fullest extent reasonably possible.
B. RESERVED AREAS. Landlord reserves all rights to use (or grant other
parties the right to use) and Tenant shall have no right, title or interest in:
(i) the roof of the Center, (ii) exterior non-storefront portions of the
Premises (including, without limitation, demising walls and outer walls of the
area of the Center in which the Premises are located), (iii) air rights above
the Premises and rights to the land and improvements below the floor level of
the Premises, and (iv) areas within the Premises necessary for utilities,
services, safety and operation of the Center that will not materially interfere
with Tenant's use of the Premises, including the Systems and Equipment, fire
stairways, and space between the suspended ceiling of the Premises and the slab
of the floor or roof of the Center thereabove. If the Premises does not contain
a suspended ceiling, the Premises shall extend vertically to the height where,
in Landlord's reasonable opinion, a suspended ceiling would otherwise exist,
and Landlord reserves the right to install a suspended ceiling and use the area
thereabove.
C. REMEASUREMENT. Landlord reserves the right to remeasure the
Premises at any time prior to the end of the second Lease Year. All
measurements shall be made from the outside of exterior walls, shaft walls or
corridors or the center of any common walls, without deduction for columns,
stairs or other interior construction or equipment, and shall include any
basements and mezzanines in the Premises. If any remeasurement determines that
the Premises contain a different number of square feet than set forth in
Article 1, the Minimum Rent, Breakpoint, Center Expenses, Taxes, Promotion Fund
Charge, and Security Deposit shall be adjusted retroactively and prospectively
on a pro rata basis to reflect the number of square feet determined by such
remeasurement. Upon either party's request, the revised square footage shall be
confirmed in an amendment to this Lease signed by both parties.
D. ACCESS TO CENTER. Landlord may prevent or restrict access to the
Center or designated portions thereof by such security procedures as Landlord
may from time to time impose on days and hours when the Center is, or portions
thereof are, closed for business to the public. Landlord reserves the right to
control, prevent access by and remove, any person whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Center, or who in the judgment of Landlord, is intoxicated
or under the influence of liquor or drugs.
E. EMERGENCY CLOSINGS. Landlord shall have the right (but not the
obligation) to limit or prevent access to all or any portion of the Center,
shut down elevator and escalator service, activate emergency controls or
procedures, or otherwise take such action or preventive measures deemed
necessary by Landlord for the safety of tenants or other occupants of the
Center or the protection of the Center or other property located thereon or
therein, in case of fire or other casualty, riot or other civil disorder,
strike or labor unrest, public excitement or other dangerous condition, or
threat thereof.
F. OTHER TENANTS. Landlord reserves the right to lease any portion of
the Center to such other tenants as Landlord, in Landlord's sole discretion,
deems appropriate, whether or not engaged in the same or similar business for
which Tenant is permitted to use the Premises under this Lease. Tenant
acknowledges that Landlord has made no representations as to the presence of
any specific tenant or number or types of tenants at the Center as of or after
the Commencement Date, hours or days that such other tenants shall or may be
open for business, or gross sales which may be achieved by Tenant or any other
tenants at the Center. A vacation or abandonment of its premises or cessation
of business in the Center by any other tenant or occupant shall not release or
excuse Tenant from Tenant's obligations under any provision of this Lease.
G. INSUFFICIENT GROSS SALES. If for any Lease Year commencing with the
third Lease Year, Tenant's Gross Sales are less than the Breakpoint for such
Lease Year, Landlord reserves the right to terminate this Lease. Landlord may
exercise such termination right by giving notice to Tenant within 180 days
after Landlord receives the final statement of Tenant's Gross Sales for such
Lease Year (or 180 days after Landlord completes its audit of such Gross
Sales). Such termination shall be effective ninety (90) days after such notice.
H. CHANGES TO THE CENTER. Landlord reserves the right to: (i) change
the name of the Center and the address or designation of the Premises or the
building in which the Premises are located, (ii) install, maintain, alter and
remove signs on or about the exterior and interior of the Center, (iii) add
land, easements or other interests to or eliminate the same from the Center,
and grant easements and other interests and rights in the Center to other
parties, (iv) add, alter, expand, reduce, eliminate, relocate or change the
shape, size, location, character, design, appearance, use, number or height of
any permanent or temporary buildings, structures, improvements, surface
parking, subterranean and multiple level parking decks, kiosks, planters,
pools, waterfalls, parking areas, driveways, landscaped areas and other
Common Areas, change the striping of parking areas and direction and flow of
traffic, and convert Common Areas to leasable areas and leasable areas to
Common Areas, (v) enclose any mall or other area, or remove any such enclosure,
or add one or more additional levels or stories to the Center or any portion
thereof, whether or not the Premises are contained therein, and add structural
support columns that may be required within the Premises or Common Areas, (vi)
relocate any HVAC equipment serving the Premises installed on the roof or other
area outside the Premises if Landlord constructs an additional story or level
or otherwise alters the Center, and (vii) in connection with the foregoing
matters, or with any other inspections, repairs, maintenance, improvements or
alterations in or about the Center, or as a result of any casualty, incident,
strike, condemnation, act of God, Law or governmental requirement or request, or
any other cause, effect scaffolding, barricades, and
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other structures reasonably required in, or otherwise close, Common Areas or
portions thereof, including but not limited to public entry ways and areas,
restrooms, stairways, escalators, elevators and corridors. However, in
connection with exercising such rights, Landlord shall: (a) take reasonable
steps to minimize or avoid any denial of access to the Premises except when
necessary on a temporary basis, (b) take reasonable steps to avoid materially
changing the configuration or reducing the square footage of the Premises,
unless required by Laws or other causes beyond Landlord's reasonable control
(and in the event of any permanent material reduction, the Minimum Rent,
Breakpoint, Center Expenses, Taxes, and Promotion Fund Charge shall be
proportionately reduced), (c) at Landlord's expense, move Tenant's entrance
doorway if access thereto is materially impaired, and (d) if Landlord enters the
Premises in connection with any of the foregoing matters, comply with Paragraph
A above.
I. TERMINATION OR RELOCATION. Landlord reserves the right to terminate
this Lease if Landlord determines that such termination is required in order to
demolish or substantially renovate or change the use or character of the Center
or the building or portion thereof in which the Premises are located,
provided: (i) Landlord shall give Tenant at least ninety (90) days' prior
notice, and (ii) Landlord shall pay the direct, out-of-pocket, reasonable
expenses of tenant in moving from the Premises to any other location of Tenant
within five (5) miles thereof, and an amount equal to the unamortized costs of
Tenant's improvements and non-removable fixtures in the Premises on the
effective termination date using straight-line amortization over ten (10)
years. Landlord also reserves the right to substitute for the Premises other
premises (herein referred to as the "new premises") at the Center, provided:
(a) the new premises shall be similar to the Premises in square footage, and
Landlord shall improve or reimburse Tenant's direct, out-of-pocket reasonable
expenses of improving the new premises so that it is substantially similar to
the Premises, (b) Landlord shall give Tenant at least thirty (30) days' notice
before making such change, and the parties shall execute an amendment to the
Lease confirming the change within thirty (30) days after either party shall
request the same, and (c) if Tenant shall already have taken possession of the
Premises. Landlord shall pay the direct, out-of-pocket, reasonable expenses
of Tenant in moving from the Premises to the new premises. Landlord may also
terminate this Lease if any rent control law or ordinance is enacted which
requires reductions in any Rent payable hereunder or which prohibits, or
reduces the amount of, any increase in Rent provided for in this Lease.
ARTICLE 22
LANDLORD'S REMEDIES
A. DEFAULT. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph (B), below: (i) failure to make when due any
payment of Rent, unless such failure is cured within five (5) days after
notice, (ii) failure to observe or perform any term or condition of this Lease
other than the payment of Rent, unless such failure is cured within any period
of time, but in no event more than fifteen (15) days following notice (or such
additional time as may be required due to Unavoidable Delays as described in
Article 28), (iii)(a) making by Tenant or any guarantor of this Lease
("Guarantor") of any general assignment for the benefit of creditors, (b)
filing by or against Tenant or any Guarantor of a petition to have Tenant or
such Guarantor adjudged a bankrupt or a petition for reorganization or
arrangement under any Law relating to bankruptcy or insolvency (unless, in the
case of a petition filed against Tenant or such Guarantor, the same is
dismissed within sixty (60) days), (c) appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located in the Premises
or of Tenant's interest in this Lease, where possession is not restored to
Tenant within thirty (30) days, (d) attachment, execution or other judicial
seizure of substantially all of Tenant's assets located on the Premises or of
Tenant's interest in this Lease, (e) Tenant's or any Guarantor's convening of a
meeting of its creditors or any class thereof for the purpose of effecting a
moratorium upon or composition of its debt, (f) Tenant's or any Guarantor's
insolvency or admission of any inability to pay its debts as they mature, or
(iv) a violation by Tenant or any affiliate of Tenant under any other lease or
agreement with Landlord relating to the Center which is not cured within the
time permitted for cure thereunder. Failure by Tenant to comply with the same
term or condition of this Lease on two occasions during any twelve month period
shall cause any failure to comply with such term or condition during the
succeeding twelve month period, at Landlord's option, to constitute an incurable
Default. The notice and cure periods provided herein are in lieu of, and not
in addition to, any notice and cure periods provided by Law; provided, Landlord
may at any time and from time to time elect to comply with such notice and cure
periods as may be provided by Law in lieu of the notice and cure periods
provided herein.
B. REMEDIES. If a Default occurs, Landlord shall have the rights and
remedies hereinafter set forth to the extent permitted by Law, which shall be
distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provisions of this Lease:
(1) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any
such action shall be deemed a termination of Tenant's right to possession
only). In such event, Landlord may recover from Tenant: (i) any unpaid Rent as
of the termination date, (ii)the amount by which: (a) any unpaid Rent which
would have accrued after the termination date during the balance of the Term
exceeds (b)the reasonable rental value of the Premises under a lease
substantially similar to this Lease for the
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balance of the Term, taking into account among other things, the condition of
the Premises, market conditions and the period of time the Premises may
reasonably remain vacant before Landlord is able to re-lease the same to a
suitable replacement tenant, and Costs of Reletting (as defined in Paragraph I
below) that Landlord may incur in order to enter such replacement lease, and
(iii) any other amounts necessary to compensate Landlord for all damages
proximately caused by Tenant's failure to perform its obligations under this
Lease. For purposes of computing the amount of Rent herein that would have
accrued after the termination date, Tenant's obligation for Percentage Rent
shall be projected based on Tenant's average annual Gross Sales for the 36
months (or lesser period, if 36 months of the Term have not expired) preceding
Tenant's Default, and Tenant's obligations for Taxes, Center Expenses, and
Promotion and Media Fund Charges shall be projected, based upon the average
rate of increase, if any, in such items from the Commencement Date through the
termination date. The amounts computed in accordance with the foregoing
subclauses (a) and (b) shall both be discounted in accordance with accepted
financial practice at the rate of four percent (4%) per annum to the then
present value.
(2) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any
such action shall be deemed a termination of Tenant's right of possession
only). In such event, Landlord may recover from Tenant: (i) any unpaid Rent as
of the date possession is terminated, (ii) any unpaid Rent which accrues during
the Term from the date possession is terminated through the time of judgment
(or which may have accrued from the time of any earlier judgment obtained by
Landlord), less any consideration received from replacement tenants as further
described and applied pursuant to Paragraph I, below, and (iii) any other
amounts necessary to compensate Landlord for all damages proximately caused by
Tenant's failure to perform its obligations under this Lease, including without
limitation, all Costs of Reletting (as defined in Paragraph I). Tenant shall
pay any such amounts to Landlord as the same accrue or after the same have
accrued from time to time upon demand. At any time after terminating Tenant's
right to possession as provided herein, Landlord may terminate this Lease as
provided in clause (1) above by written notice to Tenant, and Landlord may
pursue such other remedies as may be available to Landlord under this Lease or
applicable Law.
C. MITIGATION OF DAMAGES. If Landlord terminates this Lease or
Tenant's right to possession, Landlord shall have no obligation to mitigate
Landlord's damages except to the extent required by applicable Law. If Landlord
has not terminated this Lease or Tenant's right to possession, Landlord shall
have no obligation to mitigate under any circumstances and may permit the
Premises to remain vacant or abandoned. If Landlord is required by applicable
Law to mitigate damages under this Lease: (a) Landlord shall be required only
to use reasonable efforts to mitigate, which shall not exceed such efforts as
Landlord generally uses to lease other space at the Center, (b) Landlord will
not be deemed to have failed to mitigate if Landlord leases any other portions
of the Center before reletting all or any portion of the Premises, and (c) any
failure to mitigate as described herein with respect to any period of time
shall only reduce the Rent and other amounts to which Landlord is entitled
hereunder by the reasonable rental value of the Premises during such period,
taking into account the factors described in clause B(1), above. In recognition
that the value of the Center depends on the rental rates and terms of leases
therein, Landlord's rejection of a prospective replacement tenant based on an
offer of rentals below Landlord's published rates for new leases of comparable
space at the Center at the time in question, or at Landlord's option, below the
rates provided in this Lease, or containing terms less favorable than those
contained herein, shall not give rise to a claim by Tenant that Landlord failed
to mitigate Landlord's damages.
D. RELETTING. If this Lease or Tenant's right to possession is
terminated, or Tenant vacates or abandons the Premises, Landlord may: {i) enter
and secure the Premises, change the locks, install barricades, remove any
improvements, fixtures or other property of Tenant therein, perform any
decorating, remodeling, repairs, alterations, improvements or additions and
take such other actions as Landlord shall determine in Landlord's sole
discretion to prevent damage or deterioration to the Premises or prepare the
same for reletting, and (ii) relet all or any portion of the Premises
(separately or as part of a larger space), for any rent, use or period of time
(which may extend beyond the Term hereof), and upon any other terms as Landlord
shall determine in Landlord's sole discretion, directly or as Tenant's agent
(if permitted or required by applicable law). The consideration received from
such reletting shall be applied pursuant to the terms of Paragraph I hereof,
and if such consideration, as so applied, is not sufficient to cover all Rent
and damages to which Landlord may be entitled hereunder, Tenant shall pay any
deficiency to Landlord as the same accrues or after the same has accrued from
time to time upon demand, subject to the other provisions hereof.
E. SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord
shall at all times have the right without prior demand or notice except as
required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and Tenant hereby waives any right to
require that Landlord post a bond in connection therewith, and (ii) sue for and
collect any unpaid Rent which has accrued. Notwithstanding anything to the
contrary contained in this Lease, to the extent not expressly prohibited by
applicable Law, in the event of any Default by Tenant, Landlord may terminate
this Lease or Tenant's right to possession and accelerate and declare that all
Rent reserved for the remainder of the Term shall be immediately due and
payable (in which event, Tenant's obligations for Percentage Rent, Taxes,
Center Expenses, and Promotion and Media Fund Charges herein that would have
accrued thereafter shall be projected in the manner described in Section B(1)
above); provided the Rent so accelerated shall be discounted in accordance with
accepted financial practice at the rate of four percent (4%) per annum to the
then present value, and Landlord shall, after receiving payment of the same
from Tenant, be obligated to turn over to Tenant
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any actual net reletting proceeds (net of all Costs of Reletting) thereafter
received during the remainder of the Term, up to the amount so received from
Tenant pursuant to this provision.
F. LATE CHARGES AND INTEREST. Tenant shall pay, as additional Rent, a
service charge of Two Hundred Dollars ($200.00) for bookkeeping and
administrative expenses, if any portion of Rent is not received when due. If
Landlord rightfully issues a Notice of Default to Tenant, Tenant shall pay
Landlord an additional service charge in the amount of One Hundred Dollars
($100.00). In addition, any Rent not paid when due shall accrue interest from
the due date at the Default Rate until payment is received by Landlord. Such
service charges and interest payments shall not be deemed consent by Landlord
to late payments, nor a waiver of Landlord's right to insist upon timely
payments at any time, nor a waiver of any remedies to which Landlord is entitled
as a result of the late payment of Rent.
G. LANDLORDS' CURE OF TENANT DEFAULTS. If Tenant fails to perform any
obligation under this Lease for five (5) days after notice thereof by Landlord
(except that no notice shall be required in emergencies), Landlord shall have
the right (but not the duty), to perform such obligation on behalf and for the
account of Tenant. In such event, Tenant shall reimburse Landlord upon demand,
as additional Rent, for all expenses incurred by Landlord in performing such
obligation together with an amount equal to fifteen percent (15%) thereof for
Landlord's overhead, and interest thereon at the Default Rate from the date such
expenses were incurred. Landlord's performance of Tenant's obligations
hereunder shall not be deemed a waiver or release of Tenant therefrom.
H. BAD RENT CHECKS. If during the Term, as it may be extended,
Landlord receives two (2) or more checks from Tenant which are returned by
Tenants' bank for insufficient funds, Landlord may require that all checks
thereafter be bank certified or cashier's checks (without limiting Landlord's
other remedies). All bank service charges resulting from any bad checks shall be
borne by Tenant.
I. OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of the Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant.
Landlord may bring suits for amounts owed by Tenant hereunder or any portions
thereof, as the same accrue or after the same have accrued, and no suit or
recovery of any portion due hereunder shall be deemed a waiver of Landlord's
right to collect all amounts to which Landlord is entitled hereunder, nor shall
the same serve as any defense to any subsequent suit brought for any amount not
theretofore reduced to judgment. Landlord may pursue one or more remedies
against Tenant and need not make an election of remedies until findings of fact
are made by a court of competent jurisdiction. All rent and other consideration
paid by any replacement tenants shall be applied, at Landlord's option: first,
to the Costs of Reletting, second, to the payment of all costs of enforcing this
Lease against Tenant or any Guarantor, third, to the payment of all interest and
service charges accruing hereunder, fourth, to the payment of Rent theretofore
accrued, and the residue, if any, shall be held by Landlord and applied to the
payment of other obligations of Tenant to Landlord as the same become due (with
any remaining residue to be retained by Landlord). "Costs of Reletting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises (whether to prevent damage or to prepare the Premises for
reletting), brokerage commissions, advertising costs, attorneys' fees, any
economic incentives given to enter leases with replacement tenants, and costs of
collecting rent from replacement tenants. Landlord shall be under no
obligation to observe or perform any provision of this Lease on its part to be
observed or performed which accrues after the date of any Default by Tenant.
The times set forth herein for the curing of violations by Tenant are of the
essence of this Lease. Tenant hereby irrevocably waives any right otherwise
available under any Law to redeem or reinstate this Lease or Tenant's right to
possession after this Lease or Tenant's right to possession is terminated based
on a Default by Tenant.
ARTICLE 23
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease required
to be performed by Landlord, Landlord shall not be deemed to be in default
hereunder nor subject to claims for damages of any kind, unless such failure
shall have continued for a period of thirty (30) days after written notice
thereof by Tenant or such additional time as may be required due to Unavoidable
Delays. If Landlord shall fail to cure within the time permitted for cure
herein, Landlord shall be subject to such claims for damages and remedies as may
be available to Tenant (subject to the other provisions of this Lease);
provided, Tenant shall have no right to self-help to perform repairs for any
other obligation of Landlord, and shall have no right to withhold, set off, or
abate Rent.
ARTICLE 24
INDEMNIFICATION
Except to the extent arising from the intentional or grossly negligent
acts of Landlord or Landlord's agents or employees, Tenant shall defend,
indemnify and hold harmless Landlord
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from and against any and all claims demands, liabilities, damages, judgments,
orders, decrees, actions, proceedings, fines, penalties, costs and expenses,
including without limitation, court costs and attorneys' fees arising from or
relating to any violation of Law, loss of life, diminution in value of the
Center, damage or injury to persons, property or business occurring in, about or
from the Premises, or directly or indirectly caused by or in connection with any
violation of this Lease or use of the Premises or Center by, or any other act or
omission of, Tenant, any other occupant of the Premises, or any of their
respective agents, employees, invitees or contractors. Without limiting the
generality of the foregoing, Tenant specifically acknowledges that the indemnity
undertaking herein shall apply to claims in connection with or arising out of
any "Work" as described in Article 7, the use or consumption of any utilities in
the Premises under Article 10, any repairs or other work by or for Tenant under
Article 11 and the transportation, use, storage, maintenance, generation,
manufacturing, handling, disposal, release or discharge of any "Hazardous
Material" as described in Article 26 (whether or not such matters shall have
been theretofore approved by Landlord), except to the extent that any of the
same arises from the intentional or grossly negligent acts of Landlord or
Landlord's agents or employees.
ARTICLE 25
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
Landlord shall have no obligation to provide any safety or security
devices, services or programs for Tenant or the Center and shall have no
liability for failure to provide the same or for inadequacy of any measures
provided. However, Landlord may institute or continue such safety or security
devices, services and programs as Landlord in its sole discretion deems
necessary. The costs and expenses of instituting and maintaining such devices,
services and programs shall be borne by Tenant as a part of Center Expenses, or
as a separate, additional charge to Tenant based on Tenant's Proportionate Share
or such other reasonable factors as Landlord shall determine. The parties
acknowledge that safety and security devices, services and programs provided by
Landlord, if any, while intended to deter crime and enhance safety, may not in
given instances prevent theft or other injurious acts or ensure safety of
parties or property. The risk that any safety or security device, service or
program may not be effective, or may malfunction, or be circumvented, is assumed
by Tenant wish respect to Tenant's property and interests, and Tenant shall
obtain insurance coverage to the extent Tenant desires protection against such
acts and other losses, beyond that described in Article 13. Tenant agrees to
cooperate in any safety or security program developed by Landlord or required by
Law.
ARTICLE 26
HAZARDOUS MATERIALS
A. Tenant shall not transport, use, store, maintain, generate, manufacture,
handle, dispose, release or discharge any "Hazardous Materials" (as defined
below) upon or about the Center, or permit Tenant's employees, agents,
contractors, invitees and other occupants of the Premises to engage in such
activities upon or about the Center. However, the foregoing provisions shall not
prohibit the transportation to and from, and use, storage, maintenance and
handling within, the Premises of substances customarily used in the business or
activity expressly permitted to be undertaken in the Premises under Article 1,
provided: {a) such substances shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing standards, and the manufacturers'
instructions therefor, {b) such substances shall not be disposed of, released or
discharged in the Center, and shall be transported to and from the Premises in
compliance with all applicable Laws, and as Landlord shall reasonably require,
{c) if any applicable Law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), (d) any remaining such substances shall be
completely, properly and lawfully removed from the Center upon expiration or
earlier termination of this Lease, and (e} for purposes of removal and disposal
of any such substances, Tenant shall be named as the owner and generator, obtain
a waste generator identification number, and execute all permit applications,
manifests, waste characterization documents and any other required forms.
B. Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup
or other regulatory action taken or threatened by any governmental or regulatory
authority with respect to the Presence of any Hazardous Material on the Premises
or the migration thereof from or to other property, (ii) any demands or claims
made or threatened by any party relating to any loss or injury resulting from
any Hazardous Material on the Premises, (iii) any release, discharge or
nonroutine, improper or unlawful disposal or transportation of any Hazardous
Material on or from the Premises or in violation of this Article, and (iv) any
matters where Tenant is required by Law to give a notice to any governmental or
regulatory authority respecting any Hazardous Material on the Premises, Landlord
shall have the right (but not the obligation) to join and participate, as a
party, in any legal proceedings or actions affecting the Premises initiated in
connection with any environmental, health or safety Law. At such times as
Landlord may reasonably request, Tenant shall provide Landlord with a written
list, certified to be true and complete, identifying any Hazardous Material then
used, stored, or maintained upon the Premises, the use and approximate quantity
of each such material, a copy of any
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material safety data sheet ("MSDS") issued by the manufacturer therefor, and
such other information as Landlord may reasonably require or as may be required
by Law. The term "Hazardous Material" for purposes hereof shall mean any
chemical, substance, material or waste or component thereof which is now or
hereafter listed, defined or regulated as a hazardous or toxic chemical,
substance, material or waste or component thereof by any federal, state or
local governing or regulatory body having jurisdiction, or which would trigger
any employee or community "right-to-know" requirements adopted by any such
body, or for which any such body has adopted any requirements for the
preparation or distribution of an MSDS.
C. If any Hazardous Material is released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Center in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable Laws clean
up and remove the Hazardous Material from the Center and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense (without limiting Landlord's other
remedies therefor). Such clean up and removal work shall be subject to
Landlord's prior written approval (except in emergencies), and shall include,
without limitation, any testing, investigation, and the preparation and
implementation of any remedial action plan required by any court or
governmental body having jurisdiction or reasonably required by Landlord. If
Landlord or any Lender or governmental body arranges for any tests or studies
showing that this Article has been violated, Tenant shall pay for the costs of
such tests. If any Hazardous Material is released, discharged or disposed of
on or about the Center and such release, discharge or disposal is not caused by
Tenant or other occupants of the Premises, or their employees, agents or
contractors, such release, discharge or disposal shall be deemed casualty
damage under Article 14 to the extent that the Premises are affected thereby;
in such case, Landlord and Tenant shall have the obligations and rights
respecting such casualty damage provided under such Article.
ARTICLE 27
CAPTIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
or portion thereof shall be found invalid, void, illegal, or unenforceable
generally or with respect to any particular party, by a court of competent
jurisdiction, it shall not affect, impair or invalidate any other terms or
provisions or the remaining portion thereof, or its enforceability with respect
to any other party.
ARTICLE 28
DEFINITIONS
A. "Center" shall mean the building or structure in which the Premises
are located and any other buildings or structures owned or ground leased by
Landlord from time to time and operated in conjunction therewith, whether or
not shown on Exhibit A hereto, together with the Common Areas, and all parcels
or tracts of land owned or ground leased by Landlord form time to time on which
all or any portion of the foregoing items are located and any fixtures, Systems
and Equipment, furniture and other personal property owned or leased by
Landlord located thereon or therein and used in connection therewith. "Center"
shall also include, at Landlord's election from time to time, Majors and other
buildings, structure and parcels or tracts of land owned by other parties which
adjoin the other areas of the Center or the Common Areas.
B. "Center Expenses" shall mean all expenses, costs and amounts of every
kind and nature which Landlord shall pay during any calendar year any portion
of which occurs during the Term in connection with the management, repair,
maintenance, replacement, insurance and operation of the Center, including,
without limitation, any amounts paid for: (a) utilities, including but not
limited to electricity, power, gas steam, oil or other fuel, water, sewer,
lighting, heating, air conditioning and ventilating, (b) permits, licenses and
certificates necessary to operate and manage the Center, and costs of complying
with other legal requirements, including, without limitation, the "ADA" (as
described in Article 39), (c) insurance applicable to the Center, which may
include without limitation, commercial liability insurance for personal injury,
death, property damage, defamation and false arrest, "all risk" insurance on
the Center, including without limitation, earthquake, flood, boiler and rent
loss coverage, automobile, worker compensation and employer liability insurance,
(d) supplies, materials, tools, equipment, and vehicles used in the operation,
repair, maintenance and security, floor care and cleaning, landscaping, and
other services for the Center, including rental, installment purchase and
financing agreements therefor and interest thereunder, (e) accounting, legal,
inspection, consulting and other services, (f) wages, salaries, bonuses, and
other compensation and benefits for any manager, personnel and other parties
engaged in the operation maintenance or security of the Center, and employer's
Social Security taxes, unemployment taxes or insurance, and any other taxes
which may be levied on such wages, salaries, compensation and benefits, data or
payroll processing expenses relating thereto (if the manager or other personnel
are located off-site and handle other properties, the foregoing expenses shall
be allocated appropriately between the Center and such other properties), (g)
payments under any easement, operating agreement, declaration, restrictive
covenant, or instrument pertaining to the sharing of costs in any development
of which the Center is part,
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(h) alarm monitoring and security service, janitorial service, trash removal,
removal of ice and snow (and salting and sanding in connection therewith), (i)
parking surcharges or fees that may result from any environmental or other Law
or guideline, and the cost of obtaining, providing and operating public
transportation or shuttle bus systems to bring customers or workers to or from
the Center if required by such Laws or guidelines, or if otherwise deemed
desirable by Landlord, (I) the costs of operating and maintaining any on-site
office at the Center, including without limitation, the fair rental value
thereof, telephone charges, postage, stationery and photocopying expenses, (k)
music programs and equipment, whether rented or purchased, (I) telephone
directory listings for the Center, (m) appropriate reserves for operation of
the Center and for covering uninsured portions, including deductible amounts,
of casualty damage and general liability claims relating to the Center, (n)
operation, maintenance, repair, installation, replacement, inspection, testing,
painting, decorating and cleaning of: (i) elevators, escalators, fire exits and
stairways, (ii) sidewalks, curbs, gutters, guardrails, bumpers, fences,
flagpoles, flags, banners, bicycle racks, Center identification and pylon
signs, directional signs, traffic signals and markers, including those located
off-site but installed for the benefit of the Center, (iii) parking structures,
parking lots, loading and service areas and driveways (including sweeping,
cleaning, re-striping, repairing, sealing, re-surfacing and replacement), (iv)
storm and sanitary drainage systems, including disposal plants, lift stations
and detention ponds and basins, (v) irrigation systems, (vi) any Systems and
Equipment, (vii) interior and exterior planting, replanting and replacement of
flowers, shrubbery, plants, trees, grass, sod and other landscaping, (viii) all
portions of buildings, both interior and exterior, in the Center, including
without limitation, Common Areas and fixtures, equipment and other items
therein or thereon, including but not limited to floors, floor coverings,
corridors, ceilings, foundations, walls, wall-coverings, restrooms, lobbies,
canopies, skylights, trash and ash cans and receptacles, trash compactors,
planters, waterfalls, fountains, pools, benches, furniture, doors, locks and
hardware, windows, glass and glazing, (ix) gutters and downspouts, roof
flashings and roofs (including repairs and replacements), and (o) an amount
equal to fifteen percent (15%) of all of the foregoing costs and expenses as a
liquidation of Landlord's general off-site overhead (which amount shall be in
addition to the compensation and related expenses for the manager and other
aforementioned expenses). The foregoing provision is for definitional purposes
only and shall not be construed to impose any obligation upon Landlord to incur
such expenses. Landlord reserves the right to: (x) determine and bill Tenant's
Proportionate Share of insurance costs relating to the Center separately from
other Center Expenses, and (y) include Taxes attributable to the Common Areas
as a part of Center Expenses rather than determining and billing the same
separately. Notwithstanding the foregoing, Center Expenses shall not, however,
include:
(i) interest and amortization on Mortgages, and other debt costs or
ground lease payments, if any, except as provided herein; depreciation
of buildings and other improvements (except permitted amortization of
certain capital expenditures as provided below); improvements, repairs
or alterations to spaces leased to other tenants; the cost of
providing any service directly to and paid directly by, any tenant;
costs of any items to the extent Landlord receives reimbursement from
insurance proceeds or from a third party (such proceeds to be deducted
from Center Expenses in the year in which received); and
(ii) capital expenditures, except those: (a) made primarily to reduce
Center Expenses, or to comply with any Laws or other governmental
requirements, or (b) for repairs or replacements (as opposed to
additions or new improvements, except that Landlord shall be permitted
to include new improvements involving pylon or other signs for the
Center or the upgrading or addition of lights in the parking and other
Common Areas); provided, all such permitted capital expenditures
(together with reasonable finance charges) shall be amortized for
purposes of this Lease over three (3) years. Tenant shall be
responsible for Tenant's Proportionate Share of such permitted
amortization of capital expenditures during the Term, including any
remaining amortization of permitted capital expenditures made prior to
the Commencement Date.
C. "Common Areas" shall have the meaning specified therefor in Article
12.
D. "CPI" shall mean the Consumer Price Index for All Urban Consumers,
All Items (Base year 1982-1984 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics, All City Average. If the Bureau of Labor
Statistics substantially revises the manner in which the CPI is determined, an
adjustment shall be made in the revised index which would produce results
equivalent, as nearly as possible, to those which would be obtained hereunder
if the CPI were not so revised. If the CPI becomes unavailable to the public
because publication is discontinued, or otherwise, Landlord shall substitute
therefor a comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by a governmental agency,
major bank, other financial institution, university or recognized financial
publisher.
E. "Default Rate" shall mean eighteen percent (18%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
F. "Gross Sales" shall have the meaning specified therefor in Article
3.
G. "HVAC" shall mean heating, ventilating and air-conditioning.
H. "Landlord" and "Tenant" shall be applicable to one or more parties
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
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officers, directors, employees, shareholders, principals, Lenders, agents,
affiliates, successors and assigns.
I. "Law or "Laws" shall mean all federal, state, county and local
governmental and municipal laws, statutes, ordinances, rules, regulations,
codes, decrees, orders and other such requirements, applicable equitable
remedies and decisions by courts in cases where such decisions are binding
precedents in the state in which the Center is located, and decisions of federal
courts applying the Laws of such state, at the time in question.
J. "Lease Year" shall mean each calendar year or portion thereof during
the Term, and any initial or final partial years are sometimes referred to
herein as "Partial Lease Years"; provided, Landlord reserves the right to change
the "Lease Year" to each consecutive twelve month period commencing on the
Commencement Date or such other date as Landlord shall designate by notice to
Tenant.
K. "Lender" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
L. "Major" shall mean any store of any type in excess of 25,000 square
feet of rentable area in, or at Landlord's election from time to time adjoining,
the Center, whether in buildings or on parcels owned by Landlord or other
parties.
M. "Mortgage" shall mean all mortgages, deeds of trust, ground leases and
other such encumbrances now or hereafter placed upon the Center or any part
thereof, and all renewals, modifications, consolidations, replacements or
extensions thereof, and all indebtedness now or hereafter secured thereby and
all interest thereon.
N. "Rent" shall have the meaning specified therefor in Article 4.
O. "Systems and Equipment" shall mean any plant, machinery,
transformers, ducts, cables, wires, and other equipment, facilities, and systems
designed to supply light, heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of any electrical, gas, steam, plumbing, water, sewer, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any other mechanical, electrical, electronic, computer or other systems or
equipment for the Center, except to the extent that any of the same serves any
tenant exclusively or is subject to shared tenant use as described in Article
11.
P. "Taxes" shall mean all federal, state, county, or local governmental,
special district, improvement district, municipal or other political subdivision
taxes, fees, levies, assessments, charges or other impositions of every kind and
nature, whether foreseen or unforeseen, general, special, ordinary or
extraordinary (unless required to be paid by Tenant under Article 4), respecting
the Center, including without limitation, real estate and other ad valorem
taxes, general and special assessments, interest on any special assessments paid
in installments, transit taxes, water and sewer rents, taxes based upon the
receipt of rent including, without limitation, gross receipts taxes applicable
to the receipt of rent, personal property taxes imposed upon the fixtures,
machinery, equipment, apparatus, Systems and Equipment, appurtenances, furniture
and other personal property used in connection with the Center which Landlord
shall pay during any calendar year, any portion of which occurs during the Term
(without regard to any different fiscal year used by such government or
municipal authority except as provided in Article 5). Notwithstanding the
foregoing, taxes shall not include excess profits taxes, franchise taxes, gift
taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and state income taxes, and other taxes to the extent applicable to
Landlord's general or net income (as opposed to rents, receipts or income
attributable to operations at the Center). If the method of taxation of real
estate prevailing to the time of execution hereof shall be, or has been altered,
so as to cause the whole or any part of the taxes now, hereafter or theretofore
levied, assessed or imposed on real estate to be levied, assessed or imposed on
Landlord, wholly or partially, as a capital levy or otherwise, or on or measured
by the rents received therefrom, then such new or altered taxes attributable to
the Center shall be included within the term "Taxes", except that the same shall
not include any enhancement of said tax attributable to other income of
Landlord. Tenant shall pay increased Taxes whether Taxes are increased as a
result of increases in the assessment or valuation of the Center (whether based
on a sale, change in ownership or refinancing of the Center or otherwise),
increases in tax rates, reduction or elimination of any rollbacks or other
deductions available under current law, scheduled reductions of any tax
abatement, elimination, invalidity or withdrawal of any tax abatement, or for
any other cause whatsoever. In addition, Landlord may include in Taxes any
actual, out-of-pocket expenses incurred by Landlord in attempting to protest,
reduce or minimize Taxes (including without limitation, fees for attorneys,
consultants, appraisers and other experts) in the calendar year such expenses
are paid.
Q. "Tenant's Proportionate Share" shall be a fraction equal to the
rentable square footage of the Premises set forth in Article 1 (as the same may
be remeasured pursuant to Article 21) divided by the total square footage of all
rentable floor space in the Center; provided Landlord may exclude from such
rentable floor space of the Center, at Landlord's option, any portions of the
Center: (i) not occupied and open for business during all or any portion of the
subject year, (ii) leased to or used by other parties as Majors, theaters,
restaurants, kiosks, storage areas, or premises which do not front on any
enclosed mall area of the Center, where such parties are not required to pay a
full pro rata share of Center Expenses or Taxes, as the case may be, pursuant to
a lease or other agreement with Landlord, and (iii) with respect to Taxes,
areas of the Center for which separate Tax bills are received and which are the
sole responsibility of separate parties pursuant to a lease or other agreement
with Landlord; provided, Landlord shall also deduct from Center Expenses or
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Taxes, as the case may be, all amounts received from such excluded parties for
Center Expenses or Taxes. If the Center shall be part of or shall include a
group of buildings or structures collectively owned or managed by Landlord or
its affiliates, or shall include any space used for office, medical, dental or
other non-retail purposes, Landlord may determine separately and allocate Taxes
or Center Expenses between such buildings and structures and the parcels on
which they are located, and between the retail and non-retail areas of the
Center, in accordance with sound accounting and management principles, in which
event Tenant's Proportionate Share shall be based on the ratio of the rentable
area of the Premises to the rentable floor space of the buildings, structures
or areas for which Landlord separately determines such Taxes or Center
Expenses, subject to the adjustments set forth above.
R. "Unavoidable Delays" shall mean delays due to strike, lockouts,
labor troubles, inability to procure labor or materials or reasonable
substitutes therefor, failure of power, governmental requirements, restrictions
or Laws, fire or other casualty, damage, war, or civil disorder, or other causes
beyond the reasonable control of the party delayed; provided, Unavoidable
Delays hereunder shall not include delays resulting from changes in economic or
market conditions, or financial or internal problems of the parties or problems
that can be satisfied by the payment of money. As a condition to Tenant's
right to claim an Unavoidable Delay, Tenant shall notify Landlord within seven
(7) days after the delay occurs and on at least a weekly basis thereafter
describing in reasonable detail the nature and the status of tenant's diligent
efforts to end the delay.
ARTICLE 29
RULES
Tenant shall comply with all of the rules which are set forth in Rider
On attached to the Lease, as the same may be amended or supplemented hereunder
(the "Rules"). Landlord shall have the right by notice to Tenant or by posting
at the Center to reasonably amend such rules and supplement the same with other
reasonable Rules relating to the Center or the promotion of safety, care,
cleanliness or good order therein. Nothing herein shall be construed to give
Tenant or any other party any claim against Landlord arising out of the
violation of such Rules by any other tenant, occupant or visitor of the Center,
or out of the enforcement, modification or waiver of the Rules by Landlord in
any particular instance.
ARTICLE 30
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay any other act or omission of either party. No waiver by either
party of any provision of the Lease shall be deemed a waiver of such provision
with respect to any subsequent matter relating to such provision, and Landlord's
consent respecting any action by Tenant all not constitute a waiver of the
requirement for obtaining Landlord's consent respecting any subsequent action.
Acceptance of Rent by Landlord shall not constitute a waiver of any breach by
Tenant of any term or provision of this Lease. No acceptance of a lesser amount
than the Rent herein stipulated shall be deemed a waiver of Landlord's right to
receive the full amount due, nor shall any endorsement or statement on any check
or payment or any letter accompanying such check or payment be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the full amount due. The acceptance of
Rent or of the performance of any other term or provision from any party other
than Tenant, including any Transferee, shall not constitute a waiver of
Landlord's right to approve any transfer.
ARTICLE 31
ATTORNEYS' FEES, COUNTERCLAIMS, VENUE AND JURY TRIAL
If Landlord or any of its officers, directors, trustees, beneficiaries,
partners, agents, affiliates or employees shall be made a party to any
litigation commenced by or against Tenant and are not found to be at fault,
Tenant shall pay all costs, expenses and reasonable attorneys' fees incurred by
Landlord or any such party in connection with such litigation. Tenant shall also
pay all costs, expenses and reasonable attorney's fees that may be incurred by
Landlord in successfully enforcing this Lease, IN THE INTEREST OF OBTAINING A
SPEEDIER AND LESS COSTLY HEARING OF ANY DISPUTE, EACH OF LANDLORD AND TENANT
HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER PARTY AGAINST THE OTHER AND ANY RIGHTS TO A TRIAL BY JURY
UNDER ANY STATUTE, RULE OF LAW OR PUBLIC POLICY IN CONNECTION WITH ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS LEASE, THE PREMISES OR
THE CENTER. Although such jury waiver is intended to be self-operative and
irrevocable, Landlord and Tenant each further agree, if requested, to confirm
such waivers in writing at the time of commencement of any such action,
proceeding or counterclaim. If Landlord commences any detainer suit, summary
proceedings or other action seeking possession of the Premises, Tenant agrees
not to interpose by consolidation of actions, removal to chancery or otherwise,
any counterclaim, claim for set-off, recoupment or deduction of Rent, or other
claim seeking affirmative relief of any kind (except a mandatory or compulsory
counterclaim which Tenant would forfeit if not so interposed). Any action or
proceeding brought by either party against the other for any matter arising out
of or in any way relating to this Lease, the Premises or the Center, shall be
heard, at Landlord's option, in the County where the Center is located.
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ARTICLE 32
PERSONAL PROPERTY TAXES
Tenant shall pay before delinquent all taxes, assessments, license
fees, charges or other governmental impositions assessed against or levied or
imposed upon Tenant's business operations, Tenant's leasehold interest, or
based on Tenant's use or occupancy of the Premises, or tenant's fixtures,
furnishings, equipment, leasehold improvements, inventory, merchandise, and
personal located in the Premises (whether or not title shall have vested in
Landlord pursuant to any provision hereof). Whenever possible, Tenant shall
cause all such items to be assessed and billed separately from the property of
Landlord and other parties. If any such items shall be assessed and billed
with the property of Landlord or another party, Landlord shall include the same
or an appropriate portion thereof in Center Expenses, or shall reasonably
allocate the same or an appropriate share thereof between Tenant and such other
party (and Tenant shall promptly pay the amount so allocated to Tenant).
ARTICLE 33
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Center shall convey or
otherwise dispose of any portion thereof in which the Premises are located to
another party (and nothing herein shall be construed to restrict or prevent
such conveyance or disposition), such other party shall thereupon be and become
landlord hereunder and shall be deemed to have fully assumed and be liable for
all obligations of this Lease to be performed by Landlord, including the return
of any Security Deposit. Tenant shall attorn to such other party, and
Landlord or such successor owner shall, from and after the date of conveyance,
be free of all liabilities and obligations hereunder. The liability of
Landlord to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration, or any other matter relating to the Center or the
Premises, shall be limited to the interest of Landlord in the Center (and
rental proceeds). Tenant agrees to look solely to Landlord's interest in the
Center (and rental proceeds) for the recovery of any judgment against Landlord,
and Landlord shall not be personally liable for any such judgment or deficiency
after execution thereon. Under no circumstances shall any present or future
general or limited partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have
any liability for the performance of Landlord's obligations under this Lease.
ARTICLE 34
NOTICES
Except as expressly provided to the contrary in this Lease, every
notice, demand or other communication given by either party to the other with
respect hereto or to the Premises or Center, shall be in writing and shall not
be effective for any purpose unless the same shall be served personally or by
national air courier service, or United States registered or certified mail,
return receipt requested, postage prepaid, addressed if to Tenant, at the
address first set forth in the Lease, and if to Landlord, at the address at
which the last payment of Rent was required to be made and to JMB Properties
Company at 900 North Michigan Avenue, Chicago, Illinois, 60611, Attn: Director
of Lease Administration, or such other address or addresses as Tenant or
Landlord may from time to time designate by notice given as above provided.
Every notice or other communication hereunder shall be deemed to have been
given as of the second business day following the date of such mailing or
dispatch by national air courier service (or as of any earlier date evidenced by
a receipt from such national air carrier service or the United States Postal
Service) or immediately if personally delivered. Notices not sent in
accordance with the foregoing shall be of no force or effect until received by
the foregoing parties at such addresses required herein.
ARTICLE 35
REAL ESTATE BROKERS
Tenant shall defend, indemnify and hold Landlord harmless from all
damages, judgments, liabilities and expenses (including attorneys' fees)
arising from any claims or demands of any broker, agent or finder with whom
Tenant has dealt for any commission or fee alleged to be due in connection with
its participation in the procurement of Tenant or the negotiation with Tenant
of this Lease, other than a broker with whom Landlord has signed a written
agreement relating to this Lease.
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ARTICLE 36
SECURITY DEPOSIT AND LANDLORD'S LIEN
Tenant shall deposit with Landlord the amount set forth in Article 1
as a Security Deposit upon Tenant's execution and submission of this Lease. The
Security Deposit shall serve as security for the prompt, full and faithful
performance by Tenant of the terms and provisions of this Lease. If Tenant
commits a Default, or owes any amount to Landlord upon the expiration of this
Lease, Landlord may use or apply the whole or any part of the Security Deposit
for the payment of Tenant's obligations hereunder. The use or application of
the Security Deposit shall not prevent Landlord from exercising any other right
or remedy available to Landlord and shall not be construed as liquidated
damages. If the Security Deposit is reduced by such use or application, Tenant
shall deposit with Landlord within ten (10) days after written notice, an
amount sufficient to restore the full amount of the Security Deposit. In the
event of bankruptcy or other insolvency proceeding against Tenant or Tenant's
guarantor, the Security Deposit shall be deemed automatically applied to the
payment of overdue Rent from the earliest time such Rent became overdue prior
to the filing of such proceeding. Landlord shall not be required to keep the
Security Deposit separate from Landlord's general funds or pay interest on the
Security Deposit. Any remaining portion of the Security Deposit shall be
returned to Tenant within sixty (60) days after Tenant has vacated the Premises
in accordance with Article 16.
As further security for Tenant's performance under this Lease, to the
extent not expressly prohibited by applicable Law, Tenant hereby grants
Landlord a lien and security interest in all existing and after-acquired
property of Tenant placed in or relating to Tenant's business at the Premises,
including but not limited to, accounts receivable, insurance proceeds, good
will, contracts, intangibles, fixtures, equipment, inventory, furnishings and
personal property, and all proceeds thereof, and all rents and other
consideration from any Transfer. Notwithstanding the foregoing, Tenant may
freely use, replace and dispose of such property (provided Tenant immediately
replaces the same with similar property of comparable or better quality), and
receive such rents and consideration, in the ordinary course of Tenant's
business, until such time as Tenant shall commit a Default; upon such Default,
Tenant's right to remove or use such property shall terminate, and all other
parties shall be entitled to rely on written notification thereof given by
Landlord without requiring any proof of such Default or any other matter.
Tenant agrees to execute such financing statements, collateral assignment of
rents and subleases, and other documents necessary to perfect a security
interest, as Landlord may now or hereafter reasonably request in recordable
form. Landlord may at its election at any time execute such a financing
statement and collateral assignment as Tenant's agent and attorney-in-fact or
file a copy of this Lease as such financing statement and collateral
assignment. Landlord shall be entitled hereunder to all of the rights and
remedies afforded a secured party under the Uniform Commercial Code or other
applicable Law in addition to any landlord's lien and rights provided by
applicable Law.
ARTICLE 37
MISCELLANEOUS
A. Each of the terms and provisions of this Lease shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 20 respecting Transfers. However, if
Tenant is an individual and dies or becomes incapacitated, Landlord reserves
the right to terminate this Lease upon thirty (30) days' advance notice to
Tenant or Tenant's legal representative.
B. Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
C. This Lease shall be construed in accordance with the Laws of the
state and county in which the Center is located.
D. All obligations (including indemnity obligations) or rights of
either party arising during or attributable to the period prior to expiration
or earlier termination of this Lease shall survive such expiration or earlier
termination, except as provided to the contrary in Article 33.
E. If the Commencement Date is delayed in accordance with Article 2
for more than one year, Landlord may declare this Lease terminated by notice to
Tenant, and if the Commencement Date is so delayed for more than three years,
this Lease shall thereupon be deemed terminated without further action by
either party.
F. Landlord agrees that if Tenant timely pays the Rent and performs
the terms and provisions hereunder, Tenant shall hold and enjoy the Premises
during the Term, free of lawful claims by any party acting by or through
Landlord, subject to all other terms and provisions of this Lease.
G. The parties agree that they intend hereby to create only the
relationship of landlord and tenant. No provision hereof, or act of either
party hereunder, shall be construed as creating the relationship of principal
and agent, or as creating a partnership, joint venture or other enterprise, or
render either party liable for any of the debts or obligations of the other
party, except under any indemnity provisions of this Lease.
26
<PAGE> 28
H. Tenant acknowledges that any site or lease plan of the Center
attached as an Exhibit hereto shall not be deemed a representation, warranty or
agreement by Landlord respecting the Center or any other matter shown thereon
other than the approximate location of the Premises, and that Majors and other
parties unrelated to Landlord may own or control portions of the Center shown
on such Exhibit.
I. If applicable Laws require that this Lease be in the form of a
deed, this Lease shall be deemed a deed of lease for all purposes, and Landlord
shall be deemed to have granted and demised the Premises to Tenant for the Term
hereof, subject to the other terms and provisions contained herein.
J. This Lease, and any Riders and Exhibits hereto, have been mutually
negotiated by Landlord and Tenant, and any ambiguities shall not be interpreted
in favor of either party. Any printed provisions that have been deleted shall
not be used to interpret the remaining provisions.
ARTICLE 38
OFFER
The submission and negotiation of this Lease shall not be deemed an
offer to enter the same by Landlord, but the solicitation of such an offer by
Tenant. Tenant agrees that its execution of this Lease constitutes a firm offer
to enter the same which may not be withdrawn for a period of six (6) weeks
after delivery to Landlord. During such period and in reliance on the
foregoing, Landlord may, at Landlord's option, deposit any Security Deposit
and Rent, proceed with any alterations or improvements, and permit Tenant to
enter the Premises and make alterations or improvements. If Landlord shall fail
to execute and mail or deliver this Lease to Tenant within such period, Tenant
may revoke its offer to enter this Lease by sending notice thereof to Landlord
before Landlord mails or delivers an executed copy of this Lease to Tenant. In
such case, Landlord shall return any Security Deposit and Rent to Tenant, and
Tenant shall promptly remove any alterations, improvements, fixtures or
personal property made or placed in or upon the Premises by Tenant or its
contractors, agents or employees and restore the same to good condition as
required under Article 16. If Tenant shall seek to revoke its offer to enter
this Lease in violation of the foregoing provisions, Landlord shall have the
options of forfeiting and retaining any Security Deposit and Rent theretofore
paid, as liquidated damages without executing and delivering this Lease to
Tenant, or executing and delivering this Lease to Tenant and enforcing the same
as a valid and binding lease agreement.
ARTICLE 39
AMERICANS WITH DISABILITIES ACT
The parties acknowledge that the Americans With Disabilities Act of
1990 (42 U.S.C. ss. 12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to
time (collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Premises and Center depending on,
among other things: (1) whether Tenant's business is deemed a "public
accommodation" or "commercial facility", (2) whether such requirements are
"readily achievable", and (3) whether a given alteration affects a "primary
function area" or triggers "path of travel" requirements. The parties hereby
agree that: (a) Landlord shall be responsible for ADA Title III compliance in
the Common Areas, except as provided below, (b) Tenant shall be responsible for
ADA Title III compliance in the Premises, including any leasehold improvements
or other work to be performed in the Premises under or in connection with this
Lease, and (c) Landlord may perform, or require that Tenant perform, and Tenant
shall be responsible for the cost of, ADA Title III "path of travel"
requirements triggered by alterations in the Premises. Tenant shall be solely
responsible for requirements under Title I of the ADA relating to Tenant's
employees.
27
<PAGE> 29
ARTICLE 40
ENTIRE AGREEMENT
This Lease, together with Riders One through Two, and Exhibits A
through D (WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN
AND MADE A PART HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and
provisions between Landlord and Tenant relating to the matters set forth herein
and no prior or contemporaneous agreement or understanding pertaining to the
same shall be of any force or effect. Without limiting the generality of the
foregoing, Tenant hereby acknowledges and agrees that Landlord's leasing and
field personnel are only authorized to show the Premises and negotiate terms
and conditions for leases subject to Landlord's final approval, and are not
authorized to make any agreements, representations, understandings or
obligations binding upon Landlord, respecting the present or future condition
of the Premises or Center, suitability of the same for Tenant's business, or
any other matter, and no such agreements, representations, understandings or
obligations not expressly contained herein shall be of any force or effect.
TENANT HAS RELIED ON TENANT'S INSPECTIONS AND DUE DILIGENCE IN ENTERING THIS
LEASE AND NOT ON ANY REPRESENTATIONS OR WARRANTIES MADE BY LANDLORD CONCERNING
THE CONDITION OR SUITABILITY OF THE PREMISES OR CENTER FOR ANY PARTICULAR
PURPOSE. Neither this Lease, nor any Riders or Exhibits referred to above may
be modified, except in writing signed by both parties.
IN TESTIMONY WHEREOF, the parties have caused this Lease to be signed
under seal by their respective representatives designated below, or if either
party is a corporation, it has caused these presents to be signed by its
president or other officer designated below, attested by its secretary, and its
corporate seal to be affixed, and if the Center is in Washington, D.C., does
hereby appoint such president or other officer its true and lawful
attorney-in-fact to acknowledge and deliver these presents as its act and deed
as of the day and year first above written.
WITNESS; ATTESTATION
(TWO FOR EACH SIGNATORY Witness Our Hands And Seals
REQUIRED IF CENTER IS
IN FLORIDA OR OHIO; ONE IF
CENTER IS IN D.C.):
/s/ Eileen S. Matthew LANDLORD: COUNTRY ISLES ASSOCIATES, an
-------------------------- Illinois general partnership
/s/ BY: ARVIDA/JMB PARTNERS, a
-------------------------- Florida general partnership,
its managing partner
BY: ARVIDA/JMB MANAGERS, INC., a
Delaware corporation, as
general
BY: /s/ John Baric
--------------------------------
NAME TYPED: John Baric
--------------------------------
TITLE: Vice President
--------------------------------
/s/ Charles D. Brecker TENANT: HAVANA REPUBLIC W.H., INC., a
-------------------------- Florida corporation
[Seal] Charles D. Brecker
Ada Valiente-Garcia BY: /s/ Stephen Schatzman
-------------------------- --------------------------------
Ada Valiente-Garcia NAME TYPED: Stephen Schatzman
--------------------------------
TITLE: President
--------------------------------
CERTIFICATE
(IF TENANT IS A CORPORATION)
I, Alex Gimelstein, Secretary of HAVANA REPUBLIC W.H., INC., Tenant,
hereby certify that the officer(s) executing the foregoing Lease on behalf of
Tenant was/were duly authorized to act in his capacity as PRESIDENT and his
action is the action of Tenant.
(Corporate Seal) Alex Gimelstein
--------------------------------
Secretary
28
<PAGE> 30
THIS PAGE IS REQUIRED IF PROPERTY IS IN DELAWARE,
OKLAHOMA, OHIO, UTAH, WASHINGTON D.C. OR WASHINGTON STATE
LANDLORD ACKNOWLEDGMENT
STATE OF___________________ )
) SS.:
COUNTY OF__________________ )
On this _____ day of __________, 19__, before me, a Notary Public in
and for the County and State aforesaid, personally appeared __________________,
known to me to be the ______________________________________________________ of
_________________________________________________________________________, a(n)
__________________________________________________, and acknowledged that being
authorized so to do, (s)he executed the foregoing instrument on behalf of said
entity, as a free and voluntary act, and as the free and voluntary act and deed
of said entity, in its capacity described in the foregoing instrument for the
Landlord designated therein, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________
Notary Public
My Commission Expires: _____________________
TENANT ACKNOWLEDGMENTS
INDIVIDUAL
STATE OF___________________ )
) SS.:
COUNTY OF _________________ )
On this _____ day of __________, 19__, before me, a Notary Public in
and for the County and State aforesaid, personally appeared _________________
and acknowledged that (s)he executed the foregoing instrument as a free and
voluntary act, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________
Notary Public
My Commission Expires: _____________________
CORPORATION
STATE OF___________________ )
) SS.:
COUNTY OF _________________ )
On this _____ day of __________, 19__, before me, a Notary Public in
and for the County and State aforesaid personally appeared __________________
known to me to be _______________ President of _______________________________,
one of the corporations described in the foregoing instrument, and acknowledged
that as such officer, being authorized so to do, (s)he executed the foregoing
instrument on behalf of said corporation and caused the corporate seal of said
corporation to be affixed thereto, as his/her free and voluntary act, and as
the free and voluntary act of said corporation for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________
Notary Public
My Commission Expires: _____________________
29
<PAGE> 31
PARTNERSHIP
STATE OF___________________ )
) SS.:
COUNTY OF _________________ )
On this _____ day of __________, 19__, before me, a Notary Public in
and for the County and State aforesaid personally appeared___________________
______________________________ known to me to be a general partner of the
partnership known as ___________________, one of the partnerships described in
the foregoing instrument, and acknowledged that being authorized so to do,
(s)he executed the foregoing instrument on behalf of said partnership as a free
and voluntary act, and as the free and voluntary act of said partnership, for
the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________
Notary Public
My Commission Expires: _____________________
30
<PAGE> 32
COUNTRY ISLES PLAZA LEASING PLAN
- --------------------------------------------------------------------------------
[MAP]
<PAGE> 33
EXHIBIT B
DESCRIPTION OF LEASEHOLD IMPROVEMENTS
FOR LEASE (THE "LEASE")
BETWEEN COUNTRY ISLES ASSOCIATES, AS LANDLORD,
AND HAVANA REPUBLIC W.H., INC., AS TENANT,
DATED As of 11/1/96
1. On or before October 31, 1996, Tenant shall cause to be prepared and
delivered to Landlord plans and specifications for construction and improvement
of and to the Premises, including its interior, and Tenant's signage drawings,
all of which are subject to Landlord's approval as set forth in Paragraph 2
below, together with the sum of Three Hundred and No/100 U.S. Dollars ($300) as
a plan review fee.
2. Landlord shall make available to Tenant access to the plans and
specifications for the building in which the Premises are to be located to
assist Tenant and Tenant's architects in the preparation of plans for the
Premises. The plan sketch, the plans and specifications for construction of and
improvement to the Premises, including signage, and the general contract for
Tenant's improvements, including, without limitation, the general contractor
(who must be licensed and properly insured), shall be subject to written
approval by Landlord prior to commencement of construction, which approval may
be withheld for any reason whatsoever, aesthetic grounds being sufficient. In
the event that Landlord shall disapprove the plan sketch, plans and
specifications or general contract within thirty (30) days of receipt, Tenant
shall modify, change and resubmit the same within fifteen (15) days of notice of
disapproval.
3. Landlord shall deliver the Premises to Tenant on or before October
31, 1996. Upon such delivery of the Premises to Tenant, Tenant shall commence
construction of and improvement to the Premises pursuant to the approved plans
and specifications therefor, and shall complete the same not later than sixty
(60) days after commencement thereof.
4. Subcontractors, materialmen, equipment suppliers and others who are
directly under contract with Tenant or its agents for improvement of the
Premises (collectively "Tenant's Contractor") shall coordinate all activities
through the office of Landlord. Tenant's Contractor will not order or consign
shipments to the Premises in the Landlord's name. While improving the Premises,
Tenant's Contractor shall abide by and all construction shall comply with all
applicable Federal, state and local laws, ordinances, regulations, laws,
building codes, fire codes and underwriter's codes, including, but not limited
to, laws and regulations affecting the safety of persons and property on the
Premises, and Tenant, at its expense, shall obtain all permits and licenses
required thereby for such construction. Tenant's Contractor and its
subcontractors shall conduct their work related to improvement of the Premises
in a manner that will not interfere with other work being done on or in the
Center.
5. Tenant's Contractor and its subcontractors shall not knowingly
employ men, means, materials or equipment that may cause strikes, work
stoppages or disturbances by workmen employed by Landlord or other contractors
or subcontractors working on or in connection with the Center. The cause of any
such action which is directly attributable to Tenant's Contractor shall cause
an immediate removal of such contractor's men, materials and equipment from the
Center site within twenty-four (24) hours.
6. Within ten (10) days of completion of construction of and to the
Premises in accordance with the approved plans and specifications therefor,
Tenant shall deliver to Landlord a certificate, executed by architect or
general contractor and by Tenant or a duly authorized officer of Tenant,
setting forth and accompanied by the following, as applicable:
<PAGE> 34
(a) That construction of and improvement to the Premises have been
completed in conformance with the plans and specifications
therefor and with all codes and ordinances of applicable
governmental authority and that an appropriate certificate of
occupancy for the Premises has been issued (all permits for
the completion and operation of the Premises are the sole
responsibility of Tenant); and
(b) The actual total sum paid by Tenant for construction of and
improvement to the Premises in accordance with the plans and
specifications therefor, together with an itemized statement
setting forth in reasonable detail the nature and amount of
each such cost or expenses; and
(c) That all contractors, subcontractors, materialmen, suppliers,
engineers, architects and other persons (whose names and
addresses shall be stated) who have rendered or furnished
services or materials (the principal subdivision or categories
thereof which shall be stated) have been paid in full, and the
several amounts paid to each; and
(d) That there is no outstanding indebtedness known after due
inquiry, which is then due and payable for work, labor,
services or materials in connection with construction of and
improvement to the Premises which, if unpaid, might become the
basis of a vendor's, mechanic's, laborer's or statutory
construction or other similar lien upon Tenant's leasehold
estate or Landlord's interest in the Premises, or the building
in which the Premises are located, or any part thereof; and
(e) An official search or a certificate of a title company
approved by Landlord, or other evidence reasonably
satisfactory to Landlord, showing that there has not been
filed with respect to Tenant's leasehold estate or Landlord's
interest in the Premises or the building in which the Premises
are located, any vendor's, mechanic's, laborer's, statutory
construction or other similar lien which has not been
discharged of record, except such as will be discharged upon
payment of the amount then requested to be withdrawn; and
(f) A Termination of the Notice of Commencement shall have been
properly recorded, with the appropriate final lien waiver, all
in statutory form; and
(g) A copy of the "as-built" plans for the Premises prepared by
Tenant's engineer or architect and a certification thereby
that the "as-built" plans conform to the plans and
specifications for the Premises previously submitted by Tenant
and approved by Landlord.
7. If, during construction of and improvement to the Premises by
Tenant, or after completion thereof, Landlord shall find that there are unpaid
bills for work, labor, services or materials in connection with construction of
and improvement to the Premises by Tenant which might become the basis of a
vendor's, mechanic's, laborer's, statutory construction or other similar lien
upon Tenant's leasehold estate or Landlord's interest in the Premises, or any
part thereof, Landlord may pay such unpaid bill(s), in whole or in part,
directly to the person(s) or entity(ies) to which such payments are due, and
hold Tenant liable for the same.
8. If Tenant shall fail to commence construction of and improvement to
the Premises, and to complete the same, on or before the Commencement Date,
Landlord may, at its option: (a) terminate this Lease, retaining all deposits or
advances of rent theretofore made by Tenant as agreed and liquidated damages, it
being understood that in such event Landlord will suffer damages, incapable of
exact ascertainment; or (b) re-enter upon the Premises and complete construction
of and improvement to the Premises, in accordance with the approved plans and
2
<PAGE> 35
specifications therefor, at Tenant's sole cost and expense, which costs and
expenses Tenant agrees to pay upon demand.
9. The Commencement Date of the term of this Lease shall occur
regardless of whether construction of Tenant's improvements described herein
are completed on or before such date and, in such event, the provisions of
Article 6 shall apply; provided, however, that in the event that the Premises
are not delivered to Tenant on or before October 1, 1996, then Landlord shall
have no liability therefor and the Commencement Date shall be deemed to be a
date that is sixty (60) days after the date Landlord delivers the Premises to
Tenant.
10. During the construction of Tenant's improvements set forth in this
Exhibit B. Tenant shall comply with the Construction Regulations attached
hereto on Schedule 1, as such rules may be reasonably amended and/or
supplemented by other rules from time to time to promote the safe and orderly
construction of the Tenant's improvements in the Center. Nothing herein shall
be construed to give Tenant or any other party any claim against Landlord
arising out of the violations of such rules by any other tenant, occupant or
visitor of the Center, or out of the enforcement, modification or waiver of the
rules by Landlord in any particular instance.
11. Prior to delivery of the Premises to Tenant, Landlord shall cause
the HVAC, plumbing and electrical systems to be in working order. Tenant's
acceptance of the Premises shall be deemed to be conclusive proof that Tenant
has accepted such systems in their "as-is" condition and that Landlord has
complied with its obligation to cause such systems to be in working order. The
work, if any, of Landlord described in this paragraph, shall be deemed to be
Landlord's Work and except as set forth in this paragraph, Landlord is not
obligated to perform any other work prior to delivery of the Premises to
Tenant.
LANDLORD:
COUNTRY ISLES ASSOCIATES, AN ILLINOIS
GENERAL PARTNERSHIP
BY: ARVIDA/JMB PARTNERS, a Florida general
partnership, its managing partner
BY: ARVIDA/JMB MANAGERS, INC., a Delaware
corporation, as general partner
By: John Bariz
----------------------------
Name: John Bariz
--------------------------
Title: Vice President
-------------------------
TENANT:
HAVANA REPUBLIC W.H., INC.,
a Florida corporation
By: Stephen Schatzman
----------------------------
Name: Stephen Schatzman
--------------------------
Title: President
-------------------------
3
<PAGE> 36
EXHIBIT C
COUNTRY ISLES PLAZA TENANT GRAPHICS SIGN CRITERIA
- --------------------------------------------------------------------------------
[DIAGRAM]
<PAGE> 37
COUNTRY ISLES PLAZA TENANT GRAPHICS
- --------------------------------------------------------------------------------
[FLOOR PLAN]
<PAGE> 38
COUNTRY ISLES PLAZA TENANT GRAPHICS
- -------------------------------------------------------------------------------
[FLOOR PLAN]
<PAGE> 39
COUNTRY ISLES PLAZA TENANT GRAPHICS
- ------------------------------------------------------------------------------
[DIAGRAM]
<PAGE> 40
COUNTRY ISLES PLAZA TENANT GRAPHICS
- ------------------------------------------------------------------------------
[DIAGRAM]
<PAGE> 41
COUNTRY ISLES PLAZA TENANT GRAPHICS
- ------------------------------------------------------------------------------
[DIAGRAM]
<PAGE> 42
COUNTRY ISLES PLAZA TENANT GRAPHICS
- --------------------------------------------------------------------------------
[THE TOY CHEST DIAGRAM]
<PAGE> 43
COUNTRY ISLES PLAZA TENANT GRAPHICS
- --------------------------------------------------------------------------------
[THE TOY CHEST DIAGRAM]
[MARIA'S CARD AND GIFT DIAGRAM]
<PAGE> 44
EXHIBIT "D"
GUARANTY
THIS GUARANTY ("Guaranty") is made this ____ day of __________, 1996,
by STEPHEN AND FRANCINE SCHATZMAN, whose address is 2101 NE 212th Street, North
Miami Beach, Florida 33179 and ALEX AND TOBY GIMELSTEIN, whose address is 21160
NE 22nd Court, North Miami Beach, Florida 33180 (collectively,"Guarantor"), and
COUNTRY ISLES ASSOCIATES ("Landlord"), having its principal place of business at
900 North Michigan Avenue, Chicago, Illinois 60611-1957.
WHEREAS, HAVANA REPUBLIC W.H., INC., a Florida corporation ("Tenant"),
having an office at 2101 NE 212th Street, North Miami Beach, Florida 33179, is
desirous of becoming the tenant of the space designated as Space 1360 (the
"Premises") in the Center known as Country Isles Plaza, Weston, Florida,
pursuant to a lease (the "Lease") between Landlord and Tenant dated of even date
herewith (all capitalized terms used but not defined herein shall have the
meanings assigned to the same in the Lease).
WHEREAS, Guarantor is a shareholder of Tenant; and
WHEREAS, Landlord has refused to enter into the Lease unless Guarantor
executes and delivers this Guaranty to Landlord;
NOW, THEREFORE, to induce Landlord to enter into the Lease, and in
consideration of the sum of Ten Dollars and other good and valuable
consideration, the receipt of which is hereby acknowledged, Guarantor hereby
represents, covenants, warrants and agrees as follows:
1. Guarantor absolutely and unconditionally guarantees to Landlord and
any mortgagee having an interest in Landlord's interest in the Lease, and to
each separately, punctual, full and faithful performance and observance by
Tenant of all of the terms, provisions and conditions of the Lease to be
performed and observed by Tenant.
2. Guarantor waives notice of any breach or default by Tenant under the
Lease and any and all other notices and demands. Under no circumstances shall
Landlord be required to institute or pursue any action or proceeding at law or
in equity against Tenant or anyone else prior to demanding or obtaining
performance from Guarantor under this Guaranty.
3. All rights and remedies afforded to Landlord by reason of this
Guaranty are separate and cumulative rights and remedies and it is agreed that
no one of such rights or remedies, whether exercised by Landlord or not, shall
be deemed to be an exclusion of any of the other rights or remedies available to
Landlord and shall not limit or prejudice any other legal or equitable right or
remedy which Landlord may have.
4. Any act of Landlord, or the successors or assigns of Landlord,
consisting of a waiver of any of the covenants to be performed by Tenant, the
giving of any consent to any manner or thing relating to the Lease, or the
granting of any indulgences or extensions of time to Tenant may be done without
notice to Guarantor and without releasing the obligations of Guarantor
hereunder.
5. The obligations of Guarantor hereunder shall not be released or
diminished by Landlord's failure to enforce the Lease or any waiver under,
extension to, or other modification of the Lease or assignment thereof or
subletting thereunder.
6. The liability of Guarantor hereunder shall in no way be affected by
(a) the release or discharge of Tenant in any creditors', receivership,
bankruptcy or other proceedings, whether voluntary or involuntary; (b) the
impairment, limitation or modification of the liability of Tenant or the estate
of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant's
liability under the Lease, resulting from the operation of any present or future
proceedings with respect to bankruptcy or creditors' rights; (c) the rejection
or disaffirmance of the Lease in any such
<PAGE> 45
proceedings; (d) the assignment, attempted assignment or transfer of the Lease
or any subletting of the Premises by Tenant; (e) any disability or other
defense of Tenant; (f) the cessation from an cause whatsoever of the liability
of Tenant; (g) any default, failure or delay, willful or otherwise, in the
performance of the terms of the Lease to be performed by Tenant; (h) the
failure or delay of Landlord to assert any claim or demand or to enforce,
assert or exercise any right, power or remedy against Tenant or any other
person with respect to the Lease; or (i) any modification, amendment or other
change to the terms and provisions of the Lease.
7. No invalidity, irregularity or unenforceability of all or any part
of the terms of the Lease shall affect, impair or be a defense to this Guaranty,
and the promise to pay contained in this Guaranty is a primary obligation of
Guarantor.
8. In the case of any proceedings to collect any payment hereunder,
Guarantor shall pay all costs and expenses of Landlord whatsoever, of every kind
for collection, sale or delivery, including without limitation thereto
reasonable attorneys' fees and paralegal fees at all levels, and such sums, at
Landlord's election, may be offset against the proceeds of sale or collection
and thereafter the Landlord may apply any residue to pay any liabilities of
Guarantor, who shall continue to be liable for any deficiency.
9. Guarantor covenants and represents that:
a. There is no action or proceeding pending or, to the
knowledge of Guarantor, threatened against Guarantor before any court or
administrative agency and no event has occurred which might result in any
material adverse change in the business condition of Guarantor or in the
property of Guarantor from the condition as set forth in the most recent
financial statement of Guarantor furnished to Landlord. Guarantor shall deliver
to Landlord within ninety (90) days after the end of each calendar year, an
audited statement of its net worth prepared in accordance with generally
accepted accounting principles applied in a manner satisfactory to Landlord.
b. Guarantor has filed all Federal and State Income Tax
returns which are required to be filed, and has paid all taxes as shown on said
returns to the extent that such taxes have become due.
c. Guarantor is not individually or jointly a party to any
contract or guaranty which materially and adversely affects its business,
property, assets or financial condition (exclusive of guarantees and other
similar contingent obligations incurred in the ordinary course of business and
generally disclosed on the most recent financial statement of such Guarantor
furnished to Landlord). Neither the execution, honor or delivery of this
Guarantor nor the fulfillment of or compliance with the terms and provisions
hereof will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under or result in the creation of any
lien, charge or encumbrance upon any property or assets of Guarantor under any
other guaranty or instrument to which Guarantor is now a party or by which
Guarantor may be bound.
10. If any of the following events shall occur and be continuing:
a. If any representation or warranty by Guarantor herein or
any representation or warranty in any writing furnished in connection with or
pursuant to this Guaranty shall be false in any respect on the date as of which
made; or
b. If Guarantor defaults after demand in the performance or
observance of any guarantee, covenant, term or condition contained in this
Guaranty; or
c. If Guarantor makes an assignment for the benefit of
creditors; or
d. If Guarantor petitions or applies to any tribunal for the
appointment of a trustee or receiver of the business, estate or assets or of any
substantial portion of the business, estate or assets of Guarantor, or commence
any proceedings, relating to Guarantor under any
2
<PAGE> 46
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter in
effect; or
e. If any such petition or application is filed or any such
proceedings are commenced against Guarantor and Guarantor by any act indicates
its approval thereof, consent thereto, or acquiescence therein, or any order is
entered appointing any such trustee or receiver, or declaring Guarantor bankrupt
or insolvent, or approving the petition in any such proceedings;
THEN, an event of default under this Guaranty shall have occurred and
Landlord, at its option, may declare all sums guaranteed hereunder forthwith due
and payable, under the terms of and with the effect provided in this Guaranty,
regardless of whether (a) a default by Tenant shall have occurred under the
Lease or (b) Landlord shall have exercised any of its rights or remedies under
the Lease.
11. This Guaranty may not be changed, modified, discharged or
terminated orally or in any manner other than by a written instrument signed by
Guarantor and Landlord.
12. Notice of acceptance of this Guaranty, presentment, demand for
payment, protest, notice of default or non-payment, notice of dishonor and all
other notices and demands are hereby waived by Guarantor.
13. This Guaranty and the rights and obligations of the Landlord and of
Guarantor hereunder shall be governed and construed in accordance with the laws
of the State of Florida; and this Guaranty is binding upon Guarantor, its
successors and assigns, and shall inure to the benefit of the Landlord, its
successors and assigns. Guarantor hereby irrevocably submits to the jurisdiction
of any Florida State or Federal Court located in Broward County over any action
or proceeding arising out of any dispute between Guarantor and the Landlord, and
Guarantor further irrevocably consents to the service of any process in any such
action or proceeding by the mailing of a copy of such process to Guarantor at
the address set forth herein.
14. Guarantor hereby agrees and acknowledges that this Guaranty is an
instrument for the payment of money, and hereby consents that Landlord, at its
sole option, in the event of a default by Guarantor in the payment of any of the
moneys due hereunder, shall have the right to bring an action under the summary
proceeding statutes of the State of Florida.
15. Notwithstanding anything contained herein to the contrary, this
Guaranty shall only be a guarantee of the obligations and liabilities of the
Tenant arising during the first fifteen (15) months of the initial term of the
Lease and, thereafter, shall be limited to a guarantee of the obligations and
liabilities of the Tenant under the Lease up to and including the date Tenant
vacates the Premises (the "Guaranty Term"); it being understood and agreed by
Tenant that any claim arising under this Guaranty by Landlord for any
obligations or liabilities of Tenant during the Guaranty Term may be made after
the expiration thereof.
16. If there shall be more than one Guarantor, each of the Guarantors
agrees to be bound jointly and severally by the terms, covenants, and agreements
herein and the word "Guarantor" shall be deemed and taken to mean each and every
person or party mentioned as a Guarantor herein, be the same one or more. If
there shall be more than one Guarantor, any notice required hereunder 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. A separate action may be brought to enforce the
provisions hereof against any one or more of the Guarantors whether or not
Tenant, or any of the other Guarantors, is a party in any such action. Tenant
and/or each of the Guarantors may be sued together, or any one of them may be
sued separately without first or contemporaneously suing the other.
[SIGNATURES AND ACKNOWLEDGMENTS FOLLOW]
3
<PAGE> 47
IN WITNESS WHEREOF, Guarantor has hereunto set his hand and seal this
day and year first above written.
WITNESSES (as to both): GUARANTOR:
- --------------------------------- ---------------------------------
Printed Name: STEPHEN SCHATZMAN
--------------------
- --------------------------------- ---------------------------------
Printed Name: FRANCINE SCHATZMAN
--------------------
- --------------------------------- ---------------------------------
Printed Name: ALEX GIMELSTEIN
--------------------
- --------------------------------- ---------------------------------
Printed Name: TORY GIMELSTEIN
--------------------
STATE OF FLORIDA )
) ss:
COUNTY OF _______)
The foregoing instrument was acknowledged before me this ____ day of
_________, 1996 by STEPHEN AND FRANCINE SCHATZMAN, who are personally known to
me or who produced ___________________ and ___________________ as identification
end who did take an oath.
----------------------------------------
Notary Public, State of Florida at Large
My Commission Expires: Print Name:
-----------------------------
STATE OF FLORIDA )
) ss.:
COUNTY OF ________)
The foregoing instrument was acknowledged before me this day ____ of
_________, 1996 by ALEX AND TOBY GIMELSTEIN, who are personally known to me or
who produced ____________________ and ____________________ as identification and
who did take an oath.
----------------------------------------
Notary Public, State of Florida at Large
My Commission Expires: Print Name:
-----------------------------
4
<PAGE> 48
RIDER ONE
Rules
(1) COMMON AREAS. Tenant shall not use the Common Areas, including
areas adjacent to the Premises, for any purpose other than ingress and egress,
and any such use thereof shall be subject to the other provisions of this
Lease, including these Rules. Without limiting the generality of the
foregoing. Tenant shall not use the Common Areas to canvass, solicit business
or information from, or distribute any article or material to, other tenants,
occupants or invitees of the Center. Utility closets and other such areas
shall be used only for the purposes and in the manner designated by Landlord,
and may not be used by Tenant, or its contractors, agents employees, or other
parties without Landlord's prior written consent.
(2) DELIVERIES. Furniture, inventory and all other deliveries may be
brought into the center only at times and in the manner designated by Landlord,
in compliance with all Laws, and always at Tenant's sole risk. Tenant shall
move all inventory, supplies, furniture, equipment and other items as soon as
received directly to the Premises.
(3) TRASH, PEST CONTROL AND FIRE PROTECTION. all garbage, refuse,
trash and other waste shall be kept in the kind of container, placed in the
areas, and prepared for collection in the manner and at the times and places
specified by Landlord. If Landlord designates a service to pick up such items,
Tenant shall also use the same at Tenant's cost. Tenant shall use, at Tenant's
cost, such past and rodent extermination contractor as Landlord may direct and
at such intervals as Landlord may require; Tenant shall provide Landlord with
evidence of Tenant's compliance with this provision within five (5) days after
Landlord's written request. Notwithstanding the foregoing, Landlord may provide
or arrange for trash collection, pest control and/or supervised fire sprinkler
and/or alarm service for the Center; in such case, Tenant shall pay Tenant's
Proportionate Share of the cost thereof (or such other share as Landlord may
fairly and reasonably determine) to Landlord on or before the first day of each
calendar month in advance, or Landlord may include such charges in Center
Expenses. Landlord reserves the right to require that Tenant participate in
any recycling program designated by Landlord.
(4) SIGNS AND DISPLAY WINDOWS. Tenant shall not place any sign or
other thing of any kind outside the Premises (including without limitation,
exterior walls and roof), or on the interior or exterior surfaces of glass
panes or doors except such single sign as Landlord shall expressly approve in
writing for or in connection with Tenant's storefront. Within the Premises,
Tenant shall not: (i) install any sign that advertises any product, (ii)
install any sign within 24 inches of any window or (iii) install any sign that
is visible from outside the Premises or that is illuminated without Landlord's
prior written approval. If Landlord approves or requires illuminated signs,
Tenant shall keep the same illuminated each day of the Term during the hours
designated by Landlord from time to time. All Tenant's signs shall be
professionally designed, prepared and installed and in good taste so as not to
detract from the general appearance of the Premises or the Center and shall
comply with the sign criteria attached hereto as Exhibit C or otherwise
developed by landlord from time to time. After the initial installation of
Tenant's storefront sign as approved in writing by Landlord in accordance with
these provisions, Landlord reserves the right to require from time to time that
Tenant change or replace such sign in order to comply with any new sign
criteria developed by Landlord, at Landlord's expense. The term "sign" in this
Rule shall mean any sign, placard, picture, name, direction, lettering,
insignia or trademark, advertising material, advertising display, awning or
other such item, except that Tenant's storefront sign shall be an actual sign.
Blinds, shades drapes or other such items shall not be placed in or about the
windows in the Premises except to the extent if any, that the character, shape,
design, color, material and make thereof is first approved by Landlord in
writing.
(5) DISPLAY OF MERCHANDISE. Tenant shall not place or maintain any
permanent or temporary fixture or item or display any merchandise: (i) outside
the Premises, or (ii) anywhere inside the Premises within six (6) feet of any
entrance to the Premises (except that for any recessed entry of the Premises,
tenant shall not so place or maintain fixtures within three (3) feet of such
entrance). all displays of merchandise shall be tasteful and professional.
(6) PLUMBING EQUIPMENT. The toilet rooms, urinals, wash bowls, drains
and sewers and other plumbing fixtures, equipment and lines shall not be
misused or used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein, and
Tenant shall properly install, maintain, clean, repair and replace adequate
grease traps.
(7) ROOF; AWNINGS AND PROJECTIONS. Tenant shall not install any
aerial, antennae, satellite dish or any other device on the roof, exterior walls
or Common Areas of the Center. Tenant may install and have access to rooftop
HVAC equipment only to the extent approved or required by Landlord from time to
time in connection with Tenant's obligations under articles 10 and 11 of this
Lease. No awning or other projection shall be attached by or for Tenant to the
exterior walls of the Premises or the building of which it is a part.
(8) LOCKS AND KEYS. Upon termination of the Lease or Tenant's right to
possession, Tenant shall: (i) return to Landlord all keys, parking stickers or
cards, and in the event of loss of any such items shall pay Landlord therefor,
and (ii) advise Landlord as to the combination of any vaults or locks that
Landlord permits to remain in the Premises.
1
<PAGE> 49
(9) UNATTENDED PREMISES. Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the Premises
and shut off all lights (except signs required to be illuminated hereunder),
water faucets and other utilities in the Premises (except heat to the extent
necessary to prevent the freezing or bursting of pipes). This provision shall
not imply that Tenant may leave the Premises unattended in violation of the
operating requirements set forth elsewhere in this Lease.
(10) ENERGY CONSERVATION. Subject to Rule (6) concerning illumination,
Tenant shall not waste electricity, water, heat or air conditioning, or other
utilities or services, and agrees to cooperate fully with Landlord and comply
with any Laws to assure the most effective and energy efficient operation of
the Center.
(11) FOOD, BEVERAGES, GAME AND VENDING MACHINES. Except to the extent
expressly permitted under Article 1 of this Lease, Tenant shall not: (i) use
the Premises for the manufacture, preparation, display, sale, barter, trade,
gift or service of food or beverages, including without limitation,
intoxicating liquors, or (ii) install, operate or use any video, electronic or
pinball game or machine, or any coin or token operated vending machine or
device to provide products, merchandise, food, beverages, candy, cigarettes or
other commodities or services including, but not limited to, pay telephones,
pay lockers, pay toilets, scales, and amusement devices.
(12) GOING-OUT-OF-BUSINESS SALES AND AUCTIONS. Tenant shall not use, or
permit any other party to use, the Premises for any distress, fire, bankruptcy,
closeout, "lost our lease" or going-out-of-business sale or auction. Tenant
shall not display any signs advertising the foregoing anywhere in or about the
Premises. This prohibition shall also apply to the Tenant's creditors.
(13) LABOR RELATIONS. Tenant shall conduct its labor relations and
relations with employees so as to avoid strikes, picketing, and boycotts of, on
or about the Premises or Center. If any employees strike, or if picket lines or
boycotts or other visible activities objectionable to Landlord are established,
conducted or carried out against Tenant, its employees, agents, contractors, or
subcontractors in or about the Premises or Center, Tenant shall immediately
close the Premises and remove or cause to be removed all such employees,
agents, contractors, and subcontractors until the dispute has been settled.
(14) LANDLORD'S TRADENAME AND TRADEMARKS. No symbol, design, name, mark
or insignia adopted by Landlord for the Center or picture or likeness of the
Center shall be used by Tenant without the prior written consent of Landlord,
except as provided in Article 9 of this Lease.
(15) PROHIBITED ACTIVITIES. Tenant shall not: (i) use strobe or flashing
lights in or on the Premises or in any signs therefor, (ii) use, sell or
distribute any leaflets, handbills, bumper stickers, other stickers or decals,
balloons or other such articles in the Premises (or other areas of the Center),
(iii) operate any loudspeaker, television set, phonograph, radio, CD player or
other musical or sound producing instrument or device so as to be heard outside
the Premises, (iv) operate any electrical or other device which interferes
with or impairs radio, television, microwave, or other broadcasting or
reception from or in the Center or elsewhere, (v) bring or permit any bicycle
or other vehicle, or dog (except in the company of a blind party) or other
animal, fish or bird in the Center, (vi) make or permit objectionable noise,
vibration or odor to emanate from the Premises or any equipment serving the
same, (vii) do or permit anything in or about the Premises that is unlawful,
immoral, obscene, pornographic, or which tends to create or maintain a nuisance
or do any act tending to injure the reputation of the Center, (viii) use or
permit upon the Premises anything that violates the certificates of occupancy
issued for the Premises or the Center, or causes a cancellation of Landlord's
insurance policies or increases Landlord's insurance premiums (and Tenant shall
comply with all requirements of Landlord's insurance carriers, the American
Insurance Association, and any board of fire underwriters), (xi) use the
Premises for any purpose, or permit upon the Premises anything, that may be
dangerous to parties or property (including but not limited to flammable oils,
fluids, paints, chemicals, firearms or any explosive articles or materials),
(x) permit any of its employees or customers to loiter in any Common Areas, nor
(xi) do or permit anything to be done upon the Premises in any way tending to
disturb, bother or annoy any other tenant at the Center or the occupants of
neighboring property.
(16) PARKING. Tenant and Tenant's employees shall park their cars only
in those portions of the parking area designated by Landlord for tenant and
employee parking and shall use such areas only for parking cars (or at
Landlord's option, Landlord may require that any or all such employees park
off-site). Tenant shall furnish Landlord with a list containing the
description and automobile license numbers (and State of issuance) of the cars
of Tenant and its employees within five (5) days of any request by Landlord,
and shall thereafter advise Landlord of any changes, additions or deletions to
such list. Landlord reserves the right to: (i) adopt additional requirements
pertaining to parking, including, without limitation, posting and enforcing time
limits, and establishing a parking system with charges favoring carpooling for
tenants and their employees, and any other parking system by validation,
metering or otherwise, (ii) assign specific spaces, and reserve spaces for
small cars, handicapped individuals, and other tenants, customers of tenants or
other parties (and Tenant and its employees and visitors shall not park in any
such assigned or reserved spaces) and (iii) restrict or prohibit full size vans
and other large vehicles. In case of any violation of these provisions or any
applicable Laws, Landlord may: (a) refuse to permit the violator to park, and
remove the vehicle owned or driven by the violator from the Center without
liability whatsoever, at such violator's risk and expense and/or (b) charge
Tenant such reasonable rates as Landlord may from time to time establish for
such violations, which shall be at least $50.00 per day for each vehicle that
is parked in violation of these Rules. These provisions shall be in addition to
any other remedies available to Landlord under this Lease or otherwise.
(17) RESPONSIBILITY FOR COMPLIANCE. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by Tenant's
employees and as applicable, by Tenant's agents, invitees, contractors,
subcontractors, and suppliers.
2
<PAGE> 50
RIDER TWO TO SHOPPING CENTER LEASE (THE "LEASE")
DATED AS OF 11/1/96 BETWEEN
COUNTRY ISLES ASSOCIATES, AS LANDLORD,
AND HAVANA REPUBLIC W.H., INC., AS TENANT
1. Conflict: Defined Terms. In the event of any conflict between the
terms of this rider (this "Rider") and the terms of the Lease, then the terms
and provisions of this Rider shall control. Unless otherwise defined herein, all
capitalized terms used herein shall have the same meanings assigned to the same
in the Lease.
2. Termination. Tenant agrees to use all good faith efforts to
negotiate and enter into a legally binding lease (the "Issa Center Lease") for
the operation of a cigar emporium in premises located in that certain shopping
center to be developed by Issa Developers, Inc., on Lot 1, Block 4, Park of
Commerce, according to the Plat thereof, recorded in Plat Book 110, Page 15 of
the Public Records of Broward County, Florida (the "Issa Center"). In the event
that Tenant enters into the Issa Center Lease, then, within fifteen (15) days of
the execution of the Issa Center Lease by the parties thereto, Tenant shall
furnish to Landlord written notice that the Issa Center Lease has been executed
(the "Issa Lease Notice"), together with a fully executed copy thereof. Tenant
shall specify in the Issa Lease Notice a termination date of this Lease, which
termination date shall be no later than the first (1st) anniversary of the date
of the Issa Lease Notice (the "Termination Date"). Notwithstanding the
foregoing, Tenant may extend the Termination Date, from time to time, if Tenant
provides Landlord written notice thereof no later than thirty (30) days before
the expiration of then Termination Date; provided, however that: (a) Tenant may
not extend the Termination Date for a period of more than ninety (90) days for
each extension notice; and (b) Tenant's right to extend the Termination Date
shall automatically expire on such date that is the earlier to occur of: (i)
such time as the landlord of the Issa Center has fulfilled all material
conditions precedent necessary for Tenant to be able to take occupancy of the
Issa Center premises as provided for in such Issa Center Lease (the "Conditions
Precedent"); (ii) the date that Tenant opens for business in the Issa Center; or
(iii) the second anniversary of the date of the Issa Lease Notice. In the event
that the Tenant has entered into the Issa Center Lease but has not given the
Issa Lease Notice as provided for herein and the Conditions Precedent under such
Issa Center Lease have been fulfilled, then, at any time thereafter, Landlord,
but not Tenant, shall have the right, in its sole and absolute discretion, to
immediately terminate this Lease by providing five (5) days prior written notice
of such termination to Tenant.
Notwithstanding anything contained herein to the contrary, Tenant's
right to terminate this Lease pursuant to this Section 2 shall terminate and be
of no further force and effect and Tenant shall have the right to continue to
occupy the Premises in accordance with the terms of this Lease if: (i) the
Tenant has not entered into the Issa Center Lease, provided that all good faith
efforts to negotiate and enter into the Issa Center Lease have been exhausted by
Tenant with respect thereto; or (ii) prior to Tenant's occupancy of the Issa
Center premises, the Issa Center Lease is terminated by Tenant in accordance
with the terms thereof for failure of the landlord of the Issa Center to fulfill
the Conditions Precedent with respect thereto.
3. Renewal Option.
a. Provided that this Lease is not previously terminated in
accordance with Paragraph 2 of this Rider, Tenant shall have the option
("Renewal Option") to renew this Lease for two (2) successive renewal terms of
five (5) years each, which renewal term shall commence on the day immediately
succeeding the Expiration Date of the initial term (the "Renewal Date"), by
giving Landlord written notice of its intention to renew this Lease pursuant to
this Paragraph no earlier than nine (9) months and no later than six (6) months
prior to the Expiration Date of the initial term or any renewal term, provided
that: (i) this Lease shall not have been previously terminated; and (ii) Tenant
has not been and will not be in Default (whether or not cured) during the term
of this Lease through the Expiration Date of such initial or successive renewal
term and no event has occurred which with notice and/or passage of time would
cause a Default to occur, unless waived by Landlord in writing. Failure of
Tenant to provide written notification to Landlord that it has elected to
exercise its Renewal Option within the time specified herein shall be deemed to
be an irrevocable waiver of Tenant's right to so exercise such Renewal Option
and Tenant shall have no further right or option to renew the term of this
Lease.
<PAGE> 51
b. If Tenant exercises the Renewal Option in accordance with
the provisions of this Article, this Lease shall be renewed for such renewal
term upon all the terms, covenants, and conditioned contained in this Lease,
except that: (i) the Minimum Rent shall be as follows:
<TABLE>
<CAPTION>
PERIOD MONTHLY AMOUNT ANNUAL AMOUNT
------ -------------- -------------
<S> <C> <C>
Renewal Date Through 1st Anniversary of $ 3,744.38 $44,932.50
Renewal Pate
1st Anniversary Through 2nd Anniversary $3,827.58 $45,931.00
of Renewal Date of Renewal Date
2nd Anniversary Through 3rd Anniversary $3,910.79 $46,929.50
of Renewal Date of Renewal Date
3rd Anniversary Through 4th Anniversary $3,994.00 $47,928.00
of Renewal Date of Renewal Date
4th Anniversary Through 5th Anniversary $4,077.21 $48,926.50
of Renewal Date of Renewal Date
5th Anniversary Through 6th Anniversary $4,160.42 $49,925.00
of Renewal Date of Renewal Date
6th Anniversary Through 7th Anniversary $4,243.63 $50,923.50
of Renewal Date of Renewal Date
7th Anniversary Through 8th Anniversary $4,326.83 $51,922.00
of Renewal Date of Renewal Date
8th Anniversary Through 9th Anniversary $4,410.04 $52,920.50
of Renewal Date of Renewal Date
9th Anniversary Through 10th Anniversary $4,493.25 $53,919.00
of Renewal Date of Renewal Date
</TABLE>
(ii) the Percentage Rent shall be as follows:
<TABLE>
<CAPTION>
PERIOD AMOUNT EACH LEASE YEAR
------ ----------------------
<S> <C>
Renewal Date Through 1st Anniversary Four percent (4%) of Gross Sales
of Renewal Date exceeding a Breakpoint of $1,368,734.40
1st Anniversary Through 2nd Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,423,483.70
2nd Anniversary Through 3rd Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,480,423.00
3rd Anniversary Through 4th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,539,639.90
4th Anniversary Through 5th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,601,225.40
5th Anniversary Through 6th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,665,274.40
6th Anniversary Through 7th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,731,885.30
7th Anniversary Through 8th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,801,160.70
8th Anniversary Through 9th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,873,207.10
9th Anniversary Through 10th Anniversary Four percent (4%) of Gross Sales
of Renewal Date of Renewal Date exceeding a Breakpoint of $1,948,135.30
</TABLE>
2
<PAGE> 52
and (iii) the Expiration Date of the then existing term shall be deemed extended
to the fifth anniversary of the Renewal Date (or the tenth anniversary of the
Renewal Date (if applicable). Except as specifically set forth herein, Tenant
shall have no further right or option to renew this Lease or the term hereof.
4. Construction 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 contractors 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 Tenant shall fail to cause such
lien forthwith to be so discharged or bonded after being notified of the filing
thereof, Landlord may bond or discharge the same by paying the amount claimed to
be due, and the amount so paid by Landlord, including reasonable attorneys' 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 rent.
5. Radon Disclosure. Tenant is hereby advised that radon is a naturally
occurring radioactive gas that, when it has accumulated in a building in
sufficient quantities, may present health risks to persons who are exposed to it
over time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit. The foregoing
disclosure is provided to comply with state law and is for informational
purposes only. Landlord has not conducted radon testing with respect to the
Center and specifically disclaims any and all representations and warranties as
to the absence of radon gas or radon producing conditions in connection with the
Premises, the building in which the Premises are located or the Center.
6. Exclusive Use.
a. Landlord hereby grants to Tenant the exclusive right to
operate within the Center a retail store whose primary use is the sale of cigars
for consumption on and off the Premises. Such exclusive right shall terminate in
the event that Tenant is in Default more than three (3) times during any five
(5) year period, with the exception of nonmonetary defaults which are cured
within three (3) days from notice thereof and not thereafter repeated.
Notwithstanding the foregoing, such exclusive right shall not apply to: Publix
Supermarkets or any other supermarket in the Center or Eckerd Drugs or any other
drugstore in the Center, and their successors and/or assigns.
b. Tenant hereby agrees that it shall not violate any
exclusive use rights granted by Landlord to any tenant of the Center, now or
hereafter existing, including but not limited to Publix Supermarket or any other
supermarket in the Center or Eckerd Drugs or any other drug store in the Center.
7. Brokers. Tenant represents that the only real estate broker Tenant
has dealt with in connection with this Lease is Arvida Realty Sales, Ltd.
Tenant's breach of this representation shall entitle Landlord to pursue all
available remedies against Tenant under the Lease, including, without
limitation, Article 35 thereof, at law or in equity.
8. Guaranty. As a material inducement of Landlord to enter into this
Lease and as a condition precedent to the effectiveness thereof, Tenant agrees
to cause the Guaranty in the form
3
<PAGE> 53
attached hereto as Exhibit D to be executed by the guarantor thereunder and
delivered to Landlord simultaneously upon the execution of this Lease by Tenant.
9. Revisions to the Lease. Landlord and Tenant agree that the Lease is
modified as set forth below:
a. Notwithstanding anything contained in Article 2 of the
Lease to the contrary, Tenant shall pay Minimum Rent and Percentage Rent
commencing on the ninetieth (90th) day after the Commencement Date; provided,
however, that the Initial Estimated Monthly Center Expenses and Initial
Estimated Monthly Taxes shall begin to accrue as of the Commencement Date.
b. Article 3, Paragraph (A) is hereby amended to replace the
clause, "when Tenant executes this Lease," with the clause, "on the Commencement
Date."
c. The clause "made during each preceding month" in the third
sentence of Article 3(b) is hereby deleted and replaced with "made during each
preceding calendar month".
d. The second (2nd) sentence of Article 3(D) is hereby deleted
in its entirety.
e. The clause "at least ten (10) days notice" in the first
sentence of Article 3(G) is hereby deleted and replaced with "at least ten (10)
business days notice".
f. The references to "one percent (1%)" and "five percent
(5%)" in Article 3(G) are hereby deleted and replaced with "two and one-half
percent (2 1/2%)" and "seven and one-half percent (7 1/2%) " respectively.
g. The following shall be inserted at the end of the second
(2nd) sentence in Article 3(H): "(f) the amount of any sales to employees at a
discount of at least twenty percent (20%), such excluded amount not to exceed
one percent (1%) of Gross Sales at the Premises per lease year; (g) bad debts
actually written off by Tenant for federal tax purposes up to a maximum of one
percent (1%) of Gross Sales at the Premises in any one lease year; provided that
Tenant has exhausted all reasonable methods for calculating said bad debts and
provided that any amount so written off which is later received by Tenant shall
be included in Gross Sales when and to the extent received; and (h) the amount
of separately stated interest, service or sales carrying charges or other
charges, however denominated, paid by Tenant's customers for extensions of
credit on sales and not included in the merchandise sales price, provided,
however, such exclusion shall not include charges paid to credit card companies
or the like (e.g. Visa, Master Card, American Express)".
h. The clause "within ten (10) days after Landlord sends the
Statement" in the last sentence of Article 5(C)(iii) is hereby deleted and
replaced with "within ten (10) business days after Landlord sends the
Statement".
i. The clause "at least ten (10) days notice" in the second
sentence of Article 5(D) is hereby deleted and replaced with "at least ten (10)
business days notice".
j. The clause "by the Commencement Date" in the fourth
sentence of Article 6 is hereby deleted and replaced with the clause "on or
before fifteen (15) days after the Commencement Date".
k. Notwithstanding anything contained in this Lease to the
contrary, Article 7(A) shall not apply to Tenant's trade fixtures.
l. The following clause is inserted at the end of the last
sentence of Article 7(A): "provided, however that Tenant shall not be required
to obtain Landlord's consent for any nonstructural interior changes which do not
affect any Systems and Equipment".
m. Article 7(E) is hereby deleted in its entirety and replaced
with the following:
"Tenant shall pay Landlord a reasonable fee to cover
Landlord's out-of-pocket costs with respect to any outside engineer, architect
or consultant retained by Landlord to review
4
<PAGE> 54
Tenant's plans and specifications for Tenant's Work and Tenant's Work itself
when Tenant's Work includes structural changes to life safety systems or may
otherwise affect the structure of the Premises."
n. Notwithstanding anything contained in the contrary in
Article 8(B), Tenant shall (i) not be required to open for business before 9:00
a.m. or remain open after 6:00 p m., Monday through Saturday and (ii) be
permitted to close for recognized religious holidays at its discretion.
o. The following clause is hereby inserted at the end of the
last sentence of Article 8(B): "provided, however, that Tenant shall be
permitted to stay open for business during such times".
p. The following clause is hereby inserted after the clause
"during any portion of any day of the Term," in the second sentence of Article
8(E): "which failure is not cured by Tenant within three (3) days from notice
from Landlord with respect thereto,".
q. Notwithstanding anything contained in this Lease to the
contrary, as of the date hereof, there are no Promotion Fund, Merchants
Association, Media Fund and Joint Advertising.
r. The clause "Tenant's employees and invitees" in Article
12(A)(1) is hereby deleted and replaced with the following: "Tenant's employees,
invitees, agents and licensees".
s. The following clause shall be inserted at the end of the
first sentence of Article 13(A):
"and (v) liquor law liability insurance in the amount of
$1,000,000 (in the event that Tenant serves liquor on the Premises)".
t. The last sentence of Article 14(D) is hereby deleted and
replaced with the following:
"In the event that Landlord has not repaired the Premises
within two hundred seventy (270) days from the date of receipt by Landlord of
insurance proceeds with respect to any fire or other casualty, then Tenant shall
have the right to terminate this Lease provided Tenant shall give Landlord
thirty (30) days written notice of such termination; provided, however that such
termination shall be null and void if Landlord substantially completes such
repair and/or restoration within thirty (30) days from the expiration of
Tenant's thirty (30) day notice period. Except as otherwise provided herein,
Tenant waives any other rights Tenant may have under any applicable Law to
terminate this Lease by reason of damage to the Premises or Center."
u. The clause "(reasonable wear and tear excepted)" shall be
inserted after the clause "Article 11" in the first sentence of Article 16.
v. The clause "except for any security deposit paid by Tenant"
is hereby added to the end of Article 18(i) and the clause "liable for any
security deposit or bound by any prepaid rent not actually received by such
Lender," in Article 18(ii) is hereby deleted.
w. The following sentence is hereby inserted at the end of
Article 19:
"Landlord agrees to, no more than once in any calendar year,
provide Tenant a similar statement, upon written request therefor.
x. The reference to "$750.00" in Article 20 is hereby deleted
and replaced with "$500.00".
y. Article 20(E) is hereby deleted.
5
<PAGE> 55
z. The clause "provide at least twenty-four (24) hours notice
(except in the case of emergencies in which case no notice is required) and" is
hereby inserted after the clause "Landlord shall" in the last sentence of
Article 21(A).
aa. Article 21(C) is hereby deleted.
bb. Article 21(G) is hereby deleted.
cc. The clause "five (5) days after notice"' in Article
22(A)(i) is hereby deleted and replaced with "ten (10) days after the same is
due".
dd. The following clause is hereby inserted at the end of the
second sentence of Article 22(A): ", except for nonmonetary defaults which are
cured within three (3) days from notice thereof and not thereafter repeated".
ee. The following clause is hereby inserted after the first
sentence of Article 22(F): "after the expiration of any applicable grace
period".
ff. The reference to "Two Hundred Dollars ($200.00)" in
Article 22(F) is hereby deleted and replaced with "One Hundred Dollars
($100.00)"
gg. The clause "JMB Properties Company" in Article 34 is
hereby deleted and replaced with "Country Isles Associates".
hh. The reference to "six (6) weeks" in Article 38 shall be
hereby deleted and replaced with "three (3) weeks".
ii. The following clause shall be inserted at the end of the
first sentence of Article 40: "unless embodied in this Lease".
10. Mediation. The Landlord and Tenant agree that the parties hereto
shall first attempt to resolve any dispute under this Lease, other than actions
commenced by Landlord to evict Tenant from the Demised Premises (whether by
summary proceedings or otherwise) and/or Defaults arising from Tenant's failure
to pay Rent as and when due under the Lease, by mediation with a mediator
reasonably acceptable to the parties which has offices in Broward County,
Florida. The parties agree that in the event they cannot agree on an acceptable
mediator, then the parties stipulate that Mediation, Inc. shall be used as the
mediator.
11. In the event that Tenant enters the Premises prior to the
Commencement Date (to plan or perform Tenant's Initial Work), Tenant shall
comply with the terms and conditions of this Lease, except those provisions
requiring the payment of Rent (other than such charges as Landlord may impose
under Article 7 or Exhibit B).
[SIGNATURES FOLLOW]
6
<PAGE> 56
WITNESSES: LANDLORD:
COUNTRY ISLES ASSOCIATES,
an Illinois General Partnership
BY: ARVIDA/JMB PARTNERS, a Florida
general partnership, its managing partner
BY: ARVIDA/JMB MANAGERS, INC., a
Delaware corporation, as general partner
/s/ By: /s/
- ---------------------------- ----------------------------
Name:
---------------------------------
/s/ Title: Vice President
- ---------------------------- --------------------------------
TENANT:
HAVANA REPUBLIC W.H., INC.,
a Florida corporation
/s/ Charles D. Brecker By: /s/ Stephen Schatzman
- ---------------------------- ----------------------------
CHARLES D. BRECKER Name: STEPHEN SCHATZMAN
--------------------------
/s/ Ada Valiente-Garcia Title: PRESIDENT
- ---------------------------- -------------------------
ADA VALIENTE-GARCIA
7
<PAGE> 57
GUARANTY
THIS GUARANTY ("Guaranty") is made this Day of October 1996, by STEPHEN
AND FRANCINE SCHATZMAN, whose address is 2101 NE 212th Street, North Miami
Beach, Florida 33179 and ALEX AND TOBY GIMELSTEIN, whose address is 21160 NE
22nd Court, North Miami Beach, Florida 33180 (collectively,"Guarantor"), and
COUNTRY ISLES ASSOCIATES ("Landlord"), having its principal place of business at
900 North Michigan Avenue, Chicago, Illinois 60611-1957.
WHEREAS, HAVANA REPUBLIC W.H., INC., a Florida corporation ("Tenant"),
having an office at 2101 NE 212th Street, North Miami Beach, Florida 33179, is
desirous of becoming the tenant of the space designated as Space 1360 (the
"Premises" in the Center known as Country Isles Plaza, Weston, Florida, pursuant
to a lease (the "Lease") between Landlord and Tenant dated 28 of 11/1/96 (all
capitalized terms used but not defined herein shall have the meanings assigned
to the same in the Lease).
WHEREAS, Guarantor is a shareholder of Tenant; and
WHEREAS, Landlord has refused to enter into the Lease unless Guarantor
executes and delivers this Guaranty to Landlord;
NOW, THEREFORE, to induce Landlord to enter into the Lease, and in
consideration of the sum of Ten Dollars and other good and valuable
consideration, the receipt of which is hereby acknowledged, Guarantor hereby
represents, covenants, warrants and agrees as follows:
1. Guarantor absolutely and unconditionally guarantees to Landlord and
any mortgagee having an interest in Landlord's interest in the Lease, and to
each separately, punctual, full and faithful performance and observance by
Tenant of all of the terms, provisions and conditions of the Lease to be
performed and observed by Tenant.
2. Guarantor waives notice of any breach or default by Tenant under the
Lease and any and all other notices and demands. Under no circumstances shall
Landlord be required to institute or pursue any action or proceeding at law or
in equity against Tenant or anyone else prior to demanding or obtaining
performance from Guarantor under this Guaranty.
3. All rights and remedies afforded to Landlord by reason of this
Guaranty are separate and cumulative rights and remedies and it is agreed that
no one of such rights or remedies, whether exercised by Landlord or not, shall
be deemed to be an exclusion of any of the other rights or remedies available to
Landlord and shall not limit or prejudice any other legal or equitable right or
remedy which Landlord may have.
4. Any act of Landlord, or the successors or assigns of Landlord,
consisting of a waiver of any of the covenants to be performed by Tenant, the
giving of any consent to any manner or thing relating to the Lease, or the
granting of any indulgences or extensions of time to Tenant may be done without
notice to Guarantor and without releasing the obligations of Guarantor
hereunder.
5. The obligations of Guarantor hereunder shall not be released or
diminished by Landlord's failure to enforce the Lease or any waiver under,
extension to, or other modification of the Lease or assignment thereof or
subletting thereunder.
6. The liability of Guarantor hereunder shall in no way be affected by
(a) the release or discharge of Tenant in any creditors', receivership,
bankruptcy or other proceedings, whether voluntary or involuntary; (b) the
impairment, limitation or modification of the liability of Tenant or the estate
of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant's
liability under the Lease, resulting from the operation of any present or future
proceedings with respect to bankruptcy or creditors' rights; (c) the rejection
or disaffirmance of the Lease in any such
<PAGE> 58
proceedings; (d) the assignment, attempted assignment or transfer of the Lease
or any subletting of the Premises by Tenant; (e) any disability or other defense
of Tenant; (f) the cessation from any cause whatsoever of the liability of
Tenant; (g) any default, failure or delay, willful or otherwise, in the
performance of the terms of the Lease to be performed by Tenant; (h) the failure
or delay of Landlord to assert any claim or demand or to enforce, assert or
exercise any right, power or remedy against Tenant or any other person with
respect to the Lease; or (i) any modification, amendment or other change to the
terms and provisions of the Lease.
7. No invalidity, irregularity or unenforceability of all or any part
of the terms of the Lease shall affect, impair or be a defense to this Guaranty,
and the promise to pay contained in this Guaranty is a primary obligation of
Guarantor.
8. In the case of any proceedings to collect any payment hereunder,
Guarantor shall pay all costs and expenses of Landlord whatsoever, of every kind
for collection, sale or delivery, including without limitation thereto
reasonable attorneys' fees and paralegal fees at all levels, and such sums, at
Landlord's election, may be offset against the proceeds of sale or collection
and thereafter the Landlord may apply any residue to pay any liabilities of
Guarantor, who shall continue to be liable for any deficiency.
9. Guarantor covenants and represents that:
a. There is no action or proceeding pending or, to the
knowledge of Guarantor, threatened against Guarantor before any court or
administrative agency and no event has occurred which might result in any
material adverse change in the business condition of Guarantor or in the
property of Guarantor from the condition as set forth in the most recent
financial statement of Guarantor furnished to Landlord. Guarantor shall deliver
to Landlord within ninety (90) days after the end of each calendar year, an
audited statement of its net worth prepared in accordance with generally
accepted accounting principles applied in a manner satisfactory to Landlord.
b. Guarantor has filed all Federal and State Income Tax
returns which are required to be filed, and has paid all taxes as shown on said
returns to the extent that such taxes have become due.
c. Guarantor is not individually or jointly a party to any
contract or guaranty which materially and adversely affects its business,
property, assets or financial condition (exclusive of guarantees and other
similar contingent obligations incurred in the ordinary course of business and
generally disclosed on the most recent financial statement of such Guarantor
furnished to Landlord). Neither the execution, honor or delivery of this
Guarantor nor the fulfillment of or compliance with the terms and provisions
hereof will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under or result in the creation of any
lien, charge or encumbrance upon any property or assets of Guarantor under any
other guaranty or instrument to which Guarantor is now a party or by which
Guarantor may be bound.
10. If any of the following events shall occur and be continuing:
a. If any representation or warranty by Guarantor herein or
any representation or warranty in any writing furnished in connection with or
pursuant to this Guaranty shall be false in any respect on the date as of which
made; or
b. If Guarantor defaults after demand in the performance or
observance of any guarantee, covenant, term or condition contained in this
Guaranty; or
c. If Guarantor makes an assignment for the benefit of
creditors; or
d. If Guarantor petitions or applies to any tribunal for the
appointment of a trustee or receiver of the business, estate or assets or of any
substantial portion of the business, estate or assets of Guarantor, or commence
any proceedings, relating to Guarantor under any
2
<PAGE> 59
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter in
effect; or
e. If any such petition or application is filed or any such
proceedings are commenced against Guarantor and Guarantor by any act indicates
its approval thereof, consent thereto, or acquiescence therein, or any order is
entered appointing any such trustee or receiver, or declaring Guarantor bankrupt
or insolvent, or approving the petition in any such proceedings;
THEN, an event of default under this Guaranty shall have occurred and
Landlord, at its option, may declare all sums guaranteed hereunder forthwith due
and payable, under the terms of and with the effect provided in this Guaranty,
regardless of whether (a) a default by Tenant shall have occurred under the
Lease or (b) Landlord shall have exercised any of its rights or remedies under
the Lease.
11. This Guaranty may not be changed, modified, discharged or
terminated orally or in any manner other than by a written instrument signed by
Guarantor and Landlord.
12. Notice of acceptance of this Guaranty, presentment, demand for
payment, protest, notice of default or non-payment, notice of dishonor and all
other notices and demands are hereby waived by Guarantor.
13. This Guaranty and the rights and obligations of the Landlord and of
Guarantor hereunder shall be governed and construed in accordance with the laws
of the State of Florida; and this Guaranty is binding upon Guarantor, its
successors and assigns, and shall inure to the benefit of the Landlord, its
successors and assigns. Guarantor hereby irrevocably submits to the jurisdiction
of any Florida State or Federal Court located in Broward County over any action
or proceeding arising out of any dispute between Guarantor and the Landlord, and
Guarantor further irrevocably consents to the service of any process in any such
action or proceeding by the mailing of a copy of such process to Guarantor at
the address set forth herein.
14. Guarantor hereby agrees and acknowledges that this Guaranty is an
instrument for the payment of money, and hereby consents that Landlord, at its
sole option, in the event of a default by Guarantor in the payment of any of the
moneys due hereunder, shall have the right to bring an action under the summary
proceeding statutes of the State of Florida.
15. Notwithstanding anything contained herein to the contrary, this
Guaranty shall only be a guarantee of the obligations and liabilities of the
Tenant arising during the first fifteen (15) months of the initial term of the
Lease and, thereafter, shall be limited to a guarantee of the obligations and
liabilities of the Tenant under the Lease up to and including the date Tenant
vacates the Premises (the "Guaranty Term"); it being understood and agreed by
Tenant that any claim arising under this Guaranty by Landlord for any
obligations or liabilities of Tenant during the Guaranty Term may be made after
the expiration thereof.
16. If there shall be more than one Guarantor, each of the Guarantors
agrees to be bound jointly and severally by the terms, covenants, and agreements
herein and the word "Guarantor" shall be deemed and taken to mean each and every
person or party mentioned as a Guarantor herein, be the same one or more. If
there shall be more than one Guarantor, any notice required hereunder 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. A separate action may be brought to enforce the
provisions hereof against any one or more of the Guarantors whether or not
Tenant, or any of the other Guarantors, is a party in any such action. Tenant
and/or each of the Guarantors may be sued together, or any one of them may be
sued separately without first or contemporaneously suing the other.
[SIGNATURES AND ACKNOWLEDGMENTS FOLLOW]
3
<PAGE> 60
IN WITNESS WHEREOF, Guarantor has hereunto set his hand and seal this
day and year first above written.
WITNESSES (as to both): GUARANTOR:
/a/ Ada Valiente-Garcia /s/ Stephen Schatzman
- ----------------------------------- -----------------------------------
Printed Name: ADA VALIENTE-GARCIA STEPEN SCHATZMAN
----------------------
/s/ Charles D. Brecker /s/ Francine Schatzman
- ----------------------------------- -----------------------------------
Printed Name: CHARLES D. BRECKER FRANCINE SCHATZMAN
----------------------
/a/ Ada Valiente-Garcia /s/ Alex Gimelstein
- ----------------------------------- -----------------------------------
Printed Name: ADA VALIENTE-GARCIA ALEX GIMELSTEIN
----------------------
/s/ Charles D. Brecker /s/ Toby Gimelstein
- ----------------------------------- -----------------------------------
Printed Name: CHARLES D. BRECKER TOBY GIMELSTEIN
----------------------
STATE OF FLORIDA )
) ss.:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 22nd day of
October, 1996 by STEPHEN AND FRANCINE SCHATZMAN, who produced DRIVERS LICENSES
as identification and who did take an oath.
[SEAL] /s/ Ada Valiente-Garcia
----------------------------------------
Notary Public, State of Florida at Large
My Commission Expires: Print Name: ADA VALIENTE-GARCIA
----------------------------
STATE OF FLORIDA )
) ss.:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 22nd day of
October, 1996 by ALEX AND TOBY GIMELSTEIN, who produced DRIVERS LICENSES as
identification and who did take an oath.
/s/ Ada Valiente-Garcia
----------------------------------------
Notary Public, State of Florida at Large
My Commission Expires: Print Name: ADA VALIENTE-GARCIA
----------------------------
[SEAL]
4
<PAGE> 1
EXHIBIT 10.4
BRICKELL STATION
FORT LAUDERDALE, FLORIDA
LEASE TO
HAVANA REPUBLIC BRICKELL STATION, INC.
DISCLOSURE
1. AGENCY DISCLOSURE
____________ Salesperson, Michael Swerdlow Companies, Inc. is by this document
giving notice to HAVANA REPUBLIC BRICKELL STATION, INC. (TENANT) that he/she is
the agent and representative of Historic Brickell, Ltd., a Florida limited
partnership (Landlord).
The undersigned(s) acknowledge(s) that this written notice was received before
the undersigned(s) signed a contractual offer or lease agreement, in compliance
with 475.25(1)(q), Florida Statutes, and Rule 21V-10.033, Florida
Administrative Code.
TENANT:
/s/ DATE: 12/2/96
- --------------------------------- ----------------
2. Compensation - If applicable
The Tenant acknowledges that MICHAEL SWERDLOW COMPANIES, INC. is being paid by
the Landlord. Pursuant to Rule 2-13.003(2), Florida Administrative Code.
/s/
-----------------------------------
Tenant's Initials
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I BASIC DATA -1-
ARTICLE II PREMISES -2-
ARTICLE III TERM OF LEASE -2-
ARTICLE IV MINIMUM RENT -3-
ARTICLE V PERCENTAGE RENT -3-
ARTICLE VI CONSTRUCTION -5-
ARTICLE VII ADDITIONAL RENT - TAXES -6-
ARTICLE VIII MAINTENANCE OF COMMON AREAS; AND THE TENANT'S CONTRIBUTION -7-
ARTICLE IX UTILITIES -8-
ARTICLE X USE OF PREMISES -8-
ARTICLE XI OTHER STORES -11-
ARTICLE XII MAINTENANCE OF BUILDING, ETC. -11-
ARTICLE XIII INDEMNITY AND COMMERCIAL/GENERAL LIABILITY INSURANCE -11-
ARTICLE XIV LANDLORD'S ACCESS TO PREMISES -12-
ARTICLE XV INSURANCE -13-
ARTICLE XVI DAMAGE CLAUSE -13-
ARTICLE XVII EMINENT DOMAIN -14-
ARTICLE XVIII BANKRUPTCY OR INSOLVENCY -15-
ARTICLE XIX LANDLORD'S REMEDIES -15-
ARTICLE XX MISCELLANEOUS PROVISIONS -17-
Section 20.1. Waiver -17-
Section 20.2. Covenant of Quiet Enjoyment -17-
Section 20.3. Status Report -17-
Section 20.4. Notice to Mortgagee -17-
Section 20.5. Assignment of Rents -17-
Section 20.6. Mechanics' Liens -18-
Section 20.7. No Brokerage -18-
Section 20.8. Definition of Additional Rent -18-
Section 20.9. Landlord's Fees and Expenses -18-
Section 20.10. Invalidity of Particular Provisions -18-
Section 20.11. Provisions Binding, Etc. -18-
Section 20.12. Other Agreements -18-
Section 20.13. Governing Law -18-
Section 20.14. Recording -18-
Section 20.15. Notices -18-
Section 20.16. When Lease Becomes Binding -19-
Section 20.17. Paragraph Headings -19-
Section 20.18. Lease Superior or Subordinate to Mortgage -19-
Section 20.19. Holding-Over -19-
Section 20.20. Interest -19-
Section 20.21. Force Majeure -19-
Section 20.22 Security Deposit -20-
Section 20.23. Expansion -20-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 20.24. Marketing Funds -20-
Section 20.25. Price Index -21-
Section 20.26. Radon Gas -21-
Section 20.27. No Mechanics' Liens -21-
Section 20.28. Subordination of Landlord's Lien -22-
Section 20.29. Contingency -23-
</TABLE>
Exhibit "A" - Site Plan
Exhibit "B" - Construction
Exhibit "C" - Sign Criteria
Exhibit "D" - Prohibited/Exclusive Uses
<PAGE> 4
INDENTURE OF LEASE
BRICKELL STATION
THIS INDENTURE OF LEASE made as of the 6th day of December, 1996, by and
between HISTORIC BRICKELL, LTD., a Florida limited partnership, having a mailing
address c/o Michael Swerdlow Companies, Inc., 200 South Park Road, Suite 200,
Hollywood, Florida 33021 (hereinafter referred to as the "Landlord"), of the one
part, and the tenant named in Section 1.1(a) below (hereinafter referred to as
the "Tenant"), of the other part.
W I T N E S S E T H:
ARTICLE I
BASIC DATA
Section 1.1 The following sets forth basic data hereinafter referred to in this
lease, and, where appropriate, constitute definitions of the terms hereinafter
listed.
(a) The Tenant: Havana Republic Brickell Station, Inc.
(b) Present Mailing Address of the Tenant: 2101 N.E. 212th Street,
North Miami Beach, Florida 33179.
(c) The Tenant's Trade Name: Havana Republic.
(d) Lease Term: The initial term ("Initial Term") of the lease shall
be eighty-four (84) full calendar months from and after the Commencement
Date (as that term is herein defined), subject to Tenant's right to
terminate after the fifth (5th) lease-year (as hereinafter defined) as more
particularly described in Section 3.6 hereof.
(e) Renewal Options: Two (2) renewal options of six (6) years each
(each renewal option shall be referred to as an "Option Term").
(f) Commencement Date: The Commencement Date is as determined
pursuant to Section 3.2 hereof.
(g) Minimum Rent Payment: Commencing on the Commencement Date and
continuing until the first (1st) day of the second (2nd) anniversary of the
Commencement Date, Minimum Rent shall be payable at the rate of $40.00 per
square foot of the demised premises in the amount of Seventy-One Thousand
Four Hundred Forty and 00/100 Dollars ($71,440.00) per annum. Commencing on
the first (1st) day of the second (2nd) anniversary of the Commencement
Date, and on the first (1st) day of each second (2nd) anniversary thereof
thereafter occurring during the Initial Term and each Option Term, the
Minimum Rent shall be subject to Cost of Living increases as determined by
Section 4.2 hereof. Notwithstanding the foregoing, and provided Tenant
shall not be in default beyond any applicable notice and cure period under
the terms of this lease, Minimum Rent and percentage rent (as hereinafter
defined), shall abate in full commencing on the Commencement Date and
continuing until the forty-fifth (45th) day thereafter (the "Abatement
Period").
(h) Percentage Rent:
Percentage: Five percent (5%)
Base gross sales: $1,428,800.00. On the same date as Minimum Rent
shall increase pursuant to the terms and provisions of this lease,
Base gross sales shall increase in proportion to increases in Minimum
Rent.
(i) Landlord's Estimate of First Year Payments:
Taxes: $6,251.00
Common Area Maintenance $11,609.00
(j) Pre-Opening Marketing Charge: $2.00 per square foot of the
demised premises.
(k) Initial Marketing Charge: $2.00 per square foot of the demised
premises.
<PAGE> 5
(l) Use: The demised premises shall solely be used for the sale of cigars
and other tobacco products and accessories, and for the sale and consumption of
coffees and non-alcoholic and alcoholic beverages. In no event shall the
demised premises be used for any of the prohibited uses set forth in Exhibit
"D" annexed hereto, and in no event shall the demised premises be used in
violation of the exclusive uses set forth in Exhibit "D".
(m) Guarantor of the Tenant's Obligations: The Havana Republic, Inc., a
Colorado corporation
(n) Security Deposit: N/A
ARTICLE II
PREMISES
Section 2.1. The Landlord hereby leases to the Tenant and the Tenant
hereby leases from the Landlord, upon and subject to the terms and provisions of
this lease, the premises (hereinafter referred to as the "demised premises")
shown on Exhibit "A" hereto annexed and made a part hereof as First (1st Floor.
Space 1E, containing approximately one thousand seven hundred eighty-six (1,786)
square feet of floor area as shown on said Exhibit "A" in the shopping center
known as Brickell Station (the "Shopping Center") located in Fort Lauderdale,
Florida, the initial boundaries of which are delineated on said Exhibit "A".
Excepting and reserving to the Landlord the roof and exterior walls of the
demised premises, and further reserving to the Landlord the right to place,
replace, maintain and repair above the dropped ceiling and/or below the floor
in the demised premises (in such manner as to reduce to a minimum the
interference with the Tenant's use of the demised premises) utility lines,
pipes, and the like, to serve premises other than the demised premises.
ARTICLE III
TERM OF LEASE
Section 3.1. TO HAVE AND TO HOLD the demised premises unto the Tenant for
the term specified in Section 1.1(d) hereof unless sooner terminated as
provided herein.
Section 3.2. Subject to Section 20.21 hereof, and expressly excluding the
financial inability of Tenant, the term hereof shall commence on the first to
occur of the following dates (the "Commencement Date"): (i) the expiration of
seventy-five (75) days after the demised premises are delivered to Tenant with
Landlord's Work completed except for minor "punchlist items" which do not
materially prevent Tenant from commencing the Tenant's Work: or (ii) the date
that the Tenant first opens for business in the demised premises. Either party
shall, upon written request of the other, execute a supplemental instrument
expressing the Commencement Date of the term hereof when the Commencement Date
has been determined.
Notwithstanding any other provisions of this lease, Tenant shall not be
required to open for business or pay Landlord Minimum Rent, percentage rent,
Common Area Maintenance and all other costs and expenses due Landlord under this
lease, until all the following shall have occurred (collectively, the "Opening
Cotenancy Requirement"): (i) the Capaccios' restaurant to be located in the
Shopping Center, or such substitute restaurant as Tenant may reasonably approve,
shall be open for business: and (ii) the Max's Grille restaurant to be located
in the Shopping Center Tenant, or such substitute restaurant as Tenant may
reasonably approve, shall be open for business: and (iii) the movie theater to
be located in the Shopping Center shall be open for business. Notwithstanding
the Foregoing, in the event Landlord shall fail to achieve the Opening
Cotenancy Requirement by the date which is six (6) months after the "Grand
Opening" date of the Shopping Center, then either Landlord or Tenant may
terminate this lease by thirty (30) day written notice to the other party, and
upon the expiration of the thirtieth (30th) day following such notice, or such
earlier date as the parties hereto may agree, neither Landlord nor Tenant shall
have any further obligations to the other under this lease, except for such
obligations arising prior to the date of termination of the lease; provided,
however, that in the event Landlord shall elect to terminate this lease pursuant
to this Section 3.2, then Tenant may cancel Landlord's notice of termination, by
providing Landlord with written notice of Tenant's intent to open for business
in the demised premises no later than forty-five (45) days from the date of
Landlord's notice to Tenant. In the event that Tenant shall fail to open for
business in the demised premises on that date which is the forty-fifth (45th)
day following the date of Landlord's notice to Tenant then Landlord's notice of
termination shall become immediately effective and this lease shall immediately
terminate, and neither Landlord or Tenant shall have any further obligations to
the other under this lease, except for such obligations arising prior to the
date of termination. However, in the event that Tenant shall elect to open for
business prior to the date the Opening Cotenancy Requirement is satisfied,
Tenant shall be deemed to have waived the Opening Cotenancy Requirement and
Tenant shall pay Landlord Minimum Rent, percentage rent, Common Area Maintenance
and all other costs and expenses due Landlord under this lease as set forth
herein.
Section 3.3. The Tenant, prior to the Commencement Date, shall be
permitted to install fixtures and other equipment, and do other work, provided,
however, that such activities of the Tenant shall not unreasonably interfere
with construction work of the Landlord or the conduct of business or
construction work of other tenants or occupants in the Shopping Center.
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Section 3.4. When Landlord's Work described in Exhibit "B" hereto annexed
and hereby made a part hereof is substantially completed as to the demised
premises (subject to "punchlist" items shown on the "punchlist" which shall be
submitted by Tenant to Landlord no later than five (5) days from Tenant's
receipt of the Certificate, as defined herein) the Landlord or Landlord's
architect shall send Tenant a certificate ("Certificate") to that effect which
certificate shall be binding and conclusive upon the Tenant; "completed" as used
in this ARTICLE III being hereby defined to mean completed in such a fashion as
to enable the Tenant, upon performance of the work to be done by the Tenant, to
open its store for business in the normal course, except for minor "punchlist"
items. Promptly after the demised premises are ready for occupancy by the
Tenant, the Tenant shall perform at its own cost and expense all of the Tenant's
work set forth in Exhibit "B", shall equip the demised premises with trade
fixtures and all inventory and personal property necessary of proper for the
operation of the Tenant's business, and open for business as soon thereafter as
possible but in no event later than the Commencement Date. Except as herein
specifically set forth, if the Tenant shall have failed to complete the Tenant's
Work and to have opened the demised premises for business on or before the
Commencement Date, all of the Tenant's charges shall nevertheless commence on
the Commencement Date, or upon termination of the Abatement Period, if
applicable, at the rates specified in this lease, except that if Tenant has not
opened for business by the fifteenth (15th) day immediately following the
Commencement Date, then Minimum Rent shall increase to the rate of one-fifteenth
(1/15th) of the monthly amount of the Tenant's Minimum Rent per day until the
Tenant shall open for business.
Section 3.5. If this lease is still in full force and effect, and if Tenant
shall not be in default beyond any applicable notice and cure period under the
terms of this lease, then Tenant shall have the right to extend the Initial Term
for the applicable Option Term as set forth in Section 1.1(e) hereof. In the
event Tenant so desires to extend the Initial Term of the lease. Tenant shall
deliver written notice to Landlord requesting the same, no later than one
hundred eighty (180) days prior to the expiration of the Initial Term or
applicable Option Term. The Option Term shall be upon the same terms, provisions
and conditions set forth in this lease, and Tenant shall pay Landlord the
Minimum Rent set forth in Section 1.1(g) plus all other rent costs and expenses
due Landlord under this lease.
Section 3.6. Notwithstanding any other provisions of this lease, Tenant
shall have a one time option to terminate this lease in the event Tenant's gross
sales (as defined in Section 5.3 hereof and calculated and determined in
accordance with Section 5.4 hereof) during the fifth (5th) lease-year (as
defined in Section 5.2) do not exceed One Million and 00/100 Dollars
($1,000,000.00) ("Minimum Gross Sales Amount"), provided, however, that in the
event Tenant shall not be open for business for three hundred sixty (360) days
during the fifth (5th) lease-year, the Minimum Gross Sales Amount shall be
reduced by a fraction the numerator of which shall be the number of days during
the fifth (5th) lease-year that Tenant was open for business and the denominator
of which shall be three hundred sixty (360). If Tenant so desires to terminate
this lease pursuant to this Section 3.6. Tenant shall deliver written notice to
Landlord requesting the same no later than ninety (90) days from the
commencement of the sixth (6th) lease-year, and upon the ninetieth (90th) day
following the date of Tenant's notice to Landlord (the "Termination Date"), this
lease shall be of no further force and effect: provided however, that Tenant
acknowledges that Tenant shall remain liable to Landlord for Minimum Rent, costs
and other expenses due under this lease and obligations arising under this lease
prior to Termination Date.
ARTICLE IV
MINIMUM RENT
Section 4.1. The Tenant shall pay without notice, demand of offset to the
Landlord, at the Landlord's office in Hollywood, Florida, or at such place as
the Landlord shall from time to time designate in writing, Minimum Rent for the
demised premises at the rate specified in Section 1.1(g) hereof, and
proportionately at such rate for any partial month, which Minimum Rent shall be
paid monthly, in advance, on the first day of each and every calendar month
during the term hereof, the first such payment to be made on the Commencement
Date. For and with respect to each installment of Minimum Rent that is not paid
within five (5) days of the date due, the Tenant shall pay to the Landlord on
demand, as additional rent, a late charge in an amount equal to five percent
(5%) of the amount of the overdue payment for the purpose of defraying
Landlord's administrative expenses relative to handling such overdue payment.
Section 4.2. Commencing on the first (1st) day of the second (2nd)
anniversary of the Commencement Date, provided however, if the Commencement Date
is a date other than the first (1st) day of a calendar month, then on the second
(2nd) anniversary of the first (1st) day of the calendar month following the
Commencement Date, and continuing on the first (1st) day of each second (2nd)
anniversary thereof thereafter occurring during the Initial Term and each Option
Term (collectively, "Adjustment Date"), Minimum Rent shall be adjusted in
accordance with the Consumer Price Index for urban wage earners and clerical
workers ("Price Index" as further defined in Section 20.25 hereof). On the
Adjustment Date, Minimum Rent shall be adjusted by multiplying the initial
Minimum Rent of Seventy-One Thousand Four Hundred Forty and 00/100 Dollars
($71,440.00) by a fraction, the numerator of which shall be the index number for
the month preceding the applicable Adjustment Date, and the denominator of which
shall be the index number for the month preceding the Commencement Date. In the
event of any delay in computing the applicable rental adjustment, Tenant shall
continue payment of the most recent Minimum Rent plus five percent (5%) thereof
until such time as the rental adjustment has been computed at which time an
accounting will be made retroactive to the beginning of the adjustment period in
question and the amount then due Landlord shall be paid upon demand without
delay by Tenant. Notwithstanding anything to the contrary herein contained, no
adjustments shall ever be made which would decrease the amount of Minimum Rent
(as previously adjusted). In the event that the Price Index herein referred to
ceases to be published during the term of this lease, or if a substantial change
is made in the method of establishing such Price Index then the determination of
the adjustment in the Minimum Rent
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shall be made with the use of such conversion factor, formula or table as may be
published by the Bureau of Labor Statistics, or if none is available, the
parties shall accept comparable statistics on the cost of living in the United
States, as shall then be computed and published by an agency of the United
States, or if none, by a respectable financial periodical reasonably selected by
Landlord. Notwithstanding anything to the contrary herein contained, increases
to the Minimum Rent on each Adjustment Date shall not exceed an amount equal to
one hundred seven percent (107%) of the Minimum Rent paid by Tenant during the
immediately preceding twelve (12) month period.
Section 4.3. Subject to Section 7.3 hereof, concurrently with Tenant's
monthly payment of Minimum Rent hereunder, and unless otherwise required by the
appropriate taxing authority, Tenant shall pay to Landlord the entire amount of
all taxes upon and/or measured by the rental and/or other charges payable by
Tenant under this lease, whether by way of a sales tax, use tax or otherwise.
The parties agree that Tenant shall be solely responsible for the payment of
such tax. In no event shall such tax include any inheritance, estate,
succession, transfer, gift or excise tax imposed upon Landlord, or any income
tax specifically payable by Landlord as a tax-paying entity without regard to
the source of Landlord's income (as opposed, for example, to a tax payable by
Landlord specifically imposed upon the rents received by Landlord from the
Shopping Center).
Section 4.4. If directed by Landlord, Tenant shall make payments of Minimum
Rent and other charges to a so-called "lock box" (the "Lock Box") at a Florida
bank or such other institution as Landlord may designate from time to time.
ARTICLE V
PERCENTAGE RENT
Section 5.1. In addition to the Minimum Rent specified in ARTICLE IV above,
the Tenant covenants and agrees to pay to the Landlord, as aforesaid, as
percentage rent for each lease-year (as hereinafter defined) of the term hereof,
a sum equal to the percentage specified in Section 1.1(g) hereof, multiplied by
the amount by the excess (if any) of Tenant's gross sales (as hereinafter
defined) during such lease-year over the Base gross sales specified in Section
1.1(g) hereof. On the same date as Minimum Rent shall increase pursuant to the
terms and provisions of this lease, Base gross sales shall increase in
proportion to increases in Minimum Rent.
For any lease-year with respect to which the Minimum Rent paid by the
Tenant under this lease is a sum which is less than the total amount of Minimum
Rent specified in Section 1.1(g) hereof as payable for such lease-year, the Base
gross sales figure shall be reduced proportionately to the same extent as the
amount of Minimum Rent actually paid by the Tenant hereunder for such lease-year
bears to the Minimum Rent stated as payable for such lease-year in said Section
1.1(g). To the extent that any lease-year constitutes less than a full twelve
(12) calendar month period, the Base gross sales figure shall be reduced
proportionately to the same extent as the number of days in such lease-year
bears to 365. If the Tenant is not open for business during the days and hours
required hereunder, then, in addition to all other remedies available hereunder,
the Base gross sales figure shall be proportionately reduced.
Section 5.2. Lease-years shall be the twelve month periods from January 1
through December 31. However, the first lease-year shall run from the date the
Tenant first opens for business in the demised premises through the 31st day of
December immediately following; and the last lease-year shall run from the
previous January 1 through the date of the expiration or earlier termination of
the term of this lease.
Section 5.3. The phrase "gross sales", as used in this lease, is hereby
defined to mean the dollar aggregate of:
(a) the sales prices of all food, beverages, goods,
wares and merchandise sold, and the charges for
all services performed by the Tenant at, in, on or
from the demised premises, whether made for cash,
in credit, or otherwise without reserve or
deduction for inability or failure to collect
amounts in excess of one percent (1%) of Tenant's
gross sales, including but not limited to such
sales and services (i) where the orders therefor
originate at and are accepted by the Tenant in the
demised premises but delivery or performance
thereof is made from or at any place other than
the demised premises, (ii) pursuant to mail,
telegraph, telephone, computer, or other similar
orders received or filled at or from the demised
premises, (except for those used in the non-sales
area of the demised premises exclusively by
Tenant's employees), (iii) by means of mechanical
and other vending devices in the demised premises,
(iv) as a result of transactions originating upon
the demised premises, and/or (v) which the Tenant
in the normal and customary course of its
operations would credit or attribute to its
business upon the demised premises, or any part or
parts thereof; and
(b) all revenues, moneys or other things of value
received by the Tenant from its operations at, in,
on or from the demised premises which are not
expressly excluded from gross sales by the other
provisions of this definition.
"Gross sales" shall not include (i) the exchange of merchandise between
stores and/or warehouses of the Tenant where such exchanges are made solely for
the convenient operation of the Tenant's business and not for the
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purpose of consummating a sale which has theretofore been made at, in, on or
from the demised premises and/or for the purpose of depriving the Landlord of
the benefit of a sale which otherwise would have been made at, in, on or from
the demised premises, or (ii) returns to shippers or manufactures, or (iii)
sales of fixtures or equipment after use thereof in the conduct of the Tenant's
business in the demised premises, or (iv) charges imposed by the Tenant on
customers of the demised premises for delivery of merchandise sold from the
demised premises, which charges are separately stated on the Tenant's sales
slips, or (v) the proceeds of property insurance received by the Tenant for loss
or damage to the Tenant's merchandise or equipment while located in the demised
premises, or (vi) the proceeds received by the Tenant of bona fide, close-out
bulk sales to jobbers at or below the Tenant's costs, where the items so sold
are removed from and not thereafter sold to the public from the demised premises
(but this exclusion shall not be construed to permit any such sales in violation
of the provisions contained in Section 10.2 or elsewhere herein), or (vii)
revenues from lotto and cigarette sales. Further, there shall be deducted from
gross sales (x) cash or credit refunds made upon transactions included within
gross sales, not exceeding the selling price of merchandise returned by the
purchaser and accepted by the Tenant, and (y) the amount of any city, county,
state or federal sales, luxury, or excise or value added tax on such sales which
is both (a) added to the selling price or absorbed therein, and (b) paid to the
taxing authority by the Tenant.
The phrase "gross sales" shall also include such gross sales made by any
sublease, concessionaire, licensee or otherwise at, in, on or from the demised
premises; and such gross sales made by sublessees, concessionaires, licensees,
or otherwise, shall be included in the reports provided for in this lease (but
the foregoing shall not be construed to give the Tenant the right to sublease,
concession or license, which right shall be governed by the provisions of
ARTICLE X hereof).
Section 5.4. The Tenant agrees without notice or demand from the Landlord
to deliver to the Landlord within fifteen (15) days after the end of each
month during the term hereof, a complete uncertified statement signed by an
executive officer of the Tenant or the store manager of the demised premises,
showing gross sales for the preceding month. The Tenant shall utilize cash
registers equipped with sealed continuous and cumulative totals (or computer
equipment performing substantially similar functions) to record all gross sales
and which shall number consecutive rings. The Tenant agrees to maintain
accounting controls and books of account, in form adequate for auditing
purposes, in accordance with generally accepted accounting principles to assure
the proper recording of all gross sales and the exclusions and deductions
therefrom provided in Section 5.3 hereof.
No percentage rent shall be payable for any lease-year until gross sales
during that lease-year exceed the applicable Base gross sale figure. The Tenant
agrees without notice or demand from the Landlord, within fifteen (15) days
after the end of the month in each lease-year during which gross sales so exceed
the Base gross sales and after each ensuing month during that lease-year, to pay
to the Landlord on account of percentage rent a sum equal to the percentage of
gross sales specified in Section 1.1(b) hereof, multiplied by the amount by
which gross sales during the portion of that lease-year which had expired as of
the end of such immediately preceding month exceed the applicable Base gross
sales, less amounts theretofore paid hereunder for and with respect to that
lease-year on account of percentage rent. Each such payment shall be accompanied
by a complete statement signed by an authorized representative of the Tenant
showing the amount of gross sales for such immediately preceding month and for
that lease-year through and including such immediately preceding month.
The Tenant agrees, without notice or demand from the Landlord within
forty-five (45) days after the end of each lease-year, to cause a statement of
the gross sales of the Tenant made at, in, on and/or from the demised premises
for such lease-year to be certified by an executive officer of the Tenant and a
copy of such certified statement shall be delivered by the Tenant to the
Landlord within such forty-five (45) day period, accompanied by a check of the
Tenant for the balance of the percentage rent, if any, payable with respect to
such prior lease-year. In the event that the Tenant's periodic payments of
percentage rent for and with respect to a lease-year shall in the aggregate
exceed the percentage rent payable by the Tenant for the such lease-year, the
Landlord agrees to apply any such excess against the Minimum Rent next due under
this lease.
All statements deliverable by the Tenant to the Landlord under this lease
shall be delivered to the place where rent is then payable, or to such other
place or places as the Landlord may from time to time direct by written notice
to the Tenant.
Section 5.5. The Landlord shall have the right, upon reasonable prior
notice to Tenant, at any time within thirty-six (36) months after receipt of the
annual statement of gross sales of the Tenant required to be furnished pursuant
to Section 5.4 above, upon ten (10) days' prior written notice, to audit all of
the books of account, documents, records, returns, papers, sales tax returns,
original sales records (including, without limitation, cash register tapes,
sales slips, bank statements and deposit slips, credit-card records, mail
orders, telephone orders, computer records and such other sales records, if any,
which would normally be examined by an independent accountant pursuant to
generally accepted auditing standards in performing an audit of the Tenant's
gross sales) and files of the Tenant relating to gross sales for any lease-year;
and the Tenant, on request of the Landlord, shall make all such matters
available for such examination at the Shopping Center. If the Landlord shall
have such an audit made for any lease-year, and the gross sales shown by the
Tenant's statement for such lease-year shall be found to be understated by more
than three percent (3%), then the Tenant shall pay to the Landlord the cost of
such audit. In any event, the Tenant shall promptly pay to the Landlord any
deficiency in percentage rent plus interest at the rate set forth in Section
20.20 from the date such payment should have been made to the date of payment.
Such examination and audit may be made by any accountant designated in writing
by the Landlord from time to time.
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Landlord shall not undertake to audit Tenant's gross sales for any lease-year
more than once and shall not conduct more than one audit of Tenant's gross sales
during any calendar year.
Section 5.6. Computation of the percentage rent specified herein shall be
made separately with regard to each lease-year of the term hereof; it being
understood and agreed that the gross sales of any lease-year and the percentage
rent due thereon shall have no bearing on, or connection with, the gross sales
of any other lease-year of the term hereof. It is further understood and agreed
that the Landlord shall in no event be construed or held to be a partner or
associate of the Tenant in the conduct of the Tenant's business, nor shall the
Landlord be liable for any debts incurred by the Tenant in the conduct of the
Tenant's business; but it is understood and agreed that the relationship is and
at all times shall remain that of landlord and tenant.
ARTICLE VI
CONSTRUCTION
Section 6.1. The Landlord agrees to construct, at the Landlord's sole cost
and expense, on the site of the Shopping Center, the building in which the
demised premises are to be located, the demised premises to be constructed
substantially in accordance with the specifications set forth in that part of
Exhibit "B" entitled "Description of the Landlord's Work".
Section 6.2. Upon completion of Landlord's Work and Landlord's delivery
of the demised premises to Tenant, Landlord's architect shall certify the
square footage of the demised premises to Tenant. Tenant, within five (5) days
from receipt of such measurement, shall have the right, at Tenant's sole cost
and expense to have Tenant's architect verify the square footage of the demised
premises as determined by Landlord's architect, provided that Tenant's architect
shall measure the demised premises from the center line of interior walls and
from the exterior face of exterior walls. No reduction or exclusion shall be
made by reason of columns, stairs, or other interior construction or equipment.
In the event that the interior square footage of the demised premises, as
determined in good faith pursuant to this Section 6.2. is greater or less than
the square footage as set forth in Section 2.1 hereof, Landlord shall adjust
all rents, charges and expenses due Landlord under this lease, whose amounts
are calculated based upon the square footage of the demised premises,
accordingly.
Section 6.3. If Landlord has not achieved the Opening Cotenancy
Requirement as set forth in Section 3.2 hereof, and construction of the demised
premises to the extent required of Landlord shall not be substantially
completed within twenty-four (24) months following the effective date of this
lease, that date being the last of either Landlord or Tenant to sign, then
either the Tenant (as its sole remedy for Landlord's said failure) or the
Landlord shall have the right to terminate this lease by giving written notice
of such termination to the other within thirty (30) days thereafter. Upon the
giving of such notice of termination, the term of this lease shall cease and
come to an end, and thereupon there shall be no further liability or obligation
upon either party hereto.
Section 6.4. Landlord has agreed to contribute an amount equal to
Fifty-Three Thousand Five Hundred Eighty and 00/100 Dollars ($53,580.00) to
Tenant's cost of completing the permanent leasehold improvements portions of
the Tenant's Work (the "Allowance"). The Allowance shall not be used to pay for
Tenant's movable personal property (e.g. tables, chairs, dishes, cups,
glassware, silverware, etc.) or equipment (microwaves, espresso machines,
coffee makers, cash registers, computers, etc.) to be kept in the demised
premises. Any disagreement or dispute which may arise between Landlord and
Tenant concerning Landlord's approval of the Preliminary Design Drawings or the
Final Drawings and Specifications (as defined in Exhibit "B"), or the
Landlord's Work or the Tenant's Work or disbursement of the Allowance, shall be
submitted to the Landlord's project architect whose determination shall be
final and binding in resolving such dispute. In such event, the cost of the
Landlord's project architect shall be paid by the non-prevailing party as
determined by the Landlord's project architect or shall be shared equally by
the parties if the Landlord's project architect determines that neither party
was the prevailing party. Prior to the commencement of the Tenant's Work,
Tenant shall deliver to Landlord a copy of its executed construction contract
with its general contractor for the construction of the Tenant's Work. Prior to
any disbursement of the Allowance, Tenant shall submit to Landlord applications
for payment approved in writing by Tenant's architect in form and substance
reasonably satisfactory to Landlord (and containing such information as may be
reasonably requested by Landlord's lender from time to time), verifying the
percentage of work completed during the previous month, and the monies required
to be expended by Tenant therefore and Landlord shall pay to Tenant (or
Landlord may elect to pay the Allowance jointly to Tenant and Tenant's general
contractor) the cost of such work (excluding any retainage withheld by Tenant
from the contractors) within thirty (30) days of receipt of said application,
but not more often than monthly. In addition, Tenant shall furnish Landlord
with affidavits of the general contractor and subcontractors performing the
work, in form and substance reasonably satisfactory to Landlord and Landlord's
lender, that all amounts due and owing to such contractor or subcontractor from
Landlord have been paid and that all partial and final (as the case may be)
waivers of mechanics' lien normally obtainable under good construction
practices have been obtained. Prior to commencement of the Tenant's Work,
Tenant's architect shall certify to Landlord the "Percentage Ratio" between the
Allowance and the total costs of Tenant's permanent leasehold improvements,
exclusive of trade fixtures and equipment. Landlord shall not be obligated to
disburse funds to Tenant in any monthly draw request in excess of the
"Percentage Ratio". For example, if the total cost to complete Tenant's
permanent leasehold improvements is double the amount of the allowance, then
the "Percentage Ratio" between the Allowance and the total cost of Tenant's
permanent leasehold improvements, exclusive of trade fixtures and equipment,
would be fifty percent (50%), and Landlord shall only be obligated to disburse
fifty percent (50%) of the cost of the total Tenant improvements for the
monthly draw in question. Notwithstanding anything to the
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contrary contained herein, Landlord shall have no obligation to pay nor shall
Tenant be entitled to receive an amount greater than ninety percent (90%) of the
work prior to: (i) substantial completion of the Tenant's Work, (ii) Landlord's
receipt of an affidavit of the general contractor performing the Tenant's Work,
in form and substance reasonably satisfactory to Landlord and Landlord's lender,
that the general contractor has obtained full releases of and/or receipts for
all labor and materials for which a mechanics' lien could be filed, and that all
amounts due and owing such general contractor have been paid in full, (iii)
Tenant is open for business and has been issued a certificate of occupancy for
the demised premises, and (iv) a written statement from Tenant's architect or
engineer that the Tenant's Work has been completed in accordance with the Plans.
Tenant acknowledges that to the induce Tenant to enter into this lease,
Landlord will have incurred significant costs in providing the Allowance. Tenant
acknowledges that Landlord would not have paid the Allowance to Tenant but for
Tenant's agreement to perform all the terms, covenants, conditions and
agreements to be performed by Tenant under this lease for the entire Initial
Term or applicable Option Term. Accordingly, upon termination of this lease
which is the result of any rejection of this lease by Tenant in any bankruptcy
proceeding, Tenant shall promptly reimburse Landlord for the net amortized
portion of the Allowance, which liability shall be in addition to any liability
which Tenant may have for rentals that would have been payable over the
remaining portion of the lease term. For the purposes hereof the Allowance shall
be amortized on a straight-line basis over eighty-four (84) months.
ARTICLE VII
ADDITIONAL RENT - TAXES
Section 7.1. The term "Taxes" as hereby defined to mean all general and
special taxes, including existing and future assessments for road, sewer,
utility and other local improvements, so-called "linkage payments", "voluntary
payments" and other governmental fee and/or charges which may be lawfully
charged assessed, or imposed upon all of any portion of the land and/or
improvements constituting the Shopping Center. The Landlord shall pay, or cause
to be paid, before the same become delinquent, all Taxes, provided however, that
Landlord may defer compliance therewith if permitted by the laws of the State of
Florida so long as the validity or amount thereof is contested by the Landlord
in good faith and so long as the Tenant's occupancy of the demised premises is
not disturbed or threatened.
Section 7.2. The Tenant shall pay all taxes which may be lawfully charged,
assessed, or imposed upon all fixtures and equipment and personal property in
the demised premises, and the Tenant shall pay all license fees and other
charges which may lawfully be imposed upon the business of the Tenant conducted
from the demised premises.
Section 7.3. The Tenant shall, during the term of this lease, pay to the
Landlord that portion of the Taxes as shall result form multiplying the same by
a fraction ("Tenant's Fraction"), the numerator of which is the total square
footage of floor area of the demised premises (exclusive of nonsales mezzanines
and the area of any outdoor sales areas such as, by way of example only,
so-called "garden shops"), and the denominator of which is the total square
footage of leasable floor area of all buildings located in the Shopping Center
as of the first day of each applicable tax year during the term hereof,
provided, however, with respect to any buildings located in the Shopping Center
(and any land appurtenant thereto) which are now or hereafter separately owned
or assessed the taxes and assessments relating thereto shall be deemed not to be
"Taxes" hereunder, and the floor area thereof shall be excluded from the
denominator of such fraction. There shall also be excluded from the denominator
of such fraction the floor area of non-sales mezzanines (if any), passageways,
service corridors, shopping center offices, shopping center storage areas,
shopping center utility rooms, shopping center sprinkler rooms and other
non-sales areas and the area of any outdoor sales areas such as, by way of
example only, so-called "garden shops".
The Tenant's fractional share of Taxes shall be equitably adjusted for and
with respect to the first and last partial tax years (if any) of the term of
this lease. Where the applicable tax bills and computations are not available
prior to the end of the term hereof, then a tentative computation shall be made
on the basis of the previous year's Taxes payable by the Tenant, with a final
adjustment to be made to be made between the Landlord and the Tenant promptly
after all bills and computations are available for such period.
The Tenant's pro rata share of Taxes shall be due and payable within ten
(10) days after receipt by the Tenant of the Landlord's invoice accompanied by a
statement in reasonable detail of the calculation of the amount due. However,
the Tenant shall make monthly tax deposits with the Landlord (along with
payments of Minimum Rent) in an amount equal to one-twelfth (1/12th) of the
Tenant's annual pro rata share of Taxes, with a final adjustment to be made
between the parties as soon as said pro rata share has been determined. The
initial amount of such tax deposits shall be as reasonably estimated by Landlord
but thereafter, the monthly tax deposits shall be predicated upon the last
previous full year's share of Taxes payable by the Tenant.
In every case, Taxes shall be adjusted to take into account any abatement
or refund thereof paid to the Landlord, less all of the Landlord's costs of
securing such abatement or refund (the Landlord having the sole right to contest
Taxes).
Section 7.4. The foregoing provisions of this ARTICLE VII are predicated
upon the present ad valorem system of real estate taxation in the State of
Florida. Should any governmental authority having jurisdiction over all or any
portion of the Shopping Center impose a tax and/or assessment of any kind or
nature upon, against, measured by or with respect to the rentals payable by
tenants in the Shopping Center to the Landlord (other than any tax payable as
provided in Section 4.3 hereof) or with respect to the ownership of the land and
buildings
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comprising the Shopping Center by the Landlord (or any individual or entity
forming the Landlord) or measured by or with respect to any other matter,
either by way of substitution for all or any part of the present ad valorem
real estate taxes or in addition thereto, then such tax and/or assessment shall
be deemed to constitute ''Taxes'' for the purposes of this lease and the Tenant
shall be obligated to pay its proportionate share thereof as set forth in
Section 7.3 hereof. Nothing in this ARTICLE VII contained shall be construed to
include within the term ''Taxes'' any inheritance, estate, succession,
transfer, gift, franchise, corporation, net income or net profit tax, or any
capital levy that is or may be imposed upon Landlord.
ARTICLE VIII
MAINTENANCE OF
COMMON AREAS; AND THE TENANT'S CONTRIBUTION
Section 8.1. Landlord may at any time close temporarily the common areas
(including without limitation, the parking facilities and roadways) or any
portion thereof to make repairs or changes to prevent the acquisition of public
rights therein, or to discourage noncustomer parking, and may do such other
acts in and to the common areas as in its judgment may be desirable to improve
the convenience thereof.
Section 8.2. Tenant shall pay its pro rata share of all costs and expenses
of every kind and nature paid or incurred by Landlord in cleaning, operating,
managing, equipping, decorating, policing (if and to the extent provided by the
Landlord), lighting, repairing, replacing and maintaining all parking
facilities, utilities and facilities serving and/or required to be maintained by
the Shopping Center from time to time (including pylon, electronic or other
signs used to advertise or promote the Shopping Center, landscaping, gardening,
parking facilities and access ways contiguous with the Shopping Center and/or
available for use by occupants of the Shopping Center by reason of agreements or
easement rights) and all taxes, assessments, costs and other expenses related
thereto (collectively, ''Common Area Maintenance''). Such costs and expenses
shall include (but shall not be limited to) water and sewer charges, utility
system installation charges and assessments, costs of the operation, maintenance
and repair of any stormwater drainage facilities and septic system; costs of all
roof and other maintenance, repairs performed by the Landlord, costs of the
installation, operation, maintenance, repair and replacement of any energy
management system, amortization of amounts paid for the right to access the
Shopping Center, premiums for liability, property damage, fire, workers'
compensation, and other insurance (including all insurance, hazard, rent and
otherwise, from time to time carried by the Landlord on any or all structures on
the Shopping Center); all maintenance, repair, replacement, insurance, utility
costs and all other costs and expenses incurred by Landlord in providing
off-site parking spaces or facilities serving the Shopping Center, the costs of
any valet parking service or program, wages, unemployment taxes, social security
taxes, and personal property taxes and assessments; reasonable depreciation of
equipment used in the operation of the common areas, and administrative costs
equal to fifteen percent (15%) of the total costs of operating and maintaining
the common areas (except appropriate reserves maintained by the Landlord); but
there shall be excluded costs of equipment properly chargeable to capital
account and depreciation of the original cost of constructing said buildings,
parking facilities, and other common areas.
The Landlord shall not recover more than once under this Section 8.2 or
under any other Section of this lease for any item of cost or expense. Tenant's
pro rata share shall be computed by multiplying the whole of said costs and
expenses by Tenant's Fraction.
The Tenant's share shall be paid in monthly installments, in the amount
reasonably estimated from time to time by the Landlord on the first day of each
and every calendar month, in advance. No later than one hundred twenty (120)
days after the end of the first full calendar year following the Commencement
Date and within one hundred twenty (120) days after the end of each full
calendar year thereafter, the Landlord shall furnish to the Tenant a statement
in reasonable detail setting forth the computation of such total costs and
expenses. In the event that such annual statement shall reflect an overpayment
by Tenant of such costs and expenses for such calendar year, Landlord shall
promptly refund to Tenant the amount of such excess or, in lieu thereof credit
the amount of such excess toward the Minimum Rent next due from Tenant
hereunder, except that if such overpayment shall have been made for the last
full or partial calendar year of the term hereof, Landlord shall refund such
excess to Tenant promptly following the furnishing of such statement to Tenant,
provided that Tenant then has no outstanding payment obligations to Landlord and
(ii) in the event that such statement shall reflect an additional amount on
account of such costs and expenses due from Tenant, Tenant shall pay such amount
to Landlord within thirty (30) days following receipt of such statement. The
foregoing is intended to require that Landlord shall receive the entire amount
of the Tenant's pro rata share of such costs and expenses computed as aforesaid,
and no more.
Subject to Section 20.23 hereof, anything in this lease to the contrary
notwithstanding, it is expressly understood and agreed that the designation or
use from time to time of portions of the Shopping Center as common areas shall
not restrict the Landlord's use of such areas for buildings, structures and/or
for retail or such other purposes as the Landlord shall determine, including,
without limitation, the expansion or remodelling of the Shopping Center to
include one or more additional anchor stores and small stores (on the present
and/or additional levels), the Landlord hereby reserving the unrestricted right
to build, add to, subtract from, lease, license, relocate and/or otherwise use
(temporarily and/or permanently), any buildings, kiosks, other structures,
parking areas, roadways or other areas or facilities anywhere upon the Shopping
Center. Notwithstanding the foregoing provisions of this paragraph or any other
provisions of this lease, Landlord shall not do any act or thing which shall
unreasonably interfere with access to and/or egress from the demised premises
and/or the Shopping Center in such a manner as to materially adversely affect
the conduct of Tenant's business from the demised premises.
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<PAGE> 12
Tenant acknowledges that in the event Landlord determines, in its sole
discretion, that it is beneficial to the Shopping Center to provide additional
parking in the parking garage, depicted on Exhibit "A" or elsewhere in the
vicinity of the Shopping Center. Tenant shall reimburse Landlord for its costs
for providing such additional parking and pay Landlord, in addition to Minimum
Rent, other costs and charges due under this Lease, an amount equal to Tenant's
pro rata share of Landlord's costs to provide the additional parking. Said
reimbursement shall be based on Landlord's costs to add such parking using a 13%
return per year on capital costs. Tenant's pro rata share under this sub
paragraph shall not exceed $2.50 per square foot of the premises per year.
ARTICLE IX
UTILITIES
Section 9.1. Beginning on the date of delivery of possession of the
demised premises, the Tenant shall pay for all of its requirements for
utilities, including, but not limited to, gas, water, electricity, sewer
charges, and the like, including all utilities necessary for heating and air
conditioning its premises (including the Tenant's pro-rata share, computed in
accordance with Section 8.2 hereof of any premium or guaranteed payment assessed
by any utility company against the Shopping Center). In the event that the
Landlord shall elect to supply any utilities, then, insofar as and to the extent
that such is permitted pursuant to applicable law and the regulations of the
applicable utility company, the Tenant agrees to purchase the same from the
Landlord, provided the rate does not exceed the rate which the Tenant would be
required to pay on a metered basis to the utility company furnishing the same to
the Shopping Center.
ARTICLE X
USE OF PREMISES
Section 10.1. It is understood, and the Tenant so agrees, that the
demised premises during the term of this lease shall be used and occupied by the
Tenant only for the purposes specified as the use thereof in Section 1.1(1) of
this lease, and for no other purpose or purposes.
Section 10.2. The Tenant further agrees to conform to all of the
following provisions during the entire term of this lease:
(a) The Tenant shall always conduct its operations in the demised
premises under its present trade name, or another trade name to
which all then existing "Havana Republic" operations are changed
provided such trade name will not conflict with the trade names
of any other tenants of the Shopping Center.
(b) No auction, fire, bankruptcy, "lost our lease" or going out of
business sales (or the like, howsoever denominated) may be
conducted within the demised premises.
(c) The Tenant shall not use any area outside of the demised
premises, including, without limitation, sidewalks adjacent to
the demised premises for business purposes (including without
limitation, the sale or display of merchandise or the
distribution of handbills or advertising of any type).
(d) The Tenant shall keep the display windows of the demised premises
clean.
(e) The Tenant shall receive and deliver goods and merchandise only
in the manner, at such times, and in such areas, as may be
reasonably designated by the Landlord; and all trash, refuse, and
the like, shall be kept in covered trash receptacles, which trash
receptacles shall be kept within the demised premises at all
times, and in no event stored outside of the same. All trash,
refuse and the like shall be separated and otherwise disposed of
as required by applicable law. The Tenant agrees to fully
cooperate with the Landlord in any recycling programs instituted
by the Landlord. If provision is made by the Landlord for trash
removal by a contractor, the Tenant agrees to use said contractor
for its trash removal and to pay when due all charges at the rate
established therefor from time to time, provided such rate is
competitive with the rates charged for similar services within
the area.
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<PAGE> 13
(f) The Tenant shall not place any signs on the
exterior of the demised premises (including, but
without limitation, windows, doors, and entrance
lobbies) other than those signs in those locations
complying with Exhibit "C" attached hereto and
hereby made a part hereof. All interior signs must
be professionally prepared. No sign shall be
placed on any window of the demised premises or
with two (2) feet thereof.
(g) The Tenant shall not perform any act or carry on
any practice which may injure the demised premises
or any other part of the Shopping Center, or cause
any offensive odor or loud noise (including, but
without limitation, the use of loudspeakers), or
constitute a nuisance or menace to any other
occupant or other persons in the Shopping Center,
an in no event shall any loud noises or offensive
odors be emitted from the demised premises.
(h) The demised premises (as well as all doors and
entryways thereto) shall be kept open for business
for such days and hours as may be designated by
Landlord from time to time provided that they
shall not be dissimilar to the days and hours that
other retail stores in shopping centers in the
general locality of the Shopping Center are open
for business and provided that at least fifty
percent (50%) of the tenants in the Shopping
Center are likewise required to, or do, keep open
for such additional days and hours, but in no
event a greater number of hours than that
permitted by then applicable law.
(i) The Tenant shall at all times keep the demised
premises fully and adequately stocked and
fixtured, with an adequate staff so as to promote
and facilitate maximum sales, and shall not use
any portion of the demised premises for storage or
other services, except for its operations in the
demised premises.
(j) The Tenant shall at all times fully and adequately
heat and/or air-condition (as the circumstances
require) the demised premises.
(k) The Tenant agrees that it and its employees and
others connected with the Tenant's operations at
the demised premises will abide by all reasonable
rules and regulations from time to time
established by the Landlord by written notice to
the Tenant with respect to the Shopping Center,
provided that such rules and regulations are
enforced in a non-discriminatory fashion (except
where differing circumstances justify different
treatment).
(l) The Tenant shall not use, handle or store or
dispose of any oil or hazardous or toxic
materials, substances or wastes in or about the
Shopping Center.
(m) Tenant agrees that, within the demised premises,
it shall be responsible for compliance with the
Americans with Disabilities Act (42 U.S.C. Section
12101 et. seq.) and the regulations and
Accessibility Guidelines for Buildings and
Facilities issued pursuant thereto.
Section 10.3. Notwithstanding any other provisions of this lease, Tenant
covenants and agrees that it will not assign this lease or sublet (which term,
without limitation, shall include the granting of concessions, licenses, and
the like) the whole or any part of the demised premises without in each
instance having first received the express written consent of Landlord.
Landlord agrees that it shall not act unreasonably in the withholding of its
consent to any such assignment or subletting. Notwithstanding the provisions of
the foregoing sentence, Tenant shall not have the right to transfer in any
other manner or hypothecate its interest in this lease, whether by way of
leasehold mortgage, collateral assignment or any other security arrangement or
otherwise without the prior written consent of Landlord, which may be granted
or withheld in Landlord's sole and absolute discretion. In that connection,
Tenant hereby recognizes the Landlord's interest in the manner in which the
business to be conducted from the demised premises shall be conducted, the
person or entity operating the same throughout the term of this lease, the
requirement contained herein that the demised premises shall be continuously
operated as provided herein and the necessity that the Landlord have the
ability at all times throughout the term of this lease to deal directly with
the Tenant without reference to any third party. The provisions of this Section
10.3 shall not, however, be applicable to an assignment of this lease by Tenant
to a subsidiary or controlling corporation, provided (and it shall be a
condition of the validity of any such assignment) that such subsidiary or
controlling corporation agree directly with Landlord to be bound by all of the
obligations of the Tenant hereunder, including, without limitation, the
obligation to pay the rent and other amounts provided for under this lease, and
the covenant against further assignment; but such assignment shall not relieve
the Tenant herein named of any of its obligations hereunder, and the Tenant
shall remain fully liable therefor. Furthermore, it is specifically understood
and agreed that said assignment to a subsidiary or controlling corporation
shall be valid only for such period of time as said subsidiary or controlling
corporation remains a subsidiary or controlling corporation of Tenant; and in
the event Tenant shall ever sell or otherwise transfer said controlling
interest in said subsidiary to another person or entity, or if said controlling
corporation shall cease
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<PAGE> 14
to control Tenant, unless Landlord shall have specifically assented
thereto, the same shall be deemed to be a material breach of this lease
entitling Landlord forthwith to terminate this lease.
If Tenant is a corporation and if at any time during the lease term the
person or persons who own a majority of its voting shares at the time of the
execution of this lease cease to own a majority of such shares, Tenant shall so
notify Landlord, and Landlord may terminate this lease by notice to Tenant given
not later than ninety (90) days thereafter. This provision shall not apply
whenever Tenant is a corporation, the outstanding voting stock of which is
listed on a recognized security exchange, or if at least eighty percent (80%) of
its voting stock is owned by another corporation the voting stock of which is so
listed. For the purposes of this provision, stock ownership shall be determined
in accordance with the principles set forth in Section 544 of the Internal
Revenue Code of 1954, as the same existed on August 16, 1954, and the term
"voting stock" shall refer to shares of stock regularly entitled to vote for the
election of directors of the corporation.
For the purposes of this lease, the entering into of any management
agreement or any agreement in the nature thereof transferring control or any
substantial percentage of the profits and losses from business operations of
Tenant in the demised premises to a person or entity other than Tenant, or
otherwise having substantially the same effect, shall be treated for all
purposes as an assignment of this lease and shall be governed by the provisions
of this Section 10.3.
Section 10.4. The acceptance of rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof. Consent
to one assignment or subleasing shall not be deemed consent to any subsequent
assignment or subleasing. If any assignee of Tenant or any successor of Tenant
defaults in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or sublessee. landlord may consent to subsequent assignments or
subleasings of this lease for the demised premises, or to amendments or
modifications to this lease with assignees of Tenant, without notifying Tenant
or any successor of Tenant, and without obtaining its or their consent thereto,
and such action shall not relieve the Tenant named herein of its liability under
this lease nor any future assignor or sublessor of its liability under this
lease.
Section 10.5. If at any time or from time to time during the term of this
lease, Tenant desires to assign this lease or to sublet all or any part of the
demised premises, then not less than thirty (30) days, nor more than sixty (60)
days, prior to the date (the "Transfer Date") on which Tenant desires the
assignment or sublease to become effective Tenant shall give Landlord a notice
(the "Transfer Notice") which shall set forth the name, address and business of
the proposed assignee or sublessee, all of the substantive and financial terms
of the proposed transaction in full detail and information (including, without
limitation, all relevant financial statements and references) concerning the
character, financial condition and retail business experience of the proposed
assignee or sublessee. Landlord shall have the option, and notwithstanding
anything to the contrary contained in this ARTICLE X, exercisable by giving
notice to Tenant at any time within twenty (20) days after Landlord's receipt of
the Transfer Notice (a) in the case of an assignment or sublease, to terminate
this lease as to the portion of the demised premises proposed to be sublet or
assigned, in which event Tenant shall be relieved of all further obligations
hereunder with respect thereto as of the Transfer Date; or (b) in the case of a
sublease, to sublease such portion from Tenant upon the terms and conditions set
forth in the Transfer Notice. No failure of Landlord to exercise either option
with respect to the applicable portion of the demised premises shall be deemed
to be a consent by Landlord to the assignment or subletting of all or any
portion of the demised premises. If, after receipt of any Transfer Notice,
Landlord exercises its right to terminate this lease with respect to, or enter
into a sublease for, the applicable portion of the demised premises, Tenant
shall have the right, exercisable by written notice to Landlord sent within ten
(10) days after its receipt of Landlord's said notice, to rescind the applicable
Transfer Notice. If Landlord exercises its option to sublease and Tenant shall
not rescind the applicable Transfer Notice, all as provided herein, Tenant shall
sublease to Landlord the applicable portion of the demised premises upon the
terms and conditions contained in the Transfer Notice provided, however, that:
(A) Landlord shall at all times under such sublease have the right and option
further to sublease the applicable portion of the demised premises without
obtaining Tenant's consent or sharing any of the economic consideration received
by Landlord; (B) the use and trade name provisions of this lease shall not be
applicable thereto; (C) Tenant shall have no right of setoff or abatement or any
other right to assert a default hereunder by reason of any default by Landlord
under such sublease; and (D) Landlord's liability under such sublease shall not
be deemed assumed or taken subject to any successor to Landlord's interest under
this lease.
ARTICLE XI
OTHER STORES
Section 11.1. In recognition of the fact that this lease provides for a
percentage rent based upon the sales made by the Tenant in or from the demised
premises the Tenant covenants and agrees (insofar as and to the extent that it
is lawful so to agree) that for the period commencing with the execution of this
lease and continuing for the full term of this lease, none of the Tenant, any
guarantor (if applicable) or principal of or partner in the Tenant, any of their
affiliated, parent or subsidiary companies, or any franchisee or licensee of any
of them, will operate, either directly or indirectly, another store having the
same or any similar trade name to that used at the demised premises (including a
department or concession in another store) (other than stores, departments, or
concessions presently being operated by it or them) within a two (2) mile radius
of the demised premises, without the prior written consent of the Landlord. In
addition to any other remedy otherwise available to the Landlord from breach of
this covenant, it is specifically agreed that the Landlord may at the Landlord's
election require that any and all sales made
<PAGE> 15
in or from any such other store be included in the computation of the percentage
rent due hereunder, with the same force and effect as though such sales had
actually been made in or from the demised premises.
Section 11.2. So long as Tenant shall not cease to operate a cigar store
in the demised premises (excepting any periods during which permitted remodeling
or restoration work is being conducted with due diligence) Landlord shall not
permit any tenant of the Shopping Center, other than Tenant, to be primarily
engaged as a cigar store; provided, however, the foregoing shall be subject to
the rights of tenants under existing leases as of the date of this lease.
Additionally, the foregoing shall not prohibit Landlord from permitting any
tenant of the Shopping Center to engage in the sale of cigars, cigarettes and
other related tobacco products except that sale of cigars shall be limited to on
the premises stock of not more than twelve (12) boxes at any time.
ARTICLE XII
MAINTENANCE OF BUILDING, ETC.
Section 12.1. The Landlord agrees to keep in good order, condition, and
repair the roof, foundations and structural portions of the demised premises to
the extent, but only to the extent, originally constructed by the Landlord
(except glass and glass windows and doors and the so-called storefront,
irrespective of which party installed the same), except for any damage thereto
caused by any act or negligence of the Tenant, its employees, agents, licensees,
or contractors. Landlord shall also make any repairs to the demised premises
caused by any act or negligence of Landlord, its employees, agents, licensees or
contractors.
Section 12.2. Except as specifically herein otherwise provided, the Tenant
agrees that from and after the date that possession of the demised premises is
delivered to the Tenant, and continuously thereafter until the end of the term
hereof, it will keep neat and clean and maintain in good order, condition and
repair, the demised premises and every part and system thereof. With respect to
the HVAC system and equipment, the Tenant specifically agrees to maintain at all
times during the term of this lease the usual service contract with respect
thereto, furnishing evidence thereof (including renewals) to the Landlord. There
is expected from this paragraph, however, such damage as the Landlord is
required to repair pursuant to ARTICLE XVI hereof. The Tenant further agrees
that the demised premises shall be kept in a clean, sanitary and safe condition
in accordance and shall in all respects comply with the laws of the State of
Florida, the County of Broward and the City of Fort Lauderdale, and in
accordance with all directions, rules, and regulations of the Health Officer,
Fire Marshal, Building Inspector, and other proper officers of the governmental
agencies having jurisdiction thereover. The Tenant shall not permit or commit
any waste.
Section 12.3. The Tenant shall not make any alterations, improvements
and/or additions to the demised premises (except as initially required by the
terms of ARTICLE III of this lease) without first obtaining, in each instance,
the written consent of the Landlord, which shall not be unreasonably withheld or
delayed, except that Tenant may make non-structural alterations to the interior
thereof, but not affecting the storefront or any of the mechanical or utility
systems costing no more than $5,000 per project. In any event any alterations by
the Tenant shall be made in accordance with all applicable laws and in a good
and first-class, workmanlike manner and in accordance with this lease including
the provisions of Exhibit "B". Any and all alterations, additions, and
improvements made to, and any fixtures and electrical, plumbing, heating,
ventilating and/or air-conditioning systems and equipment) installed upon the
demised premises shall (unless Landlord shall direct Tenant to remove any or all
of the same, in which event Tenant shall do so) remain upon the demised
premises, and at the termination of this lease shall be surrendered with the
demised premises as a part thereof without disturbance, molestation or injury.
However, the usual trade fixtures and furniture which may be installed in the
demised premises prior to or during the term hereof at the cost of the Tenant
may be removed by the Tenant from the demised premises upon the termination of
this lease. Further, the Tenant covenants and agrees, at its own cost and
expense, to repair any and all damage to the demised premises resulting from or
caused by such removal. In any event, any trade fixtures, equipment furniture
and other personal property which remain in the demised premises following the
expiration or earlier termination of the term hereof, at the Landlord's option,
may thereafter be removed and stored at the cost of the Tenant, or retained as
the property of the Landlord or sold or otherwise disposed of by the Landlord,
in any such case without any liability to or recourse by the Tenant or anyone
claiming by, through or under the Tenant.
ARTICLE XIII
INDEMNITY AND COMMERCIAL/GENERAL LIABILITY INSURANCE
Section 13.1. The Tenant shall indemnify and save harmless the Landlord
and the Landlord's managing agent from and against all claims of whatever nature
arising from any act, omission or negligence of the Tenant, or the Tenant's
contractors, licensees, invitees, agents, servants, or employees, or arising
from any accident, injury, or damage whatsoever caused to any person, or to the
property of any person, or from any violation of applicable law including,
without limitation, any law, regulation, or ordinance concerning trash,
hazardous materials, or other pollutant occurring from and after the date that
possession of the demised premises is delivered to the Tenant and until the end
of the term hereof in or about the Tenant's demised premises, or arising from
any accident, injury or damage occurring outside of the demised premises but
within the Shopping Center, where such accident, damage or injury results or is
claimed to have resulted from an act or omission on the part of the Tenant or
the Tenant's agents or employees. This indemnity and hold harmless agreement
shall include indemnity against all costs, expenses and liabilities incurred in
or in connection with any such claim or proceeding brought thereon, and the
defense thereof and shall survive the expiration or earlier termination of this
lease.
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<PAGE> 16
Section 13.2. Landlord shall indemnify and save harmless Tenant from and
against all claims of whatever nature arising from any accident, injury, or
damage whatsoever caused to any person, or to the property of any person, in,
on or about the common areas of the Shopping Center, or arising from any
accident, injury or damage occurring any where, where such accident, injury or
damage results or is claimed to have resulted from an act or omission on the
part of the Landlord or the Landlord's agents or employees. This indemnity and
hold harmless agreement shall include indemnity against all costs, expenses and
liabilities incurred in or in connection with any such claim or proceeding
brought thereon, and the defense thereof, and shall survive the expiration or
earlier termination of this lease.
Section 13.3. In addition to the insurance required to be maintained by
the Tenant pursuant to Exhibit "B", the Tenant agrees to maintain in full force
during the term hereof a broad form policy of comprehensive general liability
and property damage insurance (without any so-called employee exclusion or the
like) with an insurance company duly licensed to do business in the State of
Florida under which the Landlord (and such other persons as are in privity of
estate with the Landlord as may be set out in notice from time to time) is named
additional insured and the Tenant is named primary insured, and under which the
insurer agrees to indemnify and hold the Landlord and those in privity of estate
with the Landlord harmless from and against all cost, expense and/or liability
arising out of or based upon any and all claims, accidents, injuries, and
damages mentioned in Section 13.1 of this ARTICLE XIII. Each such policy shall
be non-cancelable with respect to the Landlord and the Landlord's said designees
without thirty (30) days' prior written notice to the Landlord, and a duplicate
original or certificate thereof shall be delivered to the Landlord. The minimum
limits of liability of such insurance per occurrence shall be $1,000,000.00 for
injury (or death) to any one person, and $2,000,000.00 for injury (or death) to
more than one person, and $250,000.00 with respect to damage to property, or a
combined single limit of $2,000,000.00 for all injury, damage and loss per
occurrence, or such higher limits as the Landlord may from time to time request,
provided such higher limits are then customarily carried on a first-class
shopping centers. Said insurance may be maintained by Tenant under a so-called
"blanket policy" covering the demised premises as well as other premises of
Tenant, provided that Tenant shall furnish Landlord with evidence satisfactory
to Landlord of the existence of such blanket policy, that such blanket policy
specifically includes the demised premises and that the aforesaid minimum limits
apply to each occurrence covered by such blanket policy and afford the same
protection as would be provided under an individual policy meeting the
requirements hereof.
Section 13.4. The Tenant agrees to use and occupy the demised premises
and to use such other portions of the Shopping Center as it is herein given the
right to use as its own risk; and that except to the extent caused by or
resulting from the willful act or gross negligence of Landlord, its agents or
employees, the Landlord shall have no responsibility or liability for any loss
of or damage to the Tenant's leasehold improvements or to fixtures or other
personal property of the Tenant or those claiming by, through or under the
Tenant. The provisions of this Section shall apply during the whole of the term
hereof, and in view of the permission given to the Tenant to install fixtures
and do certain work prior to the Commencement Date, shall also apply at all
time prior to the Commencement Date.
Section 13.5. If at any time Tenant shall sell or serve alcoholic
beverages in, at or from the demised premises. Tenant shall at all times during
the term hereof as its sole cost and expense maintain in effect a policy or
policies of insurance insuring Landlord (as an additionally named insured) and
Tenant against loss, cost, or expense by reason of bodily injury or property
damage for which Landlord and/or Tenant may be held liable by or because of the
violation of any statute, ordinance or regulation pertaining to the sale, gift,
distribution, or use of any alcoholic beverage, by reason of the selling,
serving, or giving of any alcoholic beverage to a minor or to a person under
the influence of alcohol or which causes or contributes to the intoxication of
any person, or as a person or organization engaged in the business of
manufacturing, distributing, selling or serving alcoholic beverages, or as an
owner or lessor of the premises used for such purposes. The liquor liability
insurance shall be written with minimum limits of coverage as reasonably
required by Landlord from time to time, but not less than $1,000,000.00 per
occurrence. Tenant shall deposit with Landlord a certificate for such insurance
that the policy will not be canceled or reduced in scope of coverage until
thirty (30) days after written notice to Landlord.
ARTICLE XIV
LANDLORD'S ACCESS TO PREMISES
Section 14.1. The Landlord and its designees shall have the right upon
reasonable prior written notice to Tenant (which notice shall not be required
in the event of an emergency or if Landlord's entry shall be in the non-public
areas of the demised premises only), to enter upon the demised premises at all
reasonable hours for the purpose of inspecting or making repairs to the same or
exhibiting the same to prospective purchasers and lenders. In making such
entry, Landlord shall not unreasonably interfere under the circumstances with
Tenant's business operations in the demised premises. If repairs are required
to be made by the Tenant pursuant to the terms hereof or if the Tenant is
required to perform any other obligation under this lease, the Landlord may
demand that the Tenant make such repairs or perform such obligation forthwith,
and if the Tenant refuses or neglects to commence such repairs or performance
and complete the same with ten (10) days after such demand, the Landlord may
(but shall not be required to) make or cause such repairs or performance to be
done and shall not be responsible to the Tenant for any loss or damage that may
accrue to its stock or business by reason thereof. If the Landlord makes or
causes such repairs or performance to be done, or endeavors so to do, the
Tenant agrees that it will forthwith, on demand, pay to the Landlord the cost
thus incurred, and if the Tenant shall default in such payment, the Landlord
shall have the remedies provided in ARTICLE XIX hereof.
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Section 14.2. For a period commencing six (6) months prior to the
termination of this lease, Landlord may have reasonable access to the demised
premises for the purpose of exhibiting the same to prospective tenants, except
if the term of this lease is extended pursuant to the terms and conditions set
forth herein.
ARTICLE XV
INSURANCE
Section 15.1. The Landlord shall keep the demised premises insured against
loss or damage by fire, with All Risks of Physical Loss and such other insurance
as from time to time the then holder of the first mortgage which includes the
demised premises shall require or the Landlord otherwise shall deem advisable,
but specifically excluding any property or improvements installed by or
belonging to the Tenant.
Section 15.2. The Tenant also agrees that it shall continuously keep its
fixtures, merchandise, equipment and other personal property from time to time
located in, on or about the demised premises, and all leasehold improvements to
the demised premises constructed or installed by the Tenant insured against loss
or damage by fire with all risk endorsements in amounts equal to the full
replacement cost thereof. The Tenant shall furnish to the Landlord certificates
of such insurance satisfactory to the Landlord. It is understood and agreed that
the Tenant assumes all risk of damage to its own property arising from any cause
whatsoever, including, without limitation, loss by theft or otherwise.
Section 15.3. Insofar as and to the extent that the following provision
may be effective without invalidating or making it impossible to secure
insurance coverage obtainable from responsible insurance companies doing
business in the State of Florida (even though extra premium may result
therefrom), the Landlord and the Tenant mutually agree that with respect to any
loss which is covered by insurance then being carried by them, respectively, the
one carrying such insurance and suffering said loss releases the other of and
from any and all claims with respect to such loss, and they further mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof. In the event that an
additional premium, is payable by either party as a result of this provision,
the other party shall reimburse the party paying such premium the amount of such
extra premium. If, at the written request of one party, this release and
non-subrogation provision is waived, then the obligation of reimbursement shall
cease for such period of time as such waiver shall be effective, but nothing
contained in this Section shall be deemed to modify or otherwise affect releases
elsewhere herein contained of either party for claims.
Section 15.4. The Tenant covenants and agrees that it will not do or
permit anything to be done in or upon the demised premises or bring in anything
or keep anything therein, which shall increase the rate of insurance on the
demised premises or on the other buildings located on the Shopping Center above
the standard rate on said premises and buildings with a regular retail store
located in the demised premises; and the Tenant further agrees that in the event
it shall do any of the foregoing, it will promptly pay to the Landlord on demand
any such increase resulting therefrom, which shall be due and payable as
additional rent hereunder. Landlord acknowledges that the use described in
Section 1.1(k) hereof does not increase such rate.
ARTICLE XVI
DAMAGE CLAUSE
Section 16.1. If the demised premises shall be partially damaged (as
distinguished from "substantially damaged", as that term is hereinafter defined)
by fire or other casualty, the Landlord shall forthwith proceed to repair such
damage and restore the demised premises, or so much thereof as was originally
constructed by the Landlord, to substantially their condition at the time of
such damage.
Section 16.2. The terms "substantially damaged" and "substantial damage",
as used in this ARTICLE, shall have reference to damage of such a character as
cannot reasonably be expected to be repaired or the premises restored within
sixty (60) days from the time that such repair or restoration work would be
commenced.
If the demised premises shall be substantially damaged or destroyed by fire
or other casualty, the risk of which is covered by the Landlord's insurance,
this lease shall, except as hereinafter provided, remain in full force and
effect, and the Landlord shall promptly after such damage and the determination
of the net amount of insurance proceeds available to the Landlord, expend so
much as may be necessary of such net amount to restore, to the extent originally
constructed by the Landlord (consistent, however, with zoning laws and building
codes then in existence), the damaged portions of the demised premises to
substantially its condition at the time of such damage, except as hereinafter
provided. Should the net amount of insurance proceeds available to the Landlord
be insufficient to cover the cost of restoring the demised premises, in the
reasonable estimate of the Landlord, the Landlord may, but shall have no
obligation to, supply the amount of such insufficiency and restore the demised
premises with all reasonable diligence or the Landlord may terminate this lease
by giving notice to the Tenant within a reasonable time after the Landlord has
determined the estimated net amount of insurance proceeds available to the
Landlord and the estimated cost of such restoration. In case of substantial
damage or destruction, as a result of a risk which is not covered by the
Landlord's insurance, the Landlord shall likewise be obligated to rebuild the
demised premises, all as aforesaid, unless the Landlord, within a reasonable
time after the occurrence of such event, gives written notice to the Tenant of
the Landlord's election to terminate this lease. If the Shopping Center shall be
substantially damaged or destroyed by fire or casualty and whether or not the
demised premises are damaged or destroyed, Landlord shall promptly restore, to
the extent originally constructed by Landlord (consistent, however, with zoning
laws and building codes then in existence), so much of the Shopping Center as
was originally constructed by Landlord to substantially its
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condition at the time of such damage, unless Landlord, within a reasonable time
after such loss, gives notice to the Tenant of Landlord's election to terminate
this lease, which Landlord shall not elect to do in a manner that will
unreasonably discriminate against Tenant. If the Landlord shall elect to
terminate this lease pursuant to the provisions of this Section 16.2, as
aforesaid, this lease and the term hereof shall cease and come to an end as of
the date of said damage or destruction.
SECTION 16.3. However, if the demised premises shall be substantially
damaged or destroyed by fire, windstorm, or otherwise within the last one (1)
year of the term of this lease, either party shall have the right to terminate
this lease, provided that notice thereof is given to the other party not later
than sixty (60) days after such damage or destruction. If said right of
termination is exercised, this lease and the term hereof shall cease and come to
an end as of the date of said damage or destruction. Notwithstanding the
foregoing provisions of this Section 16.3, however, if Tenant, then having a
right to extend the term of this lease, shall notify Landlord of its election to
do so within twenty-one (21) days following its receipt of Landlord's election
to terminate this lease pursuant to the provisions of this Section 16.3, then
Landlord's said election to terminate this lease shall be null and void and the
obligations of the parties shall continue as provided in this lease as though
such termination notice by Landlord had never been sent.
SECTION 16.4. Unless this lease is terminated as provided in Section 16.2
or Section 16.3, hereof, if the demised premises shall be damaged or destroyed
by fire or other casualty, then the Tenant shall: (i) repair and restore all
portions of the demised premises not required to be restored by the Landlord
pursuant to this ARTICLE XVI to substantially the condition which such portions
of the demised premises were in at the time of such casualty; (ii) equip the
demised premises with trade fixtures and all personal property necessary or
proper for the operation of the Tenant's business; and (iii) open for business
in the demised premises - as soon thereafter as possible.
SECTION 16.5. In the event that the provisions of Section 16.1 or Section
16.2 hereof shall become applicable, the Minimum Rent and all other charges
payable by Tenant hereunder except percentage rent and Taxes payable pursuant to
ARTICLES V and VII hereof, shall be abated or reduced proportionately during any
period in which, by reason of such damage or destruction, there is substantial
interference with the operation of the business of the Tenant in the demised
premises, having regard for the extent to which the Tenant may be required to
discontinue its business in the demised premises, and such abatement or
reduction shall continue for the period commencing with such destruction or
damage and ending with the completion by the Landlord of such work of repair
and/or reconstruction as the Landlord is obligated to do. Upon termination of
this lease pursuant to this ARTICLE XVI, Landlord shall refund any unearned rent
and other charges previously paid to Landlord.
ARTICLE XVII
EMINENT DOMAIN
SECTION 17.1. If the demised premises, or such portion thereof as to render
the balance (when reconstructed) unsuitable for the purposes of the Tenant,
shall be taken by condemnation or right of eminent domain, either party, upon
written notice to the other, shall be entitled to terminate this lease, provided
that such notice is given not later than thirty (30) days after the Tenant had
been deprived of possession. For the purposes of this ARTICLE, any deed or any
transfer of title in lieu of any such taking shall be treated as such a taking.
Moreover, for the purposes of the ARTICLE, a taking of the Tenant's entire
leasehold interest in the demised premises (or assignment or termination in lieu
thereof) shall be treated as a taking of the entire demised premises, and in
such event the Tenant shall be treated as having been deprived of possession on
the effective date thereof. Should any part of the demised premises be so taken
or condemned, and should this lease not be terminated in accordance with the
foregoing provision, the Landlord covenants and agrees within a reasonable time
after such taking or condemnation, and the determination of the Landlord's award
therein, to expend so much as may be necessary of the net amount which may be
awarded to the Landlord in such condemnation proceedings in restoring the
demised premises to an architectural unit as nearly like their condition prior
to such taking as shall be practicable. Should the net amount so awarded to the
Landlord be insufficient to cover the cost of restoring the demised premises, as
estimated by the Landlord's architect, the Landlord may, but shall not be
obligated to, supply the amount of such insufficiency and restore said premises
as above provided, with all reasonable diligence, or terminate this lease. Where
the Tenant has not already exercised any right of termination accorded to it
under the foregoing portion of this paragraph, the Landlord shall notify the
Tenant of the Landlord's election not later than ninety (90) days after the
final determination of the amount of the award. Further, if so much of the
Shopping Center shall be so taken that continued operation of the Shopping
Center would be uneconomic in the Landlord's judgment or prohibited by zoning or
other applicable law, the Landlord shall have the right to terminate this lease
by giving notice to the Tenant of the Landlord's desire so to do not later than
thirty (30) days after the effective date of such taking. Landlord shall not
exercise its right to terminate this lease pursuant to this Section 17.1 in a
manner which will unreasonably discriminate against Tenant.
SECTION 17.2. Out of any award or awards for any taking of the demised
premises (including, without limitation, any taking of the Tenant's leasehold
interest as aforesaid), in condemnation proceedings or by right of eminent
domain, the Landlord shall be entitled to receive and retain the amounts awarded
for such demised premises and for the Landlord's business loss. The Tenant shall
be entitled to receive and retain only such amounts as may be specifically
awarded to it for the taking of its trade fixtures and furniture and its
leasehold improvements and for moving damages, only to the extent such amounts
are awarded in a separate proceeding and only to the extent the Landlord's award
is not thereby reduced and the Tenant is not otherwise reimbursed for the same
by the Landlord. Upon any termination of this lease pursuant to this ARTICLE
XVII, Landlord shall refund any unearned rent and other charges previously paid
to Landlord.
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Section 17.3. In the event of any such taking of the demised premises, the
Minimum Rent and all other charges payable by Tenant hereunder except percentage
rent and Taxes payable pursuant to all ARTICLES V and VII hereof, or a fair and
just proportion thereof, according to the nature and extent of the damage
sustained, shall be suspended or abated.
ARTICLE XVIII
BANKRUPTCY OR INSOLVENCY
Section 18.1. If the Tenant shall become a debtor under the United States
Bankruptcy Code, 11 U.S.C. SS.101 et seq. (the "Bankruptcy Code") then, to the
extent that the Bankruptcy Code may be applicable or affect the provisions of
this lease, the following provisions shall also be applicable. If the trustee or
debtor-in-possession shall fail to elect to assume this lease within sixty (60)
days after the commencement of a case under the Bankruptcy Code, this lease
shall be deemed to have been rejected; and the Landlord shall be thereafter
immediately entitled to possession of the demised premises and this lease shall
be terminated subject to and in accordance with the provisions of this lease and
of law (including such provisions for damages). No election to assume (and, if
applicable to assign) this lease by the trustee or debtor-in-possession shall be
permitted or effective unless: (i) all defaults shall have been cured and the
Landlord shall have been provided with adequate assurances reasonably
satisfactory to the Landlord, including (a) any reasonably required guaranties
and/or security deposits, and (b) any other reasonably required assurances that
there will continue to be sufficient funds and personnel available to
professionally merchandise, stock, promote, staff and operate the demised
premises in strict compliance with all provisions of this lease; and (ii)
neither such assumption nor the operation of the demised premises subsequent
thereto shall, in the Landlord's reasonable judgment, cause or result in any
breach or other violation of any provision of this or any applicable lease,
mortgage or other contract, or disrupt the tenant mix of the Shopping Center;
and (iii) the assumption and, if applicable, the assignment of this lease
satisfies in full the provisions of the Bankruptcy Code, including, without
limitation, Sections 365(b)(1) and (3) and (f)(2); and (iv) the assumption has
been ratified and approved by order of such court or courts as have final
jurisdiction over the Bankruptcy Code and the case. No assignment of this lease
by the trustee or debtor-in-possession shall be permitted or effective unless
the proposed assignee likewise shall have satisfied (i), (ii), (iii) and (iv) of
the preceding sentence regarding such assignment, and any such assignment,
shall, without limitation, be subject to the provisions of Section 10.3 hereof.
When pursuant to the Bankruptcy Code the trustee or debtor-in-possession is
obligated to pay reasonable use and occupancy charges, such charges shall not be
less than the Minimum Rent and other charges specified herein to be payable by
the Tenant. Neither the Tenant's interest or estate in the demised premises
herein or created herby nor any lesser interest or estate of the Tenant shall
pass to anyone under any law of any state or jurisdiction without the prior
written consent of the Landlord. In no event shall this lease, if the term
hereof has expired or has been terminated in accordance with the provisions of
this lease, be revived, and no stay or other proceedings shall nullify, postpone
or otherwise affect the expiration or earlier termination of the term of this
lease pursuant to the provisions of this ARTICLE XVIII or prevent the Landlord
from regaining possession of the demised premises thereupon.
ARTICLE XIX
LANDLORD'S REMEDIES
Section 19.1. Any one of the following shall be deemed to be an "Event of
Default":
A. Failure on the part of the Tenant to make payment of rent or any
other monetary amount due under this lease within five (5) days after the date
due hereunder, including any applicable notice and cure periods.
B. With respect to a non-monetary default under this lease, failure of
the Tenant to cure the same within the minimum time period required to cure the
default after the Landlord has sent to the Tenant notice of such default. The
Tenant shall be obligated to commence forthwith and to complete as soon as
possible the curing of such default; and if the Tenant fails so to do, the same
shall be deemed to be an Event of Default.
C. The commencement of any of the following proceedings, with such
proceeding not being dismissed within sixty (60) days after it has begun: (i)
the estate hereby created being taken on execution or by other process of law;
(ii) the Tenant being judicially declared bankrupt or insolvent according to
law; (iii) an assignment being made of the property of the Tenant for the
benefit of creditors; (iv) a receiver, guardian, conservator, trustee in
involuntary bankruptcy or other similar officer being appointed to take charge
of all or any substantial part of the Tenant's property by a court of competent
jurisdiction; or (v) a petition being filed for the reorganization of the Tenant
under any provisions of the Bankruptcy Code or any federal or state law now or
hereafter enacted.
D. The Tenant's filing a petition for reorganization or for
rearrangement under, or otherwise availing itself of any provisions of, the
Bankruptcy Code or any federal or state law now or hereafter enacted providing
a plan or other means for a debtor to settle, satisfy or extend the time for
the payment of debts.
E. Failure of the Tenant, after the term of this lease commences, to be
open for business to the public for more than one (1) day when required by this
lease to be so open in any one lease-year, or for more than an aggregate of
three (3) such days during the term hereof, or if the Tenant shall otherwise
abandon or vacate the demised premises; except to the extent (i) necessitated in
order to perform and complete repairs, remodeling or restoration to the demised
premises so long as such Tenant shall diligently commence making repairs to the
demised premises and said closure if fee remodeling or restoration shall not
exceed one (1) week in duration and shall occur not more
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than once every five (5) years during the term of this lease, or (ii)
necessitated on account of damage to or destruction of the demised premises by
fire, or other casualty.
Section 19.2. Should any Event of Default occur then, notwithstanding
any license of any former breach of covenant or waiver of the benefit hereof or
consent in a former instance, the Landlord lawfully may, in addition to any
remedies available to the Landlord under applicable statutes or case law, or
otherwise, immediately or at any time thereafter, and without demand or notice
to the maximum extent permitted by law (and to such extent the Tenant hereby
expressly waives any notice to quit possession of the demised premises), enter
into and upon the demised premises or any part thereof in the name of the whole
and repossess the same, an expel the Tenant and those claiming through or under
it and remove its or their effects (forcibly if necessary) without being deemed
guilty of any manner of trespass, and without prejudice to any remedies which
might otherwise be used for arrears of rent or preceding breach of covenant;
and the Landlord shall have the option to send written notice to the Tenant
terminating the term of this lease and upon the fifth (5th) day following the
sending of such notice of termination, the term of this lease shall terminate.
Section 19.3. Should any Event of Default occur, the Tenant covenants
and agrees, notwithstanding any entry or re-entry by the Landlord, whether by
summary proceedings (and the Tenant hereby expressly waives any notice to quit
possession of the demised premises prior to the institution of such summary
proceedings), or otherwise, to pay and be liable for on the days originally
fixed herein for the payment thereof amounts equal to the several installments
of rent and other charges reserved as they would, under the terms of this lease,
become due if Tenant's right to possession had not been terminated or if the
Landlord had not entered or re-entered, as aforesaid, and whether the demised
premises be relet or remain vacant, in whole or in part, or for a period less
than the remainder of the term, and for the whole thereof. As an alternative,
at the election of the Landlord, Landlord shall have the right to accelerate and
immediately recover from Tenant, the total rent and benefits due under this
lease for the entire unexpired balance of the lease term and said rent and
benefits shall be immediately due and payable by Tenant. In the event the
demised premises be relet by the Landlord, the Tenant shall be entitled to a
credit in the net amount of rent received by the Landlord in reletting, after
deduction of all expenses incurred in reletting the demised premises (including,
without limitation, remodelling costs, brokerage fees, and the like), and in
collecting the rent in connection therewith. It is specifically understood and
agreed that the Landlord shall be entitled to take into account in connection
with any reletting of the demised premises all relevant factors which would be
taken into account by a sophisticated developer in securing a replacement tenant
for the demised premises, such as, but not limited to, the type of shopping
center then being operated on the Shopping Center, matters of tenant mix, the
type of operation proposed to be conducted by any such replacement tenant, and
the financial responsibility of any such replacement tenant; and the Tenant
hereby waives, to the extent permitted by applicable law, any obligation the
Landlord may have to mitigate the Tenant's damages; provide, however, that after
entry as aforesaid as a result of an Event of Default, Landlord shall use
reasonable efforts to re-let the demised premises but, in using such reasonable
efforts, Landlord shall not be required to give priority to the re-letting of
the demised premises over the leasing of other areas of the Shopping Center and
Landlord shall be entitled to take into account the factors set forth above. To
induce the Landlord to enter into this lease, (i) the Tenant hereby waives any
right to trial by jury in any action or proceeding brought by the Landlord
against the Tenant on any matter whatsoever arising out of or in any way
connected with this lease, the relationship of the Landlord and the Tenant and
the Tenant's use and occupancy of the demised premises and/or any claim of
injury or damage and (ii) Tenant agrees not to interpose any non-compulsory
counterclaim of whatever name or description in any proceeding commenced by
Landlord for non-payment of rent or any other amount due hereunder (and the
foregoing shall not be construed as a waiver of Tenant's right to assert such
claims in any separate action brought by it).
Section 19.4. for the purposes of this ARTICLE XIX, it shall be deemed
that percentage rent for any period after any such default and entry by the
Landlord would have been at a monthly rate thereafter equal to one twelfth
(1/12th ) of the average annual percentage rent which the Tenant was obligated
to pay to the Landlord under this lease either. (i) from the Commencement Date
to the date of such default: or (ii) during the last three (3) years prior to
the date of such default-whichever is the greater.
Section 19.5. All of the foregoing provisions of the preceding ARTICLE
XVII and this ARTICLE XIX with respect to bankruptcy of the Tenant, etc., shall
be deemed to read "the Tenant or the guarantor hereof".
Section 19.6 the Landlord shall in no event be in default in the
performance of any of the Landlord's obligations hereunder unless and until the
Landlord shall have failed to perform such obligations within such time as is
reasonably required to correct any such default after notice by the Tenant to
the Landlord properly specifying wherein the Landlord has failed to perform any
such obligation.
Further, if the holder of a mortgage or deed of trust which includes
the demised premises, notifies the Tenant that such holder has taken over the
Landlord's rights under this lease, the Tenant shall not assert any right to
deduct the cost of repairs or any monetary claim against the Landlord from rent
thereafter due and payable, but shall look solely to the Landlord for
satisfaction of such claim.
ARTICLE XX
MISCELLANEOUS PROVISIONS
Section 20.1. Waiver. Failure on the part of the Landlord or the
Tenant to complain of any action or non-action on the part of the other, no
matter how long the same may continue, shall never be deemed to be a waiver
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by that party of any of its rights hereunder. No waiver at any time of any of
the provisions hereof by the Landlord or the Tenant shall be construed as a
waiver of any of the other provisions hereof, and that a waiver at any time of
any of the provisions hereof shall not be construed as a waiver at any
subsequent time of the same provisions. The consent or approval of the Landlord
or the Tenant to or of any action by the other requiring that party's consent or
approval shall not be deemed to waive or render unnecessary that party's consent
or approval to or of any subsequent similar act by the other. Unless expressly
provided to the contrary, any consent required of the Landlord in any provision
of this lease may be withheld by the Landlord in its sole discretion unless the
provision requiring such consent specifically states that the Landlord shall not
withhold such consent unreasonably.
No payment by the Tenant, whether to the Lock Box or otherwise, and no
acceptance by the Landlord, of a lesser amount than shall be due from the Tenant
to the Landlord shall be treated otherwise than as a payment on account. The
acceptance by the Landlord or receipt into the Lock Box 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 the Landlord may accept and/or retain such check without prejudice
to any other rights or remedies which the Landlord may have against the Tenant.
The payment by Tenant of any sum or sums due hereunder to Landlord or into the
Lock Box, or the acceptance of and/or retention of any such payment by Landlord,
at a time when an Event of Default or state of facts which with notice and/or
the passage of time may ripen into an Event of Default exists, shall never be or
be deemed to be a waiver by Landlord of any of its rights under this lease,
ARTICLE XIX hereof or otherwise under Florida law and Landlord may accept and/or
retain such amount under those circumstances without prejudice to any other
rights or remedies which Landlord may have against Tenant.
Section 20.2. Covenant of Quiet Enjoyment. The Tenant, subject to the
terms and provisions of this lease on payment of the rent and observing, keeping
and performing all of the terms and provisions of this lease on its part to be
observed, kept and performed, shall lawfully, peaceably and quietly have, hold,
occupy and enjoy the demised premises during the term hereof without hindrance
or ejection by any persons lawfully claiming under the Landlord; but it is
understood and agreed that this covenant and any and all other covenants of the
Landlord contained in this lease shall be binding upon the Landlord and the
Landlord's successors only with respect to breaches occurring during the
Landlord's and the Landlord's successors, respective ownership of the Landlord's
interest hereunder. In addition, the Tenant specifically agrees to look solely
to the Landlord's interest in the Shopping Center for recovery of any judgment
from the Landlord, it being specifically agreed that neither the Landlord nor
anyone claiming under the Landlord shall ever be personally liable for any such
judgment. In no event shall either party ever be liable to the other for any
indirect or consequential damages.
Section 20.3. Status Report. Recognizing that both parties may find it
necessary to establish to third parties, such as accountants, banks, mortgagees,
or the like, the then current status of performance hereunder, either party,
upon the written request of the other made from time to time, will promptly
furnish a written statement of the status of any matter pertaining to this
lease. Without limiting the generality of the foregoing, the Tenant
specifically agrees, promptly upon the commencement of the term hereof, to
acknowledge satisfaction of the requirements with respect to construction and
other matters by the Landlord, save and except for such matters as the Tenant
may wish to set forth specifically in said statement.
Section 20.4. Notice to Mortgagee. after receiving written notice from
any person, firm, or other entity, that it holds a mortgage (which term shall
include a deed of trust) which includes as part of the mortgaged premises the
demised premises, the Tenant shall, so long as such mortgage is outstanding, be
required to give to such holder the same notice as is required to be given to
the Landlord under the terms of this lease, but such notice may be given by the
Tenant to the Landlord and such holder concurrently.
Section 20.5. Assignment of Rents. With reference to any assignment by
the Landlord of the Landlord's interest in this lease, or the rents payable
hereunder, conditional in nature or otherwise, which assignment is made to the
holder of the first mortgage or deed of trust on the demised premises, the
Tenant agrees:
(a) that the execution thereof by the Landlord, and
the acceptance thereof by such holder, shall never
be deemed an assumption by such holder of any of
the obligations of the Landlord hereunder, unless
such holder shall, by written notice sent to the
Tenant, specifically otherwise elect; and
(b) that, except as aforesaid, such holder shall be
treated as having assumed only the Landlord's
obligations hereunder arising from and after
foreclosure of such holder's mortgage or deed of
trust and the taking of possession of the demised
premises by such holder.
Section 20.6. Mechanics' Liens. The Tenant shall, within ten (10)
business days of the filing thereof, discharge of record (either by payment or
by filing of the necessary bond, or otherwise) any mechanics', materialmen's, or
other lien against the demised premises and/or the Landlord's interest therein,
which liens may arise out of any payment due for, or purported to be due for,
any labor, services, materials, supplies, or equipment alleged to have been
furnished to or for the Tenant in, upon or about the demised premises.
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Section 20.7. No Brokerage. Except for Michael Swerdlow Companies,
Inc. ("Broker") for whose fees or commissions Landlord shall be responsible,
the Tenant warrants and represents that it has dealt with no broker in
connection with the consummation of this lease, and in the event of any
brokerage claims against the Landlord predicated upon prior dealings with the
Tenant named herein by any party other than the Broker, the Tenant agrees to
defend the same and indemnify the Landlord against any such claim.
Section 20.8. Definition of Additional Rent. Without limiting any
other provision of this lease, it is expressly understood and agreed that all
percentage rent, the Tenant's participation in Taxes, common area maintenance
expenses, utility charges, trash removal charges and all other charges which
the Tenant is required to pay hereunder, together with all interest and
penalties that may accrue thereon, shall be deemed to be additional (but not
minimum) rent, and in the event of non-payment thereof by the Tenant, the
Landlord shall have all of the rights and remedies with respect thereto as
would accrue to the Landlord for non-payment of Minimum Rent.
Section 20.9. Landlord's Fees and Expenses. If Landlord and Tenant
are involved in any litigation regarding the performance of any of their
obligations under this lease, the unsuccessful party in such litigation by
final order, decree or judgment of a court of competent jurisdiction shall
reimburse the successful party for all reasonable fees and expenses incurred by
such successful party for all reasonable legal fees and expenses incurred by
such successful party in connection with obtaining such final order, decree or
judgment.
Section 20.10. Invalidity of Particular Provisions. If any term or
provision of this lease, or the application thereof to any person or
circumstance 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.
Section 20.11. Provisions Binding, Etc. Except as herein otherwise
expressly provided, the terms hereof shall be binding upon and shall inure to
the benefit of the successors and assigns, respectively, of the Landlord and
the Tenant. Each term and each provision of this lease to be performed by the
Tenant shall be construed to be both a covenant and a condition. The reference
contained to successors and assigns of the Tenant is not intended to constitute
a consent to assignment by the Tenant that, pursuant to ARTICLE X hereof,
requires Landlord's consent, but has reference only to those instances in which
the Landlord may later give written consent to a particular assignment as
required by the provisions of ARTICLE X hereof.
Section 20.12. Other Agreements. The Tenant hereby warrants and
represents that neither this lease nor the operation of the demised premises
hereunder violates the provisions of any instrument heretofore executed by the
Tenant or any affiliate of the Tenant, including, without limitation, any
so-called radius restriction contained in any such instrument.
Section 20.13. Governing Law. This lease shall be governed
exclusively by the provisions hereof and by the laws of the State of Florida as
the same may from time to time exist.
Section 20.14. Recording. The Tenant shall not record this lease or
any memorandum or short form thereof without the written consent and joinder of
the Landlord. Landlord shall have the right to record this lease and, at the
request of the Landlord, the Tenant agrees to execute the necessary
acknowledgements required to record this lease, in either short or long form.
Section 20.15. Notices. Whenever by the terms of this lease notice,
demand, or other communication shall or may be given either to the Landlord or
to the Tenant, the same shall be in writing and shall be sent by registered or
certified mail, postage prepaid, or shall be delivered by private express
carrier.
If intended for the Landlord, addressed to it at the address
set forth on the first page of this lease, with copies in like fashion
to Landlord at said address, Attn: Theodore Stotzer, Esq. and Robert
W. Banks, Senior Vice President (or to such other address or addresses
as may from time to time hereafter be designated by the Landlord by
like notice);
If intended for the Tenant, addressed to it at the address set
forth on the first page of this lease (or to such other address or
addresses as may from time to time hereafter be designated by the
Tenant by like notice).
All such notices shall be effective upon delivery, attempted delivery or
refusal (whichever shall first occur) at the address to which the same were
sent.
Any such notice, demand, or communication from an attorney acting or
purporting to act on behalf of a party shall be deemed to be notice from such
party provided that such attorney is authorized to act on behalf of such party.
Section 20.16. When Lease Becomes Binding. Employees or agents of
the Landlord have no authority to make or agree to make a lease or any other
agreement or undertaking in connection herewith. The submission of this
document for examination and negotiation does not constitute an offer to lease,
or a reservation of, or option.
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<PAGE> 23
for, the demised premises, and this document shall become effective and binding
only upon the execution and delivery hereof by both the Landlord and the
Tenant.
All negotiations, considerations, representations, and understandings
between the Landlord and the Tenant are incorporated herein and may be modified
or altered only by agreement in writing between the Landlord and the Tenant,
and no act or omission of any employee or agent of the Landlord shall alter,
change, or modify any of the provisions hereof. The Tenant specifically
confirms and acknowledges that: (i) before entering into this lease, the Tenant
has made its own observations, studies, determinations and projections with
respect to the Tenant's business in the demised premises and all other factors
relevant to the Tenant's decision to enter into this lease, including, without
limitation, competition, market size, sales volume, profitability and general,
so-called "demographics"--both present and prospective; and (ii) neither the
Tenant nor any representative of the Tenant has relied upon any representation
by (or any "conversation" with) the Landlord or any representative of the
Landlord with respect to any of said factors.
Section 20.17. Paragraph Headings. The paragraph headings throughout
this instrument are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify, or aid in the
interpretation, construction, or meaning of the provisions of this lease.
Section 20.18. Lease Superior or Subordinate to Mortgage. This lease
shall be automatically subject and subordinate to any mortgages or deeds of
trust that are now existing which encumber the Shopping Center or any portion
thereof containing the demised premises, and to any and all advances to be made
thereunder, and to the interest thereon, and all renewals, modifications,
replacements and extensions thereof, without the need for any further instrument
or for the mortgagee or trustee named in said mortgages or deeds of trust to
make any election; except that any mortgage or trustee may elect to give this
lease priority over the lien of its mortgage or deed of trust by notice
delivered to the Tenant. In the event of such election, and upon notification
by such mortgage or trustee to the Tenant to that effect, this lease shall be
automatically deemed to have priority over the lien of said mortgage or deed of
trust without the need for any further instrument, whether this lease is dated
prior to or subsequent to the date of said mortgage or deed of trust. The
Tenant shall execute and deliver whatever instruments may be required for any of
the foregoing purposes forthwith upon demand. Additionally, this lease shall be
subject and subordinate to the lien and effect of any future mortgage or deed of
trust from Landlord to its mortgage lender provided that such mortgage lender
recognizes Tenant under this lease and agrees not to disturb Tenant's use and
occupancy hereunder, so long as Tenant is not in default of its obligations
hereunder. In the event such mortgage lender shall request Tenant to
subordinate this lease to the lien of such mortgage, Tenant agrees to execute
and deliver whatever instruments may be required to subordinate the lease,
provided that such instrument contains language to the effect that such mortgage
lender shall not disturb Tenant's use and occupancy hereunder so long as Tenant
is not in default of its obligations hereunder. Any mortgagee with a mortgage
lien existing prior to this lease which is still effective and superior to this
lease at the time Tenant is to commence its construction on the premises shall
provide Tenant with its standard SNDA agreement or Tenant may cancel this lease
within 30 days of Tenant request for said agreement.
Tenant agrees that it will attorn to and recognize any purchaser at a
foreclosure sale under any mortgage or deed of trust upon the Shopping Center
or any portion thereof containing the demised premises and shall recognize any
such purchasers, any transferee that acquires the demised premises by deed in
lieu of foreclosure and the successors and assigns of such
purchasers/transferees as its landlord for the unexpired balance (and any
extensions, if exercised) of the term of this lease upon the same terms and
conditions set forth in this lease.
Landlord agrees to use reasonable efforts to have the holder of any
such mortgage of deed of trust which may become prior to this lease enter into
its usual Non-Disturbance Agreement with Tenant, or provide Tenant with an
agreement by the terms of which such holder agrees to recognize the rights of
Tenant under this lease in the event of foreclosure of such mortgage or deed of
trust so long as Tenant is not in default hereunder; provided that Tenant has
paid any reasonable legal fees and other charges which may be required by such
holder in order to obtain such agreement (and Landlord shall not be required to
pay any such charges).
Section 20.19. Holding-Over. Any holding-over by the Tenant after
the expiration of the term of this lease shall be treated as a tenancy at
sufferance at one and one-half times the rent and other charges specified
herein (and if varying rates are specified herein, at three time the highest
such rate), prorated on a daily basis, and shall otherwise be on the terms
and conditions set forth in this lease, so far as applicable.
Section 20.20. Interest. All payments becoming due under this lease
and not paid when due shall bear interest from the applicable due date until
received by the Landlord at the lesser of: (i) four percent (4%) per annum
above the prime rate announced from time to time by Barnett Bank or its
successor; or (ii) the highest lawful rate of interest permitted at the time in
the State of Florida.
Section 20.21. Force Majeure. Neither the Landlord nor the Tenant
shall be liable for failure to perform any obligation under this lease, except
for the payment of money, in the event it is prevented from so performing by
strike, lockout, breakdown, accident, order or regulation of or by any
governmental authority or failure to supply or inability by the exercise of
reasonable diligence to obtain supplies, parts or employees necessary to
furnish such services or because of war or other emergency or for any other
cause beyond its reasonable control, but (i) Tenant shall not be excused from
opening the demised premises for the conduct of business for the failure of an
applicable permit to issue and (ii) financial inability shall never be deemed
to be a cause beyond a party's reasonable control, and in no event shall either
party be excused or delayed in the payment of any money due under this lease by
reason of any of the foregoing.
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<PAGE> 24
Section 20.22. Security Deposit. Tenant has deposited the Security Deposit
identified in Section 1.1(n) hereof as security for the full and faithful
performance and observance by Tenant of all of the terms, covenants and
conditions in this lease contained and on its part to be performed and observed.
If Tenant fails in the performance or observance of any of such terms, covenants
and conditions, whether in the payment of rent or any other sums or charges due
hereunder or otherwise, Landlord may use, apply or retain the whole or any part
of the Security Deposit to the extent required for the payment of any of the
same or for the reimbursement to Landlord of any amount expended by Landlord in
curing such failure, including, without limitation, any damages or deficiency in
the reletting of the demised premises whether such damages or deficiency accrue
before or after summary proceedings or other re-entry of the demised premises by
Landlord after an Event of Default. Promptly after such use, application or
retention of any such sum by Landlord, Tenant shall pay to Landlord, as
additional rent hereunder, an amount equal to the sum so used, applied or
retained which shall be added to and become a part of the Security Deposit. To
the fullest extent permitted by law, Landlord shall not be obligated to pay any
interest on the Security Deposit. Within sixty (60) days following the
expiration or earlier termination of the term hereof, Landlord shall return the
Security Deposit or that portion thereof remaining after Landlord shall have
applied so much thereof as shall be necessary to cure any then outstanding
defaults of Tenant. If Landlord shall sell or otherwise transfer the Shopping
Center or any part thereof which shall include the demised premises, Landlord
shall have the right to transfer the Security Deposit to the transferee thereof
and such transfer shall constitute full and automatic release of the
transferring party by Tenant from all liability for the return of the Security
Deposit then and thereafter, and Tenant agrees in such event to look solely to
such transferee or purchaser for the return of the Security Deposit.
Section 20.23. Expansion. The Landlord shall have the right to expand the
Shopping Center beyond its present boundaries and in that event, the Landlord
may from time to time elect either of the following procedures:
(a) To exclude all taxes and assessments on the land and
buildings of said expansion area as well as all common area
maintenance charges with respect to said expansion area from
Taxes and the common area maintenance charges in which the
Tenant is required to participate, in which case the square
footage of floor area of the buildings in the expansion area
shall be excluded from the denominator in computing the
Tenant's share of Taxes and common area maintenance charges
hereunder; or
(b) To include all such taxes, assessments and common area
maintenance charges for the expansion area in the charges
to be prorated pursuant to the terms of this lease, in which
case the expansion area shall be deemed to be included within
the Shopping Center for the purposes of computing Tenant's
proportionate share of Taxes and common area maintenance
charges and the square footage of floor area of buildings in
the expansion area shall be included in said denominator to
the extent provided in Sections 7.3 and 8.2 of this lease.
The Landlord agrees to notify the Tenant as to which of the foregoing
procedures the Landlord elects to follow, which notice shall be sent to the
Tenant within a reasonable time after any such election has been made.
The term "Shopping Center" shall be deemed to mean for all purposes
hereunder the entire development shown on Exhibit "A" including any and all
structures, parking facilities, roadways, common facilities and the like built
(or to be built) thereon and including any parking, access and utility
easements appurtenant thereto, as the same may from time to time be reduced
by eminent domain takings, dedications to public authorities, or exclusions or
removals by the Landlord (by written notice to the Tenant) of portions thereof,
or increased by the addition of other lands together with structures and the
like thereon which may from time to time be designated by the Landlord (by
written notice to the Tenant) as constituting part of the Shopping Center.
Section 20.24. Marketing Fund. The Tenant agrees to pay to the Landlord
not later than ninety (90) days before the "Grand Opening" date of the Shopping
Center, as shall be determined by Landlord and announced to Tenant, the sum
specified in Section 1.1(i) hereof as the Tenant's Pre-Opening Marketing
Charge, to be expended for marketing and advertising of the Shopping Center.
Said fund shall be used, together with funds from other tenants and occupants
of the Shopping Center, for such purposes as the Landlord in the Landlord's
sole discretion shall determine; and the Landlord shall not be responsible to
account therefor to the Tenant.
The Tenant shall fully cooperate with the other tenants and occupants of
the Shopping Center in promoting the use of such trade names and slogans as
may, from time to time, be adopted for the Shopping Center and in all marketing
and advertising campaigns. In this connection, the Landlord shall promptly
establish a so-called "Marketing Fund" for the Shopping Center (the "Marketing
Fund"). The Tenant shall pay to the Landlord, as the Tenant's contribution to
the Marketing Fund, as additional rent, a sum initially equal to the Initial
Marketing Charge specified in Section 1.1(k) hereof, payable on the first day
of each and every month, in advance, included within the term hereof, the first
such payment to be made on the Commencement Date. For any fraction of a month at
the commencement or expiration of the term, the monthly payment of the Tenant's
Marketing Charge shall be pro rated. The Marketing Fund will be used for
advertising, promotion, public relations and administrative expenses relating
to the promotion of the Shopping Center. Without limiting the generality of the
foregoing, the Landlord shall have the right to utilize the Marketing Fund for
the costs of circulars and other publications, as well as electronic or other
advertising media, and the Tenant agrees, upon request from the Landlord, to
furnish suitable
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<PAGE> 25
advertising material for such purposes. Any advertisements, circulars or other
promotions need not make specific reference to any one or more occupants of the
Shopping Center, but may advertise the Shopping Center generally or specific
portions therein or occupants of such portions. Tenant's Marketing Charge shall
be subject to a cost of living increase for each lease-year after the first
lease-year included within the term of this lease. In that regard, on the first
January 1 included within the term of this lease (such date and each ensuing
anniversary thereof being referred to hereinafter as a "Marketing Adjustment
Date"), and on each Marketing Adjustment Date thereafter during the term of
this lease, the Tenant's Marketing Charge shall be increased above the Initial
Marketing Charge specified in Section 1.1(k) hereinabove in the same proportion
as the Price Index (hereinafter defined) has increased, if at all, as of the
Marketing Adjustment Date in question above the Price Index as of the
Commencement Date, and each such increased figure shall then become the
Tenant's Marketing Charge and shall remain in effect until the next Marketing
Adjustment Date. In no event shall anything contained herein permit the
Tenant's Marketing Charge to be reduced below the amount of the Tenant's
Initial Marketing Charge specified in Section 1.1(k) hereinabove. If the
Landlord shall elect, the Landlord may replace the Marketing Fund with an
association (the "Association") in order to carry out the activities formerly
carried out by the Marketing Fund. Upon the creation of such Association, the
Tenant shall immediately join such Association and maintain membership therein.
In addition thereto, the Tenant shall pay to the Association a sum equal to
that which the Tenant would have paid to the Landlord for the Tenant's Marketing
Charge if the Marketing Fund had remained in existence. If the Landlord shall
create such Association to replace the Marketing Fund or if the Marketing Fund
shall be an independent entity, if the Tenant shall fail to pay the dues and
assessment to the Association or if the Tenant shall fail to pay the Marketing
Charge to such an independent Marketing Fund, as above provided, the Landlord
shall have the same rights granted to the Landlord under this lease for the
non-payment of rent or other charges, even though such dues or assessments may
be payable to such Association or the Tenant's Marketing Charge may be payable
to another entity.
Section 20.25. Price Index. The term "Price Index," as used in this
lease, means the Consumer Price Index for all Urban Consumers (CPI-U): U.S.
City Average, All Items (unadjusted) (1982-84 = 100), published monthly by the
Bureau of Labor Statistics, U.S. Department of Labor, and first so published in
1988. If the Bureau of Labor Statistics should cease to publish such Index in
its present form and calculated on the present basis, a comparable index or an
index reflecting changes in the cost of living determined in a similar manner
or by substitution, combination or weighting of available indices, expenditure
groups, items, components or population, published by the Bureau of Labor
Statistics or by a responsible financial periodical or recognized authority
shall be designated by the Landlord to be the Price Index thereafter. The Price
Index for any date relevant to the application of any Section hereof shall be
that published by the Bureau of Labor Statistics for the month containing such
date, if computed for such month, or otherwise for the most recent month
immediately preceding the month for which the application is to be made. Since
a Price Index relevant to the application of any Section may not be available
as of the date on which a determination using the Price Index is to be made,
necessary adjustments between the Landlord and the Tenant shall be made
retroactively, within a reasonable time after required computations can be
readily completed.
Section 20.26. Radon Gas. Radon is a naturally occurring radioactive gas
that, when it has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in building in
Florida. Additionally, information regarding radon and radon testing may be
obtained from your county public health unit.
Section 20.27. No Mechanics' Liens. Under Florida Section 713.10, Florida
Statutes, the interests of Landlord in the demised premises, the Shopping
Center or the improvements therein, shall not be subject to liens for any
improvements made by or on behalf of the Tenant and it is specifically provided
that neither Tenant nor any one claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and/or laborers, shall have any right to file or place any mechanics'
or materialmen's liens of any kind whatsoever upon the demised premises, the
Shopping Center or the improvements thereon; and any such liens are hereby
specifically prohibited. All parties with whom Tenant may deal are put on
notice that Tenant has no power to subject Landlord's interest to any
mechanics' or materialmen's lien of any kind or character, and all such persons
so dealing with Tenant must look solely to the credit of Tenant, and not to
Landlord's said interest or assets. Tenant shall provide written notice to each
contractor, subcontractor, materialman, mechanic and laborer performing work in
the demised premises of the foregoing.
Section 20.28. Subordination of Landlord's Lien. Landlord's lien on the
property of Tenant located on the demised premises shall be subordinate to any
lien and security interest in favor of an institutional lender arising prior to
a default by Tenant under this lease. Landlord further agrees to subordinate
any Landlord's lien and security interest from time to time to such
institutional financing and to all renewals, consolidations, refinancing,
modifications and extensions thereof. Respecting any lender of Tenant having a
security interest in Tenant's property or leasehold interest ("Tenant's
Lender"), Landlord agrees as follows: (i) to provide Tenant's Lender, upon
written request of Tenant (accompanied by the name and address of Tenant's
Lender), with a copy of any default notice(s) given to Tenant under this lease,
and (ii) to allow Tenant's Lender, prior to any termination of the lease or
repossession of the demised premises by Landlord, the same period of time,
after receipt of such copy of default notice, to cure such default as is
allowed Tenant under the lease, and (iii) to permit Tenant's Lender to go upon
the demised premises for the purpose of removing Tenant's property anytime
within twenty (20) days after the effective date of any termination of this
lease or any repossession of the demised premises by Landlord (with Landlord
having given Tenant's Lender prior written notice of such date or termination
or repossession), provided that Tenant's Lender shall have agreed, in writing,
to repair any damage to the demised premises caused by such removal. Landlord
further agrees to execute and deliver such instruments reasonably requested by
Tenant's Lender from time
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<PAGE> 26
to time to evidence or effect the aforesaid waiver and agreements of Landlord.
Notwithstanding the foregoing, the provisions of this Section 20.28 and the
agreement of Landlord to subordinate its Landlord's lien shall not be
applicable to any property of Tenant located in the demised premises which was
paid for by Landlord or purchased by Tenant with monies provided by Landlord.
Section 20.29. Satellite Dish. Landlord hereby grants Tenant at Tenant's
sole cost and expense, the right to install, maintain, operate and replace from
time to time a satellite dish or similar antenna device ("Satellite Dish") in
order to provide television reception to the demised premises; provided,
however, that: (i) the Satellite Dish shall not be more than twenty inches
(20") in diameter and three feet (3') in height; (ii) the installation,
maintenance, operation and replacement of the Satellite Dish shall be subject
to all applicable governmental laws and shall comply with the condition of any
roof bond maintained by Landlord on the Shopping Center; and (iii) the
Satellite Dish shall be appropriately hidden or screened from view. Tenant
shall be permitted to install the Satellite Dish in an area designated by
Landlord, in Landlord's sole and absolute discretion, on the roof of the
Shopping Center or outside wall of the Shopping Center in which the demised
premises are located. Tenant acknowledges and agrees that Tenant shall install
the Satellite Dish in a manner as prescribed by Landlord prior to Landlord's
commencement of the construction of the Shopping Center. Landlord expressly
reserves the right to make reasonable changes to the location of the Satellite
Dish and the manner in which the Satellite Dish may be installed, as may be
reasonable required during the construction of the Shopping Center.
Additionally, Landlord reserves the right to temporarily relocate or remove the
Satellite Dish in order that Landlord may make repairs to the roof or outside
wall of the Shopping Center. Prior to the installation of the Satellite Dish,
Landlord may, at its option, require Tenant to have a structural engineer, at
Tenant's cost, to certify that the roof or outside wall of the Shopping Center
is sufficient to support the Satellite Dish. Tenant shall be responsible for
the repair of any damage to any portion of the Shopping Center caused by
Tenant's installation, maintenance, operation, removal, or replacement of the
Satellite Dish. The Satellite Dish shall remain the exclusive property of
Tenant, and Tenant shall have the right to remove the same at any time during
the term of the lease. Tenant shall protect, defend, indemnify and hold
harmless Landlord from and against any and all claims, damages, liabilities,
costs or expenses of every kind and nature (including without limitation
reasonable attorney fees) imposed upon or incurred by or asserted against
Landlord arising out of Tenant's installation, maintenance, use or removal of
the Satellite Dish.
Section 20.30. Contingency. Landlord and Tenant acknowledge and agree
that this lease shall not be effective and binding on Tenant until such time as
Landlord shall enter into leases for space in the Shopping Center with respect
to the Carpaccios' and Max's Grille to be located in the Shopping Center, or
enter into leases with such substitute restaurant tenant ("Substitute Tenant")
which Tenant shall reasonably approve no later than ten (10) days from
Landlord's notice to Tenant that such Substitute Tenant has executed a lease
with respect to space in the Shopping Center ("Approval Period"). In the event
Tenant fails to deliver written notice to Landlord objecting to the lease(s)
with any Substitute Tenant within the Approval Period, Tenant shall be deemed to
have waived its right to object and this lease shall be of full force and
effect. In the event Tenant shall notify Landlord within the Approval Period
that Tenant reasonably disapproves of the lease(s) with any Substitute Tenant,
either Landlord or Tenant may terminate further negotiations and this lease
shall become void. Notwithstanding the foregoing, in the event Landlord shall
fail to satisfy the contingency set forth in this Section 20.29 ("Contingency")
within six (6) months from the date of this lease ("Contingency Period"), then
Tenant may, at its option either: (i) terminate this lease upon thirty (30) day
written notice to Landlord, and upon the expiration of the thirtieth (30th) day
following such notice, or such earlier date as the parties hereto may agree,
neither Landlord or Tenant shall have any further obligations to the other
under this lease, except for such obligations arising prior to the date of
termination of the lease; or (ii) elect to extend the Contingency Period for
one (1) or more consecutive periods of sixty (60) days until such time as
Landlord shall satisfy the Contingency, or Tenant, at its option shall elect to
terminate this lease pursuant to subsection (i) hereof. Tenant acknowledges
that the Contingency shall be satisfied upon Landlord's delivery to Tenant
of a letter confirming that Carpaccios' and Max's Grille, or such Substitute
Tenant as Tenant shall reasonably approve pursuant to this paragraph, have
executed leases with respect to space in the Shopping Center.
WITNESS the execution hereof under seal in any number of counterpart
copies, each of which shall be deemed an original for all purposes as of the
day and year first above written.
WITNESSES: HISTORIC BRICKELL, LTD.
By: Hollywood, Inc. (Brickell),
Its: General Partner
/s/ ??? By: Ryan ???
- ---------------------------------- ---------------------------
Its: Service President
/s/ ??? Hereunto duly authorized
- ----------------------------------
Attest: /s/ ????
------------------------------
[LANDLORD] Sec.
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<PAGE> 27
HAVANA REPUBLIC BRICKELL STATION, INC.
-------------------------------------
/s/ By: /s/
- -------------------------- ----------------------------------
/s/ Its: President
- -------------------------- ----------------------------------
Hereunto duly authorized
Attest:
-------------------------------
[TENANT]
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<PAGE> 28
GUARANTEE
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
HISTORIC BRICKELL, LTD., A Florida limited partnership (the "Landlord") to make
the foregoing lease (the "Lease") with HAVANA REPUBLIC BRICKELL STATION, INC.
(the "Tenant"), the undersigned, THE HAVANA REPUBLIC, INC., a Colorado
corporation (the "Guarantor"), unconditionally guarantees, in an amount not to
exceed One Hundred Seven Thousand One Hundred Sixty and 00/100 Dollars
($107,160.00) ("Maximum Amount"), together with any costs of collection incurred
by Landlord, which Maximum Amount shall be reduced on each consecutive yearly
anniversary of the Commencement Date, to and including the fourth (4th)
anniversary of the Commencement Date, by an amount equal to Twenty-Six Thousand
Seven Hundred Ninety and 00/100 Dollars ($26,790.00), the full performance and
observance of all the covenants, conditions and agreements therein provide to be
performed and observed by the Tenant, the Tenant's successors and assigns, and
expressly agrees that the validity of this agreement and the obligations of the
Guarantor shall in no wise be terminated, affected or impaired by reason of the
granting by the Landlord of any indulgences to the Tenant or by reason of the
assertion by the Landlord against the Tenant of any of the rights or remedies
reserved to the Landlord pursuant to the provisions of the lease or by the
relief of the Tenant from any of the Tenant's obligations under the lease by
operation of law or otherwise (including, but without limitation, the rejection
of the lease in connection with proceedings under the bankruptcy laws now or
hereafter enacted); the Guarantor hereby waiving all suretyship defenses. The
obligations of the Guarantor include the payment to Landlord of any monies
payable by Tenant under any provisions of the lease, at law, or in equity,
including, without limitation, any monies payable by virtue of the breach of any
warranty, the grant of any indemnity or by virtue of any other covenant of
Tenant under the lease.
The Guarantor further covenants and agrees that this Guarantee shall
remain and continue in full force and effect as to any renewal, modification
or extension of the lease, whether or not the Guarantor shall have received any
notice of or consented to such renewal, modification or extension. The
Guarantor further agrees that its liability under this Guarantee shall be
primary (and that the heading of this instrument and the use of the word
"guarantees(s)" shall not be interpreted to limit the aforesaid primary
obligations of the Guarantor), and that in any right of action which shall
accrue to the Landlord under the lease, the Landlord may, at its option, proceed
against the Guarantor, any other guarantor, and the Tenant, jointly or
severally, and may proceed against the Guarantor without having commenced any
action against or having obtained any judgment against the Tenant or any other
guarantor. The Guarantor irrevocably waives any and all rights the Guarantor
may have at any time (whether arising directly of indirectly, by operation of
law or by contract or otherwise) to assert any claim against the Tenant on
account of payments made under this Guarantee, including, without limitation,
any and all rights of or claim for subrogation, contribution, reimbursement,
exoneration and indemnity, and further waives any benefit of and any right to
participate in any security deposit or other collateral which may be held by
the Landlord; and the Guarantor will not claim any set-off or counterclaim
against the Tenant in respect of any liability the Guarantor may have to the
Tenant. The Guarantor further represents to the Landlord as an inducement for
it to make the lease, that the Guarantor owns all of the entire outstanding
capital stock of the Tenant, that the execution and delivery of this Guarantee
is not in contravention of its charter or by-laws or applicable state laws, and
has been duly authorized by its Board of Directors.
It is agreed that the failure of the Landlord to insist in any one or more
instances upon a strict performance or observance of any of the terms,
provisions or covenants to the lease or to exercise any right therein
contained shall not be construed or deemed to be a waiver or relinquishment for
the future of such term, provision, covenant or right, but the same shall
continue and remain in full force and effect. Receipt by the Landlord of rent
with knowledge of the breach of any provision of the lease shall not be deemed
a waiver of such breach.
No subletting, assignment or other transfer of the Lease, or any interest
therein, shall operate to extinguish or diminish the liability of the Guarantor
under this Guarantee; and wherever reference is made to the liability of the
Tenant named in the lease, such reference shall be deemed likewise to refer to
the Guarantor
All payments becoming due under this Guarantee and not paid when due shall
bear interest from the applicable due date until received by the Landlord at
the interest rate set forth in Section 20.20 of the lease.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of the heirs, executors, administrators and assigns of the
Landlord, and shall be binding upon the successors and assigns of the Guarantor.
Notwithstanding any of the terms and conditions herein contained, in the
event that Tenant has not been in default under the lease at any time during the
period Commencing on the Commencement Date and ending on the fourth (4th)
anniversary of the Commencement Date and the Maximum Amount has been reduced to
zero (0), Landlord shall release Guarantor from this Guarantee and return this
Guarantee to Guarantor, at which time this Guarantee shall be of no further
force and effect.
-25-
<PAGE> 29
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed
in its corporate name by its duly authorized representative, and its corporate
seal to be affixed hereto this 2nd day of December, 1996.
ATTEST: THE HAVANA REPUBLIC, INC., a Colorado
corporation
By: /s/
- ------------------------------- -----------------------------------
Secretary Its: President
Hereunto duly authorized
<PAGE> 30
EXHIBIT "A"
Page 1 of 3
[1ST FLOOR TENANT PLAN]
<PAGE> 31
EXHIBIT "A"
Page 2 of 3
[2ND FLOOR TENANT PLAN]
<PAGE> 32
EXHIBIT "A"
Page 3 of 3
[3RD FLOOR TENANT PLAN]
<PAGE> 33
EXHIBIT A-1
[DIAGRAM]
<PAGE> 34
EXHIBIT "B"
CONSTRUCTION
I. LANDLORD'S WORK
Landlord's Work as described below will be performed by Landlord's contract at
Landlord's sole cost and expense prior to Landlord's delivery of possession to
Tenant. Landlord will provide to Tenant a "shell" space as follows:
DESCRIPTION:
A. Floor type:
Finished concrete slab ready for floor covering.
B. Electrical:
Electrical service will be provided to the panel for each tenant as
follows:
Retail: 0 - 2,000 s.f. 100 amp 30 circuit panel
2,000-5,000 s.f. 200 amp 42 circuit panel
5,000-7,500 s.f. 400 amp 42 circuit panel
7,500-10,000 s.f. 600 amp 42 circuit panel
Restaurant: 0-2,500 s.f. 200 amp 42 circuit panel
2,500-6,500 s.f. 400 amp 42 circuit panel
6,500-10,000 s.f. 600 amp 42 circuit panel
over 10,000 s.f. 800 amp 42 circuit panel
The panels will be installed on the rear wall of each space. All
distribution beyond the panel shall be at Tenant's sole cost and
expense.
Power: 277 volt - 480 volt 3 phase
C. Air Conditioning: Air conditioning will be provided on the following basis:
Tonnage -
Retail: 1 ton per 275 square feet of floor area to
the Tenant's space.
1 ton per 175 square feet of floor area to
the Tenant's space.
Control Wiring - One thermostat per A.C. unit.
Tenant is responsible for design and construction of the air distribution
at Tenant's sole cost and expense.
D. Demising Walls:
Wall Studs - 5-1/2" 25 gauge metal studs 16" on center only on that wall
which separates one tenant from another.
Wall Height - All demising walls shall go from the concrete floor slab to
the underside of the structure.
E. Plumbing:
Water -
Retail: One (1) 3/4" supply with shut-off valve.
Restaurant: One (1) 2" supply with shut-off valve.
Gas -
Restaurant: 0 - 2,500 s.f. One (1) 2-1/2" connection.
2,500 s.f. & up One (1) 4" connection.
B-1
<PAGE> 35
Sanitary -
Retail: One (1) 4" connection.
Restaurant: One (1) 4" sanitary and one (1) 4" grease/waste.
F. Storefront: Tenant is responsible for design and construction of Tenant's
storefront at Tenant's sole cost and expense, subject to applicable building
codes and Landlord's prior written approval.
G. Sprinkler System: A sprinkler main (capped), sized to provide adequate
coverage of Group Occupancy up to a maximum coverage of Ordinary Hazard Group 1
as defined by NFPA - 13.
H. Telephone Conduit: Landlord will install one 1/2" I.D. conduit from main
telephone room to Tenant's space.
I. Meters: All meters are the responsibility of the Tenant per the Landlord's
specifications at Tenant's sole cost and expense.
Any additional work needed above the Landlord's Work as described above shall
be at the sole cost and expense of the Tenant. Any additional work required by
Tenant shall be performed by Landlord or Tenant, at the sole discretion of the
Landlord.
II. TENANT'S WORK
All other work necessary to complete the construction of the demised
premises in order to permit Tenant to open its store for conduct of business on
the Commencement Date ("Tenant's Work") shall be performed by Tenant within the
times set forth in ARTICLE III hereof, and in accordance with plans and
specifications which shall first have been approved by Landlord, which approval
shall not be unreasonably withheld or delayed. Tenant's contractor shall
adhere to such reasonable rules and regulations established by Landlord.
GENERAL
Within fifteen (15) days following the execution of this lease, Landlord
shall furnish Tenant with one (1) set of prints of Lease Outline Drawings
giving technical and design information for the demised premises, provided that
Landlord shall not be responsible for the accuracy, efficiency or sufficiency
of said Lease Outline Drawings and Tenant shall be solely responsible for all
technical and other examinations of the demised premises and shall be
exclusively responsible with respect to verification of actual field
conditions and actual field measurements and a full review of all technical and
engineering requirements with respect to the demised premises and Tenant's
construction therein.
Within fifteen (15) days following the execution of this lease, Tenant
shall notify Landlord's Representative in writing who Tenant's Architect (or
Designer) will be, including name, address and telephone number. Tenant's
Architects and Engineers must be licensed professionals within the State of
Florida and be qualified in all phases of store design and construction.
Landlord reserves the right to approve Tenant's Architects and Engineers.
Basic service for Landlord's Architect/Engineer reviews of Tenant
submittals shall include two (2) reviews per submittal. Any additional review
exceeding the two basic reviews shall be an additional service at a lump sum
fee of three hundred dollars ($300.00) per review payable by the Tenant.
PRELIMINARY DESIGN DRAWINGS
Within thirty (30) days from either of the following dates, whichever
shall be the first to occur: (a) receipt by Tenant of Lease Outline Drawings
or As-Built drawings, and (b) execution of this lease by the parties hereto,
Tenant shall submit to Landlord one (1) set of reproducible prints and two (2)
sets of prints of Preliminary Design Drawings prepared by an architect with
experience in retail design, showing intended design character and finishing of
the demised premises. The Preliminary Design Drawings shall comply with the
design criteria of the Shopping Center and shall set forth the requirements of
Tenant within the demised premises. Should Tenant's storefront design be an
extension of an established store prototype, it is recommended that Tenant
include photographs of the most recently completed store for review. Samples
of storefront and interior samples keyed to drawings should accompany this
submittal. Store fixture (both permanent and movable) should be located on
Tenant's floor plan.
Said drawings shall include such information as Landlord may require.
A copy of the Preliminary Design Drawings will be returned to Tenant
indicating Landlord's approval as noted or not approved within ten (10) days.
Should the drawings not be approved, Tenant shall resubmit revised drawings for
approval within ten (10) days of their receipt by Tenant.
B-2
<PAGE> 36
WORKING DRAWINGS AND SPECIFICATIONS/FINAL PLANS
1. Within thirty (30) days following the date on which Preliminary
Design Drawings bear Landlord's approval are returned to Tenant, Final
Drawings and Specifications shall be prepared by Tenant's Architect
and shall adhere to the Store Design Drawings as approved by Landlord.
Working drawings and specifications which are not preceded by Store
Design Drawings are subject to rejection by Landlord's Representative.
2. All Final Drawings and Specifications prepared by Tenant's Architect
shall be submitted by Tenant, in the form of one (1) set of
reproducible and two (2) sets of prints, to Landlord. Plans will be
stamped approved for permit. Landlord shall review and comment to or
approve Final Drawings within twenty (20) days of receipt of same.
Any Landlord comments shall be addressed by Tenant's Architect and
revised working drawings will be resubmitted within ten (10) days of
receipt of comments.
3. Working Drawings and Specifications shall contain such information as
Landlord may require.
CONTRACTOR'S SHOP DRAWINGS
Tenant's Contractor must submit Shop Drawings for systems and equipment as
requested by Landlord's Architect/Engineer upon review of preliminary submittal.
Tenant shall not commit the performance of Tenant's Work until such time
as such plans and specifications shall be fully and finally approved.
COMMENCEMENT OF CONSTRUCTION
Tenant shall commence construction upon Landlord's approval of the drawings
or notification by Landlord that the space is available for construction and
receiving Building Permit. Work shall commence within fourteen (14) days from
whichever is the later to occur. Tenant shall carry such construction to
completion with all due diligence.
TENANT CONTRACTOR CHECK-IN
Tenant's Contractor will follow Landlord's pre-construction procedures
with regard to insurance certificates (for insurance coverages as outlined
below), notice of work commencement, posting of permits and plans and other
reasonable rules as Landlord may establish.
Tenant's Contractor shall comply with Landlord's reasonable procedures and
regulations as required, including, but not limited to, deposits, utility
charges, trash removal procedures and costs.
Tenant's Work shall not unreasonably interfere with the performance of
construction or other work by Landlord or any other tenant of the Shopping
Center, or unreasonably impede vehicular or pedestrian ingress or egress from
the Shopping Center or any part thereof. Tenant's Contractor shall adhere to
such reasonable rules and regulations established by Landlord.
TENANTS CONTRACTORS CLOSE-OUT PROCEDURES
4. One set of "as-built" reproducible copy sepias for Landlord's file.
5. One set of "as-built" final mechanical and electrical calculation
forms.
6. One set of the electrical testing report, testing all wiring for
shorts, grounds and insulation resistance.
7. Certification of non-combustible lumber, if used, conforming to UL
requirements.
Before commencing any construction work on the demised premises, Tenant
shall first provide Landlord with assurances reasonably satisfactory to
Landlord that all funds necessary for the completion of all Tenant's Work are
available to Tenant, to the end that Landlord shall be assured that there will
be no delay or stoppage of work because of non-payment of bills, that Tenant's
Work will be performed and completed within the time required by ARTICLE III
hereof and that no liens for such work will ever attach against the demised
premises.
Tenant shall perform Tenant's Work in a good a workmanlike fashion,
consistent with said plans and specifications as fully and finally approved and
with all applicable governmental laws, ordinances, rules and regulations. The
approval by Landlord of said plans and specifications shall not be or be deemed
to be in any manner a representation by Landlord that said plans and
specifications comply with any of such laws, ordinances, rules or regulations,
and such compliance shall be and remain solely Tenant's responsibility.
Tenant, having commended Tenant's Work, shall prosecute the same diligently to
completion as herein provided and at all times
B-3
<PAGE> 37
shall keep the demised premises, the Shopping Center and Landlord's interest
therein, free from any and all liens which may arise out of any claim for
labor, services, materials, supplies or equipment furnished or alleged to have
been furnishes to or for Tenant in connection with Tenant's Work.
Prior to commencement of the Tenant's Work and until the last to occur of
(a) the completion of the Tenant's Work, or (b) the Commencement Date, the
Tenant shall maintain, or cause to be maintained, casualty insurance in
builder's risk form, covering the Landlord, the Landlord's officers, directors,
employees and agents, the Landlord's contractor or subcontractors, the Tenant,
the Tenant's Contractor and all subcontractor, materialmen, mechanics and/or
laborers, as their interest may appear, against loss or damage by fire,
vandalism and malicious mischief, and such other risks as are customarily
covered by the so-called "extended coverage endorsement" upon all the Tenant's
Work in place, and all materials stored at the site of the Tenant' Work and all
materials, equipment, supplies and temporary structures of all kinds incidental
to the Tenant's Work and builder's machinery, tools and equipment, all while
forming a part of, or contained in, such improvements or temporary structures
while on the demised premises or when adjacent thereto while on malls, drives,
sidewalks, streets or alleys, all in the full insurable value thereof at all
times by reputable insurance companies licensed to do business in the State of
Florida. In addition, the Tenant agrees to require all contractors and
subcontractors, materialmen, mechanics and/or laborers engaged in the
performance of the Tenant's Work to effect and maintain and deliver to the
Tenant and the Landlord certificates evidencing the existence of, prior to the
commencement of the Tenant's Work and until completion thereof, the following
insurance coverages.
a. Worker's Compensation Insurance - In accordance with the
laws of the State of Florida, including Employer's Liability
Insurance, the limit of $1,000,000 each accident.
b. Comprehensive General Liability Insurance in the same form
as the Tenant is required hereunder to carry, with minimum
limits of liability of $1,000,000 Each Occurrence;
$2,000,000 General Aggregate Limit and $2,000,000 Products -
Completed Operations Aggregate Limit, or in such greater
reasonable amounts and/or such other reasonable types or
categories of insurance as the Landlord may hereafter from
time to time advise the Tenant in writing.
c. Business Automobile Liability, including "non-owned and
hired" automobiles, with a combined single limit of
$1,000,000.
Prior to the commencement of the Tenant's Work, the Tenant shall deliver
to the Landlord certificates of all required insurance (and certificates of
renewal, where appropriate). All such insurance shall provide, and
certificates thereof shall state, that the same is non-cancelable and
non-amendable without thirty (30) days' prior written notice to the Landlord.
Under Florida Statutes Section 713.10, the interests of the Landlord in the
demised premises and/or the Shopping Center shall not be subject to liens for
any improvements made by or on behalf of the Tenant. Tenant agrees to notify
in writing each of its contractors performing work in the demised premises of
the foregoing.
B-4
<PAGE> 38
EXHIBIT "C"
SIGN CRITERIA
Specific Limitations:
1. Tenant will be required to identify the demised premises by signage. The
wording of same shall be limited to Tenant's trade name and logo only.
2. Tenant's signage location, size and number may vary. See Tenant's Lease
Outline Drawings for allowable signage procedures.
3. Tenant is required to design, fabricate, install and maintain a graphical
identity.
4. Tenant will be provided by Landlord (at Tenant's cost) with a sign bracket
system that will allow the installation of the Tenant's "insert sign",
(refer to Lease Outline Drawings). The furnishing and installation of a
insert sign and cost incurred shall be the responsibility of Tenant. Sign
construction is to be completed in compliance with the instructions,
limitations and criteria established herein. The sign illumination, if
any, shall be controlled by a 24 hour timer and operated during the hours
specified by Landlord.
5. Tenant identification signage shall relate to storefront design and
location in the Shopping Center. Tenant's store graphic designer is
encouraged to develop innovative signage design in harmony with the store
merchandise, interior design character and storefront materials selections.
6. Electrical service to Tenant's sign must come from Tenant's electrical
panel.
7. No exposed conduit, tubing, raceways, conductors, transformers or other
equipment are permitted.
8. No sign maker's labels or other identification (including UL label) are
permitted on the exposed surface of signs, except those required by local
ordinance. If required by local ordinance, such labels or other
identification must be in an inconspicuous location.
9. Transformers must be concealed and located within the demised premises and
be equipped with dimmers. Dimmer settings will be established by Landlord.
10. Allowable insert sign types are:
* Sand-blasted, etched and/or silk-screened glass
* Wood
* Brass, stainless or painted metal letters (1/2" thick), pin mounted,
false metal laminates are not permitted.
* Back illuminated individual letters with Plexiglas backer panel
Interior signage is subject to Landlord's approval and requires submittal
of shop drawings.
Coloration and materials of storefront signs are to blend with and be
consistent with other materials and store decor and not be overly
contrasting with the surface it is mounted on.
Sign brightness (if applicable) not to exceed one hundred (100) lamberts.
Prohibited Types of insert signs are:
* red signs
* moving or rotating signs
* flashing light or noise making signs
* Signs employing unedged or uncapped plastic letter(s) with no returns
and exposed fastenings
* signs employing exposed neon as the primary sign material (except as
part of a designed theme and/or motif)
* the name "Brickell Station" is not permitted in Tenant's sign
C-1
<PAGE> 39
EXHIBIT "D"
PROHIBITED/EXCLUSIVE USES
1. Prohibited Uses: Tenant shall not permit the demised premises to be
used for any of the following prohibited uses: a bingo hall; a bowling alley;
religious facilities; for residential purchases; for industrial purchases; sales
of automobiles and other vehicles; funeral parlor; massage parlor; skating
rink; off-track betting establishment; so-called "flea market"; manufacturing
facility, coin operated laundry; adult book store or store selling or
exhibiting pornographic materials.
2. Exclusive Uses: Tenant shall not permit the demised premises to be
used in violation of the following exclusive uses:
a. Primarily engaged as an Entertainment Center (video arcade or
gameroom), Movie Theater.
b. Primary use: the operation of a full service restaurant which
features Spanish-style appetizer-sized menu portions.
c. Principal and primary use of which is for the sale of coffee
("a Coffee Operation").
d. Primarily engaged as a table service Italian restaurant.
e. Primarily engaged as a cigar store.
f. Primarily engaged in the sale of non-alcoholic "smoothies" and
fresh fruit drinks, provided, however, the foregoing shall be
subject to the rights of the "Daiquiri Bar" to be located in the
Shopping Center to engage in the incidental sale of the same.
D-1
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED
CONTRACT FOR SALE OF TOBACCO AND CIGARS
This Amended and Restated Contract for Sale of Tobacco and Cigars
("Agreement") made this 22nd day of September, 1997 and effective November 1,
1996 between Tabanica, S.A., whose address is Jalapa, Nicaragua, A NICARAGUAN
CORPORATION, Seller, and THE HAVANA REPUBLIC, INC. whose address is 1360 Weston
Road, Weston, FL 33324, A FLORIDA CORPORATION, Buyer.
RECITALS
The parties entered into a Contract for Sale of Tobacco and Cigars on
September 1, 1997. This Agreement is intended to restate, amend and supersede
said Contract.
Therefore, in consideration of their mutual covenants, and for other good
and valuable consideration, receipt of which is acknowledged, the parties agree
as follows:
SECTION ONE
PURCHASE AND SALE
Seller will grow tobacco for cigars, manufacture and deliver finished
cigars and Buyer will accept and buy 625,000 finished cigars of the sizes,
types, and classes in the schedules attached to and incorporated in this
agreement by reference as Exhibit "A" (the "Cigars"), that Seller shall
manufacture all from Seller's tobacco crop grown in 1997.
SECTION TWO
TERM OF AGREEMENT
This agreement shall commence on November 1, 1996, and shall continue
until October 31, 2001.
SECTION THREE
PURCHASE PRICE AND PAYMENT
The purchase price for the Cigars, as set forth hereunder shall be
$616,000 which Seller acknowledges has all been paid by the date hereof.
-1-
<PAGE> 2
SECTION FOUR
DELIVERIES
Seller will deliver to Buyer all of the Cigars in lots of 50,000 each,
per month commencing January 1, 1998, in the mix set forth on Exhibit "A" , for
12 months and 25,000 Cigars in the month thereafter. Buyer shall supply Seller
with boxes and labels, at its own cost, for use exclusively by Seller in
fulfilling this Contract for Buyer.
SECTION FIVE
TRANSPORTATION CHARGES
All Cigars listed in the attached price schedules will be sold and
delivered to buyer F.O.B. point of shipment. Buyer shall be responsible for
payment of transportation and insurance.
SECTION SIX
OUTPUT CAPABILITIES OF SELLER
It is agreed that the output capabilities of Seller with respect to
cigars is necessary to meet the requirements of Buyer. If Seller determines at
any time that some unavoidable calamity will prevent the continuing production
of cigars at the rate contemplated, Seller will immediately notify Buyer of that
fact and state its best estimate of the reduced schedule and the projected date
production will be resumed at the previous rate. If Seller experiences such
unavoidable calamity it should fulfill Buyer's orders prior to anyone else.
SECTION SEVEN
DEALING WITH OTHER PARTIES
Buyer shall be deemed the sole distributor in the United States for
cigars manufactured by Seller during the term hereof or until the earlier sale
by Buyer of its equity interest in Seller. Accordingly, Buyer shall have the
right to purchase, in each year, all or any part of, the cigar production of
Seller at a price equal to Seller's actual cost plus 50% per cigar. Cost shall
include all expenses incurred in the production of cigars. Seller agrees not to
manufacture for or sell any similar goods to any other party whatsoever. The
parties agree that this provision is integral to this Agreement and Buyer would
not allow Seller to manufacture its cigars or utilize its designs otherwise.
Notwithstanding the aforementioned, Buyer acknowledges Seller's previous
commitment to manufacture up to 1,000,000 cigars per year for Cigar Depot, Inc.
-2-
<PAGE> 3
SECTION EIGHT
CONTROLLING LAW
This agreement shall be binding upon each party, its attorneys,
management personnel, agents, successors and assigns. The parties each agree
that Buyer may enforce this agreement either under Florida law or Nicaraguan law
and each agree that Buyer may select venue for any action hereunder either in
Managua, Nicaragua or in Dade County, Florida and each party agrees to submit to
the jurisdiction of the courts sitting in such venue. Service of process may be
made upon the Secretary of State of Florida as agent if enforcement is sought in
Florida.
Executed at Miami, Fla., the day and year first above written.
Tabanica, S.A.
By: /s/
-----------------------
The Havana Republic, Inc.
By: /s/
-----------------------
-3-
<PAGE> 4
EXHIBIT "A"
<TABLE>
<CAPTION>
CIGAR SIZE MONTHLY QUANTITY
<S> <C>
5 X 50 15,000
7-1/2 X 52 15,000
6-1/2 X 46 8,000
7 X 48 12,000
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.6
STOCK OPTION PLAN
Havana Republic, Inc., a Colorado corporation (the "Company") sets forth
herein the terms of this Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company by providing
eligible individuals (as designated pursuant to Section 4 below) with an
opportunity to acquire or increase a proprietary interest in the Company, which
will thereby create a stronger incentive to expend maximum effort for the growth
and success of the Company and its subsidiaries, and will encourage such
eligible individuals to remain in the employ or service of the Company or that
of one or more of its subsidiaries. Each stock option granted under the Plan (an
"Option") is intended to be an "incentive stock option" ("Incentive Stock
Option") within the meaning of Section 422 of the Internal Revenue Code of 1986,
or the corresponding provision of any subsequently-enacted tax statute, as
amended from time to time (the "Code"), except (i) to the extent that any such
Option would exceed the limitations set forth in Section 7 below; (ii) for
Options specifically designated at the time of grant as not being "incentive
stock options"; and (iii) for Options granted to consultants or to members of
the board of directors of the Company who are not officers or other employees of
the Company or any "subsidiary corporation" (a "Subsidiary") thereof within the
meaning of Section 424(f) of the Code or to directors of any Subsidiary who are
not officers or other salaried employees of the Company (a "Subsidiary
Director"). If any Options granted hereunder shall, for any reason, fail to
qualify as an Incentive Stock Option, they shall nevertheless be deemed options
issued by the Company pursuant to the Plan and for tax purposes shall be
"non-qualified stock options."
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board
of Directors of the Company (the "Board"), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option or Option Agreement (as defined in
Section 8 below) entered into hereunder and all such other actions and
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by the Board to be necessary or appropriate to the administration of
the Plan or any Option granted or Option Agreement entered into hereunder. All
such actions and determinations shall be by the affirmative vote of a majority
of the members of the Board present at a meeting at which any issue relating to
the Plan is properly raised for consideration or without a meeting by written
consent of the Board executed in accordance with the Company's Articles of
Incorporation and By-Laws, and with applicable law. The interpretation and
construction by the Board of any provision of the Plan or of any Option granted
or Option Agreement entered into hereunder shall be final and conclusive.
(b) Committee. The Board may appoint a Stock Option
Committee (the "Committee"), which may be the compensation committee, consisting
of not less than two members of the Board, none of whom shall be an officer or
other salaried employee of the Company or any of its subsidiaries, and each of
whom shall qualify in all respects as a "non-employee director" as
<PAGE> 2
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and as an "outside director" under Section
162(m)(4)(C)(i) of the Code. The Committee shall be solely responsible for those
actions and responsibilities which are required to be taken by outside directors
to qualify for the exceptions under Code Section 162(m) and the regulations
thereunder for performance-based compensation. The Board, in its sole
discretion, may provide that the role of the Committee shall be otherwise
limited to making recommendations to the Board concerning any determinations to
be made and actions to be taken by the Board pursuant to or with respect to the
Plan, or the Board may delegate to the Committee such powers and authorities
related to the administration of the Plan, as set forth in Section 2(a) above,
as the Board shall determine, consistent with the Articles of Incorporation and
By-Laws of the Company and applicable law. The Board may remove members, add
members, and fill vacancies on the Committee from time to time, all in
accordance with the Company's Articles of Incorporation and By-Laws, and with
applicable law. The majority vote of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
(c) No Liability. No member of the Board or of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted or Option Agreement entered into
hereunder, and the Company shall indemnify and hold harmless any member of the
Board or Committee from any and all damages, losses or claims, including
reasonable attorneys fees, arising from their actions (or inactions) in
connection with this Plan or its administration.
(d) Delegation to the Committee. In the event that the
Plan or any Option granted or Option Agreement entered into hereunder provides
for any action to be taken by or determination to be made by the Board, such
action may be taken by or such determination may be made by the Committee if the
power and authority to do so has been delegated to the Committee by the Board as
provided for in Section 2(b) above. Unless otherwise expressly determined by the
Board, any such action or determination by the Committee shall be final and
conclusive.
(e) Action by the Board. The Board may act under the
Plan with respect to any Option granted to or Option Agreement entered into with
an officer, director or stockholder of the Company who is subject to Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") other
than by, or in accordance with the recommendations of, the Committee,
constituted as set forth in Section 2(b) above, only if the Plan is otherwise
administered in accordance with the provisions of Rule 16b-3 and if the
provision of Code Section 162(m) are not applicable to such recommendations.
3. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of common stock, no par value per share, of the Company (the
"Stock"), which shares may be treasury shares or authorized but unissued shares.
The number of shares of Stock that may be issued pursuant to Options granted
under the Plan shall not exceed in the aggregate 1,500,000 shares. The foregoing
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numbers of shares are subject to adjustment as provided in Section 17 below. If
any Option expires, terminates, or is terminated or canceled for any reason
prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options granted
under the Plan and such number of shares shall be restored to the number of
shares available for issuance under Options granted.
4. ELIGIBILITY
(a) Employees and Subsidiary Directors. Options may be
granted under the Plan to any employee or consultant of the Company or any
Subsidiary (including any such employee who is an officer or director of the
Company or any Subsidiary) or to any Subsidiary Director as the Board or
Committee shall determine and designate from time to time prior to the
expiration or termination of the Plan.
(b) Outside Directors. On the day of each annual meeting
of the Stockholders of the Company, each director who is not then an employee of
the Company or any of its subsidiaries (an "Outside Director"), shall be granted
an Option to purchase 10,000 shares of Stock, in each case at the price and upon
the other terms and conditions specified in the Plan. In addition, subject to
the availability of shares of Stock under the Plan, each person first elected to
the Board as an Outside Director after the effective date of the Plan, shall be
granted, as of the date such individual takes office, an Option to purchase
5,000 shares of Stock at the price and upon the terms and conditions specified
in the Plan. Each Option granted to an Outside Director shall be granted at an
Option Price equal to 100 percent of the fair market value of a share of Stock
on the date of grant (determined under Section 9 below) and upon the other terms
and conditions specified in the Plan. Except as provided in this Section 4(b),
no Outside Director shall be eligible to be granted Options under this Plan.
(c) Multiple Grants. An individual may hold more than
one Option subject to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERMS OF THE PLAN
(a) Effective Date. The Plan shall be effective and
considered adopted as of October 1, 1997, subject to approval of the Plan within
one year of such effective date by a majority of the votes present and entitled
to vote at a duly held meeting of the stockholders of the Company at which a
quorum representing a majority of all outstanding voting stock is present,
either in person or by proxy; provided, however, that upon approval of the Plan
by stockholders of the Company as set forth above, all Options granted under the
Plan on or after the effective date shall be fully effective as if the
stockholders of the Company had approved the Plan on the effective date. If the
stockholders fail to approve the Plan within one year of such effective date,
any Options granted hereunder shall be null and void and of no effect.
(b) Term. The Plan shall terminate on September 30,
2007.
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6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board or Committee
may, at any time and from time to time, prior to the date of termination of the
Plan, grant to such eligible individuals as the Board or Committee may determine
("Optionees"), Options to purchase such number of shares of the Stock on such
terms and conditions as the Board or Committee may determine, including any
terms or conditions which may be necessary to qualify such Option as "incentive
stock options" under Section 422 of the Code. The date on which the Board or
Committee approves the grant of an Option (or such later date as is specified by
the Board or Committee) shall be considered the date on which such Option is
granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) or (iii) of
Section 1) shall constitute an Incentive Stock Option to the extent that the
aggregate fair market value of Stock (determined at the time the Option is
granted) with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by the Company and by the
Optionee, in such form or forms and containing such provisions as the Board or
Committee shall from time to time determine. Option Agreements covering Options
granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option (the
"Option Price") shall be fixed by the Board or Committee and stated in each
Option Agreement, and shall be not less than 100 percent (or, in the case of an
Option (other than for an Outside Director) which does not or is not intended
to qualify as an incentive stock option, not less than 50 percent) of the fair
market value of a share of Stock on the date the Option is granted (as
determined in good faith by the Board or Committee); provided, however, that in
the event the Optionee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the
Code (relating to stock ownership of more than ten percent), the Option Price of
an Option that is intended to be an Incentive Stock Option shall be not less
than 110 percent of the fair market value of a share of Stock at the time such
Option is granted. In the event that the Stock is listed on an established
national or regional stock exchange, is admitted to quotation on the Nasdaq
National
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Market System, or is publicly traded on an established securities market, in
determining the fair market value of the Stock, the Board or Committee shall use
the closing price of the Stock on such exchange or System or in such market (the
highest such closing price if there is more than one such exchange or market) on
the trading date the Option is granted (or, if there is no such closing price,
then the Board or Committee shall use the mean between the high and low prices
on such date or if unavailable the mean between the high and low bid prices on
such date), or, if no sale (or bid) of the Stock had been made on such day, on
the next preceding day on which any such sale (or bid) shall have been made.
10. TERM AND EXERCISE OF OPTION
(a) Term. Each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon the expiration of
ten years from the date such Option is granted, or, with respect to Options
granted to persons other than Outside Directors, on such date prior thereto as
may be fixed by the Board or Committee and stated in the Option Agreement
relating to such Option; provided, however, that in the event the Optionee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than ten percent), an Option granted to such Optionee that is
intended to be an Incentive Stock Option, shall in no event be exercisable after
the expiration of five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option
granted to persons other than Outside Directors under the Plan shall be
exercisable, in whole or in part, at any time and from time to time, over a
period commencing on or after the date of grant and ending upon the expiration
or termination of the Option, as the Board or Committee shall determine and as
set forth in the Option Agreement relating to such Option. Without limiting the
foregoing, the Board or Committee, subject to the terms and conditions of the
Plan, may in its sole discretion provide that an Option may not be exercised in
whole or in part for any period or periods of time during which such Option is
outstanding; provided, however, that any such limitation on the exercise of an
Option contained in any Option Agreement may be rescinded, modified or waived by
the Board or Committee, in its sole discretion, at any time and from time to
time after the date of such Option, so as to accelerate that time at which the
Option may be exercised. Subject to Section 10(a), each Option granted to
Outside Directors shall be exercisable, in whole or in part, at any time and
from time to time, over a period commencing on the date of grant and ending upon
the expiration of the Option as set forth in the Option Agreement.
Notwithstanding any other provision of the Plan, no Option granted to an
Optionee under the Plan shall be exercisable in whole or in part prior to the
date the Plan is approved by the stockholders of the Company as provided in
Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder
may be exercised by delivery to the Company on any business day, at its
principal office, addressed to the attention of the Committee (or Board if no
Committee), of written notice of exercise, which notice shall specify the number
of shares with respect to which the Option is being exercised. The minimum
number of shares of Stock with respect to which an Option may be exercised, in
whole or in part, at any time, shall be the lesser of 100 shares or the maximum
number of shares available
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for purchase under the Option at the time of exercise. Except as provided in the
next following sentence, payment in full of the Option Price of the shares for
which the Option is being exercised shall accompany the written notice of
exercise of the Option and shall be made either (i) in cash or in cash
equivalents; (ii) through the tender to the Company of shares of Stock,
including the shares of Stock subject to the Option being exercised, which
shares shall be valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their fair market value (determined in
the manner described in Section 9 above) on the date of exercise; or (iii) by a
combination of the methods described in (i) and (ii); provided, however, that
the Board or Committee may in its discretion impose and set forth in the Option
Agreement pertaining to an Option granted to persons other than Outside
Directors such limitations or prohibitions on the use of shares of Stock to
exercise Options as it deems appropriate. Unless the Board or Committee shall
provide otherwise, in the case of an Option Agreement relating to an Option
granted to someone other than an Outside Director, payment in full of the Option
Price need not accompany the written notice of exercise provided the notice of
exercise directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Company as the agent for the individual exercising the Option and, at the
time such Stock certificate or certificates are delivered, the broker tenders to
the Company cash (or cash equivalents acceptable to the Company) equal to the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option plus the amount (if any) of federal and other taxes which the Company
may, in its judgment, be required to withhold with respect to the exercise of
the Option. An attempt to exercise any Option granted hereunder other than as
set forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the individual exercising the Option shall be entitled
to the issuance of a Stock certificate or certificates evidencing his ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stock Option which certificate or certificates shall not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising an Option shall have
none of the rights of a stockholder until the shares of Stock covered thereby
are fully paid and issued to him and, except as provided in Section 17 below, no
adjustments shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
11. TRANSFERABILITY OF OPTIONS
Unless set forth in the Option Agreement at the time of grant, or at any
time thereafter, no Option shall be assignable or transferable by the Optionee
to whom it is granted, other than by will or the laws of descent and
distribution and during the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incompetency, the
Optionee's guardian or legal representative) may exercise the Option.
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12. TERMINATION OF SERVICE OR EMPLOYMENT
(a) Employees and Subsidiary Directors. Upon the
termination of the employment or service of an Optionee (other than an Outside
Director) with the Company or a Subsidiary, other than by reason of the death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee, any Option granted to an Optionee pursuant to the Plan
shall terminate three months after the date of such termination of employment,
unless earlier terminated pursuant to Section 10(a); provided, however, that the
Board or Committee may provide, by inclusion of appropriate language in any
Option Agreement, that the Optionee may (subject to the general limitations on
exercise set forth in Section 10(b) above), in the event of termination of
service or employment of the Optionee with the Company or a Subsidiary, exercise
an Option, in whole or in part, at any time subsequent to such termination of
service or employment and prior to termination of the Option pursuant to Section
10(a) above, either subject to or without regard to any installment limitation
on exercise imposed pursuant to Section 10(b) above. Whether a leave of absence
or leave on military or government service shall constitute a termination of
service or employment for purposes of the Plan shall be determined by the Board
or Committee, which determination shall be final and conclusive. For purposes of
the Plan, a termination of employment with the Company or a Subsidiary shall not
be deemed to occur if the Optionee is immediately thereafter employed with or in
the service of the Company or any Subsidiary.
(b) Outside Directors. Except as provided in Section
13(c), any Option granted to an Outside Director shall terminate upon the
expiration of three months after the termination of the Outside Director's
service with the Company other than because of death or "permanent and total
disability" as defined above, or, if earlier, upon the expiration of ten years
after grant of the Option.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death of an Employee or Subsidiary Director. If an
Optionee (other than an Outside Director) dies while in the employ or service of
the Company or a Subsidiary or within the period following the termination of
employment or service during which the Option is exercisable under Section 12
above or 13(b) below, the executors or administrators or legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 10(b) above), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option pursuant to Section 10(a) above, to exercise any Option held by
such Optionee at the date of such Optionee's death, whether or not such Option
was exercisable immediately prior to such Optionee's death; provided, however,
that the Board or Committee may provide by inclusion of appropriate language in
any Option Agreement that, in the event of the death of the Optionee, the
executors or administrators or legatees or distributees of such Optionee's
estate may exercise an Option (subject to the general limitations on exercise
set forth in Section 10(b) above), in whole or in part, at any time subsequent
to such Optionee's death and prior to termination of the Option pursuant to
Section 10(a) above, either subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 10(b) above.
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(b) Disability of an Employee or Subsidiary Director. If
an Optionee (other than an Outside Director) terminates employment or service
with the Company or a Subsidiary by reason of the "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, then such Optionee shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), at any time within
one year after such termination of service or employment and prior to
termination of the Option pursuant to Section 10(a) above, to exercise, in whole
or in part, any Option held by such Optionee at the date of such termination of
service or employment, whether or not such Option was exercisable immediately
prior to such termination of service or employment; provided, however, that the
Board or Committee may provide, by inclusion of appropriate language in any
Option Agreement, that the Optionee may, in the event of the termination of
service or employment of the Optionee with the Company or a Subsidiary by reason
of the "permanent and total disability" (within the meaning of Section 22(e)(3)
of the Code) of such Optionee, exercise an Option, in whole or in part, at any
time subsequent to such termination of service or employment and prior to
termination of the Option pursuant to Section 10(a) above, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 10(b) above. Whether a termination of service or employment is to be
considered by reason of "permanent and total disability" for purposes of this
Plan shall be determined by the Board or Committee, which determination shall be
final and conclusive.
(c) Death or Disability of an Outside Director. Any
Option granted to an Outside Director shall remain exercisable for its remaining
term in the event the Outside Director's termination of service is by reason of
death or "permanent and total disability," as defined above, or, in the event of
the Outside Director's death during the three-month period following the Outside
Director's termination of service by reason other than death or permanent and
total disability during which the Option was exercisable pursuant to Section
12(b) above.
14. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the Company.
15. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required
to sell or issue any shares of Stock under any Option if the sale or issuance of
such shares would constitute a violation by the individual exercising the Option
or the Company of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Option, the Company shall not be required to sell or issue
such shares unless the Board or Committee has received evidence satisfactory to
it that the holder of such Option may acquire such shares pursuant to an
exemption from registration under such Act. Any determination in this connection
by the Board or Committee
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shall be final, binding, and conclusive. The Company may, but shall in no event
be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The Company
shall not be obligated to take any affirmative action in order to cause the
exercise of an Option or the issuance of shares pursuant thereto to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable unless
and until the shares of Stock covered by such Option are registered or are
subject to an available exemption from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction apply) shall be
deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.
(b) Compliance with Rule 16b-3. The intent of this Plan
is to qualify for the exemption provided by Rule 16b-3 promulgated under the
Exchange Act. To the extent any provision of the Plan does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board or Committee and shall not
affect the validity of the Plan. In the event Rule 16b-3 is revised or replaced,
the Board, or the Committee acting on behalf of the Board, may exercise
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board or Committee may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board or Committee
shall, without approval by a majority of the votes present and entitled to vote
at a duly held meeting of the stockholders of the Company at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the amendment, or by written consent, in
accordance with applicable state law and the Certificate of Incorporation and
By-Laws of the Company, materially increase the benefits accruing to
participants under the Plan, change the requirements as to eligibility to
receive Options or increase the maximum number of shares of Stock in the
aggregate that may be sold pursuant to Options granted under the Plan (except as
permitted under Section 17 hereof). Except as permitted under this Section 16,
no amendment, suspension or termination of the Plan shall, without the consent
of the holder of the Option, alter or impair rights or obligations under any
Option theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increases or decreases in such shares effected without
receipt of consideration by the Company, occurring after the effective date of
the Plan, the number and kinds of shares of Stock for the purchase of which
Options may be granted under the Plan shall be adjusted proportionately and
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accordingly by the Company. In addition, the number and kind of shares of Stock
for which Options are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the holder of the Option
immediately following such event shall, to the extent practicable, remain the
same as immediately prior to such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares of Stock subject to the unexercised portion of the Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
(b) Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets of Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation, reorganization or other business
combination of the Company with one or more other entities in which the Company
is not the surviving entity, or upon a sale of all or substantially all of the
assets of the Company to another entity, or upon any transaction (including,
without limitation, a merger or reorganization in which the Company is the
surviving corporation) approved by the Board which results in any person or
entity (or persons or entities acting as a group or otherwise in concert) owning
80 percent or more of the combined voting power of all classes of stock of the
Company, the Plan and all Options outstanding hereunder shall terminate, except
to the extent provision is made in writing in connection with such transaction
for the continuation of the Plan and/or the assumption of the Options
theretofore granted, or for the substitution for such Options of new options
covering the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Board or Committee in its sole
discretion shall determine and designate, to exercise such Option in whole or in
part, whether or not such Option was otherwise exercisable at the time such
termination occurs and without regard to any installment limitation on exercise
imposed pursuant to Section 10(b) above. The Board or Committee shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its stockholders.
(d) Adjustments. Adjustments under this Section 17 related to
Stock or securities of the Company shall be made by the Board or Committee,
whose determination in that
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respect shall be final, binding, and conclusive. No fractional shares of Stock
or units of other securities shall be issued pursuant to any such adjustment,
and any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Company. The grant of an Option pursuant
to the Plan shall not affect or limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary either to increase or decrease the compensation of any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes or individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
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Exhibit 10.8
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of ________________, 1997,
by and between THE HAVANA REPUBLIC, INC., a Florida corporation (the "Company"),
and _______________________ (the "Indemnitee").
PRELIMINARY STATEMENTS
WHEREAS, the Company desires to retain the services of the Indemnitee
as a director, officer, employee and/or agent of the Company;
WHEREAS, Section 607.0850 of the Florida Business Corporation Act (the
"Act") provides a non-exclusive statutory basis for the indemnification of
directors, officers, employees and agents of a Florida corporation and
authorizes agreements between the Company and its directors, officers, employees
and agents with respect to indemnification of such individuals.
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified, and the Indemnitee is wiling to serve, continue to serve
and to take on additional service for or on behalf of the Company on the
condition that he be so indemnified; and
WHEREAS, in order to induce the Indemnitee to serve or to continue to
serve as a director, officer, employee and/or agent of the Company and/or a
subsidiary of the Company, the Company has determined and agreed to enter into
this agreement with the Indemnitee, and the Company and the Indemnitee agree as
follows:
1. INDEMNIFICATION OF INDEMNITEE. The Company hereby agrees to hold
harmless and indemnify the Indemnitee to the fullest extent authorized or
permitted by the provisions of the Florida Statute, or by any amendment thereof
or other statutory provision authorizing or permitting such indemnification
adopted after the date hereof that has the effect of broadening (but not
narrowing) the scope of indemnification provided under the Florida Statute as it
exists as of the date hereof.
2. ADDITIONAL INDEMNIFICATION. In addition to any other indemnification
to which the Indemnitee may be entitled pursuant to the Florida Statute, the
Company's Articles of Incorporation (the "Articles") or Bylaws (the "Bylaws"),
or otherwise, and subject only to the limitation set forth in Section 3 hereof,
the Company hereby further agrees to hold harmless and indemnify the Indemnitee
against any and all costs and expenses (including trial, appellate and other
attorneys' fees), judgments, fines, penalties and amounts paid in settlement,
actually and reasonably incurred by the Indemnitee in connection with any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the Company or a corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise or by or in the right of any other
person) to which the Indemnitee is, was or at any time becomes a
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party, or is threatened to be made a party, by reason of the fact that the
Indemnitee is, was or at any time becomes a director, officer, employee or agent
of the Company, or is or was serving or at any time serves at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Notwithstanding any other provision of this Agreement, the Company shall pay and
reimburse all expenses incurred by Indemnitee in connection with his appearance
as a witness or other participation in a proceeding at a time when he is not a
named defendant or respondent in the proceeding.
3. LIMITATIONS ON ADDITIONAL INDEMNIFICATION. No indemnification
pursuant to Section 2 hereof shall be paid by the Company if a judgment (after
exhaustion of all appeals) or other final adjudication determines that the
Indemnitee's actions, or omissions to act, were material to the cause of action
so adjudicated and constitute:
a. a violation of criminal law, unless the Indemnitee had
reasonable cause to believe his conduct was lawful; or had no reasonable cause
to believe his conduct was unlawful;
b. a transaction from which the Indemnitee received an
improper personal benefit within the meaning of Section 607.0850(7)(b) of the
Florida Statute;
c. in the case of a director, a circumstance under which the
liability provisions of Section 607.0834 of the Florida Business Corporation Act
are applicable; or
d. willful misconduct or a conscious disregard for the best
interests of the Company in a proceeding by or in the right of the Company to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder of the Company.
4. DISBURSEMENT/REPAYMENT OF EXPENSES. In addition to the prompt
payment of any indemnification to which the Indemnitee may be entitled, upon the
demand of the Indemnitee, the Company shall promptly (and in any event within
five (5) business days after written demand therefor) advance to or reimburse
the Indemnitee for all reasonable expenses (including, without limitation,
trial, appellate and other attorneys' fees, court costs, judgments, fines,
penalties, amounts paid in settlement and other payments) that the Indemnitee
may incur in responding to, investigating, defending, settling or appealing any
claim, action, suit or proceeding for which it reasonably appears that the
indemnitee may be entitled to indemnification from the Company, either pursuant
to this Agreement, the Florida Statute, the Articles, the Bylaws or otherwise.
The Indemnitee agrees to reimburse the Company for all such expenses in the
event, and only to the extent, that it shall be ultimately determined that the
Indemnitee is not entitled to be indemnified by the Company for such expenses
under the provisions of Section 3 of this Agreement. Such undertaking to
reimburse the Company for amounts advanced if it is ultimately determined that
the Indemnitee is not entitled to be indemnified by the Company is an unlimited
general, unsecured and interest free obligation of the Indemnitee.
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<PAGE> 3
5. INDEMNIFICATION PROCEDURES.
a. PAYMENT/DETERMINATION OF INDEMNIFICATION. Upon any request from the
Indemnitee for indemnification from the Company, whether pursuant to this
Agreement, the Florida Statute, the Articles, the Bylaws or otherwise, the
Company shall promptly pay the full amount of such requested indemnification. If
the Company's Board of Directors (the "Board") reasonably believes that all or
any portion of such indemnification pursuant to this Agreement is prohibited by
Section 3 hereof, the Company shall in any event promptly pay the amount of such
indemnification if any, that may reasonably then be paid and shall promptly make
or cause to be made a determination (the "Determination") of whether the payment
of the balance is limited by Section 3 hereof. Such Determination shall be made
in the following order or preference:
(i) by the Board of Directors by majority vote or consent of a
quorum consisting of directors who are not, at the time of the Determination,
named parties to such action, suit or proceeding ("Disinterested Directors"); or
(ii) if such a quorum of Disinterested Directors cannot be
obtained by majority vote or consent of a committee duly designated by the Board
(in which designation all directors, whether or not Disinterested Directors, may
participate) consisting solely of two or more Disinterested Directors; or
(iii) if such a committee cannot be established, by the
opinion of independent outside legal counsel employed by the Company; or
(iv) if such legal opinion cannot be obtained, by a majority
vote or consent of a quorum of shareholders who are not parties to such action,
suit or proceedings or, if not such quorum is obtainable, by a majority vote of
such shareholders.
b. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. In making a
Determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making the Determination shall presume that
Indemnitee is entitled to indemnification under this Agreement and the Company
shall have the burden of proof to overcome that presumption in connection with
the making by any person, persons or entity of any Determination contrary to
that presumption. The termination of any claim, action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, be determinative of or create a
presumption that the Indemnitee is not entitled to indemnification or
reimbursement of expenses hereunder or otherwise.
c. RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; or with respect to any criminal action or proceeding, to have had
reasonable cause to believe his conduct was lawful, or no reasonable cause to
believe his conduct was unlawful; if his action is based on information,
opinions, reports, or statements, including financial statements and other
financial data, prepared or presented by one or
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<PAGE> 4
more officers or employees of the Company whom the Director reasonably believes
to be reliable and competent in such matters presented; legal counsel, public
accountants, or other persons as to matters the Director reasonably believes are
within the persons' professional or expert competence; or a committee of the
Board of Directors of which he is not a member if the Director reasonably
believes the committee merits confidence. The term "another enterprise" as used
in this Section 5(c) shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which the
Indemnitee is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent. The provisions of this Section
5(c) shall not be deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed to have met the applicable
standard of conduct set forth herein.
d. SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision
for this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
herein, or in defense of any claim, issue or matter therein, he shall be
indemnified against all costs and expenses (including trial, appellate and other
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 5(d), the term "successful on the merits or otherwise" shall include,
but not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 90 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
of payment made to induce a settlement, or (iii) the settlement of any action,
suit or proceeding pursuant to which the Indemnitee pays less than $15,000 in
settlement.
e. PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the costs and expenses
(including trial, appellate and other attorneys' fees) judgments, fines,
penalties or amounts paid in settlement by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any action specified herein, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including trial, appellate and other attorneys' fees), judgments, fines or
amounts paid in settlement for which the Indemnitee is entitled to
indemnification and/or reimbursement under this Agreement.
f. COSTS. All costs of making any Determination required by this
Section 5 shall be borne solely by the Company, including, but not limited to,
the costs of legal counsel, proxy solicitations and judicial determinations. The
Company shall also be solely responsible for paying (i) all reasonable expenses
incurred by the Indemnitee to enforce this Agreement including trial, appellate
and other attorneys' fees and costs; and (ii) all costs of defending any suits
or proceedings challenging payments to the Indemnitee under this Agreement
including trial, appellate and other attorneys' fees and costs.
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<PAGE> 5
g. TIMING OF THE DETERMINATION. The Company shall use its best efforts
to make the Determination contemplated by this Section 5 promptly, but in all
events within the following time periods:
i. if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 30 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
ii. if the Determination is to be made by the Company's
outside independent legal counsel, such Determination shall be made not later
than 30 days after a Request is delivered to the Company by the Indemnitee; and
iii. if the Determination is to be made by the Company's
shareholders, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination that full indemnification is not limited or
prohibited by Section 3 hereof.
h. SHAREHOLDER VOTE ON DETERMINATION. In connection with each meeting
at which a Shareholder Determination will be made, the Company shall solicit
proxies that expressly include a proposal to indemnify or reimburse the
Indemnitee. Subject to the fiduciary duties of its members under applicable law,
the Board will not recommend against Indemnification or reimbursement in any
proxy statement relating to the proposal to indemnify or reimburse the
Indemnitee.
i. RIGHT OF INDEMNITEE TO APPEAL ON ADVERSE DETERMINATION BY BOARD OR
COMMITTEE. If a Determination is made by the Board or a committee thereof that
all or any portion of a request for indemnification pursuant to this Agreement
is prohibited by Section 3 hereof, then upon the written request of the
Indemnitee, the Company shall cause a new Determination to be made by the
Company's shareholders at the next regular or special meeting of shareholders.
Such Determination by the Company's shareholders shall be binding and conclusive
for all purposes of this Agreement, but shall not preclude the Indemnitee from
seeking court-ordered indemnification or reimbursement pursuant to any provision
of the Florida Statutes or otherwise.
j. RIGHT OF INDEMNITEE TO SELECT FORUM FOR INDEMNIFICATION. If at any
time subsequent to the date of this Agreement, "Continuing Directors" (as
defined below) do not constitute a majority of the members of the Board, or
there is otherwise a change in control of the Company (as contemplated by Item
403(c) of Securities and Exchange Commission Regulation S-K), then upon the
request of the Indemnitee, the Company shall cause the Determination required by
this Section 5 to be made by special legal counsel designated by the Indemnitee
and approved by the Board (which approval shall not be unreasonably withheld),
which counsel shall be deemed to satisfy the requirements of Section 5(a)(iii)
hereof. If none of the legal counsel selected by the Indemnitee
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<PAGE> 6
are willing and/or able to make the Determination, then the Company shall cause
the Determination to be made a majority vote or consent of a Board committee
consisting solely of Continuing Directors. For purposes of this Agreement, a
"Continuing Director" means either a member of the Board at the date of this
Agreement or a person nominated to serve as a member of the Board by a majority
of the then Continuing Directors.
k. ACCESS BY THE INDEMNITEE TO DETERMINATION. The Company shall afford
to the Indemnitee and his representative ample opportunity to present evidence
of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a shareholder Determination.
6. CONTRIBUTION.
a. If the indemnification provided in Sections 1 and 2 hereof is
unavailable and may not be paid to the Indemnitee for any reason other than
those set forth in Section 3 hereof, then in respect of any threatened, pending
or completed action, suit or proceeding in which the Company is jointly liable
with the Indemnitee (or would be joined in such action, suit or proceeding), the
Company shall contribute to the amount of expenses, judgments, fines and
settlements paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and the Indemnitee on the other hand from the transaction from which
such action, suit or proceeding arose, and (ii) the relative fault of the
Company on the one hand and of the Indemnitee on the other in connection with
the events that resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Indemnitee on the other shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
or any other method of allocation that does not take in to account the foregoing
equitable considerations.
b. The determination as to the amount of the contribution, if any,
shall be made by:
i. a court of competent jurisdiction upon the application of
both the Indemnitee and the Company (if an action or suit had been brought in,
and final determination had been rendered by such court);
ii. the Board by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding; or
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iii. outside independent legal counsel of the Company, if a
quorum is not obtainable for purpose of (ii) above, or, even if obtainable, a
quorum of Disinterested Directors so directs.
7. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt of notice
of the commencement of any action, suit or proceeding, the Indemnitee will, if a
claim in respect thereof is to be made against the Company under this Agreement,
notify the Company of the commencement thereof, but the omission to so notify
the Company will not relieve the Company from any liability that it may have to
the Indemnitee otherwise than under this Agreement. With respect to any such
action, suit or proceeding as to which the Indemnitee so notifies the Company:
a. The Company will be entitled to participate therein at its own
expense.
b. Except as otherwise provided below, the Company may assume the
defense thereof, with counsel satisfactory to the Indemnitee. After notice from
the Company to the Indemnitee of its election to assume the defense, the Company
will not be liable to the Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation or as otherwise provided
below. The Indemnitee shall have the right to employ his counsel in such action,
suit or proceeding, but the fees and expenses of such counsel incurred after
notice from the Company of its assumption of the defense thereof shall be at the
expense of the Indemnitee unless: (i) the employment of counsel by the
Indemnitee has been authorized by the Company; (ii) the Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and the Indemnitee in the conduct of the defense of such action; or
(iii) the Company shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Company or as to which the Indemnitee shall have come to the
conclusion provided for in (ii) above; and
c. The Company shall not be liable to indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner that would impose any penalty or limitation on the
Indemnitee without the Indemnitee's written consent. Neither the Company nor the
Indemnitee will unreasonably withhold its or his consent to any proposed
settlement.
8. LIABILITY INSURANCE. So long as the Indemnitee shall continue to
serve as a director or officer of the Company (or shall continue at the request
of the Company to serve as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise), the Company will use its
best efforts to purchase and maintain in effect for the benefit of the
Indemnitee one or more valid, binding and enforceable policy or policies of D&O
Insurance providing coverage within limits determined by the Board in its sole
discretion. Notwithstanding the foregoing, the Company shall
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<PAGE> 8
not be required to purchase or maintain such insurance policy, if, in the sole
discretion of the Board (i) such insurance is not reasonably available; (ii) the
premium cost for such insurance is disproportionate to the amount of coverage;
or (iii) the coverage provided by such insurance is so limited by exclusions
that there is insufficient benefit from such insurance.
9. DISCLOSURE OF PAYMENTS. Except as expressly required by law, neither
party shall disclose any payments under this Agreement unless prior approval of
the other party is obtained. Any payments to the Indemnitee that must be
disclosed shall, unless otherwise required by law, be described only in Company
proxy or information statements relating to special and/or annual meetings of
the Company's shareholders, and the Company shall afford the Indemnitee the
reasonable opportunity to review all such disclosures and, if requested, to
explain in such statement any mitigating circumstances regarding the events
reported.
10. COVENANT NOT TO SUE; LIMITATION OF ACTIONS AND RELEASE OF CLAIMS.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Company (or any of its subsidiaries) against the Indemnitee,
his spouse, heirs, personal representatives, successors or assigns after the
expiration of 2 years from the date the Indemnitee ceases (for any reason) to
serve as either a director, officer, or agent of the Company, and any claim or
cause of action of the Company (or any of its subsidiaries) shall be
extinguished and deemed released unless asserted by the filing of a legal action
within such 2-year period.
11. CONTINUATION OF OBLIGATIONS. All agreements and obligations of the
Company contained herein shall continue during the period the Indemnitee is a
director, officer, employee or agent of the Company (or is serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise), and shall
continue thereafter for so long as the Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that the
Indemnitee has ceased to serve in any such capacity due to his resignation,
removal by vote of directors or shareholders, termination, death, disability or
otherwise.
12. ENFORCEMENT.
a. The Company expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in order to
induce the Indemnitee to serve or to continue to serve as a director, officer,
employee and/or agent of the Company and/or a subsidiary of the Company, and
acknowledges that the Indemnitee is relying upon this Agreement in agreeing to
serve or to continue to serve in such capacity.
b. In the event the Indemnitee is required to bring any action to
enforce his rights and to collect monies due under this Agreement and is
successful in such action, the Company shall reimburse the Indemnitee for all of
the Indemnitee's reasonable fees and expenses in bringing and pursuing such
action, including reasonable attorney's fees (including trial, appellate and
other attorney's fees), court costs and other related expenses.
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13. MISCELLANEOUS.
a. COOPERATION AND INTENT. The Company shall cooperate in good faith
with the Indemnitee and use its best efforts to ensure that the Indemnitee is
indemnified and/or reimbursed for expenses as described herein to the fullest
extent permitted under the provisions of this Agreement.
b. NONEXCLUSIVITY; SUBROGATION; ENTIRE AGREEMENT. The rights of
indemnification and reimbursement provided in this Agreement shall be in
addition to any rights by which the Indemnitee may otherwise be entitled by the
Florida Statutes, the Articles, the Bylaws, a vote of the Company's
shareholders, or otherwise. In the event of any payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including the execution of such
documents as are necessary to enable the Company to bring suit to enforce such
rights. The Company shall not be liable under this Agreement to make any payment
of amounts otherwise indemnifiable hereunder if and to the extent that the
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise. This Agreement constitutes the entire
agreement between the Company and the Indemnitee with respect to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, both written and oral, between the parties hereto with respect
to such subject matter (the "Prior Agreements"); provided, however, that if this
Agreement shall ever be held void or unenforceable for any reason whatsoever,
and is not reformed pursuant to Section 13(d) hereof, then (i) this Agreement
shall not be deemed to have superseded any Prior Agreements; (ii) all of such
Prior Agreements shall be deemed to be in full force and effect notwithstanding
the execution of this Agreement; and (iii) the Indemnitee shall be entitled to
maximum indemnification benefits provided under the Florida Statute, the
Articles, the Bylaws, a vote of Company's shareholders, or any Prior Agreements.
c. EFFECTIVE DATE. The provisions of this Agreement shall cover claims,
actions, suits, and proceedings whether now pending or hereafter commenced and
shall be retroactive to cover acts or omissions or alleged acts or omissions
that heretofore have taken place.
d. SEVERABILITY; REFORMATION. Each of the provisions of this Agreement
is a separate and distinct agreement and independent of the others, so that if
any provision hereof shall be held to be invalid or unenforceable in whole or in
part for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof. In the event that all
or any portion of this Agreement is ever held void or unenforceable by a court
of competent jurisdiction, then the parties hereto hereby expressly authorize
such court to modify any provision(s) held void or unenforceable to the extent,
and only to the extent, necessary to render it valid and enforceable.
e. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication is directed, or (ii) mailed by certified or registered mail,
postage prepaid, on the third business day after the date on which it is so
mailed:
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If to the Indemnitee: To the address set forth on the signature page hereof.
If to the Company: The Havana Republic, Inc.
1360 Weston Road
Weston, FL 33326
or to such other address as may have been furnished by either party to the
other.
f. AMENDMENTS OR MODIFICATION. This Agreement may not be amended or
modified in any way except by a written instrument executed by all of the
parties.
g. GOVERNING LAW. This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of law thereof.
h. SUCCESSOR AND ASSIGNS. This Agreement shall be binding, upon the
Indemnitee and the Company, its successors and assigns, and shall inure to the
benefit of the Indemnitee, his heirs, personal representatives, successors and
assigns and to the benefit of the Company, its successors and assigns.
i. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
j. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
THE HAVANA REPUBLIC, INC.
BY:
-----------------------------------
Stephen Schatzman, President
THE INDEMNITEE:
--------------------------------------
Address:
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of
our report dated August 8, 1997 (October 18, 1997 as to Note 9), on our audit of
the consolidated financial statements of The Havana Republic, Inc. and
Subsidiaries. We also consent to the reference to our firm under the caption
"Experts."
/s/ Millward & Co.
- ------------------------
Millward & Co. CPAs
Fort Lauderdale, Florida
November 13, 1997
