<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended January 31, 1994
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
- ---------- to ----------
Commission file number 0-1946
------
DART GROUP CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0242973
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3300 75th Avenue, Landover, Maryland 20785
- ------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-1200
---------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $1.00 per share
-----------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
At April 29, 1994, registrant had 1,453,423 shares of Class A Common Stock
outstanding, and the aggregate market value of such shares held by
non-affiliates of the registrant was approximately $98,026,000. The Class B
Common Stock, of which there are 302,952 shares outstanding, is the only voting
stock and is not publicly traded.
All the Registrant's voting stock, Class B Common Stock, is held by affiliates.
The exhibit index begins at page 102 of this Form 10-K.
Page 1
<PAGE> 2
PART I
Item 1. Business
Dart Group Corporation (the "Corporation") operates retail discount auto
parts stores through Trak Auto Corporation ("Trak Auto"), retail discount book
stores through Crown Books Corporation ("Crown Books"), retail discount grocery
stores through Shoppers Food Warehouse Corp. ("Shoppers Food"), retail discount
beverage stores through Total Beverage Corporation ("Total Beverage"), a real
estate company through Cabot-Morgan Real Estate Company ("CMREC"), and a
financial business which purchases bankers' acceptances through Dart Group
Financial Corporation ("Dart Financial"). The Corporation, Trak Auto, Crown
Books, Shoppers Food, Total Beverage, CMREC, Dart Financial and the
Corporation's other direct and indirect wholly-owned and majority-owned
subsidiaries and majority owned partnerships are referred to collectively as
the "Company". The Corporation owns 65% of the common stock of Trak Auto, 51%
of the common stock of Crown Books, in excess of 50% of the common stock of
Shoppers Food, 100% of the common stock of Total Beverage, 100% of the common
stock of CMREC and 100% of the common stock of Dart Financial. The common
stock of Trak Auto and Crown Books is traded on the National Association of
Securities Dealers Automated Quotations Systems ("NASDAQ") national market
under the symbols TRKA and CRWN, respectively.
On January 31, 1994, there were 314 Trak Auto, 240 Crown Books, and 35
Shoppers Food stores; CMREC owned a 75% interest in two real estate
partnerships which own and operate two shopping centers and 51% of three real
estate partnerships which own and operate two shopping centers and an office
building; and there were three Total Beverage stores. On such date, Dart
Financial owned approximately $62,307,000 of bankers' acceptances.
Trak Auto Operations
Trak Auto operates retail discount specialty stores in the Washington,
D.C., Richmond, Virginia, Chicago, Illinois and Los Angeles, California
metropolitan areas.
Trak Auto is engaged in the retail sale of a wide range of automobile
parts and accessories for the do-it-yourself market. Trak Auto products
include "hard parts" (such as alternators, starters, shock absorbers, fan
belts, spark plugs, mufflers, thermostats, and wheel bearings), as well as
motor oil, oil filters, headlights, batteries, waxes, polishes, car stereos,
anti-freeze and windshield wipers. A typical store normally carries 10,000
different item numbers or SKU's. Trak Auto does not sell tires and does not
provide automotive service or installation.
During the year ended January 30, 1993, Trak Auto organized Super Trak
Corporation. Super Trak was organized as a Delaware corporation to operate
retail auto part stores and is a wholly-owned subsidiary of Trak Auto. Super
Trak stores are similar to the Trak Auto stores described above, however, the
stores provide additional services and merchandise. Super Trak stores carry
approximately 5,000 more SKU's, concentrated primarily in application parts
categories. Additionally, the stores feature special order services permitting
customers access to virtually any automotive part, including engines. The
stores also offer extensive technical assistance through computerized parts
look-up, instruction for repairs, free use of specialized tools, and factory
trained parts people. Trak Auto is planning a conversion to the Super Trak
concept through the opening of new stores and the conversion, relocation and
expansion of its existing stores.
2
<PAGE> 3
Trak Operations (Continued)
Trak Auto's merchandise is generally purchased directly from a large
number of manufacturers and suppliers. Trak Auto's distribution system is
computerized utilizing an automated replenishment and perpetual inventory
system to generate shipments of product from distribution centers in Landover,
Md., Bridgeview, Ill. and Ontario, California. The required items are
generally assembled and packaged for delivery in the order in which they will
be unpacked and displayed on the shelves at the retail stores, promoting store
efficiency. Inventories are monitored both at stores and in the distribution
centers to determine purchase requirements. Trak Auto has a computerized point
of sale ("POS") register system in every store. Trak Auto uses scanners to
identify most merchandise at the register and uses a price look-up function to
price the sale. Most merchandise is pre-labeled with bar codes by the
manufacturers.
Trak Auto's merchandising philosophy is to develop strong consumer
recognition and acceptance of its name by use of mass-media advertising to
promote a broad selection of products at low prices. Trak Auto emphasizes
quality customer service through knowledgeable personnel and advanced
technology such as electronic parts look-up, POS and computerized
do-it-yourself aids.
Trak Auto stores are approximately 5,000 to 6,000 square feet and Super
Trak stores range from 6,000 to 11,000 square feet. Trak Auto's stores use
modern fixtures and equipment and the interiors have been standardized, so that
the interiors of new stores can be assembled quickly. The stores are open
seven days a week.
The following table indicates Trak Auto's store locations and the number
of stores opened, closed and remodeled for the last five years.
<TABLE>
<CAPTION>
Number of Stores
at end of fiscal year
--------------------------------
Metropolitan Area 1990 1991 1992 1993 1994
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Washington, D.C. ............ 74 77 81 84 86
Baltimore, Maryland ......... 14 14 6 0 0
Richmond, Virginia .......... 14 14 15 15 15
Chicago, Illinois ........... 93 100 99 99 97
Los Angeles, California ..... 113 119 121 119 116
San Diego, California........ - 7 11 0 0
---- ---- ---- ---- ----
Total .............. 308 331 333 317 314
==== ==== ==== ==== ====
Super Trak Stores
- -----------------
Opened during the year....... - - - 1 10
Closed during the year....... - - - - 1
Classic Trak Stores
- -------------------
Opened during the year....... 36 26 19 6 1
Closed during the year....... 2 3 17 23 13
Converted to Super Trak
during the year............ - - - 11 52
Remodeled during the year.... - 4 - - -
Super Trak Stores - - - 12 73
Classic Trak Stores 308 331 333 305 241
</TABLE>
3
<PAGE> 4
Trak Auto Operations (continued)
Trak Auto had 15 stores substantially damaged or completely destroyed in
the Los Angeles civil disturbances at the end of the first fiscal quarter of
1993. Eleven of these stores have subsequently reopened and four stores remain
closed. The Los Angeles earthquake in January of 1994 damaged two Trak Auto
stores and one Super Trak resulting in their closing. The Super Trak reopened
shortly after year-end while the two Trak Auto stores remain closed.
Trak Auto has closed certain stores in various markets. At January 29,
1994, Trak Auto had an accrual for closed stores of approximately $1,000,000
which represents estimated unrecoverable lease costs (net of sublease), the
remaining book value of leasehold improvements and certain other costs. The
net charge (income) was $(943,000), $500,000, and $3,162,000 during fiscal
1994, 1993, and 1992, respectively. Income during the year ended January 29,
1994 was the result of early lease terminations, net of cash buyouts. Trak
Auto continually reviews store operations and expects to close additional
underperforming stores in the future.
A restructuring charge of $7,400,000 was recorded in 1993 for the
anticipated costs associated with closing, relocating, expanding and converting
existing stores to the new Super Trak concept. During the year ended January
29, 1994, approximately $600,000 was charged to this reserve. No store
contributed more than 1.0% to Trak Auto's consolidated sales during the year
ended January 29, 1994.
Crown Books Operations
Crown Books operates specialty retail book stores offering popular
hardback books, paperbacks and magazines below the publishers' suggested retail
prices.
Crown Books responds to the demand for books at prices below the
publishers' suggested retail prices and at the same time provides quality
service to its customers. Crown Books sells hardbacks on The New York Times
best seller list at 40% below the publishers' suggested retail prices,
paperbacks on The New York Times best seller list at 25% below the publishers'
suggested retail prices, other new books at 10% to 25% below the publishers'
suggested retail prices, and magazines at 10% below the publishers' suggested
retail prices. Crown Books sells publishers' over-stock, reprints and former
best sellers at significant discounts from the publishers' original suggested
retail prices. In addition, Crown Books allows customers at all stores to
special order books not stocked in inventory at discount pricing. This
merchandise is generally purchased directly from a large number of publishers
and suppliers and Crown Books is not dependent on any single publisher or
supplier.
Crown Books advertises intensively, primarily through newspapers, seasonal
radio and television and direct mail, stressing its pricing policy. Crown
Books satisfies regional and local consumer preferences by tailoring the
selections and quantities of books that it makes available in individual
stores. Crown Books clusters its stores in selected market areas to maximize
the efficiency of advertising, publicity, management and distribution. Within
those areas, Crown Books generally locates its stores in convenient strip
shopping centers and urban street locations. These locations typically may be
rented at more favorable rates than locations in large enclosed malls and
provide for increased consumer awareness and convenience of the store
locations.
4
<PAGE> 5
Crown Books Operations (continued)
All major merchandising decisions concerning pricing, advertising and
promotional campaigns, as well as the initial ordering of inventory for each
store, are managed centrally at Crown Books' headquarters in Landover,
Maryland. Over 80% of the merchandise is shipped directly from publishers to
the stores. Best sellers and other hardback books which are purchased in large
quantities are often shipped directly from the publishers to Crown Books'
regional warehouses for distribution to the stores. Inventories are monitored
both at stores and in the central office in Landover, Maryland, to determine
purchase requirements. In general, unsold books and magazines can be returned
to the publishers for credit.
During the year ended January 31, 1990, Crown Books organized Super Crown
Books Corporation ("Super Crown Books"). Super Crown Books was organized as a
Delaware corporation to operate retail book superstores and is a wholly-owned
subsidiary of Crown Books. The first Super Crown Books store opened in May of
1990 and Crown Books has been expanding the Super Crown concept since. The
stores carry as many as 70,000 titles, nearly seven times the number of titles
as a classic Crown Books store. Super Crown Books stores provide enhanced
service as well as value to its customers, wider aisles, a children's play
area, and benches and chairs to sit and relax.
The following table indicates the locations of Crown Books' stores and the
number of stores opened, closed and remodeled by Crown Books for the last five
years:
<TABLE>
<CAPTION>
Number of Stores
at end of fiscal year
------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Washington, D.C. ........... 62 63 61 59 60
Los Angeles, California .... 75 80 79 76 68
Chicago, Illinois .......... 44 44 43 43 43
San Francisco, California .. 30 31 30 30 31
San Diego, California ...... 19 19 20 20 17
Houston, Texas ............. 8 6 5 3 6
Seattle, Washington ........ 15 16 16 16 15
---- ---- ---- ---- ----
Total..................... 253 259 254 247 240
==== ==== ==== ==== ====
Super Crown Books stores:
- -------------------------
Opened during the year.... - 6 9 13 37
Closed during the year.... - - - - 4
Classic Crown Books stores:
- ---------------------------
Opened during the year.... 33 10 4 - 5
Closed during the year.... - 10 18 20 45
Remodeled during the year. - 16 7 2 -
Super Crown Books stores.... - 6 15 28 61
Classic Crown Books stores.. 253 253 239 219 179
</TABLE>
Classic Crown Books stores are approximately 2,000 to 3,000 square feet
and Super Crown Books stores are approximately 6,500 to 35,000 square feet, and
all use specially-designed display fixtures. The Company's new prototype
stores, such as the Super Crown White Flint in Rockville, Maryland, generally
range from approximately 12,000 to 35,000 square feet. The new prototype
stores permit more effective and economic utilization of space. The interior
5
<PAGE> 6
Crown Books Operations (continued)
of the stores is standardized, so that the stores can be assembled quickly.
Most of the stores are open seven days a week.
Currently, all Super Crown Books stores and all classic Crown Books
stores have computerized point of sale and inventory management systems
("systems"). Crown Books implemented systems in new stores and in the
remaining classic Crown Books stores during fiscal 1994. The systems enable
store personnel to scan bar coded merchandise resulting in less time to process
the sales transaction and more accurate pricing. The systems also provide
detailed inventory information on an item basis to store management and the
central office providing for better informed reordering and merchandising
decisions.
Crown Books believes systems will enhance customer service as well as
store operating efficiency.
The majority of Crown Books' stores are located in strip shopping centers
anchored by supermarkets and drug stores.
Crown Books has closed certain stores in various markets. At January 29,
1994, Crown Books had a reserve for closed stores of approximately $1,000,000,
which represents the estimated unrecoverable lease costs, and certain other
incidental costs. Crown Books recorded net charges (income) of $(631,000),
$513,000 and $1,106,000 during the fiscal years 1994, 1993 and 1992 for closed
stores. Income during the year ended January 29, 1994 was the result of early
lease terminations, net of cash buyouts. Crown Books continues to review store
operations and may close additional stores in the future.
Crown Books recorded a restructuring charge of $6,600,000 during the year
ended January 30, 1993 for anticipated costs associated with closing,
relocating, expanding and converting existing classic stores to the Super Crown
Books concept. At January 29, 1994, Crown Books had charged approximately
$840,000 against this reserve. These charges consisted primarily of
unrecoverable lease costs (including buyouts of remaining lease terms) and the
remaining book value of leasehold improvements and store fixtures for stores
which have closed.
Crown Books continues to test various concepts (principally related to the
size of the store) in the Super Crown Books prototypes. As a result of these
test stores, Crown Books has determined that a number of the smaller Super
Crown Books stores opened in previous years (typically 6,000 - 10,000 square
feet) are not a competitive format in the current market environment. These
stores have been negatively impacted by the industry's roll out of the larger
stores. Accordingly, Crown Books recorded an additional restructuring charge
of $6,200,000 in the year ended January 29, 1994, representing the anticipated
costs (unrecoverable lease costs and the remaining book value of leasehold
improvements and store fixtures subsequent to management's estimate of the
stores' closing dates) associated with closing, relocating and converting these
stores to the new, larger prototype.
No store contributed more than 2.0% to Crown Books' consolidated sales
during the year ended January 29, 1994.
6
<PAGE> 7
Shoppers Food Operations
Shoppers Food operates retail discount grocery stores that sell groceries,
meats, produce, beer and wine, baked goods, cigarettes, health and beauty aids
and have a deli department. The stores are located in the Washington, D. C.
metropolitan area and the warehouses and office facilities are located in
Lanham, Maryland. The Corporation acquired in excess of 50% of the common
stock of Shoppers Food (see Note 3 to the Consolidated Financial Statements)
during fiscal 1989.
Shoppers Food's stores are operated on a high volume discount pricing
marketing strategy. Shoppers Food stores are operated primarily on a
self-service basis and customers bag or box their own groceries. The stores
sell popular brand names at discount prices as well as manufacturers' or
distributors' specials.
The following table indicates the number of stores and the number of
stores opened, closed and remodeled for the last five years.
<TABLE>
<CAPTION>
Number of Stores
January 31,
------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Open..................... 21 24 31 34 35
Opened during the year......... 4 3 7 4 2
Closed during the year......... 1 - - 1 1
Remodeled during the year...... 1 - 1 1 2
</TABLE>
Total Beverage Corporation
Total Beverage operates retail discount beverage superstores in the
Washington, D.C. metropolitan area. The stores carry a wide range of foreign
and domestic beers and wines as well as non-alcoholic beverages. The
Corporation organized Total Beverage Corporation on January 26, 1993 and
purchased the assets for the first store on February 27, 1993 from Shoppers
Food for approximately $1,494,000. In October 1993 Total Beverage opened two
additional stores and is seeking locations for additional stores.
Cabot-Morgan Real Estate Company
CMREC, a wholly-owned subsidiary, was organized under the laws of Delaware
as a real estate development company. CMREC owns the majority interest in five
real estate partnerships that own four shopping centers and an office building
in the Washington, D.C. metropolitan area. CMREC owns 75% of two of these
partnerships (each owning a shopping center) and 51% of the other three
partnerships (two owning shopping centers and one owning an office building).
The remaining partnership interests are owned by partnerships in which the
partners are members of the Haft family. Combined Properties, Inc., a Haft
controlled entity, manages the shopping centers and office building for the
partnerships. Trak Auto, Crown Books, Shoppers Food and Total Beverage have
stores in some of these shopping centers.
7
<PAGE> 8
Dart Financial Operations
Dart Financial is engaged in the business of buying and holding bankers'
acceptances. Dart Financial acquires institutional size transactions of
typically $5,000,000. All of the outstanding bankers' acceptances are
obligations of Japanese banks with a minimum credit rating of A1/P1 and are
secured further by the underlying commodities.
A bankers' acceptance is a short-term instrument drawn on and accepted by
a bank that, by accepting the draft, assumes the obligation to pay the draft at
maturity. By purchasing bankers' acceptances, the purchaser assists in
financing purchases of merchandise by commercial businesses. Obligations to
the holders of bankers' acceptances typically are secured by the merchandise
being purchased. While there is an active market for bankers' acceptances,
such market is not regulated by any governmental agency.
Fluctuations in market interest rates and the creditworthiness of the
accepting bank are the major factors which affect the value of a bankers'
acceptance. Accordingly, management has established certain criteria for
buying and holding bankers' acceptances, including limiting purchases to
acceptances which have maturities of six months or less, limiting purchases to
acceptances of banks selected from a periodically reviewed list which
management believes are creditworthy, purchasing acceptances that are "with
recourse" obligations for which the drawer is contingently liable and
diversifying purchases among the selected group of banks.
It is management's belief that the foregoing criteria provide an
appropriate basis for financing commercial transactions through the purchase
and holding of bankers' acceptances and afford an opportunity for reasonable
profit relative to the risks incurred.
During the year ended January 31, 1994 Dart Financial purchased bankers'
acceptances at face value of approximately $442,125,000, sold bankers'
acceptances of approximately $2,000,000 at face value, and held bankers'
acceptances of approximately $468,250,000 at face value to maturity. On
January 31, 1994, Dart Financial held bankers acceptances of approximately
$62,525,000 at face value compared to $90,650,000 one year ago.
Competition
The market for the products and services provided by the Corporation's
retail discount specialty operations is highly competitive. The stores compete
with retail outlets, including drug stores, supermarkets, department stores,
hardware stores, variety stores, auto parts stores and book stores.
Competitors range from small independent stores to large regional and national
chains, many of which have greater resources than the Corporation and its
subsidiaries. The stores encounter strong competition with respect to the
prices at which they sell their products and services. Many companies are
engaged in the financial business through dealing in bankers' acceptances and
many have greater assets than Dart Financial. Many companies are engaged in
real estate development and many have greater resources than CMREC.
Employees
On January 31, 1994, the Company and its subsidiaries employed
approximately 6,580 full time and 4,590 part time persons. The Company
considers its relations with employees to be good.
8
<PAGE> 9
Changes in Management
Robert M. Haft's employment as President and Chief Operating Officer of
the Corporation terminated in June 1993. In August 1993, Ronald S. Haft was
elected President and Chief Operating Officer of the Corporation. Robert M.
Haft's employment as Chief Executive Officer and President of Crown Books
concluded in November 1992 upon the employment and election of Glenn Hemmerle
to those two positions. Robert Haft continued to serve as Chairman of Crown
Books until June 25, 1993, when he was removed as a director by action of the
Corporation pursuant to its rights under Delaware corporation law. Thereafter,
Herbert H. Haft resumed the position of Chairman of the Board of Crown Books.
The Board of Directors of each of the Corporation, Crown Books and Trak
Auto was reconstituted in 1993 to include five new directors, four of whom are
neither officers or employees of the Company. Bonita A. Wilson and Douglas M.
Bregman were elected directors of the Corporation, Crown Books and Trak Auto in
June 1993. Ronald S. Haft became President and Chief Operating Officer of the
Corporation on August 1, 1993 and a director of the Corporation, Crown Books
and Trak Auto on July 28, 1993. H. Ridgely Bullock and Larry G. Schafran were
elected as directors by the respective boards of the Corporation, Crown Books
and Trak Auto pursuant to each company's bylaws on December 20, 1993. Robert
M. Haft and Gloria G. Haft ceased to be directors of the Corporation, Crown
Books and Trak Auto in June 1993.
These changes have affected the Company's operations in two respects.
First, current management's review of Crown Books' operations and market
position concluded that many of the Super Crown stores opened under the
direction of the former Chairman were not in a competitive format in the the
current market environment, in which competitors have opened larger stores.
Current management has moved in a direction towards the conversion of many of
Crown Books' classic Crown and Super Crown Books stores to larger Super Crown
Books stores, and the elimination of a number of stores, requiring a
restructuring charge of $6.2 million and increased capital expenditures over
the next three to five years. Second, litigation, principally that initiated
by Robert Haft, has required management to divert significant time and expense
to defend against the claims. See Note 6 to the Consolidated Financial
Statements.
Segment Information
See Note 16 to the Consolidated Financial Statements.
9
<PAGE> 10
Item 2. Properties
The Corporation has a lease with a private partnership in which members of
the Haft family own all of the beneficial interests for a headquarters building
and distribution center of approximately 271,000 square feet in Landover,
Maryland. The Corporation has sublet 210,000 square feet of the headquarters
building and distribution center to Trak Auto and 28,000 square feet to Crown
Books. In addition, the Corporation has a lease agreement with the
aforementioned partnership for land, identified for future Trak Auto expansion,
adjacent to the headquarters building and distribution center. Trak Auto has
agreed to bear the annual carrying cost for the land.
Trak Auto
All of Trak Auto's 314 stores are leased. As of January 31, 1994, the
total minimum payments for Trak Auto's retail stores and equipment under leases
aggregated approximately $85,555,000 to lease expiration dates. The lease
expiration dates (without regard to renewal options) range from 1994 to 2013.
Twenty-three of these leases, are with entities in which members of the Haft
family have all or substantially all the beneficial interest, two are with
CMREC shopping centers and two are subleased from Crown Books.
Trak Auto leases a 176,000 square foot distribution center located in
Bridgeview, Illinois, and a 317,000 square foot distribution center located in
Ontario, California, from private partnerships in which members of the Haft
family own all of the beneficial interests.
Crown Books
All of Crown Books' 240 stores are leased. As of January 31, 1994, the
total minimum payments for Crown Books' retail stores and equipment aggregated
approximately $114,297,000 to the lease expiration dates. The lease expiration
dates (without regard to renewal options) range from 1994 to 2009. Thirteen of
these leases are with entities in which members of the Haft family have all or
substantially all the beneficial interest and three are with CMREC shopping
centers.
Shoppers Food
Shoppers Food leases 34 stores and owns one store. As of January 31,
1994, the total minimum payments for Shoppers Food's 34 retail stores and
equipment under lease aggregated approximately $165,902,000 to the lease
expiration dates. The lease expiration dates (without regard to renewal
options) range from 1994 to 2013. Seven of these leases are with entities in
which members of the Haft family have all or substantially all the beneficial
interest and one is with a CMREC shopping center.
Shoppers Food has a lease agreement with a limited partnership in which
members of the Haft family and the owners of the minority interest in Shoppers
Food own all of the beneficial interests for approximately 86,000 square feet
of space in an office building in Lanham, Maryland. Shoppers Food has sublet
approximately 25,000 square feet of the office to unaffiliated third parties.
10
<PAGE> 11
Total Beverage
Total Beverage's three stores are leased. As of January 31, 1994, the
total minimum payments for Total Beverage's retail stores under lease
aggregated approximately $10,947,000 to the lease expiration dates. The lease
expiration dates (without regard to renewal options) range from 1994 to 2008.
One lease agreement is with a partnership in which members of the Haft family
have all or substantially all the beneficial interest and two are with CMREC
shopping centers.
CMREC
As of January 31, 1994, CMREC owned a 75% interest in two shopping centers
located in Greenbelt and Silver Spring, Maryland, a 51% interest in a shopping
center and office building located in Fairfax, Virginia and 51% interest in a
shopping center located in Prince William County, Virginia. The remaining
interests in these properties are owned by partnerships in which members of the
Haft family own all the beneficial interests. At January 31, 1994, the total
minimum rental revenues for these properties aggregated approximately
$113,853,000 to the lease expiration dates, which range from 1994 to 2011.
Warehouse Facility
During fiscal 1991, the Corporation, because of its guarantee as part of
the sale of its drug store division in fiscal 1985, reassumed the lease
obligations for certain warehouse and office facility leases. The leases, with
private partnerships in which members of the Haft family own all of the
beneficial interests, are for 533,800 square feet of warehouse and office
facility space in Landover, Maryland. Trak Auto has a sublease agreement for
6,500 square feet of the facility for a term of one year with nine one year
option periods and Shoppers Food currently subleases, on a month to month
basis, approximately 6,000 square feet of the facility. The Corporation is
actively marketing the remaining space for lease to unaffiliated parties.
See Note 4 to the Consolidated Financial Statements for further
information regarding leases with related parties.
11
<PAGE> 12
Item 3. Legal Proceedings
See Note 6 to the Corporation's Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The following table shows the high and low sale prices for the common
stock in the over-the-counter market for the fiscal quarters indicated, as
reported by NASDAQ.
Class A Common Stock
<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Paid
- ------------- ---- --- ---------
<S> <C> <C> <C>
April 30, 1992 78 69 .03 1/3
July 31, 1992 74 67 .03 1/3
October 31, 1992 74 1/2 68 1/2 .03 1/3
January 31, 1993 87 66 1/2 .03 1/3
April 30, 1993 87 74 .03 1/3
July 31, 1993 88 76 .03 1/3
October 31, 1993 88 1/2 77 .03 1/3
January 31, 1994 88 1/2 79 .03 1/3
</TABLE>
<TABLE>
<CAPTION>
Approximate Number of Record
Title of Class Holders (As of March 31, 1994)
- -------------- ------------------------------
<S> <C>
Class A Common Stock $1.00 Par Value 390
Class B Common Stock $1.00 Par Value 4
</TABLE>
12
<PAGE> 13
Item 6. Selected Financial Data
Income Statement Data: (in thousands, except per share and sales % data)
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $1,376,543 $1,272,677 $1,195,148 $1,083,583 $ 943,050
Unusual items - 3,894 - 1,829 -
Income (loss) before
minority interests (225) 11,652 18,113 18,623 20,876
Minority interests
(1), (2), (3) and
(4) (6,512) (8,143) (11,802) (10,473) (8,976)
Income before extra-
ordinary items and
cumulative effect of
accounting change - 3,509 6,311 8,150 11,900
Extraordinary items:
Repurchase of
debentures (5) - (885) (1,589) 104 (223)
Cumulative effect of
change in accounting
principle (6) - 1,135 - - -
---------- ---------- ---------- ---------- ----------
Net Income (loss) $ (6,737) $ 3,759 $ 4,722 $ 8,254 $ 11,677
========== ========== ========== ========== ==========
Earnings per share:
Income (loss) before
extraordinary items
and cumulative effect
of accounting
change $ (4.10) $ 1.91 $ 3.46 $ 4.36 $ 6.27
Extraordinary items:
Repurchase of
debentures - (.48) (.87) .06 (.12)
Cumulative effect of
change in accounting
principle - .62 - - -
---------- ---------- ---------- ---------- ----------
Net Income (loss) $ (4.10) $ 2.05 $ 2.59 $ 4.42 $ 6.15
========== ========== ========== ========== ==========
Cash dividends
declared per
share of Class A
common stock $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: (in thousands)
- -------------------
Fiscal Year
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Working capital $ 281,242 $ 267,801 $ 260,374 $ 369,061 $ 363,595
Total assets (4) 802,898 722,379 696,395 704,080 658,274
Long-term
obligations
(4) and (5) 151,818 120,231 92,096 178,310 180,061
Stockholders'
Equity 274,307 279,239 276,476 271,896 263,528
</TABLE>
13
<PAGE> 14
Item 6. Selected Financial Data (Continued)
(1) The Corporation owns 65% of the common stock of Trak Auto.
(2) The Corporation owns 51% of the common stock of Crown Books.
(3) The Corporation owns in excess of 50% of the common stock of Shoppers
Food.
(4) On December 31, 1989, partnerships in which CMREC holds a 75%
interest purchased two shopping centers. The operating results of
these partnerships are reported from January 1, 1990. On March 12,
1991 CMREC acquired a 51% interest in two partnerships that own the
Greenbriar Town Center. The operating results of these partnerships
are reported from March 12, 1991. In January 1993, CMREC acquired a
51% interest in a partnership that owns Bull Run Plaza. The
operating results of this partnership are reported from January 1,
1993.
(5) See Note 14 to the Consolidated Financial Statements.
(6) The 1993 cumulative effect of a change in accounting principles was
the result of Trak Auto's adopting Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes.
Note: See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
14
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash, including short-term instruments, U.S. government and other
marketable debt securities and bankers' acceptances, is the Company's primary
source of liquidity. Cash, including short-term instruments, U.S. government
and other marketable debt securities and bankers' acceptances, increased by
$10,300,000 to $287,377,000 at January 31, 1994 from $277,077,000 at January
31, 1993. This increase was primarily due to funds provided by operations,
proceeds from a mortgage obtained by CMREC for Bull Run Plaza, stock option
exercises, a stock option purchase and funds received from Trak Auto's
insurance carrier as a result of the 1993 civil disturbances in Los Angeles.
The increase was offset by capital expenditures for superstore expansion by
Trak Auto and Crown Books, the acquisition of, and subsequent capital
expenditures for Total Beverage, and cash paid by CMREC for construction and
renovation of Bull Run Plaza.
For the year ended January 31, 1994, the Company realized a pretax yield
of approximately 3.2% on the bankers' acceptances, and 3.2% on United States
Treasury Bills, and realized an annualized total return of approximately 5.4%
on marketable debt securities.
Operating activities provided $38,402,000 in funds to the Company for the
year ended January 31, 1994, compared to $25,223,000 for the same period one
year ago. The increase is primarily a result of the timing of payments for
merchandise inventory and other accrued liabilities which had the effect of
extending payments to after January 31, 1994 and to a decrease in income tax
payments as a result of lower taxable income.
Investing activities used $71,327,000 of the Company's funds during the
year ended January 31, 1994, compared to using $11,212,000 of such funds
for the same period one year ago. The primary use of funds was the conversion
of Trak Auto and Crown Books United States Treasury Bills to marketable debt
securities. Capital expenditures increased $7,644,000 over the prior year as a
result of continuing Trak Auto's and Crown Books' expansion to Super Trak and
Super Crown formats, respectively, and Total Beverage store openings. In
addition, Crown Books completed the purchase and installation of point-of-sale
equipment in all stores.
Financing activities provided $18,797,000 to the Company during the year
ended January 31, 1994, compared to $3,699,000 one year ago. The primary
source of these funds in both years was borrowings secured by real estate
mortgages (as discussed below), which were partially offset in fiscal 1993 by
the repurchase of the Corporation's remaining outstanding debentures.
The Corporation, together with Crown Books and Trak Auto, has a $6,000,000
revolving credit facility agreement. As of January 31, 1994 there has been no
borrowing under this credit agreement (see Note 7 to the Consolidated Financial
Statements).
During fiscal 1994, CMREC (through the Bull Run Plaza partnership)
obtained a $9,750,000 mortgage which was used to repay the Corporation the
bridge loan it advanced to that partnership for the purchase of its shopping
center and the Briggs Chaney partnership refinanced two mortgages at Briggs
Chaney Shopping Center into one $16,000,000 mortgage bearing interest at 8.5%
15
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
for a term of ten years, secured by the land and building at that shopping
center. During fiscal 1993, CMREC (through the Greenbriar Retail partnership)
obtained a $38,000,000 mortgage, which may be increased to $40,600,000 upon
meeting additional lease criteria.
At January 31, 1994, Crown Books had eleven signed leases for Super Crown
stores, Trak Auto had eleven signed leases for new stores and 13 signed
agreements for additional space in existing stores for Super Trak stores,
Shoppers Food had two signed leases for new stores and CMREC's Bull Run Plaza
is undergoing renovation and expansion.
The Company anticipates that funds necessary to fund these capital
expenditures, as well as purchase inventory for new stores, meet the Company's
long-term lease obligations, and pay current liabilities, will come from
operations, existing current assets and, if necessary, the aforementioned
credit agreement.
The liquid assets maintained by the Company are intended to fund the
expansion of the Company's retail business through opening stores in new
markets, converting selected existing stores to superstores, and opening
additional stores in existing markets.
At January 31, 1994:
Working capital increased by $13,441,000 to $281,242,000 at January 31,
1994 from $267,801,000 at January 31, 1993. The increase was primarily due to
an increase in cash (see discussion of cash above). Increased inventory levels
were offset by increased accounts payable, trade.
At January 31, 1993:
Working capital increased by $7,427,000 to $267,801,000 at January 31,
1993 from $260,374,000 at January 31, 1992. The increase was primarily due to
funds received from the Greenbriar mortgage, current operating results,
increased inventory for new Super Trak and Super Crown stores which was more
than increased accounts payable as a result of the timing of inventory
purchases, and the timing of payments for other current liabilities. The
increase was partially offset by the redemption of the outstanding debentures,
additional investment in real estate partnerships by CMREC and increased
capital expenditures.
16
<PAGE> 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
RESULTS OF OPERATIONS
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
Trak Auto
Sales of $334,798,000 in fiscal 1994 increased by $19,005,000 or 6.0% from
the prior fiscal year primarily due to increased sales for stores converted
from classic to Super Trak stores. Sales for stores open more than one year
increased 1.3% for the year ended January 29, 1994. Super Trak sales increased
to $78,054,000 from $6,775,000 one year ago and comparable Super Trak sales
decreased 4.0%. Classic Trak Auto store sales decreased to $256,744,000 from
$309,018,000 as a result of converting over 50 classic stores to Super Traks.
Comparable sales for classic Trak Auto stores increased 1.4%. Sales for Super
Trak stores represented 23.3% and 2.1% of total sales for the year ended
January 29, 1994 and January 30, 1993, respectively.
During the year ended January 29, 1994, Trak Auto opened ten Super Trak
stores, converted 52 classic stores to Super Traks and opened one classic Trak
store while closing one Super Trak (temporarily due to the January 1994 Los
Angeles earthquake), and 13 classic Trak stores. Super Trak stores have
generated increased sales at converted locations as well as increased gross
margin as a result of the change in product mix (increased hard parts). Trak
Auto believes that by leasing larger stores it can obtain more favorable lease
rates and that as the stores mature, operating expenses as a percentage of
sales will decrease. The increased sales and margins together with the
knowledge acquired during the current year to control operating expenses are
expected to have a positive impact on future operating results.
Interest and other income decreased by $197,000 during the year ended
January 29, 1994 compared to the year ended January 30, 1993. The decrease was
primarily due to decreased sublease income as a result of the expiration of the
primary lease and was partially offset by an increase in interest income as a
result of increased average balance on funds available for short-term
investment.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales increased to 76.4% for the year ended January 29, 1994, compared to 73.9%
for the year ended January 30, 1993. This increase was primarily the result of
decreased margins as a result of Trak Auto's marketing strategy of reducing
prices to meet increased competition and increased advertising costs resulting
from utilizing alternative advertising media.
Selling and administrative expenses, as a percentage of sales, were 21.2%
of sales for the year ended January 29, 1994 compared to 20.9% for the year
ended January 30, 1993. The increase was primarily due to increased payroll
costs associated with opening and operating Super Trak stores. The increase
was partially offset by favorable settlement of future lease obligations of
$943,000 for stores closed in prior years and by decreased insurance costs as a
result of Trak Auto's safety programs, which have reduced workers compensation
claims.
Depreciation and amortization increased $727,000 when compared to fiscal
1993. The increase was due primarily to the increase in fixed assets resulting
from conversions to Super Trak.
17
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Interest expense increased $40,000 for the year ended January 29, 1994
compared to the year ended January 30, 1993 due to amounts owed under capital
lease obligations.
During the year ended January 29, 1994, Trak Auto recorded a tax benefit
of $545,000 as a result of its current book net operating loss and the effect
of certain permanent book/tax differences.
Crown Books
Sales of $275,125,000 for the year ended January 29, 1994 increased by
$34,443,000 or 14.3% compared to the year ended January 30, 1993. Sales for
stores open more than one year decreased 0.6% for the year ended January 29,
1994. Sales for Super Crown Books stores represented 39.8% and 21.0% of total
sales for the twelve months ended January 29, 1994 and January 30, 1993,
respectively. Super Crown Books stores sales of $109,637,000 increased 116.7%
over the prior year and sales for comparable Super Crown Book stores increased
1.2%. Classic Crown Books stores sales of $164,886,000 decreased 13.3% over
the prior year and sales for comparable classic Crown Books stores decreased
1.0%. As a result of the adoption of a 52/53 week fiscal year in December of
1992, fiscal 1994 has one less day than fiscal 1993. If prior year sales are
adjusted to reflect the 52/53 week fiscal year, total sales increased 14.5% for
the year ended January 29, 1994 and comparable sales decreased 0.3%.
During the twelve months ended January 29, 1994, Crown Books opened 37
Super Crown Books stores, five expanded classic Crown Books stores and one
store that primarily sells remainders, while closing 45 classic Crown Books
stores and four Super Crown Books stores. At January 29, 1994, Crown Books had
a total of 240 stores and subsequent to that date, opened five Super Crown
Books stores and closed eight classic Crown Books stores.
Interest and other income increased by $58,000 when compared to the prior
fiscal year. The increase was primarily due to increased income from magazine
distributors for displays in new stores. Interest income decreased $193,000 as
a result of decreased funds available for short term investment.
Cost of sales, store occupancy, and warehousing as a percentage of sales
was 80.4% for the year ended January 29, 1994 compared to 78.5% the prior
fiscal year. The increase was primarily due to a decrease in store margins, as
a result of a less favorable sales mix, increased purchasing from wholesalers
at a higher cost and the impact of closed store liquidation sales, and to an
increase in store occupancy costs for Super Crown Books stores.
18
<PAGE> 19
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Selling and administrative expenses as a percentage of sales were 17.1%
for the year ended January 29, 1994 compared to 16.0% for the same period one
year ago. The increase was due primarily to increased payroll costs at both
the store and administrative levels, largely the result of expansion of Super
Crown Books stores, and to increased legal fees (see Note 6 to the Consolidated
Financial Statements) including the accrual of future estimated legal costs to
be incurred in relation to certain litigation. The increases were partially
offset by decreased insurance costs as a result of Crown Books' efforts to
reduce workers compensation cost.
Depreciation and amortization expense increased by $1,568,000 for the year
ended January 29, 1994 when compared to the prior fiscal year. This increase
was primarily due to the acquisition and installation of a point-of-sale system
in all stores and to the purchase of fixed assets for new Super Crown Books
stores.
Interest expense decreased by $68,000 in fiscal 1994 compared to fiscal
1993 due to the reduction of amounts owed under capital lease obligations.
During the year ended January 29, 1994, Crown Books recorded a
restructuring charge of $6,200,000 before income taxes. The charge includes
the anticipated costs associated with closing, relocating, expanding and
converting smaller existing Super Crown Books to a new larger prototype store.
This charge reflects the cost of implementing a decision of current management
to close smaller Super Crown Books stores opened over the past three years
which have proved to be too small to compete effectively. These costs are
primarily unrecoverable lease obligations and the remaining book value of
leasehold improvements.
Crown Books recorded a $276,000 tax benefit during the year ended January
29, 1994.
Shoppers Food
Shoppers Food sales increased $30,177,000 or 4.4% to $718,144,000 during
the twelve months ended January 31, 1994 when compared to the same period in
the prior year. The increase is primarily due to the opening of two new stores
during 1994. Sales on a comparable basis decreased 3.8% largely due to new
stores opening near existing stores.
Interest and other income increased $1,022,000 during the twelve months
ended January 31, 1994 as a result of increased funds available for short-term
investment.
Cost of sales, store occupancy and warehousing, as a percentage of sales,
decreased to 82.1% during the twelve months ended January 31, 1994 compared to
83.8% for the same period last year. The decrease is primarily due to
increased margins as a result of a lessening of competitive pricing pressure in
the Washington, D.C. grocery market.
19
<PAGE> 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Selling and administrative expenses, as a percentage of sales, increased
to 14.0% from 12.9% during the twelve months ended January 31, 1994. The
increase resulted primarily from increased payroll and insurance costs and from
a $1,000,000 charge for a closed store reserve.
Depreciation and amortization decreased $599,000 during the twelve months
ended January 31, 1994 when compared to the same period last year. The
decrease is primarily the result of an increase in fixed assets last year and
Shoppers Food recording a full year depreciation at that time.
Shoppers Foods' effective income tax was 39.2% for the year ended January
31, 1994 compared to 39.0% in the prior year.
Total Beverage
Total Beverage purchased the assets of a discount beverage superstore in
February 1993 and opened two additional stores in October 1993. During the
year ended January 31, 1994, Total Beverage sales were $15,273,000 and Total
Beverage recorded a net operating loss of $5,512,000 which included legal
expenses of approximately $3,800,000 (see Note 6 to the Consolidated Financial
Statements).
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $5,005,000 during the
year ended January 31, 1994 when compared to the same period in the prior year.
The increase is the result of the acquisition of Bull Run Plaza in January 1993
and Greenbriar Town Center's increased occupancy for the whole year.
During the twelve months ended January 31, 1993, Greenbriar Town Center
completed renovation and expansion and the center became fully operational. As
a result, and combined with the acquisition of Bull Run Plaza, CMREC's
administrative expenses increased to $6,107,000 from $3,957,000 and
depreciation expense increased to $4,338,000 from $3,190,000 during the twelve
months ended January 31, 1994.
Interest expense increased by $2,774,000 to $7,683,000 during the twelve
months ended January 31, 1994, primarily due to the full year impact of the
mortgage for Greenbriar Town Center and to the mortgage at Bull Run Plaza.
CMREC is included in the Corporation's federal income tax return but files
separate state returns. Accordingly, CMREC has recorded a $16,000 tax
provision.
Dart Financial and Other Corporate
Income from bankers' acceptances decreased $871,000 during the year ended
January 31, 1994 when compared to the same period in the prior year. The
decrease is due to a decrease in the bankers' acceptances portfolio as a result
of funds used for the redemption of the Corporation's debentures in
20
<PAGE> 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
July 1992 and to the Corporation converting bankers' acceptances to higher
yielding instruments in fiscal 1994.
Interest and other income increased $270,000 during the year ended January
31, 1994 when compared to the same period in the prior year. In its efforts to
maximize total interest income, the Corporation has invested funds where it
believes they will generate the highest return consistent with minimizing
principal risk. Accordingly, the Corporation transferred bankers' acceptances
to marketable debt securities.
Administrative expenses for the Corporation increased $2,777,000 during
the year ended January 31, 1994, due primarily to increased payroll and legal
costs (see Note 6 to the Consolidated Financial Statements).
Interest expense for the Corporation decreased by $1,787,000 during the
year ended January 31, 1994 when compared to the same period in the prior year.
The decrease is the result of the Corporation's redemption of the remaining
debentures in July 1992.
Trak Auto, Crown Books and Shoppers Food file separate income tax returns.
CMREC, Total Beverage and Dart Financial are included in the Corporation's
income tax returns. The Corporation's current net operating loss was not tax
benefitted as a result of the complete utilization of all available carrybacks.
As a result of the Corporation's operating loss for the year ended January
31, 1994, a net tax operating loss carryforward of $7,090,000 was created.
The Corporation's cumulative total net tax operating loss carryforward is
$8,643,000. All net operating loss carryforwards will expire by fiscal 2009.
In addition, the Corporation has an Alternative Minimum Tax ("AMT") credit
carryforward of approximately $1,010,000.
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
Trak Auto
Sales of $315,793,000 in fiscal 1993 decreased by $3,842,000 or 1.2% from
the prior fiscal year primarily due to the closure of 11 underperforming stores
in San Diego during the second quarter as well as the continuing impact of the
stores destroyed or damaged during the civil disturbances in Los Angeles during
the first quarter. Trak Auto's decision to close the San Diego stores was
largely due to those stores inability to generate the sales volume necessary to
meet expenses. In Los Angeles, the six stores that remain closed and the nine
stores that subsequently reopened contributed to the decrease in sales. These
decreases were partially offset by three new Super Trak stores and increased
sales at nine stores converted to Super Trak stores and a 2.6% increase in
sales for stores open more than one year.
Interest and other income increased by $614,000 during the year ended
January 31, 1993 compared to the twelve months ended January 31, 1992. The
increase was due to increased interest income as a result of increased funds
21
<PAGE> 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
available for short-term investments, partially offset by lower interest rates,
and to increased rental income from subleases.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales decreased to 73.9% for the year ended January 31, 1993, compared to 76.0%
for the year ended January 31, 1992. This decrease was primarily the result of
strong margins throughout 1993 compared to 1992 when first quarter margins were
low due to competitive market pressures, and was partially offset by a small
increase in store occupancy costs. Margins for stores open less than one year
did not vary significantly from stores open more than one year.
Selling and administrative expenses were 20.9% of sales for the year ended
January 31, 1993 compared to 20.3% for the year ended January 31, 1992. The
increase was primarily due to increased payroll costs, largely a result of
costs associated with the opening of Super Trak stores, and increased insurance
costs associated with Trak Auto's casualty program covering general
liability, auto liability and workers compensation and increased health
insurance costs.
Depreciation and amortization decreased $459,000 when compared to fiscal
1992. The decrease was due primarily to the write-off of fixed assets as a
result of utilization of net operating loss carryforwards, of negative goodwill
amortization and to last year's retroactive adjustment to the useful lives of
certain leasehold improvements.
Interest expense decreased $28,000 for the year ended January 31, 1993
compared to the year ended January 31, 1992 due to the reduction of amounts
owed under capital lease obligations.
During the year ended January 30, 1993, Trak Auto recorded a one-time
restructuring charge of $7,400,000, before income taxes. The charge includes
the anticipated costs associated with store closing, relocating, expanding and
converting to the new Super Trak concept. These costs are primarily
unrecoverable lease obligations.
As a result of the stores destroyed or damaged in the Los Angeles
disturbances discussed above, Trak Auto had received payments from insurance
carriers of approximately $6,400,000 and recorded a receivable for an
additional $3,500,000 which represent settlement of Trak Auto's insurance
claims. The payments and receivable, less related expenses and the cost of the
related inventory and fixed assets lost, have been recorded as a gain,
classified as an unusual item during the year ended January 30, 1993.
The effective income tax rate was 32.5% for the year ended January 30,
1993 compared to 31.4% in the prior year. Trak Auto's effective income tax
rate was less than the statutory rates as a result of differences in
depreciation between the book and tax basis of the assets acquired from Trak
Auto West, Inc. ("Trak West").
22
<PAGE> 23
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Trak Auto adopted Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes, effective February 1, 1992. At that time,
the Company had existing unrecoverable tax benefits of net operating loss
carryforwards of approximately $6,500,000 representing both preacquisition
losses of Trak West and its own operating losses in 1991. In conjunction with
the adoption of the standard, Trak Auto recorded $1,658,000 as the cumulative
effect of recognizing that portion of the previously unrecognized tax benefits
that it concluded would more likely than not be recognized and established a
valuation reserve of $728,000.
Crown Books
Sales of $240,682,000 for the year ended January 31, 1993 increased by
$8,198,000 or 3.5% compared to the year ended January 31, 1992. Sales for
stores open more than one year increased 2.6% for the year ended January 31,
1993. Sales for Super Crown Books stores represented 21.1% and 11.1% of total
sales for the twelve months ended January 31, 1993 and 1992, respectively.
Super Crown Books stores sales of $50,756,000 increased 96.7% over the prior
year and sales for comparable Super Crown Books stores increased 3.4%.
During the twelve months ended January 30, 1993, Crown Books opened 13
Super Crown Books stores and closed 19 classic Crown Books stores. In
addition, in September 1992, one classic Crown Books store was completely
destroyed in a fire. Crown Books recorded a partial insurance claim receivable
of approximately $260,000 which consisted of the net book value of destroyed
fixed assets and inventory, at cost and as such, no gain or loss has been
recognized. At January 31, 1993, Crown Books had received a partial settlement
of $250,000 from its insurance carrier. At January 31, 1993, Crown Books had a
total of 247 stores.
Interest and other income decreased by $1,032,000 when compared to the
prior fiscal year. The decrease, due to continuing lower interest rates, was
partially offset by increased funds available for short-term investment for
most of the year.
Cost of sales, store occupancy, and warehousing as a percentage of sales
was 78.5% for the year ended January 31, 1993 compared to 78.1% the prior
fiscal year. The increase was primarily due to greater store occupancy costs
for Super Crown Books stores, as a percentage of sales, and was partially
offset by increased margin as a result of the increasing contribution of Super
Crown Books stores margins due to Super Crown Books stores' more favorable
sales mix.
Selling and administrative expenses as a percentage of sales were 16.0%
for the year ended January 31, 1993 compared to 15.3% for the same period one
year before. The increase was due primarily to payroll increases greater than
sales and to increased administrative payroll largely the result of opening
Super Crown Books stores. Mature Super Crown Books stores payroll costs are
lower than classic Crown Books stores, as a percentage of sales.
23
<PAGE> 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Depreciation and amortization expense increased by $238,000 for the year
ended January 31, 1993 when compared to the prior fiscal year. This increase
was primarily due to additional fixed assets in new and remodeled stores,
primarily Super Crown Books stores.
Interest expense decreased by $79,000 in fiscal 1993 compared to fiscal
1992 due to the reduction of amounts owed under capital lease obligations.
During the year ended January 31, 1993, Crown Books recorded a
restructuring charge of $6,600,000 before income taxes. The charge includes
the anticipated costs associated with store closings, relocating, expanding and
converting to the Super Crown Books concept. These costs are primarily
unrecoverable lease obligations and the remaining book value of leasehold
improvements.
The effective income tax rate was 37.9% for the year ended January 31,
1993 compared to 38.0% for the year ended January 31, 1992.
Crown Books adopted SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992. Implementation of the standard had no significant effect on
the financial statements.
Shoppers Food
Shoppers Food sales increased $77,910,000 or 12.8% to $687,967,000 during
the twelve months ended January 31, 1993 when compared to the same period in
the prior year. The increase is primarily due to the opening of four new
stores and was partially offset by the closing of one underperforming store.
Sales on a comparable basis decreased 6.6%, largely due to the new stores
opening near existing stores.
Cost of sales, store occupancy and warehousing, as a percentage of sales,
increased to 83.8% during the twelve months ended January 31, 1993 compared to
82.7% for the same period last year. The increase is primarily due to
decreased margins resulting from competitive pressures in its market.
Selling and administrative expenses, as a percentage of sales, decreased
to 12.9% from 13.1% during the twelve months ended January 31, 1993. The
decrease, as a percentage of sales resulted from cost controls implemented
during the year.
Depreciation and amortization increased $3,107,000 during the twelve
months ended January 31, 1993 when compared to the same period last year. The
increase is primarily the result of additional fixed assets in new stores.
Shoppers Foods' effective income tax was 39.0% for the year ended January
31, 1993 compared to 38.1% in the prior year.
Shoppers implemented SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992. Adoption of the new statement did not have a material effect
on financial statements.
24
<PAGE> 25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $4,471,000 during the
year ended January 31, 1993 when compared to the same period in the prior year.
The increase is the result of the acquisition of Greenbriar Town Center in
March 1991 and that center's increased occupancy, increased rental income at
Greenway Center, as well as the acquisition of Bull Run Plaza in January 1993.
During the twelve months ended January 31, 1993, Greenbriar Town Center
completed renovation and expansion and the center became fully operational. As
a result, CMREC's administrative expenses increased to $3,957,000 from
$3,352,000 and depreciation expense increased to $3,190,000 from $2,688,000
during the twelve months ended January 31, 1993.
Interest expense increased by $1,336,000 to $4,909,000 during the twelve
months ended January 31, 1993 primarily due to the $38,000,000 mortgage
obtained by Greenbriar (see Note 8 to the Consolidated Financial Statements).
CMREC is included in the Corporation's federal income tax return but files
separate state returns. Accordingly, CMREC has recorded a $71,000 tax
provision.
Dart Financial and Other Corporate
Income from bankers' acceptances decreased $7,026,000 during the year
ended January 31, 1993 when compared to the same period in the prior year. The
decrease is due to continued lower interest rates and to a decrease in the size
of the bankers' acceptances portfolio, largely the result of funds used for the
redemption of the Corporation's outstanding debentures.
Interest and other income decreased $2,011,000 during the year ended
January 31, 1993 when compared to the same period in the prior year. The
decrease was primarily due to continuing lower interest rates.
Administrative expenses for the Corporation increased $248,000 during the
year ended January 31, 1993, due primarily to the result of higher payroll and
insurance expenses.
Interest expense decreased by $12,258,000 during the year ended January
31, 1993 when compared to the same period in the prior year. The decrease is
the result of the Corporation's repurchase or redemption of $75,000,000 in face
amount of its outstanding debentures in fiscal 1992 and the redemption of the
remaining debentures in July of the current fiscal year.
During the year ended January 31, 1993, the Corporation redeemed all of
its outstanding debentures, face amount of $29,120,000, resulting in a loss
classified as an extraordinary item of $885,000.
25
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Trak Auto, Crown Books and Shoppers Food file separate income tax returns.
CMREC and Dart Financial are included in the Corporation's income tax returns.
The Corporation's current net operating loss was not tax benefitted.
As a result of the Corporation's operating loss for the year ended January
31, 1993, a net tax operating loss carryforward of $4,305,000 was created.
This net operating loss carryforward expires in fiscal 2008. In addition, the
Corporation had an AMT credit carryforward of approximately $622,000.
The Corporation adopted SFAS No. 109, Accounting for Income Taxes,
effective February 1, 1992. Implementation of the standard had no significant
impact on the financial statements.
EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS
The Company is required to adopt SFAS No. 112, Employer's Accounting for
Postretirement Benefits, no later than fiscal year ending January 31, 1995.
The Company does not expect that implementing the standard will have a
significant impact on the financial statements.
The Company is required to adopt SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, in fiscal 1995. The Company does
not expect that implementing the standard will have a material effect on the
financial statements.
SEASONALITY
Crown Books' sales, net income and increase in working capital for quarter
ended January 31 have historically been substantially higher than for any of
the previous three quarters. Crown Books inventory and payables have
historically been higher at the end of the third quarter than for any other
quarter for the year. The fourth quarter results of operations have
historically been sufficient to satisfy to a substantial degree the third
quarter accounts payable requirements. Management does not believe the
Corporation's other partially or wholly-owned businesses are affected by
seasonality to any material extent.
EFFECTS OF INFLATION
Inflation in the past three years has had no significant impact on the
Corporation's business. The Corporation believes that Trak Auto, Crown Books,
Shoppers Food and Total Beverage will recover most cost increases due to
inflation with increasing selling prices.
26
<PAGE> 27
Item 8. Financial Statements and Supplementary Date
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Public Accountants 28
Consolidated Balance Sheets
January 31, 1994 and 1993 29-30
Consolidated Statements of Income
Years ended January 31, 1994, 1993 and 1992 31-32
Consolidated Statements of Stockholders' Equity
Years ended January 31, 1994, 1993 and 1992 33
Consolidated Statements of Cash Flows
Years ended January 31, 1994, 1993 and 1992 34-37
Notes to Consolidated Financial Statements 38-69
</TABLE>
27
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO DART GROUP CORPORATION:
We have audited the accompanying consolidated balance sheets of Dart Group
Corporation (a Delaware corporation) and subsidiaries as of January 31, 1994
and 1993 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended January
31, 1994. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dart Group Corporation and
subsidiaries as of January 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three fiscal years in the
period ended January 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the Consolidated Financial Statements, effective
February 1, 1992, the Company changed its method of accounting for income
taxes.
ARTHUR ANDERSEN & CO.
Washington, D. C.,
April 27, 1994.
28
<PAGE> 29
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
January 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 17,955,000 $ 14,084,000
Short-term instruments, including
$133,315,000 and $156,277,000 held
by majority owned subsidiaries
in 1994 and 1993, respectively 138,278,000 172,624,000
Marketable debt securities 68,837,000 -
Bankers' acceptances 62,307,000 90,369,000
Accounts receivable, trade 15,351,000 11,156,000
Accounts receivable, other 1,044,000 3,652,000
Merchandise inventories 203,036,000 161,794,000
Deferred income tax benefit 6,522,000 3,247,000
Other current assets 4,048,000 3,117,000
------------ ------------
Total Current Assets 517,378,000 460,043,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 128,982,000 102,779,000
Buildings and leasehold improvements 166,250,000 144,954,000
Land 33,396,000 33,550,000
Property under capital leases 35,792,000 42,885,000
------------ ------------
364,420,000 324,168,000
Accumulated Depreciation and Amortization 104,137,000 82,536,000
------------ ------------
260,283,000 241,632,000
Other Assets 9,369,000 8,081,000
------------ ------------
Excess of Purchase Price Over Net Assets
Acquired net of accumulated
amortization of $6,074,000 and
$5,064,000, in 1994 and 1993,
respectively 3,659,000 4,537,000
------------ ------------
Deferred Income Tax Benefit 12,209,000 8,086,000
------------ ------------
Total Assets $802,898,000 $722,379,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
29
<PAGE> 30
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
January 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Current Liabilities:
Current portion of mortgage payable $ 988,000 $ 14,893,000
Accounts payable, trade 154,926,000 111,439,000
Income taxes payable 4,968,000 2,272,000
Accrued salaries and employee benefits 22,791,000 17,621,000
Accrued taxes other than income taxes 11,831,000 9,629,000
Other accrued liabilities 40,287,000 35,880,000
Current portion of obligations under
capital leases 345,000 508,000
------------ ------------
Total Current Liabilities 236,136,000 192,242,000
------------ ------------
Mortgage Payable 80,709,000 53,491,000
------------ ------------
Obligations Under Capital Leases 39,295,000 38,786,000
------------ ------------
Reserve for Closed Facilities and
Restructuring 28,595,000 24,662,000
------------ ------------
Other Long-term Liabilities 3,219,000 3,292,000
------------ ------------
Commitments and Contingencies
Minority Interests 140,637,000 130,667,000
------------ ------------
Stockholders' Equity:
Class A common stock, non-voting, par
value $1.00 per share; 3,000,000
shares authorized; 1,655,763
and 1,649,013 shares issued,
in 1994 and 1993, respectively 1,656,000 1,649,000
Class B common stock, voting, par value
$1.00 per share; 500,000 shares
authorized; 302,952 shares issued
and outstanding 303,000 303,000
Paid-in capital 65,323,000 63,332,000
Retained earnings 208,774,000 215,704,000
Treasury stock, 202,340 shares of
Class A common stock, at cost (1,749,000) (1,749,000)
------------ ------------
Total Stockholders' Equity 274,307,000 279,239,000
------------ ------------
Total Liabilities and Stockholders' Equity $802,898,000 $722,379,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
30
<PAGE> 31
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Sales $1,343,340,000 $1,244,442,000 $1,162,176,000
Income from bankers'
acceptances 2,588,000 3,459,000 10,485,000
Real estate revenue 18,658,000 13,653,000 9,182,000
Other interest and
other income 11,957,000 11,123,000 13,305,000
-------------- -------------- --------------
1,376,543,000 1,272,677,000 1,195,148,000
-------------- -------------- --------------
Expenses:
Cost of sales, store
occupancy and
warehousing 1,079,553,000 998,894,000 928,563,000
Selling and
administrative 242,286,000 204,813,000 191,090,000
Depreciation and
amortization 28,022,000 25,096,000 21,741,000
Interest 13,513,000 12,549,000 23,520,000
Restructuring charge 6,200,000 14,000,000 -
Unusual item - (3,894,000) -
-------------- -------------- --------------
1,369,574,000 1,251,458,000 1,164,914,000
-------------- -------------- --------------
Income before income
taxes and minority
interests 6,969,000 21,219,000 30,234,000
Income taxes 7,194,000 9,567,000 12,121,000
-------------- -------------- --------------
Income (loss) before
minority interests (225,000) 11,652,000 18,113,000
Minority interests in
income of consoli-
dated subsidiaries
and partnerships (6,512,000) (8,143,000) (11,802,000)
-------------- -------------- --------------
Income (loss) before extra-
ordinary item and
cumulative effect of
Trak Auto's change
in accounting
principle (6,737,000) 3,509,000 6,311,000
</TABLE>
(continued on following page)
31
<PAGE> 32
CONSOLIDATED STATEMENTS OF INCOME (Continued)
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Extraordinary item:
Loss on
reacquisition of
debentures, net
of income tax
benefit of
$819,000 for
1992 - (885,000) (1,589,000)
Cumulative effect of
change in Trak Auto's
accounting principle,
net of minority
interest - 1,135,000 -
Net Income (Loss) $ (6,737,000) $ 3,759,000 $ 4,722,000
============== ============= ==============
Earnings per share:
Income (loss) before
extraordinary item
and cumulative effect
of change in accounting
principle $ (4.10) $ 1.91 $ 3.46
Extraordinary item:
Loss on
reacquisition of
debentures - (.48) (.87)
Cumulative effect of
change in Trak Auto's
accounting principle,
net of minority
interest - .62 -
-------------- -------------- --------------
Net Income (Loss) $ (4.10) $ 2.05 $ 2.59
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE> 33
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Common Stock:
Class A:
Balance, beginning
of period $ 1,649,000 $ 1,648,000 $ 1,646,000
Stock options
exercised 7,000 1,000 2,000
-------------- -------------- --------------
Balance, end of period $ 1,656,000 $ 1,649,000 $ 1,648,000
============== ============== ==============
Class B:
Balance, beginning
and end of period $ 303,000 $ 303,000 $ 303,000
============== ============== ==============
Paid-in Capital:
Balance, beginning
of period $ 63,332,000 $ 64,136,000 $ 64,088,000
Stock options
exercised 469,000 96,000 40,000
Purchase of stock option 985,000 - -
Effect of subsidiary
stock options
exercised 537,000 (900,000) 8,000
-------------- -------------- --------------
Balance, end of period $ 65,323,000 $ 63,332,000 $ 64,136,000
============== ============== ==============
Treasury Stock:
Balance, beginning and
end of period $ (1,749,000) $ (1,749,000) $ (1,749,000)
============== ============== ==============
Retained Earnings:
Balance, beginning of
period $ 215,704,000 $ 212,138,000 $ 207,608,000
Net Income (6,737,000) 3,759,000 4,722,000
Dividends paid (193,000) (193,000) (192,000)
-------------- -------------- --------------
Balance, end of period $ 208,774,000 $ 215,704,000 $ 212,138,000
============== ============== ==============
Dividends paid per share of
Class A Common Stock $ .13 $ .13 $ .13
============== ============== ==============
Class B Common Stock $ - $ - $ -
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE> 34
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income (loss) $ (6,737,000) $ 3,759,000 $ 4,722,000
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 28,022,000 25,096,000 21,741,000
Gain on sale
of fixed assets - (22,000) -
Utilization of Trak
Auto Corporation
net operating
loss and investment
tax credit carry-
forwards - - 531,000
Cumulative effect of
change in accounting
principle - (1,135,000) -
Amortization of bond
discount and
debenture costs - 41,000 318,000
Write off of debenture
costs and unamortized
discount included in
extraordinary loss - 344,000 1,015,000
Provision for closed
facilities including
restructuring charge 4,626,000 23,736,000 3,866,000
Change in assets and
liabilities, net
of effects from
acquisitions by
Cabot Morgan Real
Estate Company in
1993 and 1992:
Accounts receivable,
trade (4,195,000) 3,065,000 (2,842,000)
Accounts receivable,
other 2,608,000 (3,652,000) -
Merchandise inventories (41,242,000) (9,309,000) (3,656,000)
Income taxes refundable - - 2,957,000
</TABLE>
(continued on following page)
34
<PAGE> 35
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Other current assets (931,000) 231,000 (741,000)
Deferred income tax
benefit (7,398,000) (5,640,000) (1,836,000)
Other assets (1,288,000) (1,186,000) 25,000
Accounts payable, trade 43,487,000 4,519,000 7,163,000
Income taxes payable 2,696,000 (10,296,000) (2,341,000)
Accrued salaries and
employee benefits 5,170,000 1,349,000 1,452,000
Accrued taxes other
than income taxes 2,202,000 1,036,000 1,796,000
Other accrued
liabilities 6,662,000 (13,889,000) 22,974,000
Accrued interest - (1,529,000) (3,937,000)
Deferred income (73,000) 3,292,000 -
Reserve for closed
facilities (1,719,000) (2,730,000) (1,513,000)
Minority interest 6,512,000 8,143,000 13,302,000
-------------- -------------- --------------
Net cash provided
by operating
activities $ 38,402,000 $ 25,223,000 $ 64,996,000
-------------- -------------- --------------
Cash Flows from Securities and
Capital Investment Activities:
Capital expenditures $ (45,805,000) $ (38,161,000) $ (39,096,000)
Purchase of subsidiary
common stock (1,094,000) - -
Dispositions of bankers'
acceptances - 22,264,000 9,928,000
Maturities of bankers'
acceptances 470,250,000 517,650,000 1,207,260,000
Purchase of bankers'
acceptances (442,188,000) (495,370,000) (1,156,921,000)
Dispositions of United
States Treasury Bills 296,962,000 298,610,000 882,011,000
Purchase of United States
Treasury Bills (290,671,000) (305,308,000) (830,400,000)
Purchases of marketable
debt securities (209,328,000) - -
Dispositions of marketable
debt securities 141,263,000 - -
Maturities of marketable
debt securities 9,284,000 - -
Cash paid for purchase of
real estate partnership
interest - (10,897,000) (21,355,000)
-------------- -------------- --------------
Net cash provided
by (used for)
securities and
capital invest-
ment activities $ (71,327,000) $ (11,212,000) $ 51,427,000
-------------- -------------- --------------
</TABLE>
(continued on following page)
35
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Borrowings from real estate
mortgage $ 13,590,000 $ 38,000,000 $ -
Cash dividends (193,000) (193,000) (192,000)
Repurchase of debentures - (29,120,000) (75,000,000)
Stock options exercised 925,000 5,254,000 282,000
Contribution (distribution)
paid to minority
shareholders 3,418,000 (7,368,000) -
Proceeds from the option
to acquire common stock 985,000 - -
Proceeds from redemption
of note receivable 833,000 - -
Principal payments under
mortgage obligations (277,000) (1,452,000) (232,000)
Principal payments under
capital lease obli-
gations (484,000) (1,422,000) (1,133,000)
-------------- -------------- --------------
Net cash provided by
(used for) financing
activities $ 18,797,000 $ 3,699,000 $ (76,275,000)
-------------- -------------- --------------
Net Increase (Decrease)
in Cash and Cash
Equivalents $ (14,128,000) $ 17,710,000 $ 40,148,000
Cash and Cash Equivalents
at Beginning of Year 170,361,000 152,651,000 112,503,000
-------------- -------------- --------------
Cash and Cash Equivalents
at End of Year $ 156,233,000 $ 170,361,000 $ 152,651,000
============== ============== ==============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 13,570,000 $ 13,673,000 $ 25,291,000
Income taxes 12,457,000 20,506,000 12,780,000
Reconciliation of Cash and
Cash Equivalents to
Balance Sheet Captions:
Cash $ 17,955,000 $ 14,084,000 $ 6,895,000
Short-term investment of
majority-owned sub-
sidiaries utilized in
their operating cash
management 138,278,000 156,277,000 145,756,000
-------------- -------------- --------------
$ 156,233,000 $ 170,361,000 $ 152,651,000
============== ============== ==============
</TABLE>
(continued on following page)
36
<PAGE> 37
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Supplemental Disclosures of Noncash Investing and Financing Activities:
Dart Group Corporation, through its wholly-owned subsidiary, Cabot-Morgan Real
Estate Company, in fiscal 1993 and 1992 acquired a 51% interest in real estate
partnerships for $10,897,000 (including a $8,250,000 promissory note to Bull
Run Joint Venture) and $21,355,000, respectively. In conjunction with these
acquisitions, liabilities (including the minority interest portion) were
assumed as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Fair value of assets
acquired $ - $ 14,632,000 $ 42,138,000
Cash paid - 10,897,000 21,355,000
Minority interest not
acquired - 2,543,000 20,517,000
-------------- -------------- --------------
Liabilities Assumed $ - $ 1,192,000 $ 266,000
-------------- -------------- --------------
</TABLE>
See Note 4 re: capital leases.
The accompanying notes are an integral part of these statements.
37
<PAGE> 38
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation: The accompanying consolidated financial
statements reflect the accounts of Dart Group Corporation (the "Corporation")
and its direct and indirect, wholly-owned and majority-owned subsidiaries and
majority-owned partnerships, including Trak Auto Corporation ("Trak Auto"),
Crown Books Corporation ("Crown Books"), Shoppers Food Warehouse Corp.
("Shoppers Food"), Total Beverage Corporation ("Total Beverage"), Cabot-Morgan
Real Estate Company ("CMREC") and Dart Group Financial Corporation ("Dart
Financial"). The accounts of CMREC, through partnerships in which it owns the
majority interest, are included from the date of their purchase. The accounts
of Total Beverage are included from the date of its purchase on February 28,
1993. The Corporation, Trak Auto, Crown Books, Shoppers Food, Total Beverage,
CMREC, Dart Financial and the Corporation's other direct and indirect wholly-
owned and majority-owned subsidiaries and majority-owned partnerships are
referred to collectively as the "Company". All significant intercompany
accounts and transactions have been eliminated.
Short-Term Instruments and Marketable Debt Securities:
At January 31, 1994, The Company's short-term instruments included United
States Treasury Bills and Overnight Repurchase Agreements (collateralized by
United States Treasury obligations), and marketable debt securities included
United States Treasury Notes, corporate notes, municipal securities and United
States Agency Securities Acceptances. These short-term instruments and
marketable debt securities are recorded at lower of cost or market. At January
31, 1994 the difference between cost and market was not significant.
Bankers' Acceptances: As of January 31, 1994, the Corporation, through
its wholly-owned subsidiary, Dart Financial, held bankers' acceptances of
approximately $62,307,000 stated at cost, adjusted for discount amortization,
which approximates market. All of the outstanding bankers' acceptances are
obligations of Japanese banks with a minimum credit rating of A1/P1 and are
further secured by the underlying commodity.
Fair Value of Financial Instruments: The fair values of current assets
and current liabilities are approximately equal to the reported carrying
amounts. The carrying amounts of the Company's mortgage payables are based on
outstanding principal, and the fair values of these mortgages were estimated
based on borrowing rates currently available for bank loans with similar terms
(see Note 8). No value has been placed on the Company's line of credit
facility as any borrowings would bear interest at market rates.
Statement of Cash Flows: For purposes of the statements of cash flows,
the Corporation considers the short-term instruments, consisting of United
States Treasury Bills, purchased with an original maturity of less than one
year held by its majority owned subsidiaries to be cash equivalents. The
Company's United States Treasury Bills primarily consist of instruments with a
maturity of less than four months. These highly liquid instruments are
considered to be an integral part of the operating cash management program of
the subsidiaries.
38
<PAGE> 39
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued):
Merchandise Inventories and Cost of Sales: Trak Auto and Shoppers Food
inventories are priced at the lower of last-in, first- out (LIFO) cost or
market. At January 31, 1994, 1993 and 1992 inventories would have been greater
by $7,187,000, $6,453,000 and $5,890,000 respectively, if they had been valued
on the lower of first-in, first-out (FIFO) cost or market basis. Crown Books'
inventories are priced at the lower of FIFO cost or market.
Property and Equipment and Depreciation: The Company depreciates
furniture, fixtures and equipment generally over a ten-year period using the
straight-line method. Computer software is charged to expense in the year of
acquisition. Computer equipment is depreciated over a five-year period using
the straight-line method. All stores are leased except one store owned by
Shoppers Food. Improvements to leased premises are amortized generally over a
ten-year period, or the term of the lease, whichever is shorter. Assets
financed through asset-based financing arrangements are depreciated over the
lives of the leases.
Income Taxes: Trak Auto, Crown Books and Shoppers Food file separate
income tax returns. CMREC, Total Beverage and Dart Financial are consolidated
in the Corporation's income tax returns.
The Company implemented Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes, effective February 1, 1992.
Adoption of the new standard resulted in recognition of a net deferred tax
asset associated with the expected realization of Trak Auto's cumulative
temporary differences not previously recognized (classified as the cumulative
effect of a change in accounting principle). Prior to that date the Company
accounted for income taxes under Accounting Principles Board No. 11.
Adoption of New Accounting Pronouncements: The Company is required to
adopt SFAS No. 112, Employers' Accounting for Postemployment Benefits, no later
than its fiscal year ending January 31, 1995. The Company does not expect that
implementing the standard will have a significant effect on the financial
statements or results of operations.
The Company is required to adopt SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, no later than its fiscal year ending
January 31, 1995. The Company does not expect that implementing the standard
will have a significant effect on the financial statements.
Pre-Opening Expenses: All costs of a noncapital nature incurred in
opening a new store are charged to expense during the year as incurred.
Fiscal Year: The Corporation's fiscal year ends on January 31 each year.
Trak Auto, Crown Books, Shoppers Food and Total Beverage are reported to the
Saturday closest to January 31.
39
<PAGE> 40
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued):
Excess of Purchase Price Over Net Assets Acquired: The Company amortizes
excess of purchase price over net assets acquired over a ten-year period using
the straight-line method. However, Trak Auto has elected to amortize negative
goodwill (arising from the utilization of a preacquisition net operating loss
carryforward) over a five-year period since Trak Auto has utilized such net
operating loss over the preceding five years.
Industry Segments: The Company operates specialty retail stores, grocery
and beverage stores, a real estate company and a financial business that deals
primarily in bankers' acceptances.
Earnings Per Share: Earnings per share is based on the weighted average
number of the Corporation's Class A and Class B common stock and common stock
equivalents (certain stock options) outstanding during the period. In
reporting earnings per share, the Corporation's interest in the earnings of its
majority-owned subsidiaries is adjusted for the dilutive effect, if any, of
these subsidiaries' outstanding stock options. The difference between primary
earnings per share and fully diluted earnings per share is not significant for
any period. Weighted average shares and share equivalents for the three years
ended January 31, 1994, 1993 and 1992 were 1,867,000, 1,837,000 and 1,825,000,
respectively.
Dividends: The holders of Class A Common stock are entitled to receive,
when and as declared by the board of directors, noncumulative preferential
dividends of up to thirty cents per share. If Class A dividends reach thirty
cents per share, in any fiscal year, holders of Class B common stock are
entitled to receive dividends not exceeding thirty cents per share. Any
dividends cumulatively in excess of thirty cents per share would be shared as
if they constituted a single class of stock. During the years ended January
31, 1994, 1993 and 1992, the Corporation paid dividends to the holders of Class
A Common Stock at $.13 per share and has not paid dividends to holders of Class
B Common Stock.
40
<PAGE> 41
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES:
The provision for income taxes on income before extraordinary items
includes current income tax provision and deferred income tax provision as
follows:
<TABLE>
<CAPTION>
- In Thousands -
--------------------------------------
Fiscal Years
--------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current income tax provision:
Federal $ 8,590 $ 11,706 $ 11,571
State 2,236 2,701 2,575
-------- -------- --------
10,826 14,407 14,146
Deferred income tax provision: (3,632) (4,840) (2,025)
-------- -------- --------
$ 7,194 $ 9,567 $ 12,121
======== ======== ========
</TABLE>
As a result of the Corporation's operating loss for the year ended January
31, 1994, a tax net operating loss carryforward of $7,090,000 was created. At
January 31, 1994, the corporation's cumulative net tax operating loss
carryforwards were $8,643,000 expiring by fiscal 2009. In addition, the
Corporation has an Alternative Minimum Tax credit carryforward of approximately
$1,010,000.
As a result of the adoption of SFAS No. 109, Accounting for Income Taxes,
the Corporation has determined that it required an initial valuation allowance
of $3,369,000 during the year ended January 31, 1993. During the year ended
January 31, 1994, the Corporation increased the valuation allowance by
$3,824,000 to $7,193,000. The valuation allowance was for tax net operating
loss carryforwards and alternative minimum tax credit carryforwards, which are
not able to be utilized at January 31, 1994 and certain temporary differences
that the Corporation believe are not likely to be realizable.
At February 2, 1992, Trak Auto had existing unrecognized tax benefits on
book net operating loss carryforwards of approximately $6,500,000 representing
both preacquisition losses of Trak Auto West, Inc. ("Trak West"), and its own
operating losses in 1991. In conjunction with the adoption of SFAS No. 109,
Accounting for Income Taxes, Trak Auto recorded $1,658,000 as the cumulative
effect of recognizing that portion of the previously unrecognized tax benefits
that it concluded would more likely than not be realized and established a
valuation reserve of $728,000.
The Company will evaluate the continuing need for its valuation reserves
on a periodic basis.
41
<PAGE> 42
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES (Continued):
The effective income tax rate on income before income taxes, minority
interest, extraordinary items and cumulative change in accounting principle is
reconciled to the Federal statutory rate as follows:
<TABLE>
<CAPTION>
- In Thousands -
--------------------------------------
Fiscal Years
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
Income taxes at Federal statutory
rate $ 2,439 $ 7,214 $ 10,280
Increase (decrease) in taxes
resulting from--
Federal net operating loss
carryforward not benefitted 4,092 1,077 45
State income taxes, net of
Federal income tax benefit 838 1,287 1,583
Permanent tax difference due
to stock options exercised - - (27)
Effect of Total Beverage
twenty five percent loss
sharing 65 - -
Effect of tax exempt municipal
bond interest (295) - -
Effect of utilization of former
Trak West net operating loss (219) (209) (192)
Other 274 198 432
---------- ---------- ----------
Income taxes $ 7,194 $ 9,567 $ 12,121
========== ========== ==========
Effective tax rate 103.2% 45.1% 40.1%
========== ========== ==========
</TABLE>
42
<PAGE> 43
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES (Continued):
Temporary differences and tax carryforwards which give rise to deferred
tax assets and liabilities on a consolidated basis are as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------------
Deferred Tax Assets: January 31, January 31,
- -------------------- ----------- -----------
1994 1993
----------- -----------
<S> <C> <C>
Reserves for other liabilities $ 2,572 $ 748
Capitalized leases treated as operating
leases for tax purposes 3,288 2,506
Depreciation 701 -
Uniform capitalization of inventory
costs 2,381 1,531
Deferred gain from insurance gain 422 -
Closed store reserve 8,722 7,159
Accrued rent 1,169 792
Deferred income 1,022 1,687
Certain officers bonuses 1,617 628
Tax loss carryforwards 3,164 1,463
Tax credit carryforwards 1,018 622
Basis adjustment as a result of purchase
accounting for Trak West 659 638
Other 42 4
------- -------
Gross Deferred Tax Assets 26,777 17,778
Valuation allowance (7,921) (4,097)
------- -------
Net Deferred Tax Assets 18,856 13,681
Deferred Tax Liabilities:
- -------------------------
Depreciation - 1,750
Reserves relating to insurance gain - 490
Other 125 108
------- -------
Gross Deferred Tax Liabilities 125 2,348
------- -------
Net Deferred Tax Asset $18,731 $11,333
======= =======
</TABLE>
43
<PAGE> 44
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(3) TRANSACTIONS WITH AFFILIATES:
Shoppers Food Warehouse Corp.
In fiscal 1989 the Corporation acquired in excess of 50% of the common
stock of Shoppers Food, which operates the Shoppers Food Warehouse discount
grocery chain in the Washington, D.C. metropolitan area. As a result of the
allocation of the net purchase price, the Corporation recorded approximately
$11,160,000 as excess of purchase price over net assets acquired. The
Corporation and Shoppers Food have a buy/sell agreement whereby either
shareholder has the right, at any time, to initiate procedures under which the
initiating party offers both to sell to or buy from the other party the
initiating party's or the other party's shares in Shoppers Food at the offer
price. The recipient of the offer has the alternative of accepting the offer
to sell or the offer to buy. The Corporation is unable to determine the effect
that would result if either party initiates this procedure.
During the year ended January 31, 1992, Shoppers Food acquired two Basics
Supermarkets from Super Rite Foods, Inc. ("Super Rite"). In connection with
the purchase of the Basics Supermarkets, Shoppers Food entered into a separate
wholesale grocery multiyear supply agreement with Super Rite to supply the
Shoppers Food Chain, in exchange for receipt of approximately $4,700,000 in
cash and other considerations. This amount is being amortized over the 51
month term of the supply agreement.
Total Beverage Corporation:
On January 26, 1993, the Corporation organized Total Beverage under the
laws of Delaware as a wholly-owned subsidiary. On February 27, 1993, Total
Beverage purchased the assets of a discount beverage superstore located in
Chantilly, Virginia for approximately $1,494,000 from Shoppers Food. In
October 1993, Total Beverage opened two additional stores located in Alexandria
and Manassas, Virginia. The stores sell beer, wine and non-alcoholic
beverages.
Exercise of Subsidiary Stock Options
In each of the three years ended January 31, 1994, Trak Auto and Crown
Books stock options have been exercised. As these options are exercised, the
number of minority shares outstanding, and accordingly the minority share of
the ownership of Trak Auto and Crown Books, increases. The difference
attributable to the Corporation's change in ownership percentage for these
subsidiaries is reflected in Paid-in Capital.
Crown Books Corporation
The Corporation purchased 50,000 additional shares of Crown Books common
stock during the year ended January 31, 1994 that increased its ownership to
51.35%.
44
<PAGE> 45
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS:
Description of Leasing Arrangements
The Company leases stores, warehouses, leasehold improvements, fixtures
and equipment. Renewal options are available on the majority of leases. In
some instances, store leases require the payment of contingent rentals and
license fees based on sales in excess of specified minimums. Certain
properties are subleased with various expiration dates. Certain capital leases
have purchase options at fair market value at the end of the lease.
Following is a schedule by fiscal year of future minimum payments under
capital leases, license agreements and non-cancelable operating leases having
initial or remaining terms in excess of one year at January 31, 1994. The
imputed interest rate on the capital leases is 14.74% in the aggregate.
<TABLE>
<CAPTION>
- In Thousands -
---------------------------------------
Capital Leases
------------------------
Fixtures
Fiscal and Operating
Year Buildings Equipment Leases
- ------ --------- --------- ---------
<S> <C> <C> <C>
1995 $ 4,925 $ 398 $ 54,108
1996 5,286 298 49,277
1997 5,575 - 43,749
1998 5,891 - 37,255
1999 6,243 - 29,605
2000-2017 115,840 165,658
-------- --------- ---------
143,760 696 $ 379,652
=========
Less-Imputed interest 104,750 66
-------- ---------
Present value of net minimum 39,010 630
lease payments
Less-Current maturities - 345
-------- ---------
Long-term capital lease
obligations $ 39,010 $ 285
-------- ---------
</TABLE>
Rent expense for operating leases and license arrangements are as follows:
<TABLE>
<CAPTION>
Year Ended January 31,
------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Minimum rentals $ 51,158,000 $ 44,330,000 $41,531,000
Contingent rentals 529,000 537,000 591,000
------------ ------------ -----------
$ 51,687,000 $ 44,867,000 $42,122,000
============ ============ ===========
</TABLE>
45
<PAGE> 46
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
Capital Lease Arrangements
The Corporation has a lease with a private partnership in which Haft
family members own all of the partnership interests, for a 271,000 square foot
headquarters building and distribution center in Landover, Maryland. The lease
is for 30 years and six months, commenced in October 1985, and provides for
increasing rental payments over the term of the lease. The current annual
rental is $1,819,000. The lease requires the payment for maintenance,
utilities, insurance and taxes. The distribution center was constructed by the
partnership at a cost of approximately $8,300,000. The Corporation has sublet
approximately 238,000 square feet to Trak Auto and Crown Books at a per square
foot charge which is equal to the Corporation's per square foot cost under the
master lease. The Corporation has a lease agreement with the aforementioned
partnership for land, identified for future Trak Auto expansion, adjacent to
the headquarters building and distribution center. The lease is for the same
period as the headquarters building and distribution center lease. The lease
provides for current annual rental of $33,000 with increases of three percent
per year. The rent will be renegotiated upon commencement of construction of
any improvements. Trak Auto has agreed to bear the annual carrying cost for
the land.
The Corporation's majority-owned subsidiary, Trak Auto, entered into an
agreement to lease a 176,000 square foot distribution center in Bridgeview,
Illinois from a private partnership in which Haft family members own all of the
partnership interests. The lease is for 30 years and six months, commenced
April 1984 and provides for rental payments increasing approximately 15% every
five years over the term of the lease. The current annual rental is $588,000.
The lease requires payment of maintenance, utilities, insurance and taxes. The
Corporation is jointly and severally liable for the lease obligations. The
partnership purchased the warehouse on March 12, 1984 for approximately
$3,100,000.
The Corporation's majority-owned subsidiary, Trak Auto, has an agreement
to lease a distribution center in Ontario, California from a private
partnership in which Haft family members own all of the partnership interests.
The lease is for 20 years and commenced in December 1989. The lease also
provides for increasing rental payments, based upon the Consumer Price Index
for the Los Angeles area, over the term of the lease. The current annual
rental is $1,130,000. The lease requires payment of maintenance, utilities,
insurance and taxes. The partnership purchased the distribution center for
approximately $10,800,000.
46
<PAGE> 47
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
The Corporation's majority-owned subsidiary, Shoppers Food, has a lease
agreement for a 86,000 square foot office building in Lanham, Maryland from a
private partnership in which Haft family members and the owners of the minority
interest in Shoppers Food own all of the partnership interests. The lease is
for 20 years and commenced January 9, 1991. The lease provides for yearly
increasing rental payments, based upon the Consumer Price Index for the
Washington, D.C. Metropolitan Statistical Area, however the increases shall not
be more than 6% or less than 3%. The current annual rental is $1,225,000. The
lease requires payment of maintenance, utilities, insurance and taxes. The
partnership purchased the office building for approximately $8,700,000 in July
1990. There are currently four unaffiliated subtenants in the office building.
These subtenants are leasing approximately 36,000 square feet for a current
annual rent of $518,000.
The capital lease arrangements described above are all included in the
lease commitment table.
Lease Guarantee
The Corporation, because of its guarantee as part of the sale of its drug
store division in 1985, reassumed its lease obligations for its former 533,800
square foot executive office facility and warehouse in Landover, Maryland. The
leases are with a private partnership in which Haft family members own all of
the partnership interests. The leases expire September 30, 2016 and provide
for increasing rental payments over the term of the leases based on Consumed
Price Index increases from a base period. The current annual rental is
$845,326. The lease requires payment of maintenance, utilities, insurance and
taxes. The Corporation has reserved $9.6 million which represents the present
value of its estimated future costs under this guarantee.
Trak Auto has an agreement with the Corporation to sublease 6,500 square
feet of the facility. The term of the sublease is one year (with nine one-year
option periods). The annual rental is $21,000 and will increase to $24,000 for
each of the last five option periods. The sublease requires Trak Auto to pay
approximately $6,000 annually for its share of common area maintenance, real
estate taxes and insurance premiums. In addition, Shoppers Food has an
agreement with the Corporation to rent (on a month to month basis) 6,000 square
feet of the above facility for approximately $2,000 a month. The Corporation
is actively marketing the remaining space for lease to unaffiliated parties.
47
<PAGE> 48
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
Store Operating Leases
During the fiscal years ended January 31, 1994, 1993 and 1992,
respectively, Trak Auto made rental payments of approximately $2,180,000,
$2,008,000 and $1,848,000, Crown Books made rental payments of approximately
$1,780,000, $1,410,000 and $1,433,000, and Shoppers Food made rental payments
of approximately $2,873,000, $2,873,000 and $2,538,000 and Total Beverage made
rental payments of approximately $361,000 during the year ended January 31,
1994 to CMREC shopping centers and to partnerships in which members of the Haft
family own all or substantially all of the beneficial interests. Two of the
stores involved were acquired by the partnerships within the past two years.
Store Closing Costs
The costs associated with store closings are charged to expense when
management makes the decision to close a store. Such costs consist primarily
of future lease obligations (including rent, real estate taxes and common area
maintenance charges), after the closing date, net of estimated sublease income,
and the remaining book value of leasehold improvements.
Trak Auto, Crown Books and Shoppers Food have closed stores in various
markets with leases expiring through 2002. Net charges (income) of
approximately $(574,000), $1,013,000 and $4,268,000 were recorded in fiscal
1994, 1993 and 1992, respectively, representing estimated unrecoverable lease
costs, net of sublease the remaining book value of leasehold improvements and
certain costs for these stores. Income during the year ended January 31, 1994
was the result of Trak Auto and Crown Books early terminations of lease
agreements by Trak Auto and Crown Books, net of cash buyouts. Any settlements
of lease obligations at amounts originally estimated are recorded at the time
of settlement. Trak Auto, Crown Books and Shoppers Food continue to review
store operations and may close additional underperforming stores in the future.
(5) CERTAIN EVENTS:
Employment of Ronald S. Haft
On August 1, 1993, the Board of Directors of the Corporation approved an
employment agreement with Ronald S. Haft (the "Agreement"), pursuant to which
he was employed by the Corporation as its President and Chief Operating Officer
for a term initially ending on January 31, 1997. The term is to be extended
for one year on each February 1 that Ronald S. Haft is employed under the
Agreement. The Agreement also provides that Ronald S. Haft will be nominated
to the Board of Directors of the Corporation at each opportunity during the
term of the Agreement; he was elected as a director of the Corporation July 28,
1993. Ronald S. Haft also was elected as a Director of the Corporation's
subsidiaries. Under the terms of the Agreement, Ronald S.
48
<PAGE> 49
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(5) CERTAIN EVENTS (Continued):
Haft may engage, directly or indirectly, in any other business activities so
long as they do not interfere with his duties to the Corporation.
Sale of Options to Ronald S. Haft
Under the Agreement, Ronald S. Haft acquired for $5.00 per share options
(the "Options") to purchase 197,048 shares of the Corporation's Class B Common
Stock, par value $1.00 ("Dart Class B Stock"). All issued and outstanding Dart
Class B Stock, which is the only class of common stock of the Corporation with
voting rights, is held by members of the Haft family. The total acquisition
price for the Options, which has been paid, was $985,240.
The exercise price for the Options is $89.65 per share, which as required
by the Agreement is 110% of the reported closing price for shares of the
Corporation's Class A Common Stock, par value $1.00, on the last trading date
prior to the authorization of the Agreement. The Options were immediately
exercisable as of the date of the Agreement and expire August 1, 2008. The
Options may be exercised by notice to the Corporation, with payment in cash
following within 30 days of the notice. Further, if Ronald S. Haft's
employment is terminated other than for conviction of an offense involving
moral turpitude or for conviction of a felony, he will have the right to
exercise all of the Options prior to or at such time; in the event of his
death, his personal representative shall have the right to exercise the Options
within 60 days thereof.
Under the Agreement, the Corporation also agreed to loan to Ronald S. Haft
the full amount of the exercise price of any Options which he may exercise.
Any such loan is to bear interest at the Prime Rate charged as of the date of
the loan by NationsBank or its successor. Principal and interest on any such
loan is to be due separately upon the earlier of (i) the sale of shares of Dart
Class B Stock purchased with the loan proceeds, (ii) the fifth anniversary of
the loan, or (iii) 90 days from the termination of Ronald S. Haft's employment
under the Agreement.
Sale of Class B Common Shares to Ronald S. Haft
On July 28, 1993, Herbert H. Haft sold his 172,730 shares of Dart Class
B Stock to Ronald S. Haft for the purchase price of $80.00 per share, and
Ronald S. Haft granted to Herbert H. Haft an irrevocable proxy to vote those
shares until his death or incapacity. The total acquisition price for these
shares was $13,818,400, of which $2,763,680 was paid at closing; the remaining
$11,054,720 was paid for with a promissory note bearing interest at 6.61%, the
applicable federal rate, as announced in the Federal Register on July 28, 1993,
with the principal amount and any accrued but unpaid interest due and payable
on August 1, 2013. Accordingly, as of January 31, 1994, there were 302,952
issued and outstanding shares of Dart Class B Stock, of which Ronald S. Haft
owned 25,246 shares (or 8.33%), and another 172,730 shares (or 57.02%) without
the power to vote, for a total of 197,976
49
<PAGE> 50
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(5) CERTAIN EVENTS (Continued):
shares (or 65.35%). If all of the shares of Dart Class B Stock covered by the
Options were issued, there would be 500,000 issued and outstanding shares of
Dart Class B Stock, of which Ronald S. Haft would then own 395,024 shares (or
79.00%), with voting power over 222,294 shares (or 44.46%), and Herbert H. Haft
would have voting power over 172,730 shares (or 34.54%).
(6) LITIGATION:
Robert M. Haft Employment Litigation
In August 1993, Robert M. Haft filed a lawsuit in the United States
District Court for the District of Delaware naming as defendants the
Corporation and two of its subsidiaries, Crown Books and Trak Auto. The
complaint, as amended, alleges breach of contract regarding various employment,
stock option, stock incentive and loan agreements and seeks declaratory
judgment regarding a stock incentive agreement (see Note 10 to the Consolidated
Financial Statements) and a possible right by Robert M. Haft to acquire an
interest in Total Beverage Corporation, a wholly-owned subsidiary of the
Corporation. The complaint, as amended, seeks unspecified damages, costs and
attorneys fees.
Under the terms of the employment agreements, if upheld by the Court, the
Corporation and Crown Books could be required to pay stated compensation plus
incentives based on operating or other financial factors. Minimum payments by
the Company could be as much as $31.8 million over a nine year period ($16.0
million on an after tax basis, discounted at a 10% rate).
Management believes that the Corporation and its subsidiaries have strong
defenses to these allegations and intends to contest such claims vigorously.
Discovery in the litigation is complete and cross motions for summary judgment
have been filed regarding virtually all significant claims. Although the
ultimate outcome of this action cannot be ascertained at this time, it is the
opinion of management that the resolution will not have a material adverse
effect on the Corporation's and its subsidiaries' financial condition or
results of operations.
Derivative Litigation
In September 1993, Alan R. Kahn and Tudor Trust, shareholders of the
Corporation, filed a lawsuit in the Delaware Court of Chancery for New Castle
County naming as defendants Herbert H. Haft, Ronald S. Haft, Douglas M.
Bregman, Bonita A. Wilson, Combined Properties, Inc. ("CPI"), Combined
Properties Limited Partnership ("Combined"), and Capital Resources Limited
Partnership. The suit is brought derivatively and names as nominal defendants
the Corporation and five of its subsidiaries, Trak Auto, Crown Books, Shoppers
Food, Total Beverage, and CMREC. The complaint alleges waste, breach of
fiduciary duty, and entrenchment in connection with various lease agreements
between the Combined Properties defendants and the Corporation and
50
<PAGE> 51
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(6) LITIGATION (Continued):
its subsidiaries, the compensation paid Ronald S. Haft and Herbert H. Haft, the
Corporation's Agreement with Ronald S. Haft, and the sale of Dart Class B Stock
by Herbert H. Haft to Ronald S. Haft. Plaintiffs seek an accounting of
unspecified damages incurred by the Corporation, voiding of the options sold to
Ronald S. Haft, and costs and attorneys' fees.
In November 1993, Robert M. Haft filed another lawsuit in the Delaware
Court of Chancery for New Castle County. The lawsuit names as defendants
Herbert H. Haft, Ronald S. Haft, Douglas M. Bregman, and Bonita A. Wilson, and
also names the Corporation as a nominal defendant. The complaint derivatively
alleges interested director transactions, breach of fiduciary duty and waste in
connection with the Corporation's Agreement with Ronald S. Haft. Robert M.
Haft also brings individual claims for breach of contract and dilution of
voting rights in connection with the sale of Dart Class B Stock by Herbert H.
Haft and the Corporation's Agreement with Ronald S. Haft. The complaint seeks
rescission of the sale of Dart Class B Stock and the options Agreement,
unspecified damages from the individual directors, and costs and attorneys'
fees.
In both of these lawsuits, a Special Litigation Committee consisting of
two outside, independent directors has been appointed by the Board of Directors
to assess, on behalf of the Corporation, whether to pursue, settle or abandon
the claims. Given that the law suits are brought in the name of the
Corporation, recovery in them would inure to the benefit of the Corporation if
the claims in them are successfully litigated or settled. It is therefore the
opinion of management that the resolution of these actions will not have a
material adverse effect on the consolidated financial condition or annual
results of operations of the Corporation.
Total Beverage Litigation
In October 1993, the Corporation and two of its wholly-owned subsidiaries,
Total Beverage and Total Beverage G.B., Inc., filed a lawsuit in the United
States District Court for the Eastern District of Virginia styled The Dart
Group Corporation v. The Globe Distributing Company of Virginia, Inc., d/b/a
The Forman Distributing Company of Virginia, Inc., et al., CA No. 93-1307-A
(E.D. Va.). The lawsuit names as defendants The Globe Distributing Company,
Inc. d/b/a The Forman Distributing Company of Virginia, Inc. ("Forman"), four
other Virginia wine wholesalers, and several of their principals. The
complaint, as amended, alleges violations of the federal and Virginia state
antitrust laws and intentional tortious interference with contract by reason of
an alleged conspiracy among the wholesalers to divide territories and allocate
customers. The complaint, as amended, seeks injunctive relief and unspecified
damages, costs and attorneys' fees. In January 1994, the defendants filed
counterclaims against the plaintiffs for defamation, conspiracy to injure in
reputation, trade and business, conspiracy to coerce and compel, tortious
interference with contractual relations and business expectancies, and
violation of the Lanham Act.
51
<PAGE> 52
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(6) LITIGATION (Continued):
Subsequent to January 31, 1994, all claims and counterclaims in these
actions were settled. The terms and conditions of the settlement agreements
will not have a material adverse effect on the consolidated financial condition
or operating results of the Corporation.
The Corporation and its subsidiaries have recorded expenses of
approximately $8.0 million during the year ended January 31, 1994 for legal
expenses incurred during the year. This includes an estimated future amount
considered to resolve all legal matters discussed above.
Other
In the normal course of business, the Company is involved in various
claims and litigation. It is the opinion of management and counsel that the
disposition of these matters will not materially affect the Company's financial
position.
(7) CREDIT AGREEMENT:
The Corporation is party to a revolving credit agreement, together with
Trak Auto and Crown Books, for a $6,000,000 revolving line of credit. The
$6,000,000 is an aggregate amount and not specifically allocated to any of the
parties. The line is intended to be used for the issuance of standby and trade
letters of credit. At January 31, 1994, there had been no borrowings under the
credit agreement. This line of credit expires May 1, 1995.
(8) CABOT-MORGAN REAL ESTATE COMPANY:
In September 1989, the Corporation organized CMREC, a wholly-owned
subsidiary. CMREC was organized under the laws of Delaware as a real estate
development company.
In December 1989, CMREC and Combined Properties/Briggs Chaney Plaza
Limited Partnership ("Combined/Briggs Chaney"), a Delaware limited partnership
of which the partners are members of the Haft family, formed CM/CP Briggs
Chaney Plaza Joint Venture ("CM/CP Briggs Chaney"). On December 31, 1989,
CM/CP Briggs Chaney purchased Briggs Chaney Plaza Shopping Center located in
Silver Spring, Maryland, for approximately $30,000,000, of which land was
approximately $5,986,000, building and improvements was approximately
$24,066,000, including the assumption of mortgages. There have been no
material additions or improvements to land and building and improvements since
acquisition and the carrying amount of these assets was $27,189,000 at January
31, 1994.
52
<PAGE> 53
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
In December 1989, CMREC and Combined Properties/Greenway Center Limited
Partnership ("Combined/Greenway"), a Delaware limited partnership of which the
partners are members of the Haft family, formed CM/CP Greenway Center Joint
Venture ("CM/CP Greenway"). On December 31, 1989, CM/CP Greenway purchased
Greenway Center located in Greenbelt, Maryland, for approximately $39,300,000,
of which land was approximately $7,813,000, building and improvements was
approximately $31,376,000, including the assumption of mortgages. There have
been no material additions or improvements to land and building and
improvements since acquisition and the carrying amount of these assets was
$35,688,000 at January 31, 1994.
CMREC owns 75% of CM/CP Briggs Chaney and 75% of CM/CP Greenway. The
remaining 25% interests are owned by the aforementioned limited partnerships.
CPI, which is owned by members of the Haft family, provides certain services to
the shopping centers at a cost comparable to that available from unaffiliated
parties.
On March 12, 1991, CMREC acquired from an entity owned by Haft family
members, a 51% interest in CM/CP Greenbriar Retail Joint Venture ("CM/CP
Greenbriar Retail") and a 51% interest in CM/CP Greenbriar Office Joint Venture
("CM/CP Greenbriar Office"), which own Greenbriar Town Center Shopping Center
and Greenbriar Town Center Office Building, respectively, located in Fairfax,
Virginia. The purchase price for the Corporation's interest in CM/CP
Greenbriar Retail and CM/CP Greenbriar Office was approximately $20,000,000,
which represents 51% of the original cost to the seller of the entire center
plus interest and other net holding period costs of approximately $1,350,000
(buyers share). The outside members of CMREC's board of directors approved
this transaction. In addition, the Corporation paid fees to CPI for leasing,
acquisition and development of the Center at a cost comparable to that
available from unaffiliated parties. The Corporation's portion of these fees
was approximately $1,300,000. The seller acquired the property on October 24,
1989. The Haft family entity continues to own the remaining 49% interest and
CPI manages CM/CP Greenbriar Retail and CM/CP Greenbriar Office. The initial
cost of land and building and improvements in CM/CP Greenbriar Retail and CM/CP
Greenbriar Office was approximately $41,392,000. Greenbriar Town Center
completed renovation and expansion in fiscal 1993 and the carrying amount of
land and building and improvements was $69,653,000 at January 31, 1994.
On January 18, 1993, CMREC and CP/Bull Run Limited Partnership
("Combined/Bull Run"), a Maryland limited partnership of which the partners
are members of the Haft family, formed CM/CP Bull Run Joint Venture ("CM/CP
Bull Run"). CMREC owns 51% of CM/CP Bull Run and Combined/Bull Run owns 49%.
On January 18, 1993, CM/CP Bull Run purchased a shopping center known as
Festival at Bull Run located in Prince William County, Virginia, for
approximately $14,097,000 of which land was approximately $5,938,000 and
building and improvements was approximately $8,187,000. CMREC's share of the
cash portion of the purchase price was approximately $2,647,000. In addition,
CMREC has a loan agreement with CM/CP Bull Run for up to $15,450,000, of which
53
<PAGE> 54
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
$8,250,000 had been utilized toward the purchase price of the center and was
considered a bridge loan until CM/CP Bull Run could secure other financing.
Subsequently, CM/CP Bull Run secured other financing and the $8,250,000 was
repaid. The remaining $7,200,000 is intended to fund the construction of
certain improvements to the center. At January 31, 1994, CM/CP Bull Run had
borrowed $5,123,000 against the remaining $7,200,000. CM/CP Bull Run has an
agreement with CPI that engages CPI to manage the center.
CPI charged the four properties for management and related services
$3,264,000, $2,365,000, and $3,438,000 in fiscal 1994, 1993 and 1992,
respectively.
Trak Auto, Crown Books, Shoppers Food and Total Beverage have leases in
several of the properties in which CMREC has an interest. Rental payments on
these leases were $1,765,000, $332,000, and $232,000 in 1994, 1993 and 1992,
respectively. The future lease commitments on these leases excluding option
periods are $21,591,000 expiring on dates through 2013.
Each of these CMREC partnerships contains a buy/sell option under which
the partners have the right, at any time, to initiate procedures under which
the initiating party offers both to sell to or buy from the other party the
initiating party's or the other party's shares in the partnership at the offer
price. The recipient of the offer has the alternative of accepting the offer
to sell or the offer to buy. The Corporation is unable to determine the effect
that would result if either party initiates this procedure.
During the year ended January 31, 1994, CM/CP Briggs Chaney refinanced two
mortgages at Briggs Chaney Shopping Center into one $16,000,000 mortgage and
CM/CP Bull Run obtained a $9,750,000 mortgage. All mortgages payable are
secured by the land and buildings and leasehold improvements. Based on
borrowing rates currently available for bank loans with similar terms, the fair
value of the mortgages are $87,699,000.
54
<PAGE> 55
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
Mortgage payable at January 31, 1994, consists of the following:
<TABLE>
<S> <C>
CM/CP Briggs Chaney
-------------------
Mortgage payable, bearing interest at 8.5% per annum
principal due December 1, 2003; collateralized
by first mortgage on land and buildings $15,949,000
CM/CP Greenway
--------------
Mortgage payable, bearing interest at 10.4% per annum,
payments made on a monthly basis with the last
payment due July 1, 2011; collateralized by first
mortgage on land and buildings 9,611,000
Mortgage payable, bearing interest at 9.75% per annum,
payments made on a monthly basis with the last
payment due December 1, 1996; collateralized by
second mortgage on land and buildings 6,037,000
CM/CP Greenbriar
----------------
Mortgage payable, bearing interest at 9.5% per annum,
payments made on a monthly basis with the last
payment due May 1, 2003; secured by the land and
building at the shopping center 40,350,000
CM/CP Bull Run
--------------
Mortgage payable, bearing interest at 8.0% the first
year, 8.5% the second year, and 9.0% the third year,
principal due May 21, 1996; secured by the land and
building at the shopping center. 9,750,000
------------
Total 81,697,000
Current portion of mortgage payable 988,000
------------
Mortgage payable $ 80,709,000
============
</TABLE>
55
<PAGE> 56
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
Maturities of the mortgages payable as of January 31, 1994 are as follows:
<TABLE>
<CAPTION>
Fiscal Mortgage
Year Payable
------ -----------
<S> <C>
1995 988,000
1996 1,140,000
1997 16,587,000
1998 1,182,000
1999 1,297,000
2000 - 2011 60,503,000
-----------
Total $81,697,000
===========
</TABLE>
Description of Leasing Arrangements
Renewal options are available to the majority of the tenants of CMREC
properties and the leases require payment of contingent rentals and license
fees based on sales in excess of specified minimums. The net book value of the
property held for lease by CMREC included in land, building and leasehold
improvements on the accompanying balance sheet at January 31, 1994 was
$156,714,000 and the mortgage payable (current and long-term) of $81,697,000 is
in connection with these CMREC assets.
The following is a schedule by fiscal year of future minimum rental income
under these leases having initial or remaining terms in excess of one year at
January 31, 1994.
<TABLE>
<CAPTION>
Fiscal
Year Minimum Rental Income
------ ---------------------
<S> <C>
1995 14,705,000
1996 14,062,000
1997 13,048,000
1998 11,450,000
1999 10,853,000
2000 - 2011 49,735,000
------------
Total $113,853,000
============
</TABLE>
56
<PAGE> 57
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE
Trak Auto
During the year ended January 30, 1993, Trak Auto recorded a restructuring
charge of $7,400,000, before income taxes. The restructuring charge is divided
into two categories consisting of the estimated cost of relocating or expanding
an estimated 126 stores to Super Trak stores and discontinuing operations in an
estimated 38 stores. The restructuring charge for the two components consists
of unrecoverable lease obligations (rent, real estate taxes and common area
charges) after the projected closing date of the store or upon remodel or
expansion, the write-off of leasehold improvements and costs associated with
changing store fixtures for new product lines and cost associated with
inventory conversion, as follows:
<TABLE>
<CAPTION>
Lease Fixtures &
Category# Stores Obligations Leaseholds Inventories
- --------- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Relocation or
Expansion to
Super Trak 126 $3,560,000 $ - $1,000,000
Discontinued 38 2,780,000 60,000 -
--- ---------- ----------- ----------
164 $6,340,000 $ 60,000 $1,000,000
</TABLE>
The above lease obligations are for basic lease terms of from one to 74
months. In the case of relocations/expansions, the reserve has been estimated
at 50% of the total lease obligations because Trak Auto believes that certain
alternatives to abandonment may be available. These alternatives include
leasing different or additional space from the same landlord, subletting the
existing space, lease termination and lease buy-out. Therefore, no provision
for leasehold improvement write-off has been made, and only one-half of the
full lease obligation has been provided.
The amount of unrecoverable lease costs relating to properties under
related party leases is approximately $823,000.
57
<PAGE> 58
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE (Continued):
During the year ended January 29, 1994, Trak Auto charged approximately
$600,000 against the restructuring reserve, primarily for the write-off of the
net book value fixed assets in stores that were converted to Super Traks.
The following table indicates the fiscal years in which the restructuring
reserve is expected to be utilized.
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ----------
<S> <C>
1994 $ 600,000
1995 600,000
1996 3,000,000
1997 2,390,000
1998 505,000
1999-2001 305,000
----------
$7,400,000
</TABLE>
Crown Books
During the year ended January 30, 1993, Crown Books recorded a
restructuring charge of $6,600,000 before income taxes. The charge includes
the anticipated costs associated with closing, relocating, expanding and
converting existing stores to the Super Crown Books concept. These costs are
primarily unrecoverable lease obligations and the remaining book value of
leasehold improvements from the estimated closing date. During the year ended
January 29, 1994, Crown Books charged approximately $840,000 against this
reserve.
Crown Books continues to test various concepts (principally related to the
size of the store) in its Super Crown Books prototypes. As a result of these
test stores, Crown Books has determined that a number of the smaller Super
Crown Books stores opened in previous years (typically 6,000 - 10,000 square
feet) are not a competitive format in the current environment. These stores
have been negatively impacted by the industry's roll out of larger stores.
Accordingly, Crown Books recorded an additional restructuring charge of
$6,200,000 in the year ended January 29, 1994, representing the anticipated
costs (unrecoverable lease costs and the remaining book value of leasehold
improvements and store fixtures subsequent to management's estimate of the
stores' closing dates) associated with closing, relocating and converting these
smaller Super Crown Books stores to the new, larger Super Crown Books
prototype.
58
<PAGE> 59
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE (Continued):
The restructuring reserve as of January 29, 1994 of approximately
$11,960,000 is comprised of the following components:
<TABLE>
<CAPTION>
Lease Leaseholds
Year Ended Stores Obligations & Fixtures
- ----------------- ------ ----------- ----------
<S> <C> <C> <C>
January 30, 1993 26 $ 5,150,000 $ 610,000
January 29, 1994 7 5,100,000 1,100,000
------ ----------- ----------
33 $10,250,000 $1,710,000
</TABLE>
The above lease obligations are for primary terms from 16 to 126 months.
The amount of unrecoverable lease costs relating to properties under
related party is approximately $708,200.
The following table indicates the fiscal years in which the restructuring
reserve is expected to be utilized.
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- -------------
<S> <C>
1994 $ 840,000
1995 1,305,000
1996 2,392,000
1997 2,587,000
1998 1,984,000
1999 to 2005 3,692,000
-------------
$ 12,800,000
=============
</TABLE>
59
<PAGE> 60
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8):
Leasing Agreements
The Corporation's subsidiaries, Trak Auto, Crown Books, Shoppers Food and
Total Beverage lease certain real property from CMREC and Haft family owned
partnerships. The leased properties consist of 54 stores and four warehouses.
These leases provide for various termination dates, which, assuming renewal
options are exercised, range from 1994 to 2033 and require the payment of
minimum rentals aggregating approximately $318,932,000 to the lease expiration
dates. Minimum rentals under these leases are approximately $115,203,000 to
the expiration of their original terms. Certain of these leases also require
the payment of a percentage of sales in excess of a stated minimum, as well as
real estate tax increases.
Prior to January 29, 1994, the outside members of the board of directors
of the Corporation, Trak Auto and Crown Books approved each related party
lease. After January 29, 1994, the Real Estate Committee (composed of one
independent director) of the Board of Directors approves these transactions.
The board of directors are provided with a fairness opinion attesting that the
proposed lease is representative of market rent for the subject property. Haft
family members do not vote on these leases.
Employment Agreement
The Corporation has ten-year employment agreements with Mr. Herbert H.
Haft and Mrs. Gloria G. Haft, which are automatically extended for an
additional year on each January 31 in the absence of an election not to extend
the contract. The agreements provide for salaries for Mr. and Mrs. Haft of
$1,281,000 and $195,000, $1,154,000 and $177,000, $1,038,000 and $161,000,
respectively for the years ended January 31, 1994, 1993 and 1992, respectively,
with certain annual cost of living increases based on the CPI (with a minimum
increase of 10% annually plus $12,000 for Mr. Haft and 10% annually for Mrs.
Haft). Both Mr. Haft and Mrs. Haft elected not to receive the increases in
fiscal 1993 and 1992 and therefore their annual salaries remained at $933,000
and $146,000, respectively, for those years. In addition, the agreements
provide life insurance coverage and certain other benefits. Mr. Haft's
agreement also provides for an annual bonus equal to 1-1/2% of the Company's
consolidated pretax profit not reduced as a result of transactions which are
not ordinary, while Mrs. Haft's agreement provides for an annual bonus equal to
3/8 of 1% of the Company's consolidated pretax profit. Further, the
Corporation has agreed to lend to Mr. Haft the funds necessary to purchase a
$3,000,000 life insurance policy on his life or on the life of Mrs. Haft or any
combination thereof, at his discretion. The Corporation has also agreed to
lend Mrs. Haft the funds necessary to purchase a $1,000,000 life insurance
policy on her life. At January 31, 1994, Mr. Haft had purchased a $1,000,000
life insurance policy on the life of Mrs. Haft. Mr. Robert M. Haft (the
Corporation's former President and Chief Operating Officer) had purchased
two $3,000,000 life insurance policies on his life under similar terms with
funds
60
<PAGE> 61
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8) (Continued):
loaned by the Corporation and Crown Books. At January 31, 1994, the loan
balance for these policies was approximately $288,000 and $477,000 for Herbert
H. Haft and Robert M. Haft respectively, and was collateralized by the cash
surrender values. The Corporation has elected not to charge interest on these
loans.
Herbert H. Haft's agreement provides for a supplemental bonus related to
years beginning February 1, 1984 based on certain performance criteria for the
three year period ended January 31, 1985 and each three-year period thereafter.
The supplemental bonus payable to him equals the greatest of (i) 3% of the
increase in the aggregate market value of the Class A Common Stock on the last
day of the three-year period over such market value on the first day of such
period; (ii) 3% of any excess in consolidated stockholders' equity (based on
generally accepted accounting principles) on the last day of the three-year
period over such stockholders' equity on the first day of such period; (iii) 3%
of the aggregate consolidated net income during the three-year period; and (iv)
his base salary and annual bonus for the last year of the three-year period.
The amount accrued under this supplemental bonus plan was approximately
$1,531,000 for the three years ended January 31, 1994. The annual bonuses
accrued for Herbert and Gloria Haft for the year ended January 31, 1994 was
approximately $129,000 and $32,000, respectively. Mr. Herbert H. Haft may
elect to receive all or part of the compensation in the future in the form of
an option for shares of the Corporation's Class A Common Stock or defer
receipt of such income.
On August 1, 1993, the Board of Directors of the Corporation approved an
employment agreement with Ronald S. Haft (the "Agreement"), pursuant to which
he was employed by the Corporation as its President and Chief Operating Officer
for a term initially ending on January 31, 1997. The term is to be extended
for one year on each February 1, that Ronald S. Haft is employed under the
Agreement. Ronald S. Haft's annual base salary is $400,000 and shall be
increased annually effective February 1, 1995 and each February 1 through the
term of the agreement based on review and performance appraisal by the
Corporation's Board of Directors. The Agreement provides for a supplemental
bonus beginning February 1, 1994 and ending January 31, 1997 with terms similar
to Mr. Herbert H. Haft's supplemental bonus and provides for an annual bonus
equivalent to Mr. Herbert H. Haft's. The annual bonus accrued for Ronald S.
Haft for the year ending January 31, 1994 was approximately $129,000. Mr.
Ronald S. Haft may elect to receive all or part of the compensation in the
future in the form of an option for shares of the Corporation's Class A Common
Stock or defer receipt of such income.
In fiscal 1988, the Corporation's Board of Directors concluded that it
would be appropriate for Herbert H. Haft and Robert M. Haft each to
participate individually in acquisitions of other companies by the Corporation
on the same terms and conditions as management of the acquired company might
participate or by the purchase of each of ten percent (10%) of the
Corporation's interest in the acquired company on an equivalent basis as is
paid by the Corporation.
The Corporation's interest in Shoppers Food is held through a wholly
61
<PAGE> 62
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8) (Continued):
owned subsidiary, Dart/SFW Corp. In fiscal 1990, the Corporation granted both
Herbert H. Haft and Robert M. Haft an option to purchase up to ten shares of
the common stock of Dart/SFW Corp., or 10 percent of such stock on a fully
diluted basis, for approximately $192,688 per share. Each such option is
exercisable in whole or in part during the period beginning on August 8, 1994
and ending on August 8, 2004; provided that such options become immediately
exercisable in the event of a Major Business Change (as defined in the option
agreement) and for a period of ten years thereafter. At any time within three
years after receipt of the Dart/SFW shares pursuant to the exercise of an
option, Herbert Haft or Robert Haft, as the case may be, may require the
Corporation to purchase all or part of such shares at their then fair market
value, as determined by an independent appraiser selected by the Corporation's
Board of Directors. Pursuant to agreements dated January 11, 1990, Herbert H.
Haft assigned and transferred his option to acquire ten shares of Dart/SFW
Corp. to his two children, Ronald S. Haft and Linda G. Haft, and Robert M. Haft
assigned and transferred his option to acquire six shares of Dart/SFW Corp to
Trusts established for the benefit of his two children, Michael A. Haft and
Nicholas G. Haft.
Incentive Stock Agreement
In fiscal 1990, Crown Books entered into an incentive stock agreement with
Robert M. Haft, the former President of Crown Books. Under the terms of the
agreement, Crown Books issued 100,000 shares of stock to Mr. Haft in return for
a non-interest bearing promissory note, discounted at an 11% effective interest
rate, of $203,750, due January 2, 2004. The agreement provides that the stock
certificate representing the 100,000 shares state that the shares are subject
to certain transfer restrictions. Crown Books has the right, expiring ratably
over the period from January 2, 1999 to January 2, 2001, to repurchase all or a
portion of the shares, subject to certain conditions, in the event Mr. Haft
voluntarily terminated employment with Crown Books. Crown Books believes that
conditions exist which so entitle Crown Books to exercise its right to purchase
all or part of the shares issued to Mr. Haft under the agreement at their
original issuance price. This matter is in litigation discussed below. As of
January 31, 1994, Crown Books had not elected to exercise its right under the
agreement to purchase the shares. Purchase of the shares issued to Mr. Haft
would result in Crown Books recording a pre-tax gain of approximately $900,000
(on a consolidated basis $462,000 after minority interest) reflecting recovery
of compensation previously recognized by Crown Books.
In August 1993, Robert M. Haft filed a lawsuit in the United States
District Court for the District of Delaware styled Robert M. Haft v. Dart Group
et al. (see Note 6 to the Consolidated Financial Statements). Robert M. Haft
seeks, among other requests, that Crown Books reissue to Robert M. Haft the
stock certificate representing the 100,000 shares without any stated
restrictions on the use or transfer of the shares. Reissuance of the shares
without restriction would result in Crown Books recording a pre-tax loss of
62
<PAGE> 63
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
approximately $1,300,000 (on a consolidated basis $668,000 after minority
interest) reflecting the write-off of deferred compensation recorded in Crown
Books financial statements on January 31, 1994.
(11) MINORITY INTERESTS:
The $140,637,000 of minority interests reflected in the Consolidated
Balance Sheet as of January 31, 1994 represents the portion of real estate
partnerships' equity owned by the Haft family partnerships, the portion of Trak
Auto and Crown Books equity owned by the public shareholders of Trak Auto and
Crown Books, respectively, and the portion of Shoppers Food equity owned by the
shareholders of Shoppers Food (other than the Corporation). Income attributed
to the minority shareholders of Trak Auto was $27,000, $1,529,000 and $655,000
for the years ended January 31, 1994, 1993 and 1992, respectively. Income
(loss) attributed to the minority shareholders of Crown Books was $(101,000),
$2,014,000, and $4,825,000 for the years ended January 31, 1994, 1993 and
1992, respectively. Income attributed to the minority ownership of Shoppers
Food for the year ended January 31, 1994, 1993 and 1992 was $6,203,000,
$4,120,000, and $6,189,000, respectively. Income (loss) attributed to the
minority ownership of real estate partnerships was $383,000, $1,003,000, and
$133,000 for the years ended January 31, 1994, 1993 and 1992, respectively.
(12) STOCK OPTION PLANS:
Dart Group Corporation 1992 Stock Option Plan
The Corporation has adopted a stock option plan (the "1992 Plan") for
officers, key employees and directors. The total number of shares that may be
issued under the 1992 Plan is 400,000 and the 1992 Plan will terminate June 2,
2002. Options granted pursuant to the 1992 Plan may be incentive stock
options, as defined in Section 422 of the Internal Revenue Code or may be
non-qualified options. Based on options outstanding at January 31, 1994, the
maximum shares issuable under options exercisable over the next five years are:
19,207 in 1995, 41,332 in 1996, 45,750 in 1997 and 1998 and 32,000 in 1999.
Information concerning stock options under the 1992 Plan is as follows:
<TABLE>
<CAPTION>
No. of Option Price
Shares Per Share
-------- ---------------
<S> <C> <C>
Outstanding at January 31, 1992 - $ -
Granted 28,750 74.00 - 81.00
-------- ---------------
Outstanding at January 31, 1993 28,750 74.00 - 81.40
Granted 32,000 81.50 - 89.65
Exercised (1,500) 74.00
Expired (13,500) 74.00 - 81.40
-------- ---------------
Outstanding at January 31,1994 45,750 $ 74.00 - 89.65
======== ===============
</TABLE>
63
<PAGE> 64
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(12) STOCK OPTION PLANS (Continued):
Options for 352,750 shares remain available for grant and 4,583 options
were exercisable at January 31, 1994.
Dart Group Corporation 1981 Stock Option Plan
The Corporation has a 1981 stock option plan (the "1981 Plan") in which
directors, officers and key employees participate. Based on outstanding
options, on January 31, 1993 the maximum number of shares subject to options
exercisable in each of the next three years is 42,500 in 1995, 28,750 in 1996
and 15,000 in 1997. The 1981 Plan terminated December 4, 1991 and no more
options may be granted under the 1981 Plan.
Information concerning stock options under the 1981 Plan is as follows:
<TABLE>
<CAPTION>
No. of Option Price
Shares Per Share
-------- ---------------
<S> <C> <C>
Outstanding at January 31, 1992 204,838 $ 65.00 -104.50
Exercised (1,268) 68.25 - 77.25
Expired (94,320) 68.25 - 75.08
-------- ---------------
Outstanding at January 31, 1993 109,250 65.00 -104.50
Exercised (5,250) 65.00 - 77.25
Expired (61,500) 65.00 -104.50
-------- ---------------
Outstanding at January 31,1994 42,500 $ 65.00 -104.50
======== ===============
</TABLE>
At January 31, 1994 there were 36,746 options exercisable under the 1981
Plan.
The Board of Directors of the Corporation has authorized certain officers
and directors of the Corporation to apply for loans from the Corporation to
exercise their vested stock options. Under the plan approved by the board, the
loans must bear interest at the prime rate, adjusted annually, must be secured
by all of the stock acquired by exercise of the options, must be repaid out of
the first proceeds of sale of stock or at the end of three years, whichever is
earlier, and the borrower must demonstrate to the Corporation's chief financial
officer both that it would be difficult to dispose of the number of shares on
the open market and that he or she presents a reasonable credit risk to the
Corporation. The Board of Directors for both Trak Auto and Crown Books have
authorized such loans to certain officers and directors of Trak Auto and Crown
Books.
In May 1983, the Corporation adopted an executive non-qualified stock
option Plan (the "Plan"), amended in September 1983, which provides that a
total of 199,500 shares of Class A Common Stock may be issued. Options for
177,500 shares were granted under this Plan when it was adopted. The exercise
price at the time of the grant was equal to 100% of the fair market value
($82.50 per share) of the Class A Common Stock. The Plan provides that in the
64
<PAGE> 65
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(12) STOCK OPTION PLANS (Continued):
event of a "major business change" the exercise price of options held by
persons who are employees of the Corporation on the day immediately preceding
such a change is reduced to $20.00 per share. The sale of the Corporation's
drug store division in 1985 constituted a major business change as defined
by the Plan. Accordingly, outstanding options for 154,500 shares are
exercisable at $20.00 per share and options for 3,990 shares are exercisable at
$82.50 per share. Options granted under the Plan are exercisable until 1998.
The Corporation may lend to each optionee, without interest, as long as he/she
is an employee of the Corporation, the funds necessary to exercise the options
until the earlier of three years, the sale of the shares thereby acquired or
termination of the optionee's association with the Corporation or the
Corporation may permit the optionee to pay for the shares acquired on exercise
with shares of the Corporation's Class A Common Stock valued at the market
price on the date of exercise. The options are only transferable by will or by
the laws of descent and distribution. Options for 100, and 2,000 shares were
exercised during the fiscal years ended January 31, 1993 and 1992,
respectively. No options were exercised in fiscal 1994.
In September 1987, the Corporation adopted the 1987 Executive
Non-Qualified Stock Option Plan ("1987 Plan"). The 1987 Plan provides for the
grant of options to purchase, in the aggregate, 199,500 shares of Class A
Common Stock and granting to each of Herbert H. Haft and Robert M. Haft options
to purchase 99,750 shares of Class A Common Stock at an exercise price of
$148.50 per share, or fair market value at the time of the grant. (On December
9, 1987, when the 1981 Plan exercise prices were reduced, the exercise price
for the 1987 Plan was reduced to $68.25 per share.) The 1987 Plan provides
that in the event of a "major business change" the exercise price of options
held by persons who are employees of the Corporation on the day immediately
preceding such change is reduced to $36.00 per share. (On December 9, 1987,
the exercise price in the event of a "major business change", which has not
occurred, was reduced to $16.40 per share.) Options granted under the 1987
Plan are exercisable on or after April 1, 1988 and prior to September 30, 2002.
The Corporation may lend to each optionee, without interest, as long as he is
an employee of the Corporation, the funds necessary to exercise the options
until the earlier of three years, the sale of the shares thereby acquired or
termination of the optionee's association with the Corporation or the
Corporation may permit the optionee to pay for the shares acquired on exercise
with shares of the Corporation's Class A Common Stock valued at the market
price on the date of exercise. The options are only transferable by will or by
the laws of descent and distribution.
Stock options granted for Trak Auto and Crown Books would not, if
exercised, have a material dilutive effect on the Corporation's equity interest
in those entities.
Stock options granted for Crown Books would, if all were exercised, reduce
the Corporation's ownership percentage to 48.9%.
65
<PAGE> 66
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(13) EMPLOYEES' PROFIT-SHARING PLAN
The Corporation, Trak Auto and Crown Books maintain separate
non-contributory profit-sharing plans for all full-time employees with one year
of continuous employment. Annual contributions to the plans are based on a
discretionary percentage of net income, as defined in the respective plan, and
as determined by the respective board of directors. Contributions are
allocated to individual employees based on each employee's salary in relation
to the total salaries of all eligible employees. Contributions paid or accrued
for the Corporation's, Trak Auto's and Crown Books' plans for the years ended
January 31, 1994, 1993 and 1992 were $400,000, $1,175,000, and $870,000,
respectively.
Shoppers Food maintains a non-contributory profit sharing plan with
discretionary contributions to qualified employees. Generally, employees who
complete one year of service are eligible to participate in the plan. The
Board of Directors of Shoppers Food authorized contributions of $300,000 to the
plan for the 1993 plan year. No contribution was authorized for the 1992 plan
year.
(14) 14% SUBORDINATED DEBENTURES:
During the years ended January 31, 1993 and 1992, the Corporation redeemed
its outstanding 14% Subordinated Debentures in face amounts of $29,120,000 and
$75,000,000, respectively. The after tax losses associated with these
redemptions, including unamortized discount and issue costs, $885,000 and
$1,589,000 have been classified as an extraordinary item. As of January 31,
1993, all of the Corporation's debentures had been redeemed.
(15) UNUSUAL ITEM:
Trak Auto had 15 stores substantially damaged or completely destroyed in
the Los Angeles civil disturbances in May of 1992. Eleven of these stores have
subsequently reopened and four remain closed. At January 31, 1993, Trak Auto
had received payments from insurance carriers of approximately $6,400,000 and
recorded a receivable of an additional $3,600,000 which represent settlement of
Trak Auto's insurance claims. Trak Auto received these funds during the first
quarter of fiscal 1994. The payment and receivable, less related expenses and
the cost of the related inventory and fixed assets lost, have been recorded as
a gain, classified as an unusual item during the year ended January 31, 1993.
66
<PAGE> 67
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(16) SEGMENT INFORMATION:
The Company's four primary business segments are retail specialty, retail
grocery, a real estate company and a financial company. The following is a
summary of selected consolidated information for the business segments during
January 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
(in thousands)
Year Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Retail, specialty $ 614,558 $ 561,249 $ 557,311
Retail, grocery and beverage 739,081 692,595 614,772
Real estate 19,011 14,339 9,534
Financial company 2,588 4,152 11,771
Other 1,305 342 1,760
------------ ------------ ------------
1,376,543 $ 1,272,677 $ 1,195,148
============ ============ ============
Income from operations:
Retail, specialty $ (670) $ 8,101 $ 19,229
Retail, grocery and beverage 14,680 13,784 19,712
Real estate 8,458 6,859 3,175
Financial company (1) 2,322 3,253 10,263
------------ ------------ ------------
Total operating profit 24,790 31,997 52,379
------------ ------------ ------------
Interest income 6,813 6,122 7,986
Interest expense (13,513) (10,412) (9,125)
------------ ------------ ------------
Earnings before
unusual item and
income taxes $ 18,090 $ 27,707 $ 51,240
============ ============ ============
Identifiable assets:
Retail, specialty $ 389,426 $ 330,537 $ 304,837
Retail, grocery and beverage 136,839 117,143 111,071
Real estate 172,808 160,332 126,599
Financial company 226,803 224,411 221,808
Other (2) (122,978) (110,044) (67,920)
------------ ------------ ------------
$ 802,898 $ 722,379 $ 696,395
============ ============ ============
</TABLE>
(1) Includes income from bankers' acceptances.
(2) Includes consolidating eliminations and adjustments.
67
<PAGE> 68
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(16) SEGMENT INFORMATION (Continued):
<TABLE>
<CAPTION>
(in thousands)
Year Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Depreciation and Amortization
Expense:
Retail, specialty $ 10,742 $ 8,447 $ 8,668
Retail, grocery and beverage 11,587 12,127 9,020
Real estate 4,338 3,190 2,688
Other 1,355 1,332 1,365
------------ ------------ ------------
28,022 $ 25,096 $ 21,741
============ ============ ============
Capital Expenditures:
Retail, specialty $ 27,403 $ 11,655 $ 7,733
Retail, grocery and beverage 6,152 9,576 16,647
Real estate 12,491 29,555 55,968
Other 193 67 19
------------ ------------ ------------
$ 46,239 $ 50,853 $ 80,367
============ ============ ============
</TABLE>
68
<PAGE> 69
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(17) INTERIM FINANCIAL DATA (Unaudited):
Selected interim financial data for the fiscal years ended 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
-- In Thousands Except Per Share Data --
Three months ended: JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
1994 1993 1993 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 390,282 $ 331,512 $ 334,538 $ 320,211
Gross profit (1) 72,577 62,105 66,659 62,446
Net Income (Loss) (3) $ (7,282) $ (687) $ 682 $ 550
========== ========== ========== ==========
Earnings per share
Net Income (Loss) (2) $ (3.98) $ (.44) $ .28 $ .24
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three months ended: JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
1993 1992 1992 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 345,826 $ 311,975 $ 314,463 $ 300,413
Gross profit (1) 68,019 60,457 56,648 60,424
Income (Loss) before
extraordinary items (1,603) 1,693 1,040 2,379
Extraordinary items (3) - - (885) -
Cumulative effect of
change in accounting
principle - - - 1,135
---------- ---------- ---------- ----------
Net Income (Loss) $ (1,603) $ 1,693 $ 155 $ 3,514
========== ========== ========== ==========
Earnings per share
Income (Loss) before
extraordinary items
and in accounting
principle (.87) $ .93 $ .57 $ 1.30
Extraordinary items - - (.48) -
Cumulative effect of
change in accounting
principle - - - .61
---------- ---------- ---------- ----------
Net Income (Loss) (2) $ (.87) $ .93 $ .09 $ 1.91
========== ========== ========== ==========
</TABLE>
(1) After deduction for cost of sales, store occupancy and warehousing
expenses.
(2) The sum of these amounts does not equal the annual amount because of the
changes in the average number of shares outstanding during the year.
(3) After deduction in 4th Quarter for restructuring charge.
Financial data for the year ended January 31, 1994, has been restated to
reflect the adoption of SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992.
69
<PAGE> 70
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
70
<PAGE> 71
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Corporation are as follows.
<TABLE>
<CAPTION>
Name Age Position with the Registrant
- ---- --- ----------------------------
<S> <C> <C>
Herbert H. Haft 73 Chairman of the Board of Directors
and Chief Executive Officer
Ronald S. Haft 35 President, Chief Operating Officer
and Director
Ron Marshall 40 Senior Vice President and
Chief Financial Officer
Dennis N. Weiss 48 Executive Vice President, Real Estate
Bonita Wilson 52 Director
Douglas Bregman 44 Director
H. Ridgely Bullock 60 Director
Larry G. Schafran 55 Director
</TABLE>
Directors are elected annually by the holders of the Class B Common Stock.
All of the foregoing officers have served in the positions stated in the
previous table for more than five years, except as stated below. Officers
serve at the discretion of the Board of Directors.
Mr. Herbert H. Haft, the founder of the Corporation, has been Chief
Executive Officer and Chairman of the Board of the Corporation since 1960. He
was Co-Chairman or Chairman of the Board of Directors of Crown Books from its
organization until December 1991, when he became Chairman of the Executive
Committee. Mr. Haft became Chairman of the Board of Directors of Crown Books,
again, in June 1993. Mr. Haft has been Chairman of the Board of Directors and
Chief Executive Offficer of Trak Auto since its organization in March 1983.
Mr. Haft has been a director of Shoppers Food since April 1989.
Mr. Ronald S. Haft joined the Corporation as President and Chief Operating
Officer August 1, 1993. Prior to joining the Corporation, Mr. Haft was
President of Combined Properties, Inc., a real estate management company, from
1984, and continues to hold that position. Mr. Haft has been a director of the
Corporation, Trak Auto, Crown Books and Shoppers Food since July 28, 1993.
Mr. Marshall joined the Corporation in November 1991 as Senior Vice
President and Chief Financial Officer. At the same time he was appointed
Treasurer and Principal Financial Officer of Trak Auto and Treasurer and Chief
Financial Officer of Crown Books. Prior to joining the Corporation, Mr.
Marshall was Chief Financial Officer at Barnes and Noble Bookstores Inc., a
national retailer of college bookstores, from 1988 to 1991. Prior to that, he
was Vice President of Finance at The Office Place Inc., a subsidiary of NBI,
Inc.
71
<PAGE> 72
Item 10. Directors and Executive Officers of the Registrant - Continued
Mr. Weiss joined the Corporation in August 1981, as Director of Real
Estate. He was appointed Vice President, Real Estate, in June 1983, Senior
Vice President, Real Estate, in September 1986, and Executive Vice President,
Real Estate in December 1987.
Ms. Bonita A. Wilson has been a retailing executive with Saks Jandel
since February 1994. Prior to that she was a retailing executive with the May
Company. Ms. Wilson serves on the board of directors of Wedgewood Financial
Management, Inc. Ms. Wilson was elected to serve as a director of the
Corporation since June 1993 and was elected to be a director of Trak Auto and
Crown Books on June 30, 1993.
Mr. Douglas M. Bregman is a partner in the law firm of Bregman, Berbert &
Schwarts, specializing in commercial real estate law. Mr. Bregman is also an
Adjunct Professor of Law at the Georgetown University Law Center. Mr. Bregman
was elected to serve as a director of the Corporation since June 1993 and was
elected to be a director of Trak Auto and Crown Books on June 30, 1993.
Mr. H. Ridgely Bullock is president of Montchanin Management Corporation,
a management and financial consulting firm, and president and director of
Michel Vineyards. Mr. Bullock is an attorney in New York. Mr. Bullock
previously served as chairman and chief executive officer of Bank of New
England Corporation and UniDynamics Corporation. Mr. Bullock was elected a
director of the Corporation, Trak Auto and Crown Books on December 20, 1993.
Mr. Larry G. Schafran is managing general partner of L.G. Schafran and
Associates, a New York based investment advisory firm, and is a director of
Publicker Industries, Inc., Capsure Holdings, Corp. and OXIGENE, Inc. Mr.
Schafran has previously held the positions of vice president and director of
Webb & Knapp, Inc. and its successor General Property Corp. Mr. Schafran was
elected a director of the Corporation, Trak Auto and Crown Books on December
20, 1993.
The other officers of the Corporation are:
Mr. Robert F. Ampula rejoined the Corporation in November 1988 as Vice
President, Information Services, a position he held from January 1985 until
July 1986. Prior to rejoining the Corporation he was most recently with Coca
Cola Enterprises.
Mr. Elliot R. Arditti joined the Corporation in January 1984 as Associate
Counsel. He was appointed Assistant Vice President, Corporate Counsel in
September 1986 and Vice President, Corporate Counsel in December 1987. Prior
to joining the Corporation, he was an associate with the law firm of Pascal,
Weiss, Peartree and Habbert.
Mrs. Gloria G. Haft is Vice President of the Corporation and was a
director of the Corporation, Trak Auto and Crown Books until June 1993.
Herbert H. Haft and Gloria G. Haft are husband and wife. They are the
parents of Ronald S. Haft and Robert M. Haft. There is no other family
relationship between any director and executive officer of the Corporation.
72
<PAGE> 73
Item 10. Directors and Executive Officers of the Registrant - Continued
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Corporation's officers and directors, and persons who beneficially
own more than ten percent of a registered class of the Corporation's equity
securities, to file reports of ownership of the Corporation's securities and
changes in such ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon its review of such forms received by it, the Company
believes that during the fiscal year ended January 31, 1994, all filing
requirements applicable to its officers, directors and ten percent shareholders
were complied with, except that each of Herbert H. Haft, Robert M. Haft, Gloria
G. Haft, Ron Marshall, Warren Tydings, Charles M. Farkas and Claudine B.
Malone, did not file one Form 5 on a timely basis, reporting the granting
of stock options on July 31, 1992 pursuant to the Corporation's stock option
plan. The granting of such options was reported by each such person, except
Robert M. Haft and Warren Tydings (deceased), on Forms 5 filed on March 15,
1994, or for Claudine B. Malone, on or about March 23, 1994.
73
<PAGE> 74
Item 11. Executive Compensation
Summary Compensation Table
The Summary Compensation Table is intended to provide an overview of both
annual and long-term compensation for each of Herbert H. Haft, Ronald S. Haft,
Ron Marshall, Dennis N. Weiss, and Robert M. Haft (the "Executive Group"). It
requires separate, line-by- line entries for compensation paid to each member
of the Executive Group for the last three years, including compensation from
subsidiaries.
<TABLE>
<CAPTION>
Long Term
Compensation
Payouts Annual Compensation Awards
- ------- ----------------------------- -------------
Other
Annual Stock All other
Name of Compen- Options Compen-
Principal sation Granted sation
Position Year Salary($) Bonus($) ($) (1) (#) ($) (2)
---- --------- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Haft 1994 1,491,000 129,000 386,000 50,000 37,000
----
Chief Executive 1993 1,183,000 246,000 61,000 40,000 43,000
----
Officer 1992 1,183,000 139,000 61,000 40,000 39,000
----
Ronald S. Haft 1994 185,000 129,000 128,000 30,000 15,000
----
President (4) 1993 - - - - -
----
1992 - - - - -
----
Ron Marshall 1994 248,000 60,000 5,000 5,000 5,000
----
Chief Financial 1993 233,000 50,000 6,000 1,500 -
----
Officer (3) 1992 35,000 - - 5,000 -
----
Dennis N. Weiss 1994 240,000 - - 2,825 5,000
----
Executive Vice 1993 229,000 - - 750 10,000
----
President 1992 224,000 - - 750 7,000
----
Robert M. Haft 1994 599,000 - 357,000 - 57,000
----
Former (4) 1993 1,134,000 1,371,000 251,000 40,000 72,000
----
President 1992 1,134,000 399,000 251,000 40,000 73,000
----
</TABLE>
----------------
(1) Includes Board of Directors fees. Members of the Corporation, Trak
Auto and Crown Books Board of Directors are paid $15,000 per year
(Trak Auto and Crown Books fees were increased from $10,000 during
fiscal 1994). Members of Dart Financial Board of Directors are paid
$10,000 per year. In addition, includes: $16,000 for Mr. Herbert H.
Haft's auto usage; $206,000 for Mr. Robert M. Haft's compensation
associated with the incentive stock agreement; cumulative Shoppers
Food Board of Directors fees paid in fiscal 1994 to Mr. Herbert H.
Haft, Mr. Ronald S. Haft and Mr. Robert M. Haft of $320,000, $96,000
and $140,000, respectively, for three years ended 1994; and Mr.
Ronald S. Haft's and Mr. Marshall's auto allowance.
(2) Includes allocations to the accounts of certain members of the
Executive Group pursuant to the Profit-Sharing Plans of the
Corporation and Subsidiaries and $32,000 and $52,000 to Herbert H.
Haft and Robert M. Haft each year for interest on life insurance
loans.
(3) Mr. Marshall became Senior Vice President and Chief Financial Officer
of the Corporation in November 1992.
(4) Mr. Ronald S. Haft became President of the Corporation August 1, 1993
and Robert M. Haft's employment was terminated in June 1993.
74
<PAGE> 75
Item 11. Executive Compensation - Continued
Option Grants in Last Fiscal Year
This table provides information with respect to grants of options for
shares of the Corporation and Subsidiaries Common Stock, to the Executive Group
during the prior fiscal year and the exercise or base price, expiration date
and estimates of the potential realizable values of such options.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Potential Real-
% of Total izable Value at
Options Assumed Annual
Granted Rates of Stock
to Emp- Exer- Price Appreci-
loyees cise Market ation for Option
Options in or Base Price Expir- Term (5)
Granted Fiscal Price Date of ation -----------------
Name (#) (5) Year ($/Sh) Grant Date 5% ($) 10% ($)
---- ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert H. 1,115 (1a) 3.5 89.65 81.50 7/31/98 16,000 46,400
Haft 8,885 (1b) 27.8 81.50 81.50 7/31/98 200,100 442,100
20,000 (3) 16.6 23.00 23.00 7/31/98 127,000 280,800
20,000 (4) 21.6 12.50 12.50 7/31/98 69,000 152,600
Ronald S. 1,115 (1a) 3.5 89.65 81.50 7/31/98 16,000 46,400
Haft 8,885 (1b) 27.8 81.50 81.50 7/31/98 200,100 442,100
197,048 (2) 100.0 89.65 81.50 8/01/08 2,831,600 8,199,200
10,000 (3) 8.3 12.50 12.50 7/31/98 63,500 140,400
10,000 (4) 10.8 23.00 23.00 7/31/98 34,500 76,300
Ron 2,500 (1) 7.8 81.50 81.50 7/31/98 56,300 124,400
Marshall 1,250 (3) 1.0 23.00 23.00 7/31/98 7,900 17,600
1,250 (4) 1.4 12.50 12.50 7/31/98 4,300 9,500
Dennis N. 800 (1) 2.5 81.50 81.50 7/31/98 18,000 39,800
Weiss 1,250 (3) 1.0 23.00 23.00 7/31/98 7,900 17,600
800 (4) .9 12.50 12.50 7/31/98 2,800 6,100
Robert M. NONE
Haft
</TABLE>
-----------------
(1) Represents options for Class A Shares
a. Incentive Stock Options
b. Nonqualified Stock Options
(2) Represents options for Class B shares that Mr. Ronald S. Haft
purchased for $985,000 exercisable on date of purchase.
(3) Represents options for Trak Auto Common Stock.
(4) Represents options for Crown Books Common Stock.
(5) Class A, Trak Auto and Crown Books options become exercisable over
time. One-third will become exercisable one year from the date of
grant, an additional one-third will become exercisable two years from
the date of grant and the last third will become exercisable three
years from the date of grant. Options expire five years from the
date of grant. Options are granted at market price on the date of
grant except for incentive stock options ("ISO's") granted to the
Hafts which have been granted at 110% of market price. All options
granted to
75
<PAGE> 76
Item 11. Executive Compensation - Continued
executive officers are ISO's under the Internal Revenue Code
except for 8,885 options for the Corporation's Class A Shares and all
Trak Auto and Crown Books options to each of Herbert and Ronald Haft
which are non-qualified options. ISO's entitle the option holder to
special tax treatment provided that the option holder satisfies
certain holding periods with respect to shares acquired on the
exercise of options. In general, if the holding periods are
satisfied, the option holder will incur no taxable income by reason
of exercise of the option, and the Corporation will not receive an
income tax deduction by reason of the exercise. The option holder
will recognize gain or loss upon a subsequent sale of the common
stock, based on the difference between the amount for which the stock
is sold, and the option price paid.
(6) Potential realizable value is based on an assumption that the price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the five year
option term. These numbers are calculated based on the rules and
regulations promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price
growth.
76
<PAGE> 77
Item 11. Executive Compensation - Continued
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-
End Option Values
This table provides information regarding the exercise of options during
the fiscal year and the number and value of unexercised options held at year
end.
<TABLE>
<CAPTION>
Value of
Number of Unexercisable
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Herbert H. Haft - (1) - 139,749 2,453,000
20,001 105,000
- (2) - 49,998 115,000
40,002 39,000
- (3) - 29,999 -
30,001 -
Ronald S. Haft - (1) - - -
10,000 33,000
- (2) - - -
10,000 -
- (3) - - -
10,000 -
Ron Marshall 2,250 (1) 39,000 1,582 25,000
5,168 51,000
- (2) - - -
1,250 -
- (3) - 333 -
1,917 -
Dennis N. Weiss - (1) - 2,250 13,000
1,550 14,000
- (2) - 1,000 2,000
2,000 2,000
- (3) - - -
800 -
Robert M. Haft - (1) - 219,750 (4) 9,526,000
- -
- -------------------
</TABLE>
(1) Represents options for Class A Shares
(2) Represents options for Trak Auto Common Stock.
(3) Represents options for Crown Books Common Stock.
(4) Does not include 40,000 options for Class A Shares, 40,000 options
for Trak Auto Common Stock or 80,000 options for Crown Books Common
Stock, which the Company maintains expired by virtue of Mr. Haft's
termination of employment. Mr. Haft has contested this in
litigation. See Note 6 to the Consolidated Financial Statements.
77
<PAGE> 78
Item 11. Executive Compensation - Continued
Compensation of Directors
Members of the Board of Directors of the Corporation, Trak Auto and Crown
Books are each paid $15,000 per year. Members of the Board of Directors of
Dart Financial are each paid $10,000 per year. Ms. Wilson and Mr. Bregman are
members of the profit sharing and audit committees for the Corporation, Trak
Auto and Crown Books and are compensated $5,000 per year for each committee.
Mr. Bullock and Mr. Schafran are members of the special litigation committee
and are compensated $250 per hour plus expenses.
The Dart Group Corporation's, Trak Auto and Crown Books Stock Option
Plans specify that each director who is not an employee shall receive 1,500,
1,500 and 2,500 options each year. The options will expire five years from the
date of grant.
In September 1987, the Corporation adopted the 1988 Dart Group Corporation
Deferred Compensation Plan for Directors, effective January 1, 1988 (the
"Compensation Plan"). The Compensation Plan permits the Corporation's
directors to defer the payment of all or a specified part of future
compensation payable for services as director, including fees for serving on or
attending meetings of committees of the board of directors. Each director may
elect, on or before January 31 of any year to defer payment of compensation,
payable on or after the February 1st following such election, for services to
be performed during the twelve-month period commencing on such February 1 and
ending on January 31 of the following calendar year (the "Plan Year"). After
such an election, all subsequent compensation will be deferred until the
director notifies the Corporation, prior to the commencement of any Plan Year,
that compensation for future Plan Years is to be paid on a current basis.
Deferred compensation will not be paid to the director as earned, but will
be held in the Corporation's general funds and credited to a bookkeeping
account maintained by the Corporation in the name of the director. Each
participating director will be treated as a creditor of the Corporation with
respect to such funds. Deferred compensation will be paid to directors in a
lump sum on the February 15th of the Plan Year after retirement, unless the
director elects, at the time he exercises the deferral option, to be paid in up
to ten annual installments.
During the year ended January 31, 1994, the former directors of the
Corporation, Trak Auto, Crown Books and Dart Financial received board fees on a
quarterly basis until June 1993. In addition, the Corporation, Trak Auto and
Crown Books purchased the outstanding in-the-money stock options held by
Claudine B. Malone ($74,000), Charles Farkas ($40,000) and James G. Leonard
($73,000) (a former director of Trak Auto and Crown Books) at the market price
per share. Mr. Leonard also received, at his election, the first two of three
payments under the Compensation Plan. The Company also agreed to provide certain
retirement benefits to Mr. Leonard of approximately $50,000. The Company agreed
to continue the former directors full rights to indemnification as a director.
Employment Contracts
See Note 5 and 10 to the Consolidated Financial Statements.
78
<PAGE> 79
Item 11. Executive Compensation - Continued
Compensation Committee Interlocks and Insider Participation
None of the Boards of Directors of the Corporation, Crown Books or Trak
Auto has a compensation committee, and policies regarding executive
compensation are formulated by the respective Boards of those companies. This
section sets forth certain relationships among the members of the respective
Boards.
Certain members of the Board are directors, officers or employees of the
Corporation and its subsidiaries, as follows: Herbert H. Haft is Chairman of
the Board and Chief Executive Officer of the Corporation, Chairman of the Board
of Crown Books, Chairman of the Board and Chief Executive Officer of Trak Auto,
and Chairman of the Board and Chief Executive Officer of Total Beverage.
Ronald S. Haft is President and Chief Operating Officer and a Director of the
Corporation a Director of Crown Books and Trak Auto.
Certain former directors of the Board were directors, officers or
employees of the Corporation and its subsidiaries during the last fiscal year,
as follows: Robert M. Haft was until June 1993 President and Chief Operating
Officer and Director of the Corporation, Chairman of the Board of Crown Books,
and Vice Chairman of the Board of Directors of Trak Auto. Gloria G. Haft is a
Vice President of the Corporation and, until June 1993, was also Secretary and
Director of the Corporation, Secretary and Director of Crown Books, and Vice
President and Secretary and Director of Trak Auto.
Ronald S. Haft, Robert M. Haft, and Gloria G. Haft are all beneficial
owners of more than 5% percent of the Corporation's Class B Common Stock.
Herbert H. Haft holds an irrevocable proxy to vote certain Class B Common Stock
owned by Ronald S. Haft. See "Security Ownership of Certain Beneficial Owners
and Management." Herbert H. Haft and Gloria G. Haft are husband and wife.
Ronald S. Haft and Robert M. Haft are their sons. See "Certain Relations and
Related Transactions" for a description of certain relationships and
transactions between the Corporation or its subsidiaries and entities in which
members of the Haft family have an interest.
79
<PAGE> 80
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial owners of more than 5% of the Corporation's outstanding voting
securities (Class B Common Stock) at January 31, 1994 and the number of shares
of Class A Common Stock (non- voting) and Class B Common Stock of the
Corporation, common stock of Trak Auto and common stock of Crown Books held
beneficially by each director, each member of the Executive Group and all
directors and officers as a group. Unless otherwise indicated, all shares are
held beneficially and of record.
Directors and Executive Officers:
- --------------------------------
<TABLE>
<CAPTION>
Approximate
Title of No. of Percentage
Name Class Shares of Class
- ---- -------- ------- -----------
<S> <C> <C> <C>
Herbert H. Haft Class A (1) 262,496 16.48
3300 75th Avenue Class B (7) 172,730 57.02
Landover, MD 20785 Trak Auto (2) 50,498 .83
Crown Books (3) 30,499 .56
Ronald S. Haft Class A (4) 62,347 4.29
3300 75th Avenue Class B (5)(6)(7) 395,024 79.00
Landover, MD 20785
Robert M. Haft Class A (4)(8)(9) 285,435 17.06
2346 Massachusetts Ave. Class B (6) 25,246 8.33
Washington, DC 20008 Trak Auto (10) 41,500 .69
Crown Books (11) 231,600 4.30
Ron Marshall Class A (12) 3,832 .26
Crown Books (13) 333 .01
Dennis N. Weiss Class A (14) 2,250 .15
Trak Auto (15) 1,000 .02
Bonita Wilson Class A (16) 375 .03
Trak Auto (17) 1,500 .02
Crown Books (18) 2,500 .05
Douglas Bregman Class A (16) 375 .03
Trak Auto (17) 1,500 .02
Crown Books (18) 2,500 .05
H. Ridgely Bullock None
Larry G. Schafran None
- -----------------
All Directors and Class A (19) 617,110 33.97
Officer as a Group Class B (5) 420,270 84.05
(9 Persons) Trak Auto (20) 95,998 1.57
Crown Book (21) 267,432 4.93
</TABLE>
80
<PAGE> 81
Item 12. Security Ownership of Certain Beneficial Owners and Management -
(Continued)
Other Beneficial Owners:
- -----------------------
<TABLE>
<CAPTION>
Approximate
Title of No. of Percentage
Name Class Shares of Class
- ---- -------- ------- -----------
<S> <C> <C> <C>
Gloria G. Haft Class A (22) 15,790 1.08
2501 30th Street, NW Class B 54,484 17.98
Washington, DC 20008 Trak Auto (23) 5,000 .08
Crown Books (24) 7,999 .15
Linda G. Haft Class A (4)(25)(26) 75,185 5.17
7105 Armat Drive Class B (6) 25,246 8.33
Bethesda, MD 20817 Trak Auto 500 .01
Crown Books 500 .01
</TABLE>
(1) Includes 139,749 shares subject to exercisable stock options.
(2) Includes 49,998 shares subject to exercisable stock options.
(3) Includes 29,999 shares subject to exercisable stock options.
(4) Includes one-third of 87,043 shares of Class A Common Stock owned by a
family partnership. The disposition of the shares is subject to the
vote of the partners.
(5) Includes 197,048 shares subject to exercisable stock options.
(6) Includes one-third of 75,738 shares of Class B Common Stock which were
distributed in 1993 by a family partnership to the individual partners.
That action has been challenged in litigation by two of the partners. The
Corporation has taken no position on this matter.
(7) Mr. Herbert H. Haft retains sole voting power over 172,730 Class B shares
(owned by Ronald S. Haft) or 57.02% of the outstanding Class B shares.
See Note 5 to the Consolidated Financial Statements.
(8) Includes 388 shares of Class A Common Stock held as custodian for his
children.
(9) Includes 219,750 shares subject to exercisable stock options.
(10) Includes 41,000 shares of Trak Auto held by his wife.
(11) Includes 81,100 shares of Crown Books held by his wife.
(12) Includes 1,582 shares subject to exercisable stock options.
(13) Includes 333 shares subject to exercisable stock options.
(14) Includes 2,250 shares subject to exercisable stock options.
(15) Includes 1,000 shares subject to exercisable stock options.
(16) Includes 375 shares subject to exercisable stock options.
(17) Includes 1,500 shares subject to exercisable stock options.
(18) Includes 2,500 shares subject to exercisable stock options.
(19) Includes 364,081 shares subject to exercisable stock options.
(20) Includes 53,998 shares subject to exercisable stock options.
(21) Includes 35,332 shares subject to exercisable stock options.
(22) Includes 6,500 shares subject to exercisable stock options.
(23) Includes 4,500 shares subject to exercisable stock options.
(24) Includes 7,499 shares subject to exercisable stock options.
(25) Includes 2,000 shares subject to exercisable stock options.
(26) Includes 8,488 shares of Class A Common Stock held as custodian for her
children.
81
<PAGE> 82
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Continued)
A legal dispute has arisen among members of the Haft family concerning
agreements that have previously been reported as restricting the ability of any
of them to transfer common stock of the Corporation owned by them among them or
to others who are not members of their family. Herbert H. Haft, the
Corporation's Chairman, and Ronald S. Haft, its current President, who in July
1993 transferred ownership of certain shares of Class B Common Stock between
them (see Note 5 to Consolidated Financial Statements), have taken the position
that no enforceable agreement precludes that or similar transfers. The
Corporation's former President, Robert M. Haft, has asserted a contrary
position. The Corporation, which is not party to any of the purported
agreements, has taken no position on the matter.
Item 13. Certain Relationships and Related Transactions (Continued)
See Notes 4,8 and 10 to the Consolidated Financial Statements for
descriptions of transaction involving the Company and entities owned by members
of the Haft family.
During the fiscal year ended January 31, 1994, the Corporation made
payments for certain non-business expenses of Herbert H. Haft. The total
amounts of such payments during the period was $407,000. As of January 31,
1994, there were no balances due the Corporation. Interest was charged at the
prime rate on the average outstanding balances. The Corporation's policy
relating to such balances is to require them to be paid in full on at least a
monthly basis. See Schedule II for additional information regarding amounts
due from related parties.
82
<PAGE> 83
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A)
1. Financial Statements
See Item 8.
2. Schedules (Consolidated) -
Report of Independent Public Accountants on Schedules
I - Marketable Securities
II - Amounts Receivable from Related Parties
V - Consolidated Schedule of Property, Plant and
Equipment
VI - Consolidated Schedule of Accumulated Depreciation
of Property, Plant and Equipment
VIII - Valuation and Qualifying Accounts
X - Supplementary Income Statement Information
All other schedules are omitted because the required information is
inapplicable or it is presented in the consolidated financial statements or
related notes.
3. Exhibits...............................................
E (2a) Purchase agreement dated October 12,
1989 between Greenway Center Associates Limited Partnership and KANAM
Grundbesitz Gmbh, tenants in common and Mr. Ronald S. Haft, acting on behalf of
CM/CP Greenway Center Joint Venture. The exhibit includes a list identifying
the schedules to the agreement, but does not include the schedules themselves.
Copies of the omitted schedules will be furnished supplementally to the
Commission upon request.
E (2b) Purchase agreement dated October 12,
1989 between Briggs Chaney Associates Limited Partnership and Mr. Ronald S.
Haft, acting on behalf of CM/CP Briggs Chaney Plaza Joint Venture. The exhibit
includes a list identifying the schedules to the agreement, but does not
include the schedules themselves. Copies of the omitted schedules will be
furnished supplementally to the Commission upon request.
F (2c) Purchase agreement dated
March 12, 1991 between (i) Robert M. Haft, Ronald S. Haft and Linda G.
Haft and (ii) Cabot-Morgan Real Estate Company ("CMREC"). Amended and restated
agreement of Limited Partnership dated March 12, 1991 by and among (i) CM/CP
Greenbriar Retail Joint Venture ("CM/CP Greenbriar Retail"), (ii) CP Greenbriar
Retail, Inc. and (iii) Robert M. Haft, Ronald S. Haft and Linda G. Haft.
Joint venture agreement dated March 12, 1991 between CMREC and CP/Greenbriar
Retail Investments Limited Partnership. Exclusive development, leasing
management agreement dated March 12, 1991 between Combined
Properties/Greenbriar Limited Partnership ("CP/Greenbriar LP") and Combined
Properties Incorporated ("Combined"). Contribution agreement dated March 12,
1991 between CP/Greenbriar LP, CMREC and Linda G. Haft, Ronald S. Haft and
Robert M. Haft.
83
<PAGE> 84
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
F (2d) Purchase agreement dated March 12,
1991 between (i) Robert M. Haft, Ronald S. Haft and Linda G. Haft and (ii)
CMREC. Amended and restated agreement of Limited Partnership dated March 12,
1991 by and among (i) CM/CP Greenbriar Office Joint Venture ("CM/CP Greenbriar
Office"), (ii) CP/Greenbriar Office, Inc. and (iii) Robert M. Haft, Ronald S.
Haft and Linda G. Haft. Joint venture agreement dated March 12, 1991 between
CMREC and CP/Greenbriar Office Investments Limited Partnership. Exclusive
development, leasing and management agreement dated March 12, 1991 between
Combined Properties/Greenbriar Office Limited Partnership ("CP/Greenbriar
Office LP") and Combined. Contribution agreement dated March 12, 1991 between
CP/Greenbriar Office LP, CMREC and Linda G. Haft, Ronald S. Haft and Robert M.
Haft.
H (2e) Purchase agreement dated January 18,
1993 between PS-One Real Estate Limited Partnership and CM/CP Bull Run Joint
Venture. Joint venture agreement dated January 18, 1993 between CMREC and
CP/Bull Run Limited Partnership. Exclusive leasing and management agreement
dated January 18, 1993 between CM/CP Bull Run Joint Venture and Combined.
Promissory note agreement between CMREC and CM/CP Bull Run Joint Venture dated
January 18, 1993.
(2f) Purchase agreement dated February 27,
1993 between Total Beverage G.B., Inc. (a wholly- owned subsidiary of the
Corporation) and Total Beverage VA Corp. (a wholly-owned subsidiary of Shoppers
Food Warehouse Corp.). Promissory Note between Total Beverage VA Corp. and
Total Beverage G.B. Inc.
* (3) Certificate of Incorporation,
incorporated herein by reference to Exhibit #3a to the Company's Form S-1
Registration Statement (File #2-99831) filed with the Securities and Exchange
Commission ("Dart 1985 S1").
B (3a) Certificate of Amendment of the
Certificate of Incorporation of Dart Group Corporation dated January 13, 1987.
(3b) Bylaws, amended and restated as of
September 14, 1993.
* (4) Indenture relating to $250,000,000
Subordinated Debentures Due 1995, incorporated herein by reference to Exhibit 4
to Dart 1985 S-1.
C (10a) Employment agreement with Mr. Herbert
H. Haft, as amended.
C (10b) Employment agreement with Mr. Robert
M. Haft, as amended.
B (10c) Employment agreement with Mrs. Gloria
G. Haft.
* (10f) Indemnity Agreement dated March 10,
1983 between Dart Drug Corporation and Trak Auto Corporation, incorporated by
reference to exhibit 10(b) filed with the Trak S-1.
84
<PAGE> 85
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10h) Agreement for the Allocation of
United States and State Income Tax Liability and Benefits Among Members of the
Dart Drug Corporation Group, incorporated by reference to exhibit 10(d) filed
with the Trak S-1.
* (10i) Agreement, dated March 31, 1983,
between Dart Drug Corporation and Trak Auto East Corporation, incorporated by
reference to exhibit 10(ffff) filed with the Trak S-1.
* (10p) Dart Drug Corporation Executive
Non-Qualified Stock Option Plan, incorporated herein by reference to exhibit
(10o) to the Company's Form 10-K filed with the SEC on May 1, 1984.
* (10q) Agreement of Sale dated May 25, 1984
among Dart Drug Corporation, Dart Delaware Corporation and Dart Drug
Acquisition Corporation, incorporated herein by reference to exhibit (2) to the
Company's Form 8-K filed with the SEC on July 16, 1984.
A (10r) Lease dated December 26, 1984 between
Dart Group Corporation and Seventy-Fifth Avenue Associates.
A (10s) Sublease dated December 26, 1984
between Dart Group Corporation and Trak Auto Corporation.
A (10t) Sublease dated December 26, 1984
between Dart Group Corporation and Crown Books Corporation.
A (10u) Lease dated April 27, 1984 between
Trak Chicago Limited Partnership I and Trak Auto Corporation.
B (10w) Dart Group Corporation 1981 Stock
Option Plan, as amended.
* (10ff) Indemnity Agreement by and between
Dart Group Corporation and Crown books Corporation dated June 9, 1986
incorporated herein by reference to Exhibit 10(zzzz) to the Crown 10-K.
* (10gg) Employment Agreement between Crown
Books Corporation and Mr. Robert M. Haft dated February 28, 1987 incorporated
herein by reference to Exhibit 10(xxxx) to the Crown 10-K.
* (10hh) Agreement of Amendment, dated June
9, 1986, among Dart Group Corporation, Trak Auto Corporation, Trak Auto West,
Inc. and Thrifty Corporation, of the stockholders Agreement dated March 17,
1982 herein incorporated by reference to Exhibit 10(oooo) to the Trak 10-K.
* (10ii) Indemnity Agreement, dated June 9,
1986, by and between Dart Group Corporation and Trak Auto Corporation herein
incorporated by reference to Exhibit 10(pppp) to the Trak 10-K.
85
<PAGE> 86
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10kk) Agreement of Merger dated May 28,
1987 between Trak Auto East Corporation and Trak Auto West, Inc. herein
incorporated by reference to Exhibit 10(qqqq) filed with Trak Auto Corporation
Fiscal Year 1988 Form 10-K, No. 0- 12202 ("Fiscal 1988 Trak 10-K").
C (10pp) Dart Group Corporation Deferred
Compensation Plan for Directors, effective January 1, 1988.
D (10qq) Lease agreement dated November 22,
1988 between Dart Group Corporation and Seventy-Fifth Avenue Associates.
* (10rr) Lease agreement dated January 27,
1989 between Trak Auto Corporation and Combined Properties/Ontario Limited
Partnership herein incorporated by reference to Exhibit 10(tttt) filed with
Trak Auto Corporation Fiscal Year 1989 Form 10-K, No. 0-12202 ("Fiscal 1989
Trak 10-K").
* (10ss) Lease agreement dated February 27,
1988 between Trak Corporation and Haft/Equities- General, herein incorporated
by reference to Exhibit 10(uuuu) filed with Fiscal 1989 Trak 10-K.
* (10tt) Lease agreement dated June 17, 1987
between Trak Auto West, Inc. and Haft/Equities/Rose Hill Limited Partnership,
herein incorporated by reference to Exhibit 10(vvvv) filed with Fiscal 1989
Trak 10-K.
D (10uu) Agreement dated May 17, 1988 among
Dart Group Corporation, Shoppers Food Warehouse Corp., Kenneth M. Herman and
Robert N. Herman incorporated herein by reference to Exhibit 1 filed with the
Corporation's Report on Form 8-K on July 15, 1988.
D (10vv) Amendment No. 1 to Stockholders'
Agreement (Exhibit D to Stock Purchase Agreement dated May 17, 1988, attached
as Exhibit 1 to the Corporation's Report on Form 8-K filed July 15, 1988) dated
as of August 24, 1988 herein.
* (10ww) Assignment and Assumption agreement
dated December 30, 1989 between Greenway Center Associates Limited Partnership
and CM/CP Greenway Center Joint Venture, and lease agreement dated March 13,
1980, between Greenway Center Associates Limited Partnership and Trak Auto
(612), herein incorporated by reference to Exhibit 10(wwww) filed with Trak
Auto Corporation Fiscal Year 1990 Form 10-K, No. 0-12202 ("Fiscal 1990 Trak
10-K").
* (10xx) Assignment and Assumption agreement
dated December 30, 1989 between Briggs Chaney Associates Limited Partnership
and CM/CP Briggs Chaney Plaza Joint Venture, and lease agreement dated June 26,
1981, between Western Development Corporation and Trak Auto Corporation (641),
herein incorporated by reference to Exhibit 10(xxxx) filed with Fiscal 1990
Trak 10-K.
86
<PAGE> 87
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10yy) Trak Auto Amended Stock Option Plan,
herein incorporated by reference to Exhibit 10(yyyy) filed with Fiscal 1990
Trak 10-K.
* (10zz) Incentive stock agreement between
Mr. Robert M. Haft and Crown Books Corporation and promissory note from Mr.
Haft to Crown Books Corporation, both dated September 5, 1989, herein
incorporated by reference to Exhibit 10(ddddd) filed with Crown Books
Corporation Fiscal Year 1990 Form 10-K No. 0-11457 ("Fiscal 1990 Crown 10-K").
* (10ccc) Assignment and Assumption Agreement
dated December 30, 1989 between Briggs Chaney Associates Limited Partnership
and CM/CP Briggs Chaney Plaza Joint Venture, and lease agreement dated June 26,
1981 between Crown Books Corporation and Western Development Corporation,
herein incorporated by reference to Exhibit 10(ggggg) filed with Fiscal 1990
Crown 10-K.
* (10eee) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: Turnpike Shopping Center (815), herein incorporated by
reference to Exhibit 10(iiiii) filed with Fiscal 1990 Crown 10-K.
* (10fff) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: the Plaza at Landmark (165), herein incorporated by reference
to Exhibit 10(jjjjj) filed with Fiscal 1990 Crown 10-K.
* (10ggg) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: Manaport Plaza Shopping Center (804), herein incorporated by
reference to Exhibit 10(kkkkk) filed with Fiscal 1990 Crown 10-K.
D (10hhh) Stock option agreement dated August 8, 1989 between
Dart/SFW Corp. and Mr. Herbert H. Haft.
D (10iii) Stock option agreement dated August
8, 1989 between Dart/SFW Corp. and Mr. Robert M. Haft.
* (10jjj) Lease agreement dated October 31,
1990 between CP Acquisitions Limited Partnership and Crown Books Corporation
re: McLean Shopping Center (803), herein incorporated by reference to Exhibit
10(lllll) Crown Books Corporation Fiscal Year 1991 Form 10-K No. 0-11457
("Fiscal 1991 Crown 10-K").
* (10kkk) Lease agreement dated May 11, 1990
between CM/CP Greenway Center Joint Venture and Crown Books Corporation re:
Greenway Center (822), herein incorporated by reference to Exhibit 10(mmmmm)
Fiscal 1991 Crown 10-K.
* (10lll) Lease agreement dated March 20,
1991 between Charles County Associates Limited Partnership and Crown Books
Corporation re: Charles County Plaza (833), herein incorporated by reference
to Exhibit 10(nnnnn) Fiscal 1991 Crown 10-K.
87
<PAGE> 88
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10mmm) Lease agreement dated May 11, 1990
between Combined Properties/Greenbriar Limited Partnership and Crown Books
Corporation, the First Amendment dated September 13, 1990 and the Second
Amendment dated March 14, 1991 re: Greenbriar Town Center (104), herein
incorporated by reference to Exhibit 10(ooooo) Fiscal 1991 Crown 10-K.
* (10nnn) Lease agreement dated May 18, 1990
between Combined Properties Limited Partnership and Trak Corporation and Lease
Termination Agreement dated March 31, 1990 between Combined Properties Limited
Partnership, Retail Lease Acquisition Limited Partnership and Trak Corporation
re: Fair City Mall (605), herein incorporated by reference to Exhibit 10(zzzz)
Trak Auto Corporation Fiscal Year 1991 Form 10-K No. 0-12202 ("Fiscal 1991 Trak
10-K").
* (10ooo) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Chantilly Plaza
(609), herein incorporated by reference to Exhibit 10(aaaaa) Fiscal 1991 Trak
10-K.
* (10ppp) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: College Plaza (610),
herein incorporated by reference to Exhibit 10(bbbbb) Fiscal 1991 Trak 10-K.
* (10qqq) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Enterprise (614),
herein incorporated by reference to Exhibit 10(ccccc) Fiscal 1991 Trak 10-K.
* (10rrr) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Rolling Valley (630),
herein incorporated by reference to Exhibit 10(ddddd) Fiscal 1991 Trak 10-K.
* (10sss) Lease agreement dated May 18, 1990
between Combined Properties Limited Partnership and Trak Corporation and Lease
Termination Agreement dated March 31, 1990 between Combined Properties Limited
Partnership, Retail Lease Acquisition Limited Partnership and Trak Corporation
re: White Flint (632), herein incorporated by reference to Exhibit 10(eeeee)
Fiscal 1991 Trak 10-K.
* (10ttt) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Aspen Manor (615), herein incorporated by
reference to Exhibit 10(fffff) Fiscal 1991 Trak 10-K.
88
<PAGE> 89
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10uuu) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Lee and Harrison (633), herein
incorporated by reference to Exhibit 10(ggggg) Fiscal 1991 Trak 10-K.
* (10vvv) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Penn Daw (642), herein incorporated by
reference to Exhibit 10(hhhhh) Fiscal 1991 Trak 10-K.
* (10www) Lease agreement dated November 6,
1990 between Combined Properties Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between Combined Properties Limited
Partnership and Trak Corporation re: Fairfax Circle (656), herein incorporated
by reference to Exhibit 10(iiiii) Fiscal 1991 Trak 10-K.
* (10xxx) Lease agreement dated March 23,
1990 between Combined Properties/Silver Hill Limited Partnership and Trak
Corporation and Termination Agreement dated April 13, 1990 between Combined
Properties/Silver Hill Limited Partnership and Trak Corporation re: Silver
Hill (619), herein incorporated by reference to Exhibit 10(jjjjj) Fiscal 1991
Trak 10- K.
* (10yyy) Lease agreement dated November 6,
1990 between Haft/Equities-Bladen Limited Partnership and Trak Corporation and
Lease Termination Agreement dated November 6, 1990 between Haft/Equities-Bladen
Limited Partnership and Trak Corporation re: Bladen Plaza (662), herein
incorporated by reference to Exhibit 10(kkkkk) Fiscal 1991 Trak 10-K.
F (10zzz) Lease agreement dated July 19, 1990
between Combined Properties/4600 Forbes Limited Partnership and Shoppers Food
Warehouse Corp.
F 10(aaaa) Lease Agreement dated December 27,
1982 between Combined Properties Limited Partnership and Jumbo Food Stores VA,
Inc., Amendment dated September 8, 1988 and Amendment dated September 25, 1990
re: Fair City Mall.
F 10(bbbb) Lease Agreement dated June 28,
1983 between Combined Properties Limited Partnership and Jumbo Food Stores VA,
Inc., Amendment dated September 8, 1988, Amendment May 10, 1990 and Amendment
dated September 25, 1990 re: Rolling Valley Mall.
F 10(cccc) Lease Agreement dated September
11, 1987 between Combined Properties Limited Partnership and Jumbo Food Stores
Md., Inc., Amendment dated September 25, 1990 re: Maryland City Plaza.
F 10(dddd) Lease Agreement dated July 7, 1989
between Combined Properties/Silver Hill Limited Partnership and Jumbo Food
Stores Md., Inc., Amendment dated May 10, 1990 and Amendment dated September
25, 1990 re: Silver Hill Plaza.
89
<PAGE> 90
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
G 10(eeee) Lease agreement dated June 21,
1988 between Combined Properties Limited Partnership and Jumbo Food Stores Md.,
Inc., First Amendment dated July 7, 1989, Second Amendment dated September 25,
1990, re: Enterprise Plaza.
G 10(ffff) Letter of Agreement dated February
27, 1992 between Dart Group Corporation and Shoppers Food Warehouse Corp., re:
Whse 3, Pennsy Drive.
* 10(gggg) Lease agreement dated December 23,
1991 between Combined Properties Limited Partnership and Trak Corporation, re:
Manaport Plaza (607), herein incorporated by reference to Exhibit 10(lllll)
Trak Auto Corporation Fiscal Year 1992 Form 10-K No. 0-12202 ("Fiscal 1992 Trak
10-K").
* 10(hhhh) Amendment of lease dated December
24, 1991 between Haft/Equities-Bladen Limited Partnership and Trak Corporation,
re: Bladen Plaza (662), herein incorporated by reference to Exhibit 10(mmmmm)
filed with Fiscal 1992 Trak 10-K.
* 10(iiii) Sublease agreement dated February
19, 1992 between Crown Books Corporation and Trak Corporation, re: Vienna
(616), herein incorporated by reference to Exhibit 10 (nnnn) filed with Fiscal
1992 Trak 10-K
* 10(jjjj) Sublease agreement dated February
12, 1992 between Crown Books Corporation and Trak Corporation, re: McLean
Shopping Center (627), herein incorporated by reference to Exhibit 10(ooooo)
filed with Fiscal 1992 Trak 10-K.
* 10(kkkk) Sublease agreement dated April 20,
1992 between Dart Group Corporation and Trak Corporation, re: Whse 3 Pennsy
Drive, herein incorporated by reference to Exhibit 10(ppppp) filed with Fiscal
1992 Trak 10-K.
* 10(llll) Lease agreement dated May 8, 1991
between Combined Properties Limited Partnership and Crown Books Corporation,
re: Montgomery Village (827), herein incorporated by reference to Exhibit
10(qqqqq) filed with Crown Books Corporation Fiscal Year 1992 Form 10-K No.
0-11457.
* 10(mmmm) Dart Group Corporation 1992 Stock
Option Plan incorporated herein by reference to Dart 1993 S-8 file No.
33-57010.
* 10(nnnn) Amendment of lease dated December
11, 1992 between Combined Properties Limited Partnership and Super Trak
Corporation re: Oxon Hill (606), herein incorporated by reference to Exhibit
10(qqqqq) filed with Trak Auto Corporation Fiscal Year 1993 Form 10-K No.
0-12202 ("Fiscal 1993 Trak 10-K").
* 10(oooo) Amendment of lease dated December
1, 1992 between Haft/Equities-Bladen Limited Partnership and Super Trak
Corporation re: Bladen Plaza (662), herein incorporated by reference to Exhibit
10(rrrrr) filed with Fiscal 1993 Trak 10-K.
90
<PAGE> 91
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* 10(pppp) Amendment of lease dated January
8, 1993 between Retail Lease Acquisition Limited Partnership and Trak
Corporation re: Chantilly Plaza (609), herein incorporated by reference to
Exhibit 10(sssss) filed with Fiscal 1993 Trak 10-K.
* 10(qqqq) Note Receivable from Robert M.
Haft dated December 31, 1992, herein incorporated by reference to Exhibit
10(ttttt) filed with Fiscal 1993 Trak 10-K.
* 10(rrrr) Amendment of lease dated December
1, 1992 between Combined Properties/Montebello Limited Partnership and Super
Trak re: Montebello (520), herein incorporated by reference to Exhibit
10(uuuuu) filed with Fiscal 1993 Trak 10-K.
* 10(ssss) Third Amendment dated June 4, 1992
and Fourth Amendment dated June 15, 1992 to the Lease agreement between
Combined Properties Limited Partnership and Crown Books Corporation re:
Greenbriar Town Center (104), herein incorporated by reference to Exhibit
10(sssss) filed with Crown Books Corporation Fiscal Year 1992 Form 10-K No.
0-11457 ("Fiscal 1993 Crown 10-K").
* 10(tttt) Notes receivable from Mr. Robert
M. Haft dated December 31, 1992, herein incorporated by reference to Exhibit
10(vvvvv) filed with Fiscal 1993 Crown 10-K.
H 10(uuuu) Third Amendment dated June 17,
1992 to the Lease agreement between Combined Properties Limited Partnership and
Jumbo Food Stores MD., Inc., Re: Enterprise Plaza.
H 10(vvvv) Lease agreement dated January 21,
1993 between CM/CP Bull Run Joint Venture and Shoppers Food Warehouse VA
Corporation Re: Festival at Bull Run.
H 10(wwww) Lease agreement dated November 1,
1990 between Penn Daw Associates Limited Partnership (A Haft Controlled Entity)
and Shoppers Food Warehouse VA Corporation, the First Amendment dated February
13, 1991 Re: Penn Daw Shopping Center.
* 10(xxxx) Amendment of lease dated February
4, 1993 between Retail Lease Acquisition Limited Partnership and Super trak re:
College Plaza (610), herein incorporated by reference to Exhibit 10 (wwwww)
filed with Trak Auto Corporation Fiscal Year 1994 Form 10-K No 0-12202 ("Fiscal
1994 Trak 10-K").
* 10(yyyy) Amendment of lease dated
Setpember 13, 1993 between Combined Properties Limited Partnership and Super
Trak re: Fair City Mall (605), herein incorporated by reference to Exhibit
10(xxxxx) filed with Fiscal 1994 Trak 10-K.
* 10(zzzz) Amendment of lease dated
September 13, 1993 between Combined Properties Limited Partnership and Super
Trak re: Maryland City (623), herein incorporated by reference to Exhibit
10(yyyyy) filed with Fiscal 1994 Trak 10-K.
91
<PAGE> 92
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* 10(aaaaa) Second Amendment of lease dated
March 31, 1994 between Combined Properties Limited Partnership and Super Trak
Corporation re: Oxon Hill (606), herein incorporated by reference to Exhibit 10
(zzzzz) filed with Fiscal 1994 Trak 10-K.
* 10(bbbbb) Lease Amendment dated November
22, 1993 between Combined Properties Limited Partnership and Super Trak
Corporation re: Landmark (658), herein incorporated by reference to Exhibit
10(A) filed with Fiscal 1994 Trak 10-K.
* 10(ccccc) Second Amendment of Lease dated
August 19, 1993 and Third Amendment of lease dated August 30, 1993 between
Combined Properties Limited Partnership and Super Crown Books Corporation re:
Landmark (165), herein incorporated by reference to Exhibit 10(wwwww) filed
with Crown Books Corporation Fiscal Year 1994 Form 10-K No. 0-11457 ("Fiscal
1994 Crown 10-K").
* 10(ddddd) Lease Agreement dated August 19,
1993 between Retail Lease acquisition Limited Partnership and Super Crown Books
Corporation re: White Flint Plaza (132), herein incorporated by reference to
Fiscal 1994 Crown 10-K.
10(eeeee) Employment Agreement dated
August 1, 1993, between Ronald S. Haft and Dart Group Corporation.
10(fffff) Lease agreement dated April 2,
1991 between Combined Properties/Greenbriar Limited Partnership and Total
Beverage Corp. First Amendment dated February 15, 1993 between Combined
Properties/Greenbriar Limited Partnership and Total Beverage VA Corp. Second
amendment dated September 29, 1993 between Combined Properties/Greenbriar
Limited Partnership and Total Beverage G.B., Inc. re: Chantilly (201).
10(ggggg) Lease Agreement dated August 16,
1993 between Combined Properties Limited Partnership and Total Beverage Corp.
and First Amendment of Lease dated February 24, 1994 re: Landmark (203).
10(hhhhh) Lease Agreement dated August 16,
1993 between CM/CP Bull Run Joint Venture and Total Beverage Corp. and First
Amendment dated February 7, 1994 re: Bull Run Plaza (202).
10(iiiii) Loan Agreement dated May 21,
1993 between Cabot-Morgan Real Estate Company and CM/CP Bull Run Joint Venture.
* 10(jjjjj) Trak Auto 1993 Stock Option
Plan, herein incorporated by reference to Exhibit 10(vvvvv) filed with Fiscal
1994 10-K.
* 10(kkkkk) Crown Books 1993 Stock Option
Plan, herein incorporated by reference to Exhibit 10(yyyyy) filed with Fiscal
1994 Crown 10-K.
10(lllll) Lease agreement dated June 8,
1993 between Combined Properties/Greenbriar Office Limited Partnership and
Total Beverage Total Beverage Corp.
92
<PAGE> 93
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
(11a) Statement on Computation of Per Share
Earnings.
(21) Subsidiaries of the Corporation.
(23) Consent to Incorporation by reference
to financial statements into Form S-8, 33-12149.
Note: Dart Drug Corporation changed its name to Dart Group Corporation on July
3, 1984.
The exhibits thus indicated were filed with the Forms as noted and are
hereby incorporated by reference.
A Incorporated by reference to Dart Fiscal Year 1986 Form 10-K.
B Incorporated by reference to Dart Fiscal Year 1987 Form 10-K.
C Incorporated by reference to Dart Fiscal Year 1988 Form 10-K.
D Incorporated by reference to Dart Fiscal Year 1989 Form 10-K.
E Incorporated by reference to Dart Fiscal Year 1990 Form 10-K.
F Incorporated by reference to Dart Fiscal Year 1991 Form 10-K.
G Incorporated by reference to Dart Fiscal Year 1992 Form 10-K.
H Incorporated by reference to Dart Fiscal Year 1993 Form 10-K.
(B) Reports on Form 8-K
During the fourth quarter of fiscal year end January 31,
1994, the Corporation filed one report on form 8-K.
1. Form 8-K dated December 20, 1993 (Item 5 - Other
events). The report did not contain financial
statements.
93
<PAGE> 94
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
TO DART GROUP CORPORATION:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Dart Group Corporation and
subsidiaries included in this Form 10-K and have issued our report thereon
dated April 27, 1994. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole. The
schedules listed in the index are the responsibility of the Corporation's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Washington, D.C.,
April 27, 1994.
Exhibit 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated April 27, 1994 included in this Form 10-K, into Dart Group
Corporation's previously filed Form S-8, File Number 33-57010.
ARTHUR ANDERSEN & CO.
Washington, D.C.,
April 27, 1994.
94
<PAGE> 95
SCHEDULE I
Dart Group Corporation and Subsidiaries
SCHEDULE OF MARKETABLE SECURITIES
<TABLE>
<CAPTION>
BALANCE
PRINCIPAL SHEET
ISSUER AMOUNT COST MARKET VALUATION
- ---------- ------------ ------------ ------------ ------------
January 31, 1994
----------------
DEBT
- ----
<S> <C> <C> <C> <C>
Money Markets $ 26,528,000 $ 26,528,000 $ 26,528,000 $ 26,528,000
United States
Treasury Bills
(held by
majority owned
subsidiaries) 112,368,000 111,750,000 111,790,000 111,750,000
------------ ------------ ------------ ------------
Total Short-term
Instruments $138,896,000 $138,278,000 $138,318,000 $138,278,000
============ ============ ============ ============
United States
Treasury Bills $ 3,875,000 $ 3,783,000 $ 3,814,000 $ 3,783,000
United States
Treasury Notes 22,733,000 23,662,000 23,687,000 23,662,000
Corporate Securities 15,900,000 16,123,000 16,154,000 16,123,000
Government
Obligations 1,450,000 1,467,000 1,476,000 1,467,000
Municipals 21,860,000 23,802,000 23,835,000 23,802,000
------------ ------------ ------------ ------------
Total Marketable
Debt Securities $ 65,818,000 $ 68,837,000 $ 68,966,000 $ 68,837,000
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Dart Group Financial Corporation
- --------------------------------
<S> <C> <C> <C> <C>
Bankers'
Acceptances $ 62,525,000 $ 62,307,000 $ 62,704,000 $ 62,307,000
</TABLE>
<TABLE>
<CAPTION>
January 31, 1993
----------------
DEBT
- ----
<S> <C> <C> <C> <C>
United States
Treasury Bills $173,817,000 $172,624,000 $172,670,000 $172,624,000
</TABLE>
<TABLE>
<CAPTION>
Dart Group Financial Corporation
- --------------------------------
<S> <C> <C> <C> <C>
Bankers'
Acceptances $ 90,650,000 $ 90,369,000 $ 90,369,000 $ 90,369,000
</TABLE>
95
<PAGE> 96
Schedule II
Dart Group Corporation and Subsidiaries
AMOUNTS RECEIVABLE FROM RELATED PARTIES
<TABLE>
<CAPTION>
Balance Deductions Balance End
Beginning Amounts of Period,
Name of Debtor of Period Additions Collected Current
- -------------- --------- --------- ---------- ----------
Year Ended January 31, 1994
---------------------------
<S> <C> <C> <C> <C>
Herbert H. Haft $ - $ 407,000 $ 407,000 $ -
Robert M. Haft 914,000 12,000 (1) 834,000 (2) 92,000
Glenn E. Hemmerle 172,000 - 98,000 74,000
---------- ---------- ----------- ----------
$1,086,000 $ 419,000 $ 1,339,000 $ 166,000
========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31, 1993
---------------------------
<S> <C> <C> <C> <C>
Herbert H. Haft $ - $ 718,000 $ 718,000 $ -
Robert M. Haft 69,000 (1) 864,000 (2) 19,000 914,000
Glenn E. Hemmerle - 172,000 (3) - 172,000
R. Keith Green 100,000 - 100,000 -
---------- ---------- ----------- ----------
$ 169,000 $1,754,000 $ 837,000 $1,086,000
========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31, 1992
---------------------------
<S> <C> <C> <C> <C>
Herbert H. Haft $ - $1,126,000 $ 1,126,000 $ -
Robert M. Haft 58,000 (1) 45,000 34,000 69,000
R. Keith Green 100,000 - - 100,000
---------- ---------- ----------- ----------
$ 158,000 $1,171,000 $ 1,160,000 $ 169,000
========== ========== =========== ==========
</TABLE>
See Item 13 for further information regarding amounts receivable from directors
and officers.
(1) Represents non-interest bearing Crown Books note receivable due
January 2, 2004.
(2) Includes $400,000 and $310,000 Crown Books notes receivable and
$123,000 Trak Auto note receivable due December 31, 1995 bearing
interest at prime and an increase of $11,000 in a non-interest
bearing Crown Books note receivable due January 2, 2004.
(3) Represents bridge loan to Mr. Hemmerle for the purchase of a home.
Mr. Hemmerle is President and Chief Executive Officer of Crown Books.
96
<PAGE> 97
Schedule V
Dart Group Corporation and Subsidiaries
Consolidated Schedule of Property, Plant and Equipment
<TABLE>
<CAPTION>
BEGINNING ENDING
CLASSIFICATION BALANCE ADDITIONS RETIREMENTS BALANCE
- -------------- ------------ ---------- ----------- ------------
YEAR ENDED JANUARY 31, 1994
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $102,779,000 34,367,000 8,164,000 $128,982,000
Buildings and
leasehold
improvements 144,954,000 24,456,000 3,160,000 166,250,000
Land 33,550,000 - 154,000 33,396,000
Leased property 42,885,000 - 7,093,000 35,792,000
------------ ---------- ---------- ------------
$324,168,000 58,823,000 18,571,000 $364,420,000
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1993
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $ 87,848,000 17,927,000 2,996,000 $102,779,000
Buildings and
leasehold
improvements 122,865,000 29,752,000 7,663,000 144,954,000
Land 27,612,000 5,938,000 - 33,550,000
Leased property 39,219,000 5,566,000 1,900,000 42,885,000
------------ ---------- ---------- ------------
$277,544,000 59,183,000 12,559,000 $324,168,000
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1992
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $ 64,068,000 24,727,000 947,000 $ 87,848,000
Buildings and
leasehold
improvements 73,402,000 51,150,000 1,687,000 122,865,000
Land 13,933,000 13,679,000 - 27,612,000
Leased property 44,888,000 1,504,000 7,173,000 39,219,000
------------ ---------- ---------- ------------
$196,291,000 91,060,000 9,807,000 $277,544,000
============ ========== ========== ============
</TABLE>
97
<PAGE> 98
Schedule VI
Dart Group Corporation and Subsidiaries
Consolidated Schedule of Accumulated Depreciation and Amortization
of Property, Plant and Equipment
<TABLE>
<CAPTION>
BEGINNING ENDING
CLASSIFICATION BALANCE ADDITIONS RETIREMENTS BALANCE
- -------------- ------------ ---------- ----------- ------------
YEAR ENDED JANUARY 31, 1994
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $ 49,133,000 19,233,000 (3,158,000) $ 71,524,000
Buildings and
leasehold
improvements 17,692,000 7,376,000 1 633,000 23,435,000
Leased property 15,711,000 1,413,000 7,946,000 9,178,000
------------ ---------- ---------- ------------
$ 82,536,000 28,022,000 6,421,000 $104,137,000
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1993
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $ 36,026,000 17,664,000 4,557,000 $ 49,133,000
Buildings and
leasehold
improvements 13,507,000 4,810,000 625,000 17,692,000
Leased property 14,956,000 2,622,000 1,867,000 15,711,000
------------ ---------- ---------- ------------
$ 64,489,000 25,096,000 7,049,000 $ 82,536,000
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1992
---------------------------
<S> <C> <C> <C> <C>
Furniture,
fixtures and
equipment $ 23,153,000 14,032,000 1,159,000 $ 36,026,000
Buildings and
leasehold
improvements 9,318,000 4,625,000 436,000 13,507,000
Leased property 12,241,000 3,084,000 369,000 14,956,000
------------ ---------- ---------- ------------
$ 44,712,000 21,741,000 1,964,000 $ 64,489,000
============ ========== ========== ============
</TABLE>
98
<PAGE> 99
Schedule VIII
Dart Group Corporation and Subsidiaries
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
------------------------
Balance Charged Amounts Balance
Beginning Charged to to Other Paid or at end of
Description of Period Expense Accounts (1) Reversed Period
- ----------- ---------- ----------- ------------ ---------- -----------
As of Januray 31, 1994
----------------------
<S> <C> <C> <C> <C> <C>
Reserve for
closed facil-
ities and re-
structuring
charges $28,887,000 $ 5,626,000 - $3,118,000 $31,395,000
Obsolete
inventory 854,000 - - 544,000 310,000
LIFO reserve 6,453,000 734,000 - - 7,187,000
</TABLE>
<TABLE>
<CAPTION>
As of January 31, 1993
----------------------
<S> <C> <C> <C> <C> <C>
Reserve for
closed facil-
ities and
restructuring
charges $ 7,835,000 $15,382,000 $8,400,000 $2,730,000 $28,887,000
Obsolete
inventory 1,134,000 550,000 - 830,000 854,000
LIFO Reserve 5,890,000 563,000 - - 6,453,000
</TABLE>
<TABLE>
<CAPTION>
As of January 31, 1992
----------------------
<S> <C> <C> <C> <C> <C>
Reserve for
closed facil-
ities $5,484,000 $ 3,866,000 $ - $1,515,000 $ 7,835,000
Obsolete inven-
tory 1,211,000 693,000 - 770,000 1,134,000
LIFO Reserve 5,945,000 386,000 - 441,000 5,890,000
</TABLE>
(1) The 1993 addition was provided by the utilization of reserves related to
the sale of the drug store division in 1985.
99
<PAGE> 100
Schedule X
Dart Group Corporation and Subsidiaries
SCHEDULE OF SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Charged to Costs
and Expenses
-----------------------------------------
Years Ended January 31,
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Advertising Costs $38,432,000 $34,101,000 $32,143,000
</TABLE>
All other items do not exceed one percent of total sales.
100
<PAGE> 101
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DART GROUP CORPORATION
Date: May 2, 1994 By: Herbert H. Haft
--------------------------- ---------------------------------
Herbert H. Haft
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: May 2, 1994 /S/ Herbert H. Haft
--------------------------- -------------------------------------
Herbert H. Haft
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 2, 1994 /S/ Ronald S. Haft
-------------------------- -------------------------------------
Ronald S. Haft
President, Chief Operating Officer
and Director
Date: May 2, 1994 /S/ Bonita Wilson
--------------------------- -------------------------------------
Bonita Wilson
Director
Date: May 2, 1994 /S/ Douglas Bregman
--------------------------- -------------------------------------
Douglas Bregman
Director
Date: May 2, 1994 /S/ Larry G. Schafran
--------------------------- -------------------------------------
Larry G. Schafran
Director
Date: May 2, 1994 /S/ H. Ridgely Bullock
--------------------------- -------------------------------------
H. Ridgely Bullock
Director
Date: May 2, 1994 /S/ Ron Marshall
--------------------------- -------------------------------------
Ron Marshall
Principal Accounting and
Financial Officer
101
<PAGE> 102
DART GROUP CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Exhibit Number Exhibit Index Page Number
- -------------- ------------- -----------
<S> <C>
(2f) Purchase agreement dated February 27, 1993
between Total Beverage G.B., Inc. (a
wholly-owned subsidiary of the Corporation)
and Total Beverage Va. Corp. (a wholly-owned
subsidiary of Shoppers Food Warehouse Corp.).
Promissory Note between Total Beverage VA
Corp. and Total Beverage G.B. Inc.
(3b) Bylaws, amended and restated as of September 14,
1993.
10(eeeee) Employment Agreement dated August 1, 1993,
between Ronald S. Haft and Dart Group
Corporation.
10(fffff) Lease agreement dated April 2, 1991 between
Combined Properties/Greenbriar Limited
Partnership and Total Beverage Corp. First
Amendment dated February 15, 1993 between
Combined Properties/Greenbriar Limited
Partnership and Total Beverage VA Corp.
Second amendment dated September 29, 1993
between Combined Properties/Greenbriar Limited
Partnership and Total Beverage G.B., Inc. re:
Chantilly (201).
10(ggggg) Lease agreement dated August 16, 1993 between
Combined Properties Limited Partnership and
Total Beverage Corp. and First Amendment of
Lease dated February 24, 1994 re: Landmark
(203).
10(hhhhh) Lease agreement dated August 16, 1993 between
CM/CP Bull Run Joint Venture and Total Beverage
Corp. and First Amendment dated February 7, 1994
re: Bull Run Plaza (202).
10(iiiii) Loan agreement dated May 21, 1993 between
Cabot-Morgan Real Estate Company and CM/CP
Bull Run Joint Venture.
10(lllll) Lease agreement dated June 8, 1993 between
Combined Properties/Greenbriar Office Limited
Partnership and Total Beverage Corp.
(11a) Statement on Computation of Per Share
Earnings.
(21) Subsidiaries of the Corporation.
(23) Consent of Independent Public Accountants.
</TABLE>
102
<PAGE> 103
Exhibit 11(a)
<TABLE>
<CAPTION>
Statement on Computation of
Per Share Earnings
Years Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average common
shares outstanding
during the year 1,752,000 1,749,000 1,748,000
Effect of dilutive stock
options; net of shares
assumed repurchased at
average market 115,000 88,000 77,000
------------ ------------ ------------
Weighted average common
share and common
share equivalents 1,867,000 1,837,000 1,825,000
============ =========== ===========
Income (Loss) before
extraordinary item and
cumulative effect of change
in accounting principle $ (6,737,000) $ 3,509,000 $ 6,311,000
Extraordinary item
Income (Loss) on reacqui-
sition of debentures,
net of income tax
benefits of $819,000 and
$(54,000) for the years
ended January 31, 1992
and 1991 - (885,000) (1,589,000)
Cumulative effect of Trak
Auto's change in accounting
principle, net of minority
interest - 1,135,000 -
------------ ----------- -----------
Net Income (Loss) as reported (6,737,000) 3,759,000 4,722,000
============ =========== ===========
Adjustment for dilutive effect
of subsidiary stock options (918,000) - (1) - (1)
------------ ----------- -----------
Net (Loss) Income Per Earnings
Per Share Calculation $ (7,655,000) $ 3,759,000 $ 4,722,000
============ =========== ===========
Earnings per share
Income (Loss) before
extraordinary item $ (4.10) $ 1.91 $ 3.46
Extraordinary item:
Loss on reacquisition
of debentures - (.48) (.87)
Cumulative effect of Trak
Auto's change in accounting
principle, net of minority
interest - .62 -
------------ ----------- -----------
Net Income (Loss) as reported $ (4.10) $ 2.05 $ 2.59
============ =========== ===========
</TABLE>
(1) Not dilutive.
103
<PAGE> 104
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C> <C>
Trak Auto Corporation (65%) Delaware
Crown Books Corporation (51%) Delaware
Shoppers Food Warehouse Corp. (50%) Delaware
Dart Delaware Corporation (100%) Delaware
Dart/SFW Corporation (100%) Delaware
Discount Books East, Inc. (100%) Delaware
Trak Auto East Holding Corporation (100%) Delaware
Dart Group Financial Corporation (100%) Delaware
Cabot-Morgan Real Estate Company (100%) Delaware
Trak Corporation (100%)(1) Delaware
Super Trak Corporation (100%)(1) Delaware
Trak DHC Corporation (100%)(1) Delaware
Trak Acquisition Corp (100%)(1) Delaware
Crown Books East Corporation (100%)(2) Delaware
Crown Books West Corporation (100%)(2) Delaware
Crown DHC Corporation (100%)(2) Delaware
Super Crown Books Corporation (100%)(2) Delaware
Total Beverage Corp. (100%) Delaware
Total Beverage G.B. (100%)(3) Delaware
</TABLE>
(1) Wholly-owned by Trak Auto Corporation
(2) Wholly-owned by Crown Books Corporation.
(3) Wholly-owned by Total Beverage Corp.
104
<PAGE> 105
EDGAR APPENDIX
Exhibit 10(fffff) printed version of this document contains a map of the
Greenbriar Town Center, Fairfax, Virginia. Printed version of this document
contains drawings of store sign criteria.
Exhibit 10(ggggg) printed version of this document contains a map of the Plaza
at Landmark, Alexandria, Virginia. Printed version of this document contains
floor plans. Printed version of this document contains a drawing of store sign
criteria.
Exhibit 10(hhhhh) printed version of this document contains a map of Bull Run
Plaza, Manassas, Virginia. Printed version of this document contains a drawing
of store sign criteria.
Exhibit 10(lllll) printed version of this document contains a map of the floor
plan as of June 8, 1993. Printed version of this document contains a map of
Greenbriar Town Center, Fairfax, Virginia.
<PAGE> 1
ASSET PURCHASE AGREEMENT
by and between
TOTAL BEVERAGE G.B., INC., a
Delaware corporation, Buyer
and
TOTAL BEVERAGE VA CORP.,
a Virginia corporation, Seller
Dated: February 27, 1993
<PAGE> 2
Table Of Contents
<TABLE>
<S> <C> <C>
Page
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF PURCHASED ASSETS . . . . . . . . . . . . . . . . . . . 5
2.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Assets Not Being Purchased and Sold . . . . . . . . . . . . . 5
2.3 Assumption of Certain Obligations and Liabilities . . . . . . 5
2.4 Obligations Not Assumed . . . . . . . . . . . . . . . . . . . 6
2.5 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Purchase Money Note . . . . . . . . . . . . . . . . . . . . . 8
3.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Allocation of Closing Purchase Price . . . . . . . . . . . . . 8
3.5 Prorations and Post-Closing Adjustments . . . . . . . . . . . 9
ARTICLE IV CERTAIN AGREEMENTS IN RESPECT OF OPERATIONS AFTER CLOSING . . . . . . . . . 10
4.1 Agreements with Seller's Vendors . . . . . . . . . . . . . . . 10
4.2 Customer Deposits . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Transfer of Licenses and Permits . . . . . . . . . . . . . . . 11
4.5 Operating Losses . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Loss on Sale or Liquidation . . . . . . . . . . . . . . . . . 14
4.7 Seller's Right to Review Computations . . . . . . . . . . . . 14
ARTICLE V SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 15
5.1 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Authorization; Enforceability . . . . . . . . . . . . . . . . 15
5.3 Agreement Not in Breach of Other Instruments or Law . . . . . 15
5.4 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . 15
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
5.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 16
5.7 No Legal Bar; No Litigation . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Table of Contents
(Continued)
<S> <C> <C>
Page
----
5.8 No Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 17
5.10 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 Lease in Force . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . 18
5.14 Employee List . . . . . . . . . . . . . . . . . . . . . . . . 19
5.15 Hazardous Substances and Environmental Conditions . . . . . . 19
5.16 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.17 Equipment, Fixed Assets and Other Personalty . . . . . . . . . 20
5.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19 Condition of Leased Property and Leasehold Improvements . . . 20
5.20 Property Tax Challenges . . . . . . . . . . . . . . . . . . . 20
5.21 Total Beverage Trademark . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI BUYER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 22
6.1 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Authorization; Enforceability . . . . . . . . . . . . . . . . 22
6.3 Agreement Not in Breach of Other Instruments . . . . . . . . . 22
6.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 No Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Operate in Regular Manner . . . . . . . . . . . . . . . . . . 23
7.2 Prohibited Actions . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Access and Inspection . . . . . . . . . . . . . . . . . . . . 24
7.4 Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Building Plans . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1 Conditions for the Benefit of Buyer . . . . . . . . . . . . . 25
8.2 Conditions for the Benefit of Seller . . . . . . . . . . . . . 26
8.3 Seller's Right to Perform . . . . . . . . . . . . . . . . . . 27
8.4 Buyer's Right to Perform . . . . . . . . . . . . . . . . . . . 27
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Table of Contents
(Continued)
<S> <C> <C>
Page
----
ARTICLE IX DELIVERIES AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Seller's Deliveries to Buyer . . . . . . . . . . . . . . . . . 27
9.2 Buyer's Deliveries to Seller . . . . . . . . . . . . . . . . . 28
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . 29
10.2 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . 31
10.3 Participation . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.1 Survival of Representations and Warranties . . . . . . . . . . 34
11.2 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . 34
11.3 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . 34
11.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 35
11.5 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 36
11.6 Transfer Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . 36
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 37
11.11 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . 37
11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 37
11.13 Entire Agreement; Construction . . . . . . . . . . . . . . . . 37
11.14 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . 38
11.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this
- ---- day of ----------, 1993 by and between TOTAL BEVERAGE VA CORP., a Virginia
corporation (the "Seller"), and TOTAL BEVERAGE G.B., INC., a Delaware
corporation (the "Buyer");
W I T N E S S E T H:
WHEREAS, the Seller holds the leasehold interest in certain real
estate located at 13055 Lee-Jackson Memorial Highway, Suite C, Chantilly,
Virginia, at which the Seller operates a retail beer and wine store, operating
as "Total Beverage"; and
WHEREAS, the Seller desires to sell the store and certain other
assets of the Seller as set forth herein, and the Buyer desires to (i) purchase
the Seller's interest in the store, (ii) purchase certain of the other assets
of the Seller as set forth herein and (iii) assume certain delineated
liabilities of the Seller relating to the store as set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and the
representations, warranties, covenants and agreements contained herein, the
receipt and legal sufficiency of which is hereby acknowledged, it is agreed as
follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the meanings indicated:
"Affiliate" means any corporation, partnership, individual or
other person or entity that controls, is controlled by or is under common
control with the Buyer. Control shall be deemed to exist if such corporation,
partnership, individual or other person or entity shall own or control, either
directly or indirectly, ten percent (10%) or more of such affiliate.
"Closing" means the consummation of the purchase and sale as
provided in this Agreement.
"Closing Date" means the date set for Closing as provided in
Section 3.3 hereof.
1
<PAGE> 6
"Code" means the Internal Revenue Code of l986, as amended.
"Employees" means the employees of the Store employed as of
February 25, 1993.
"FF&E" means furniture, fixtures and equipment and all other like
personal property located at or in the Store as of February 25, 1993 together
with all furniture, fixtures and equipment acquired to replace any worn,
broken, lost or stolen furniture, fixtures and equipment or used exclusively in
connection therewith, but excluding any furniture, fixtures and equipment that
is used in the Store which the Buyer has notified the Seller that the Buyer
will not need for its operation of the Store after the Closing or that the
Buyer identifies in the future that it does not need for its operation of the
Store.
"Landlord" means Combined Properties/Greenbriar Limited
Partnership, owner of the real property and improvements leased to the Seller
and on and in which the Store is located.
"Lease" means that certain Lease Agreement, by and between the
Seller and Combined Properties/Greenbriar Limited Partnership, dated April 2,
1991, as may have been amended from time to time, setting forth the terms and
conditions under which the Seller leases the Leased Property from the Landlord.
"Leased Property" means the premises leased by the Seller under
the terms and conditions of the Lease, located at 13055 Lee- Jackson Memorial
Highway, Suite C, Chantilly, Virginia, in which the Seller operates the Store.
"Leasehold Improvements" means all of the Seller's right, title
and interest in and to all buildings, fixtures and leasehold improvements
located on, incorporated in, appurtenant to or attached to the Leased Property,
subject to the interests of the Landlord and/or any lenders in such
improvements.
"Leasehold Interests" means all of the right, title and interest
of the Seller as lessee in, to and under the Lease and the Leasehold
Improvements, including, without limitation, all of the Seller's right, title
and interest in, to and under all licenses, rights to use or occupy,
cross-easement agreements, reciprocal easement agreements, exclusive rights
agreements, parking agreements and any and all other agreements or assets
relating to the Seller's operation and use of the Store and the related
Leasehold
2
<PAGE> 7
Improvements, subject to the interests of the Landlord and/or any lenders in
such Leasehold Interests.
"Licenses and Permits" means all permits, licenses and other
approvals from any federal, state or local governmental entity owned, granted
to or held by the Seller or any other person and used in connection with the
ownership or operation of the Store, as set forth on Schedule 5.4 hereto.
Licenses and Permits shall include, without limitation, (a) all state and local
licenses and permits relating to (i) the sale of alcoholic beverages and (ii)
the occupancy of the Leased Property, and (b) all federal licenses and
approvals (including any license from the Federal Communications Commission)
relating to (i) the use of radio frequencies for the operation of equipment
used to determine the inventory of the Store and (ii) the use of the Total
Beverage Trademark.
"Liens" has the meaning set forth in Section 5.10 hereof.
"Miscellaneous Assets" means all items and information not
otherwise specified in this Agreement pertaining to the ownership and operation
of the Store, including, without limitation, all training and operations
manuals; copies of all personnel records of the Employees, to the extent
permitted by law to be disclosed, with personal, qualitative or gratuitous
comments, if any, purged; TV, radio and newspaper commercials, advertising
materials and mats; and business forms.
"Note" has the meaning set forth in Section 3.2 hereof.
"Person" means an individual, partnership, corporation, trust or
other similar entity, or a government or agency or instrumentality thereof.
"Personalty" means (i) the FF&E, office supplies and equipment and
all other tangible personal property, goods and chattels located at, on or in
the Leased Property and owned and used by the Seller in connection with owning
and operating the Store as of the date hereof, together with (ii) all tangible
personal property, goods or chattels acquired after the date hereof to replace
any worn, broken, lost or stolen FF&E, tangible personal property, office
supplies and equipment used in connection with the ownership or operation of
the Store, and with (iii) all additional tangible personal property, office
supplies and equipment, FF&E and other goods or chattels acquired after the
date hereof and prior to the Closing Date for use in connection with the
ownership or operation of the Store.
3
<PAGE> 8
"Prepaid Expenses" means any and all of the following, whether
accrued or unaccrued, contingent or noncontingent: prepaid expenses; vendor
rebates not otherwise reflected in the value of the Saleable Inventory;
promotional advertising monies or deposits; actual currency in the tills at
the Leased Property as of the close of business on the day immediately
preceding the Closing Date; customer deposits held by the Seller in connection
with the ownership or operation of the Store and which are transferred to the
Buyer on the Closing Date; and certain accounts receivable derived from the
operation of the Store prior to the Closing Date.
"Purchase Orders" means purchase orders and commitments of the
Seller for the purchase of operating supplies and FF&E relating to the
ownership and operation of the Store placed in the ordinary course of business
prior to the date hereof or, if after such date, made with the consent of the
Buyer.
"Purchased Assets" means the Store, the Store Assets and the
Leasehold Interests.
"Saleable Inventory" means all inventory in the Store as of the
close of business on the last day immediately preceding the Closing Date valued
on a lower of cost or market basis, as set forth in Section 3.1 hereof.
"Store" means the beer, wine and other beverage retail sales
business owned and operated by the Seller and being conducted at the Leased
Property as of the date hereof, which is being purchased by the Buyer pursuant
to the terms of this Agreement.
"Store Assets" means all of the Seller's right, title and interest
in, to and under the following assets, each such asset free and clear of any
Lien, to the extent such assets are necessary or appropriate in order to
transfer to the Buyer all of the current operations of the Store as they
existed on the date hereof (or such other date as specified in this Agreement):
(i) the Saleable Inventory; (ii) the Personalty; (iii) the Licenses and
Permits; (iv) the Purchase Orders; (v) the Total Beverage Trademark; (vi) the
Prepaid Expenses; and (vii) the Miscellaneous Assets.
"Total Beverage Trademark" means all right, title and interest of
the Seller in and to any trademark, service mark, service name, commercial
name, trade name or trademark registration or application containing the term
"TOTAL BEVERAGE" or comprising, related to or used in the
4
<PAGE> 9
business of the Store and all rights to the exclusive use thereof.
"Warehouse Beverage Business" has the meaning set forth in Section
11.3.1 hereof.
ARTICLE II
PURCHASE AND SALE OF
PURCHASED ASSETS
2.1 Purchased Assets. At the Closing, the Seller shall sell,
assign and transfer to the Buyer, and the Buyer shall purchase and assume from
the Seller, to the extent transferable under law, all of the Seller's right,
title and interest in and to the Store, the Store Assets and the Leasehold
Interests, as set forth in Schedule 2.1 hereto, pursuant to the terms and
conditions set forth herein, in an Assignment and Assumption Agreement in the
form attached hereto as Exhibit "A" (the "Assignment and Assumption Agreement")
and in a Trademark Assignment Agreement in the form attached hereto as Exhibit
"B" (the "Trademark Assignment"). The Seller shall transfer such right, title
and interest in and to the Purchased Assets to the Buyer free and clear of all
Liens, obligations, commitments, indebtedness or liabilities.
2.2 Assets Not Being Purchased and Sold. Specifically
excluded from the assets being purchased and sold is all right, title and
interest of the Seller in and to the bank accounts (and the contents thereof)
used by the Seller in connection with the ownership and operation of the Store,
claims of the Seller against third parties (except for claims against vendors
or advertisers for allowances or rebates or as otherwise provided herein),
income tax receivables, tax attributes, employee benefit programs and plans,
retirement plans, insurance plans, minute books and other records of corporate
proceedings and ownership of the Seller, insurance policies (to the extent not
transferable), certain accounts receivable as set forth on Schedule 2.2 hereto
and all rights and claims thereunder, utility deposits and any cash and other
assets specifically related to any of the foregoing and arising prior to the
Closing Date.
2.3 Assumption of Certain Obligations and Liabilities.
Subject to the terms and conditions contained herein and in the Assignment and
Assumption Agreement, the Buyer shall assume and agree to perform or discharge,
as of the Closing Date, only the indebtedness, obligations and liabilities of
the Seller relating to the Purchased Assets
5
<PAGE> 10
that accrue on or after the Closing Date, as set forth on Schedule 2.3 hereto.
2.4 Obligations Not Assumed. With the exception of the
obligations and liabilities of the Seller described in Section 2.3 hereof, the
Buyer does not and shall not assume hereunder or be responsible or liable in
any way or amount for, or in respect of, any obligations, commitments,
indebtedness or liabilities of the Seller of any kind or character whatsoever
whether accrued or unaccrued, contingent or noncontingent, including, without
limitation, (i) any litigation, claim, proceeding, controversy or other action
arising from or relating to any claims made by United Food and Commercial
Workers Union, Local No. 400 (the "Union") or any other union or labor
organization (A) which arises or accrues prior to the Closing Date, or (B)
which is related in any way to or challenges the Buyer's purchase of the
Purchased Assets or, (ii) any litigation to which the Seller is a party or to
which it may in the future become a party including, without limitation, that
certain Civil Action No. 92-1624-A, The Price Company v. Total Beverage Corp.,
filed against the Seller in the United States District Court for the Eastern
District of Virginia (the "Price Club Litigation"), and (iii) any litigation,
claim, proceeding, controversy or other action arising from or relating to any
claim made by any Employee arising or accruing prior to the Closing Date; but
specifically excluding any litigation proceeding, claim or controversy that now
exists or that may arise after the Closing Date that relates to the use of the
name "Total Beverage" or of the Total Beverage Trademark.
2.5 Risk of Loss.
2.5.1 Casualty Loss. The risk of any destruction, loss, or
damage to the Store and of all liability with respect to any and all injury
or damage occurring thereon or therein or in connection therewith, shall be
the sole responsibility of the Seller until the Closing. If the Store
shall be destroyed or damaged by fire or other casualty or shall suffer any
loss prior to the Closing Date, the Seller shall notify the Buyer promptly
of such damage and the Buyer shall then notify the Seller promptly of
whether the Buyer desires the Seller to (i) repair the Store or (ii) assign
to the Buyer the right to all insurance proceeds with respect to such
casualty and permit the Buyer to undertake such repair (subject to the
terms and provisions of the Lease). In the event the Buyer requests the
Seller to undertake such repairs and the Seller is permitted by the Lease
to do so, the Seller shall either (a) diligently undertake and complete
such
6
<PAGE> 11
repairs at the Seller's sole expense in accordance with the provisions of
the Lease and there shall be no reduction in the Closing Purchase Price as
the result of such casualty or (b) promptly notify the Buyer that the
Seller has determined not to undertake such repairs, in which event the
Buyer shall have the option of terminating this Agreement or going forward
with the purchase of the Store, but with the Closing Purchase Price reduced
by the estimated cost of such repairs. The Buyer shall notify the Seller
promptly of its choice under (b) hereinabove. If the Buyer elects to
require the Seller to assign the proceeds of any insurance to the Buyer,
the Seller shall take all actions as the Buyer may reasonably request to
effect such transfer and the obligations of the parties hereto to
consummate the transactions shall remain unaffected by such loss or
casualty. As used herein "insurance proceeds" shall mean all insurance
proceeds received by the Seller from its insurance carrier or carriers
(such insurance to be on a replacement cost basis) together with any
deductible amounts not received from such carrier(s).
2.5.2 Condemnation. In the event of any condemnation or the
institution of any condemnation proceeding which materially affects the use
or value of the Store, the Buyer shall have the option, subject to the
provisions herein, of (i) accepting at the Closing the transfer of the
Store and receiving an assignment of any condemnation proceeds due to the
Seller or (ii) terminating this Agreement. With respect to any immaterial
condemnation, the Buyer shall accept the transfer of the Store at the
Closing without reduction of the Closing Purchase Price and receive from
the Seller an assignment of any condemnation proceeds due the Seller.
2.6 Termination. This Agreement may be terminated (i) by
mutual consent of both of the parties hereto or (ii) by the Buyer, if any of
the conditions to its obligations to consummate the transactions contemplated
hereby, as set forth in Section 8.1 hereof, or as otherwise expressly provided
herein, shall not have been satisfied in all material respects, or waived by
the Buyer, on or prior to the time and date set for the Closing. The right to
terminate this Agreement as provided herein shall be exercised by written
notice of termination given by the terminating party to the other party in the
manner provided herein. Any such right of termination shall be the exclusive
remedy hereunder for the non-defaulting party.
7
<PAGE> 12
ARTICLE III
PRICE
3.1 Purchase Price. The total price to be paid by the Buyer
to the Seller for the Purchased Assets (the "Purchase Price") shall be the sum
of the Closing Purchase Price plus the Inventory Purchase Price. The portion
of the Purchase Price for the Purchased Assets other than for the Saleable
Inventory (the "Closing Purchase Price") shall be Five Hundred Fifty Thousand
and No/100 Dollars ($550,000.00), subject to adjustment in accordance with
Section 3.5 hereof. The portion of the Purchase Price for the Saleable
Inventory shall be determined by a physical inventory to be conducted after the
close of business on the day immediately preceding the Closing Date (the
"Inventory Purchase Price") in accordance with generally accepted accounting
principles and valued on a the lower of cost or market basis. "Cost" shall be
the invoice price of each inventory item less any allowance, discount, rebate
or other price reduction received by the Seller when purchasing the item.
"Market" shall be the price at which each inventory item is available from the
Seller's customary suppliers as of the business day that most closely precedes
the date on which the physical inventory to determine the Inventory Purchase
Price is made, less any allowance, discount, rebate or other price reduction
available to the Seller in the ordinary course of business when purchasing the
item.
3.2 Purchase Money Note. The Closing Purchase Price shall be
paid by the delivery of the Buyer's promissory note, in the principal amount
equal to the sum of (i) Five Hundred Fifty Thousand and No/100 Dollars
($550,000.00) plus (ii) the Inventory Purchase Price, in the form attached
hereto as Exhibit "C" (the "Note"). The Note shall be delivered at the Closing
or as soon thereafter as the Inventory Purchase Price shall have been
established to the satisfaction of the Buyer and the Seller.
3.3 Closing Date. Unless this Agreement is terminated in
accordance with Section 2.6 hereof, or the parties hereto agree to a different
time or date, the Closing shall be effective as of 12:01 a.m. on February 28,
1993 (the "Closing Date").
3.4 Allocation of Closing Purchase Price. The Closing
Purchase Price and any liabilities assumed by the Buyer relating to periods
through and including the Closing Date shall be allocated among the Purchased
Assets (other than the Saleable Inventory) in proportion to their relative fair
market values, provided that no amount shall be allocated to any asset in
excess of its individual fair
8
<PAGE> 13
market value. The Seller and the Buyer shall file all tax returns and tax
reports in accordance with and based upon such allocation and shall take no
position in any tax return, tax proceeding or tax audit which is inconsistent
with this Section 3.4.
3.5 Prorations and Post-Closing Adjustments.
3.5.1 Prorations. Rent, utility charges, common area
maintenance charges, tenant dues and assessments, real estate taxes,
insurance, prepaid deposits, personal property tax obligations, prepaid
expenses and all other obligations relating to the ongoing operation of the
Store shall be prorated between the Seller and the Buyer as of 12:01 a.m.
on the Closing Date. In the event the information necessary to make any
proration is not available as of the Closing Date, no adjustment shall be
made therefor at such time but, as soon thereafter as such information
becomes available, the determination of the exact amount of proration shall
be made and appropriate payments promptly rendered in cash by the Seller
and/or the Buyer or, at the election of the Buyer, as an adjustment to the
principal amount of the Note.
3.5.2 Percentage Rent. Percentage rent under the Lease shall be
prorated between the Buyer and the Seller following the Closing at the end
of the lease year for the Store in accordance with the terms of the Lease.
To the extent that percentage rent is due under the Lease, the Seller's
share of such percentage rent shall equal the total percentage rent due for
the lease year in which the Closing occurs multiplied by a fraction, the
numerator of which shall be the Seller's gross sales from the Store during
such lease year and the denominator of which shall be total gross sales
from the Store during such lease year. The Buyer's share of percentage
rent shall equal the total percentage rent due for such lease year
multiplied by a fraction, the numerator of which shall be the Buyer's gross
sales from the Store during such lease year, and the denominator of which
shall be the total gross sales from the Store during such lease year.
After the Closing Date and at least thirty (30) days prior to the
expiration of the lease year in which the Closing occurs, the Seller shall
provide to the Buyer a statement of gross sales from the Store in the form
9
<PAGE> 14
required by the Lease for that portion of the lease year prior to the
Closing Date. Not less than ten (10) days before such statement is due to
be delivered to the Landlord, the Buyer shall provide to the Seller a
statement of its gross sales from the Store in the form required by the
Lease for that portion of the lease year from and after the Closing Date,
together with a statement indicating total percentage rents due and the
Seller's share of such percentage rents. Within ten (10) days after
receipt of such documents from the Buyer, the Seller shall forward to the
Buyer a check made payable to the Landlord for the Seller's share of the
percentage rent due. Any offsets or deductions from percentage rent shall
be prorated between the Seller and the Buyer in accordance with the manner
in which the items giving rise to such offsets or deductions were prorated
between the Seller and the Buyer and shall be paid, at the Buyer's sole
election, in cash or by an adjustment to the principal amount of the Note.
ARTICLE IV
CERTAIN AGREEMENTS IN RESPECT OF
OPERATIONS AFTER CLOSING
4.1 Agreements with Seller's Vendors. The Buyer desires to
receive the benefit of any discounts, group rates or other favorable purchase
arrangements that the Seller has been receiving from its vendors and suppliers
prior to the Closing. To help achieve this, the Seller shall use reasonable
efforts to assist the Buyer in establishing relationships with and achieving
parallel agreements with and services from the Seller's vendors and suppliers.
4.2 Customer Deposits. The Seller, prior to the Closing Date,
has accepted deposits from customers of the Store in connection with agreements
to provide goods and/or services of the Store to such customers after the
Closing Date. The Buyer shall honor all such agreements and shall afford
credit for such deposits to customers offering proof thereof. The Seller shall
reimburse the Buyer from time to time upon demand for the amount of such
prepaid deposits that the Buyer is required to honor to the extent that the
aggregate amount of such prepaid deposits ever exceeds the sum of One Thousand
and No/100 Dollars ($1,000.00).
4.3 Employees. After the date hereof, the Buyer or its
representatives shall have the right to meet with the Employees during normal
business hours to arrange for the transition of ownership of the Store;
provided, however, that such meetings shall be held after notification to the
Seller and at such times and in a manner so as not to interfere with the
Seller's normal business operations. As a condition to the Closing, the Seller
shall have terminated the employment of all of the Employees effective as of
10
<PAGE> 15
11:59 p.m. on the day that is immediately prior to the Closing Date. The Buyer
agrees to offer employment to the Employees upon terms and conditions
substantially equivalent to those under which the Employees are currently
employed. Nothing contained herein shall, however, be deemed to create any
rights in any Employee or any other persons who are not parties to this
Agreement, including rights as third-party beneficiaries.
4.4 Transfer of Licenses and Permits. The Buyer shall prepare
and file with the appropriate licensing authorities applications for the
issuance or transfer of all Licenses and Permits required in order for the
Buyer to own and operate the Store in the manner currently operated by the
Seller. The parties agree to cooperate with and assist each other in securing
the transfer or issuance of the Licenses and Permits. All fees related to each
such transfer or issuance shall be paid by the Buyer. In the event that the
Buyer is unable to obtain (or procure the transfer of) any License or Permit
necessary for the operation of the Store in the manner in which the Store is
currently being operated, the Seller shall maintain the validity of such
License or Permit to the extent permitted by applicable law and the Buyer may
extend the Closing Date for a period sufficient to enable the Buyer to obtain
transfer of or authorization to transfer such License or Permit, but in no
event shall the Closing Date be extended beyond February 28, 1994.
4.5 Operating Losses.
4.5.1 Seller's Share of Operating Losses. For a period of
thirty-six (36) months after the Closing Date, the Seller shall be liable
to reimburse the Buyer for twenty-five percent (25%) of any operating
losses incurred by the Buyer in the normal course of its operations of the
Store. The Buyer's operating profit or loss from the operations of the
Store shall be determined annually for each of the twelve (12)-month
periods ending on the first three (3) anniversaries of the Closing Date
(each such twelve (12)-month period shall hereinafter be referred to as an
"Operating Period"), and shall be calculated by the Buyer in accordance
with a methodology approved by Arthur Andersen & Co. ("Arthur Andersen")
which must be in accordance with generally accepted accounting principles;
provided, however, that such calculation of any operating profit or loss
shall be net of amounts expended by the Buyer for Extraordinary Legal
Expenses. "Extraordinary Legal Expenses" shall mean the costs and expenses
of any litigation arising after the Closing Date relating to trademark
registration or infringement
11
<PAGE> 16
claims, antitrust claims or discriminatory pricing issues and the like.
(Each such operating profit or loss for any Operating Period as calculated
by the Buyer in accordance with this Section 4.5.1 shall hereinafter
respectively be referred to as an "Operating Profit" or "Operating Loss".)
4.5.2 Payment of Seller's Share. The Seller's share of any
Operating Loss shall be paid first by reducing sums due on the Note on a
dollar-for-dollar basis (reducing first all accrued but unpaid interest and
then the principal amount) and then, to the extent the sums due under the
Note shall have been reduced to Zero Dollars ($0.00) or after the Note has
been paid, by a payment in immediately available funds from the Seller to
the Buyer. Within thirty (30) days after the determination that the Buyer
has suffered an Operating Loss, the Buyer shall provide the Seller with a
copy of the calculations made by the Buyer in determining the Operating
Loss. Within ten (10) days thereafter, the Seller shall deliver to the
Buyer evidence that the Seller has made an accounting entry on its books
indicating an adjustment in the principal amount owing under the Note
computed in accordance with this Section 4.5. To the extent the remaining
sums due on the Note are less than the Seller's share of the Operating
Loss, the Seller shall remit payment to the Buyer in immediately available
funds for the amount owed to the Buyer by the Seller in connection with the
Operating Loss for such Operating Period.
4.5.3 Seller's Recoupment of Operating Losses. To the extent
that, as the result of any Operating Loss during the first two Operating
Periods, the Seller has reimbursed the Buyer for any portion of an
Operating Loss incurred by the Buyer during the first two Operating
Periods, the Seller shall have the right to recoup the Operating Loss for
which it has reimbursed the Buyer from any Operating Profit generated by
the Store during the first three Operating Periods.
The Seller's right to reimbursement during the second and third
Operating Periods shall be determined in accordance with the following
formula: If an Operating Loss is incurred in the first or second Operating
Period, and if the Buyer determines that there has been an Operating Profit
in the then just concluded Operating Period (but only if such just
concluded Operating Period is the first, second or third Operating Period
after the Closing Date), the Buyer shall retain one hundred percent (100%)
of such
12
<PAGE> 17
Operating Profit until any aggregate Operating Loss being carried by the
Buyer is reduced to an amount equal to the amount of aggregate Operating
Loss that has theretofore been paid by the Seller. Thereafter, any
remaining Operating Profit for that Operating Period shall be divided
equally between the Seller and the Buyer until the Operating Profit is
fully disbursed or the Seller is reimbursed for one hundred percent (100%)
of the aggregate of any Operating Loss. Thereafter, the Buyer shall
receive all remaining Operating Profit for that Operating Period. The
Seller's right to share in any Operating Profit shall expire after the
computation of Operating Profit or Loss at the end of the third Operating
Period after the Closing Date.
4.5.4 Example. The following example shall illustrate the
payment of any Operating Loss and the sharing of any Operating Profit:
Assume at the end of the first Operating Period ("Year 1") that
the Store shows an Operating Loss of $90,000. The Buyer shall absorb
seventy-five percent (75%) of that Operating Loss ($67,500) and the Seller
shall pay twenty-five percent (25%) to the Buyer ($22,500). (If an
Operating Profit had been generated during the first Operating Period, the
Seller would have no right to share in such Operating Profit since it had
not previously reimbursed the Buyer for any Operating Loss.)
Further assume that at the end of the next succeeding Operating
Period ("Year 2"), the Store shows an Operating Profit of $110,000. The
Buyer shall retain one hundred percent (100%) of such Operating Profit
until its current aggregate Operating Loss is reduced to the amount of the
Seller's current aggregate Operating Loss ($22,500). (Thus, the Buyer
would retain the first $45,000 of the Operating Profit (to reduce the
Buyer's aggregate Operating Loss from $67,500 to $22,500), leaving a
remaining Operating Profit of $65,000.) This remaining Operating Profit
would then be divided equally between the Buyer and the Seller until the
Seller's aggregate Operating Loss ($22,500) is reduced to zero. (Thus, the
Buyer and the Seller each would receive $22,500 of the Operating Profit,
reducing the Seller's aggregate Operating Loss to zero and leaving a
remaining Operating Profit of $20,000.) The remaining Operating Profit
would be paid to the Buyer. As a result of these calculations, at the end
of Year 2 the Seller's net Operating Loss would
13
<PAGE> 18
be zero and the Buyer's operating account would show a net profit of
$20,000.
If the Store showed an Operating Profit in the next succeeding
Operating Period ("Year 3"), the Buyer would retain the entire amount of
such Operating Profit because the Seller's aggregate Operating Loss already
had been reduced to zero and the Seller had not incurred any additional
Operating Loss prior to the end of the 36 month period immediately
succeeding the Closing Date. If operations in Year 3 resulted in an
Operating Loss, however, the Seller would be required to pay twenty-five
percent (25%) of such Operating Loss to the Buyer but would not thereafter
have any claim for reimbursement from the Buyer (since the Seller's right
to share in any Operating Profit expires at the end of Year 3).
4.6. Loss on Sale or Liquidation. Provided that (i) the Buyer
notifies the Seller in writing at any time within the twenty (20) full calendar
month period next following the Closing Date that the Buyer intends to sell or
liquidate the Store, (ii) the Buyer sells or liquidates the Store within the
one hundred eighty (180) day period next following the notice given by the
Buyer pursuant to this Section 4.5 and (iii) the Buyer incurs a loss upon such
sale or liquidation (the "Loss on Sale"), the Seller shall reimburse the Buyer
for an amount equal to fifty percent (50%) of such Loss on Sale, as determined
by the Buyer in accordance with methodology approved by Arthur Andersen which
must be in accordance with generally accepted accounting principles. The
Seller shall pay its share of the Loss on Sale in the same manner as
contemplated by Section 4.4.2 hereinabove. The Seller shall have no right to
share in any profit realized by the Buyer upon any sale or liquidation of the
Store, whether sold or liquidated within the twenty (20) month period or
otherwise.
4.7. Seller's Right to Review Computations. The Seller shall
have the right, at its own cost and expense, to review the Buyer's computations
of any Operating Profit, Operating Loss and Loss on Sale. The Seller may make
such review at the Buyer's offices (or such other place as the Buyer may
reasonably designate) during normal business hours of operation of the Buyer
and upon reasonable advance notice to the Buyer. The Buyer shall make
available to the Seller the Buyer's business, accounting and property records
reasonably necessary for the Seller to make such review.
14
<PAGE> 19
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Buyer as follows:
5.1 Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. The Seller has all requisite corporate power and
authority to carry on its business as now being conducted and to operate and
lease the Store. The Seller is duly qualified to do business in the
Commonwealth of Virginia.
5.2 Authorization; Enforceability. The execution and
performance by the Seller of this Agreement and all other agreements
contemplated herein have been duly authorized by all necessary corporate action
of the Seller. This Agreement and all other agreements contemplated herein
have been duly executed and delivered by the Seller and constitute the legal,
valid and binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms.
5.3 Agreement Not in Breach of Other Instruments or Law. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof will not result in
a breach of any of the terms or provisions of, or constitute a default under,
or conflict with, or require any consent or approval of any other party to, any
lease, agreement, indenture or other instrument to which the Seller is a party
or by which the Seller is bound, the Articles or Certificate of Incorporation
or Bylaws of the Seller, any judgment, decree, order or award of any court,
governmental body or arbitrator by which the Seller is bound, or any law, rule
or regulation applicable to the Seller.
5.4 Licenses and Permits. The Seller possesses all Licenses
and Permits required for the operation of the Store as currently being
operated, each of which is in full force and effect and is listed on Schedule
5.4 hereto, including, without limitation, the license required to permit the
sale of alcoholic beverages in the Store and the license required to permit the
use of radio frequencies in the operation of the Store. The Seller has not
received notice of any proceeding for the suspension or revocation of any such
License or Permit and no such proceeding is pending or has been threatened by
any governmental authority.
15
<PAGE> 20
5.5 Financial Statements. All financial statements of and
financial information pertaining to the Store and given to the Buyer by the
Seller (i) were unaudited statements prepared in accordance with the Seller's
internal accounting procedures, consistently applied; (ii) fairly present the
financial condition and the results of operations for the Store as at the
relevant dates thereof and for the periods covered thereby; and (iii) contain
and reflect adequate provisions for all liabilities and obligations.
5.6 Absence of Certain Changes. Since the date of the latest
financial statements of the Store presented by the Seller to the Buyer, there
has not been (i) any material transaction not in the ordinary course of
business relating to the Purchased Assets; (ii) any material adverse change in
any of the operations, conditions (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise), business or prospects of
the Store; (iii) any damage, destruction or loss materially and adversely
affecting the Leased Property or the business of the Store; (iv) any mortgage,
pledge or subjection to any lien, charge or encumbrance of any kind, of any of
the Purchased Assets; (v) any material alteration in the manner of keeping the
books, accounts or records of the Store, or in the accounting practices therein
reflected; or (vi) any other event or condition of any character which
materially and adversely affects the results of operations, conditions
(financial or otherwise), assets, property, business or prospects of the Store.
5.7 No Legal Bar; No Litigation. The Seller is not prohibited
by any order, writ, injunction or decree of any body of competent jurisdiction
from consummating the transactions contemplated by this Agreement, and no such
action or proceeding is pending against the Seller which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby. Except as set
forth on Schedule 5.7 hereto, there are no actions, suits or proceedings
pending or, to the best of the Seller's knowledge, threatened against or
affecting any of the Purchased Assets or the operation of the Store which, if
decided adversely, might reasonably be expected to have a material adverse
effect upon the Purchased Assets.
5.8 No Brokerage Fees. No broker or finder has acted for the
Seller in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fees
or other commission in respect of such transactions based in
16
<PAGE> 21
any way on agreements, arrangements or understandings made by or on behalf of
the Seller.
5.9 Compliance with Law. The conduct of the business at the
Store by the Seller does not violate any applicable federal, state, local or
foreign laws, ordinances, rules, regulations, decrees, orders, permits or other
similar items, the enforcement of which would materially and adversely affect
the business, assets, condition (financial or otherwise) or prospects of the
Store or impose any liability on the Buyer, nor has the Seller received any
notice of any such violation. All of the Leasehold Improvements are in good
operating condition and repair and the operation thereof as presently conducted
does not violate any applicable code, ordinance or other law or regulation.
5.10 Title. The Seller has good title to the Purchased Assets,
in each case free and clear of all mortgages, liens, security interests,
options, easements, covenants, rights-of-way and other similar charges or
restrictions of any nature whatsoever ("Liens"), except for zoning, building
and other similar restrictions. At the Closing, good title to the Purchased
Assets shall be transferred to the Buyer free and clear of any and all
tenancies and Liens.
5.11 Lease in Force. The Lease is in full force and effect and
enforceable in accordance with its terms. The lease made available by the
Seller to the Buyer is a true and complete copy of the Lease with all
amendments and modifications thereto, other than an amendment to add additional
space to the Leased Property, which has been executed by the Seller and agreed
to but not executed by the Landlord, a copy of which has been provided to the
Buyer. The Seller is not and, to the best of the Seller's knowledge, the
Landlord is not in default under the terms of the Lease. To the best of the
Seller's knowledge, there is not, under the Lease, any event which, with the
passage of time or the giving of notice or both, could become a default,
including but not limited to any default that could result in the termination
of the Lease. To the best of the Seller's knowledge, there is no pending or
threatened bankruptcy of the Landlord.
5.12 Labor Matters
5.12.1 Non-Conveyance of Certain Labor Related Matters. The
Seller is not assigning or otherwise conveying to the Buyer and the Buyer
is not assuming from the Seller any (i) agreement for the employment of any
person in connection with the
17
<PAGE> 22
operation of the Store, (ii) collective bargaining agreement or other
agreement with any labor organization covering any Employees, or (iii)
profit sharing, bonus, deferred compensation, health or medical insurance
plans, pension or retirement or insurance plans, agreement or obligations
or other employment benefit commitments covering or relating to any of the
Employees, including any obligation for payment of severance pay, vacation
pay or sick leave. The Seller shall be liable for all costs or expenses
arising or accruing prior to the Closing Date in connection with any
employee benefit arrangements with any Employee, including those listed on
Schedule 5.14.
5.12.2 COBRA Compliance. Each group health plan in which the
Seller participates has been maintained in compliance with the continuation
coverage provisions of Section 4980B of the Internal Revenue Code of 1986,
as amended, the corresponding provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any applicable state laws
or regulations.
5.12.3 Retiree Health and Life Insurance. No retiree health
or life insurance benefits are provided in an aggregate amount that is
material to the Purchased Assets or to the operations, business, or
financial condition of the Seller under the terms of any employee benefit
plan that is maintained or otherwise contributed to by the Seller or any
affiliate of the Seller that may be a member of a "control group" with the
Seller as defined in ERISA (an "Affiliate") for the benefit of the
Employees or of the employees of an Affiliate.
5.12.4 Union Matters. The Employees are not represented by
any union or other labor organization and there is no collective bargaining
or other agreement with any labor organization covering the Employees.
5.12.5 Strikes. There are no strikes, work stoppages,
picketing or the like in process or, to the Seller's knowledge, threatened
with respect to the Store, and there have not been any stoppages or job
actions since the Store commenced operations.
5.13 Insurance Policies. The Seller has in force with respect
to each of the Purchased Assets insurance policies providing adequate coverage
against fire, liability and other customary risks. All such insurance with
respect to the Purchased Assets will terminate as of the Closing Date. The
Seller has not received notice from any of its insurance carriers threatening
to cancel such insurance or
18
<PAGE> 23
requiring a change in such insurance for the Purchased Assets.
5.14 Employee List. Schedule 5.14 hereto sets forth a true and
correct list of the names of all Employees of the Seller employed in the Store
as of February 25, 1993, including a description of position, date of
employment and current rate of compensation. Except as set forth on Schedule
5.14, no such Employees have quit, been terminated or reassigned, nor have any
employees been hired, since the date of such Schedule.
5.15 Hazardous Substances and Environmental Conditions. The
Seller has not since the date it received possession of the Store, and does not
now, store any Hazardous Substance at the Store, and, to the best of the
Seller's knowledge, there is no Hazardous Substance located in, on or upon the
Store (including the sub-surface thereof). No Hazardous Substances have been
disposed of on, in or under the Store during the Seller's occupancy thereof,
except in compliance with all applicable environmental laws, regulations and
ordinances.
5.15.1 To the best of Seller's knowledge, no Environmental
Condition exists at, upon or under the Store, including Environmental
Conditions involving Hazardous Substances.
5.15.2 The term "Environmental Condition" shall mean any
condition involving any Hazardous Substance or other regulated substance
with respect to soil, subsurface, surface waters, groundwaters, stream
sediments, air, improvements, and other material included in, existing at
or emanating from the Store, regardless of whether such Environmental
Condition is naturally occurring or results from activities of the Seller
or its predecessors in interest, the presence or existence of which (i)
violates any applicable federal, state or local statute, regulation,
ordinance or rule, (ii) would impose any criminal or civil liability upon
the Buyer, any affiliate of the Buyer, any owner, occupant or tenant of the
Store, or (iii) would require any person listed in clause (ii) hereof to
undertake any action or incur any cost to remove such substance or
otherwise to remedy such condition. The term "Hazardous Substances" shall
include asbestos, any pollutants, dangerous substances, toxic substances,
radioactive materials, hazardous wastes, hazardous materials or hazardous
substances as defined by the federal Resource Conservation and Recovery Act
(42 U.S.C. Sections 6901, et seq.), as amended, or the federal
Comprehensive Environmental Response, Compensation and Liability Act
19
<PAGE> 24
(42 U.S.C. Sections 9601, et seq.), as amended (including as amended by
Title III of the Superfund Amendments and Reauthorization Act), or any
other material or substance the presence of which requires investigation or
remediation under any other federal, state or local environmental law,
ordinance, rule or regulation, the term "law" to include and not be limited
to statutes and judicial precedents.
5.16 FIRPTA. The Seller is not a foreign person as that term
is defined in the Foreign Investors Real Property Tax Act of 1980, as amended,
and the Buyer will have no obligation under such Act to withhold any amount
from the Closing Purchase Price under the provisions of such Act.
5.17 Equipment, Fixed Assets and Other Personalty. Schedule
5.17 contains a list of all items of FF&E and other Personalty with a useful
life in excess of one (1) year owned by the Seller and located on or in and
used in the operation of the Store as of the date hereof. The FF&E and other
Personalty being transferred to the Buyer is sufficient to operate the Store in
the manner in which it is currently being operated and at the Closing shall be
located in the Store (or shall have been replaced by FF&E or other Personalty
acceptable to Buyer). As of the Closing Date, all such FF&E and other
Personalty shall be in substantially the same condition and state of repair as
it was on the date hereof, ordinary wear and tear excepted.
5.18 Contracts. There are no contracts or other agreements
relating to the operation of the Store to which the Seller is a party that are
material to the ability of the Buyer to operate the Store in the manner in
which the Store has heretofore been operated except such contracts as the
Seller has assigned to the Buyer.
5.19 Condition of Leased Property and Leasehold Improvements.
Except as set forth on Schedule 5.19 hereto, the construction of all of the
improvements to the Leased Property has been completed and all payments
required to be made by the Seller therefore have been paid. All of the
buildings, fixtures and other Leasehold Improvements relating to the Store are
in good operating condition and repair, and the operation thereof as presently
conducted is not in violation of any applicable building code, zoning ordinance
or other law or regulation.
5.20 Property Tax Challenges. The Store is not presently the
subject of, or affected by, a property tax assessment challenge by the Seller
or the Landlord. If the Store becomes the subject of such a challenge prior to
the
20
<PAGE> 25
Closing Date, the Seller agrees to provide to the Buyer at the Closing copies
of all records in the Seller's possession or control necessary for the Buyer to
continue to pursue such property tax assessment challenge.
5.21 Total Beverage Trademark.
5.21.1 Set forth on Schedule 5.21 is a complete and
correct list of each trade name, service name, commercial name or
fictitious business name comprising, related to or used in the business of
the Store, together with a list of each jurisdiction (if any) in which such
name is registered, and a reproduction of each trademark or service mark
comprising, related or used in the business of the Store, together with a
list of each jurisdiction in which any such name or mark owned by the
Seller is registered or in which an application for registration of such
name or mark is pending. The Seller previously has delivered copies of all
such applications and related correspondence to the Buyer.
5.21.2 Except as indicated on Schedule 5.21, the Seller
is the sole and rightful owner of all right, title and interest in and to
each trade name, service name, commercial name, fictitious business name,
trademark and service mark set forth on Schedule 5.21 and has the sole and
exclusive right to use any such trademark or service mark. Schedule 5.21
sets forth the date of, parties to and a description of each assignment of
ownership and/or license, or any similar agreement, between the Seller and
any person relating to any such name or mark. The Seller is not required
under any of the foregoing agreements to make any payment or to obtain any
third party consent in connection with or as a result of the Seller
executing, delivering and performing this Agreement or consummating the
transactions provided for herein.
5.21.3 Except as indicated on Schedule 5.21, the conduct
of the business of the Store and the use of the Total Beverage Trademark
does not infringe any trademark, trade name, service mark or commercial
name, registered or unregistered, or otherwise infringe upon or violate any
other intellectual property rights of, any third parties, and no claim is
pending or has been made to such effect. The Seller has no disputes with
or claims against any third party for infringement by such third party of
any trademark, trade secret, service mark, trade name or commercial name,
registered or unregistered, except as indicated on Schedule 5.21.
21
<PAGE> 26
ARTICLE VI
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Seller as follows:
6.1 Good Standing. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
It has all necessary corporate power and authority to own its properties and
carry on its business as now conducted and to enter into and perform this
Agreement.
6.2 Authorization; Enforceability. The execution and
performance of this Agreement, the Note, and the other agreements contemplated
hereby by the Buyer have been duly authorized by all necessary corporate action
of the Buyer. Except as otherwise stated herein, the execution and performance
of this Agreement by the Buyer and the consummation of the transactions
contemplated hereby will not require the consent, approval or authorization of
any other person or public authority and will not violate any provision of law
applicable to the Buyer. This Agreement has been duly executed and delivered
by the Buyer and is the legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditor's rights in general or by general
principles of equity. Upon issuance, the Note will be duly authorized,
executed and delivered and will be the legal, valid and binding obligation of
the Buyer, enforceable against the Buyer in accordance with its terms.
6.3 Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof will not result in
a breach of any of the terms or provisions of, or constitute a default under,
or conflict with, or require any consent or approval of any other party to, any
agreement, indenture or other instrument to which the Buyer is a party or by
which it is bound, the Certificate of Incorporation or Bylaws of the Buyer, any
judgment, decree, order or award of any court, governmental body or arbitrator
by which the Buyer is bound, or any law, rule or regulation applicable to the
Buyer.
6.4 No Legal Bar. The Buyer is not prohibited by any order,
writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions
22
<PAGE> 27
contemplated by this Agreement, and no such action or proceeding is pending
against the Buyer which questions the validity of this Agreement, any of the
transactions contemplated hereby or any action which has been taken by any of
the parties in connection herewith or in connection with any of the
transactions contemplated hereby.
6.5 No Brokerage Fees. No broker or finder has acted for the
Buyer in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fees
or other commission in respect of such transactions based in any way on
agreements, arrangements or understandings made by or on behalf of the Buyer.
ARTICLE VII
COVENANTS OF SELLER
The Seller covenants and agrees as follows:
7.1 Operate in Regular Manner. From the date hereof through
and including the Closing Date, the Seller shall: (i) operate the Store only
in the usual, regular and ordinary manner; (ii) use reasonable efforts to
preserve intact its present business organization; (iii) not remove from the
Store any of the assets or properties to be purchased hereunder, other than
inventories sold and assets replaced in the ordinary course of business; (iv)
maintain stocks of all inventory (including inventory that is not Saleable
Inventory) at normal levels, in a manner consistent with past practices; (v)
maintain the Store in its current condition of repair, reasonable wear and tear
excepted; (vi) maintain the books and records of the Store in the usual,
regular and ordinary manner consistent with the Seller's past practice; (vii)
pay all taxes and assessments as they become due; (viii) take all actions
necessary to remove any Liens upon the Purchased Assets; (ix) maintain all
insurance coverage on the Purchased Assets in such amounts and kinds as are
currently maintained; (x) maintain in effect all Licenses and Permits as may be
necessary for the Buyer to operate the Store in a manner consistent with
current operations; (xi) make all payments and perform all other obligations
required under the terms of the Lease; and (xii) otherwise endeavor to maintain
the goodwill of the Store's customers.
7.2 Prohibited Actions. From the date hereof through and
including the Closing Date, the Seller shall not, without the Buyer's consent:
(i) enter into any new contracts for the purchase of goods or services with
respect
23
<PAGE> 28
to the Store that obligate the Store for supplies, FF&E or services beyond
February 27, 1993; (ii) sell, assign, encumber, lease, sublease or otherwise
dispose of (or suffer to exist any Lien upon or other encumbrance of) any of
the Purchased Assets; (iii) engage in any activity or transaction in connection
with the operation of the Store, other than in the usual and ordinary course of
business; (iv) enter into any compromise or settlement of any material suit or
proceeding of any kind relating in any way to the operation of the Store; (v)
amend, modify, terminate or permit the lapse of the Lease or renew or extend or
exercise any option to renew or extend the term of the Lease; (v) hire, fire,
transfer or relocate any Employee; or (vi) sell, assign or transfer any
interest in the Total Beverage Trademark.
7.3 Access and Inspection. From the date hereof through and
including the Closing Date, (i) the Seller shall permit representatives of the
Buyer to inspect the Store and to inspect the Seller's business and property
records with respect to the Store, (ii) the Seller shall furnish to the Buyer
all information with respect to the operations, financial condition and
business of the Store that the Buyer may reasonably request (including customer
credit records and bad-check experience), and (iii) the Buyer shall have the
right to discuss the affairs and business of the Store with the Employees.
After the Closing Date, the Seller shall provide the Buyer access to the
Seller's business, accounting and property records relating to the Store upon
reasonable advance notice from the Buyer to the Seller, at the Seller's offices
(or such other place as the Seller may reasonably designate) during normal
business hours of operation of the Seller.
7.4 Bulk Transfer Laws. The Buyer hereby waives compliance by
the Seller with any applicable bulk sales law, including Title 8.6 of the Code
of Virginia, on the condition that the Seller shall indemnify the Buyer against
any resulting claims, liabilities and expenses that may be asserted against or
incurred by or against it in connection with such waiver. The Seller shall
deliver to the Buyer at the Closing a copy, certified by the Secretary of the
Seller, of a Resolution of the Board of Directors of the Seller waiving any
rights that it may have under Title 8.6 of the Virginia Uniform Commercial Code
in connection with this Agreement and the transactions contemplated hereby.
7.5 Building Plans. Prior to the Closing Date, the Seller shall
provide to the Buyer the originals or certified copies of all building plans in
the Seller's possession with respect to the Store. In the event the
24
<PAGE> 29
Closing does not occur, such plans promptly shall be returned by the Buyer to
the Seller.
7.6 Cooperation. The Seller shall cooperate with the Buyer and
shall take all reasonable actions requested by the Buyer to assist the Buyer in
(a) effecting the transfer of the Purchased Assets, (b) effecting the transfer
of all Licenses and Permits, (c) obtaining the consents of the Landlord and any
lenders whose interests are secured by the Leased Property, (d) obtaining the
consents of all governmental agencies required to effectuate the transfer of
the Purchased Assets, and (e) obtaining the agreement of any other party that
is necessary in order to allow the Buyer to continue to operate the Store in
the manner in which it is being operated as of the date hereof. The Seller
shall provide such reasonable cooperation to the Buyer after the Closing Date
as needed from time to time.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions for the Benefit of Buyer. The obligation of
the Buyer to consummate the purchase provided for herein shall be subject to
the satisfaction, on or before the Closing Date, of the following conditions,
in addition to such other conditions as may be provided for in this Agreement:
8.1.1 The representations and warranties of the Seller
contained herein shall have been true and correct in all material respects
when made and shall be true and correct in all material respects as of and
at the Closing Date with the same effect as if made at and as of such date,
except as may be affected by any transactions expressly provided for or
permitted hereunder; the Seller shall have performed and complied in all
material respects with all agreements, covenants and conditions required
hereunder to be performed and complied with by it, at or prior to the
Closing Date; and the Seller shall have delivered to the Buyer a
certificate, in the form attached hereto as Exhibit "E", dated as of the
Closing Date, signed by the Seller's president, certifying to the
fulfillment of the foregoing conditions.
8.1.2 The Buyer shall have been able to obtain all consents
and other agreements required by this Agreement relating to the Leased
Property and the assignment of the Lease, including, without limitation,
(i) the consent of the Landlord to the assignment of the
25
<PAGE> 30
Lease, in the form attached hereto as Exhibit "D"; (ii) the consent of
each lender secured by a lien against the Leased Property to the
assignment of the Lease and each such lender's agreement not to disturb
the Buyer from the Leased Property, in the form attached hereto as Exhibit
"F"; (iii) an estoppel certificate from the Landlord in the form attached
hereto as Exhibit "G"; and (iv) an estoppel certificate from the Seller in
the form attached hereto as Exhibit "H".
8.1.3 On or before Closing Date, the Buyer shall have
received or obtained all Licenses and Permits and/or administrative
approvals necessary to the operation by the Buyer of the Store in the
manner in which the Seller has heretofore operated the Store, including,
without limitation, any Licenses relating to the sale of alcoholic
beverages, the federal License pertaining to the use of the radio frequency
system and devices and any License or other registration relating to the
use or transfer of the Total Beverage Trademark.
8.1.4 No suit, action or other proceeding (including action
under Federal antitrust laws) to prohibit, delay or otherwise materially
and adversely affect the consummation of the transactions contemplated by
this Agreement, or to subject the Buyer or the Purchased Assets to any
lien, encumbrance or liability resulting directly or indirectly from the
transactions contemplated hereby shall have been instituted.
8.1.5 The Seller shall have terminated the employment of all
of the Employees effective as of 11:59 p.m. on the day immediately prior to
the Closing Date.
8.1.6 The Seller shall have delivered the bill of sale
representing the Purchased Assets in the form attached hereto as Exhibit
"I".
8.1.7 The Seller shall have obtained and recorded, where
appropriate, releases of any Liens encumbering the Purchased Assets.
8.1.8 The Buyer shall have received all other deliveries
called for in Section 9.1 of this Agreement.
8.2 Conditions for the Benefit of Seller. The obligations of
the Seller to consummate the sale provided for herein shall be subject to the
satisfaction, on or before the Closing Date, of the following conditions, in
addition to such other conditions as may be provided for in this Agreement:
26
<PAGE> 31
8.2.1 The representations and warranties of the Buyer as
contained herein shall have been true and correct as of the date hereof and
shall be true and correct at and as of the Closing Date with the same
effect as if made on and as of such date, except as otherwise provided or
permitted hereunder, and the Buyer shall have performed all of the
obligations and agreements required by this Agreement to be performed by it
on or prior to such Closing Date.
8.2.2 No suit, action or other proceeding (including action
under Federal antitrust laws) to prohibit, delay or otherwise affect the
consummation of this Agreement or to subject the Seller to any liability
resulting directly or indirectly from the transactions contemplated hereby
shall have been instituted.
8.2.3 The Seller shall have received the Note and all other
deliveries from the Buyer called for in Section 9.2.
8.3 Seller's Right to Perform. The Buyer shall use its
reasonable best efforts to fulfill all of its pre-Closing obligations under
this Agreement and to cause the conditions for the benefit of the Seller as set
forth in Section 8.2 hereof to be satisfied. The Seller shall have the right,
after notice, but not the obligation (unless otherwise required by this
Agreement), to perform or assist the Buyer in performing all of the Buyer's
pre-Closing obligations hereunder.
8.4 Buyer's Right to Perform. The Seller shall use its
reasonable best efforts to fulfill all of its pre-Closing obligations under
this Agreement and to cause the conditions for the benefit of the Buyer as set
forth in Section 8.1 to be satisfied. The Buyer shall have the right, after
notice, but not the obligation (unless otherwise required by this Agreement),
to perform or assist the Seller in performing all of the Seller's pre-Closing
obligations hereunder.
ARTICLE IX
DELIVERIES AT THE CLOSING
9.1 Seller's Deliveries to Buyer. At the Closing, the Seller
shall deliver to the Buyer, in addition to any and all other instruments
required hereunder to be so delivered to the Buyer by the Seller, the
following:
27
<PAGE> 32
9.1.1 A bill of sale, assignments and other appropriate
instruments of transfer as set forth herein, all duly executed by the
Seller, assigning, and transferring to the Buyer the Purchased Assets
together with possession thereof;
9.1.2 (a) An executed copy of the Lease and all amendments
thereto to the extent required by the terms of this Agreement indicating
that there have been no amendments, modifications, extensions or exercises
of options to renew or extend with respect to the Lease after the date
hereof, and (b) any and all other documents of which the Seller has
knowledge and which the Seller can obtain which legally affect in any
material respect the Seller's right to the Purchased Assets;
9.1.3 A copy of the resolution adopted by the Board of
Directors of the Seller authorizing and approving the execution and
performance of this Agreement and the assignment, sale and transfer of the
Purchased Assets to be sold or assigned to the Buyer hereunder and an
incumbency certificate of the Seller, each as certified by the secretary or
other appropriate officer of the Seller as of the Closing Date;
9.1.4 A current certificate or telegram of corporate good
standing of the Seller as issued by the Secretary of State of the
Commonwealth of Virginia;
9.1.5 Books, records, and computer programs and disks
pertaining to the Store and not located at the Store; and
9.1.6 The closing certificate, releases of Liens and such
additional instruments and documents as counsel for the Buyer may
reasonably request to transfer to and vest in the Buyer good title to the
Purchased Assets free and clear of all Liens and to effectuate the other
terms of this Agreement.
9.2 Buyer's Deliveries to Seller. At the Closing, the Buyer
shall deliver to the Seller, in addition to any and all other instruments
required hereunder to be so delivered to the Seller, the following:
9.2.1 A copy of the resolution adopted by the Board of
Directors of the Buyer authorizing the execution and performance of this
Agreement and an incumbency certificate of the Buyer, both as certified by
the secretary or assistant secretary or other appropriate officer of the
Buyer as of the Closing Date;
28
<PAGE> 33
9.2.2 A current certificate or telegram of corporate good
standing of the Buyer as certified by the Secretary of State of the State
of Delaware;
9.2.3 Assignments and other appropriate instruments of
transfer as set forth herein, all duly executed by the Buyer as so required
to be executed, and assuming, to the extent required under this Agreement,
the obligations and liabilities of the Seller with respect to the Purchased
Assets;
9.2.4 The Note, to the extent the Inventory Purchase Price
has been determined by the time of the Closing; and
9.2.5 Such other additional instruments and documents as the
Seller may reasonably request to effectuate the terms of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller. The Seller shall indemnify and
hold the Buyer and its shareholders, directors and officers harmless from and
after the Closing Date from and against any and all costs, losses, damages,
liabilities and expenses (including actual attorney and professional fees)
incurred by the Buyer as a result of:
10.1.1 The breach of any of the Seller's representations and
warranties made under or pursuant to this Agreement including, without
limitation, the presence of Hazardous Substances at the Store;
10.1.2 The nonfulfillment of any covenant, agreement or
obligation to be performed by the Seller under or pursuant to this
Agreement;
10.1.3 Any and all litigation, proceedings, controversies,
disputes, claims, administrative proceedings or other actions against the
Buyer (including the costs of investigation), in connection with or
incident to any occurrence, event or circumstances occurring, accruing or
arising prior to the Closing Date relating to the Purchased Assets; but
excluding any litigation, proceeding, controversy, dispute, claim,
administrative proceeding or other action that may now exist or that may
arise after the Closing Date that relates to the use of the name "Total
Beverage" or to the Total Beverage Trademark;
29
<PAGE> 34
10.1.4 Any obligations or liabilities under the Lease arising
or accruing prior to the Closing Date;
10.1.5 Any and all loss, liability, damage, cost and expense
resulting directly or indirectly from, or arising out of, any and all
obligations or liabilities of or claims against the Seller not expressly
assumed by the Buyer hereunder;
10.1.6 Any federal, state, local or foreign income, sales,
employment, or franchise tax or any other taxes (including penalties and
interest) relating to or arising in connection with the Store and the
business conducted thereat relating to the period up to the Closing Date or
any transfer taxes to be paid by the Seller pursuant to Section 11.6
arising out of the transactions contemplated by this Agreement;
10.1.7 Any claim made against the Buyer by any customer of
the Store in connection with any deposit for the purchase of any goods or
services from the Store given by the customer prior the Closing Date to the
extent the aggregate amount of such prepaid deposits ever exceeds the sum
of One Thousand and No/100 Dollars ($1,000.00);
10.1.8 Any claim, liability or expense imposed upon or
against the Buyer relating to, arising out of or arising as a result of the
Seller's failure to comply with any applicable bulk transfer laws,
including, without limitation, Title 8.6 of the Code of Virginia;
10.1.9 Any and all litigation, proceedings, arbitrations,
controversies or claims against the Buyer accruing or arising from, in
connection with or incident to any claim or occurrence relating in any
manner to the Union or any other labor organization (i) which arise prior
to the Closing Date, including without limitation any claim pertaining to
the application to the Employees of a certain Agreement, dated December 6,
1989, by and between the Union and Shoppers Food Warehouse, or (ii) relate
in any way to or challenge the transaction contemplated by this Agreement,
including, without limitation, that certain Civil Action File No. B-93-558,
United Food and Commercial Workers Union, Local No. 400 v. Shoppers Food
Warehouse, Inc., filed February 23, 1993 in the United States District
Court for the District of Maryland;
10.1.10 Any claim, litigation, administrative proceeding,
investigation or other actions (collectively
30
<PAGE> 35
an "Action") arising from or relating to efforts by the Union to assert the
right to bargain collectively on behalf of any bargaining unit that
includes any employees of the Store ("Organizing Efforts") or any actions
taken by the Buyer in response to such Organizing Efforts, including, but
not limited to, (i) claims under Section 9(b) of the National Labor
Relations Act ("NLRA"), 29 U.S.C.A. Section 159(b), or any other applicable
law or regulation, to establish that such employees are part of an
appropriate bargaining unit or that the Union should be recognized as the
bargaining representative for a bargaining unit that includes any such
employees, or (ii) claims under Section 8(a)(1) of the NLRA, 29 U.S.C.A.
Section 158(a)(1), contending that any actions taken by the Buyer in
response to such Organizing Efforts constitute an unfair labor practice or
a violation of any other applicable law, in each case alleged in connection
with any Action to have occurred on or prior to February 28, 1996, and of
which the Seller shall have received notice on or prior to August 31, 1996;
provided, however, that the Buyer shall not have any right pursuant to this
Section 10.1.10 to receive reimbursement of any penalties, fines, or other
amounts awarded by a court of competent jurisdiction as a result of a final
determination by such court that the Buyer's conduct constituted a
violation of any applicable statute (including any substantive regulation
promulgated pursuant thereto).
10.1.11 Any claim, controversy, arbitration, proceeding,
litigation or other action by any Employee arising or accruing prior to or
on the Closing Date; and
10.1.12 Any other matters as to which the Seller has agreed
to indemnify the Buyer as set forth in this Agreement.
10.2 Indemnification by Buyer. The Buyer shall indemnify and
hold the Seller and its shareholders, directors and officers harmless after the
Closing Date from and against any and all costs, losses, damages, liabilities
or expenses (including actual attorney and professional fees) incurred by the
Seller as a result of:
10.2.1 The breach of any of the Buyer's representations and
warranties made under or pursuant to this Agreement;
10.2.2 The nonfulfillment of any covenant, agreement or
obligation to be performed by the Buyer under or pursuant to this
Agreement;
31
<PAGE> 36
10.2.3 Any litigation, proceedings, controversies, disputes,
claims, administrative proceedings or other actions against the Seller
(including the costs of investigation) arising from, in connection with or
incident to (i) acts of the Buyer prior to the Closing Date, (ii) any
occurrence, event or circumstance occurring, accruing or arising on or
after the Closing Date relating to the Purchased Assets or (iii) any
occurrence arising on or after the Closing Date relating to the Buyer's
utilization of any License or Permit held by the Seller on or after the
Closing Date;
10.2.4 Any obligations or liabilities under the Lease arising
or accruing on or after the Closing Date; and
10.2.5 Any federal, state, local, or foreign income, sales,
employment or franchise or any other taxes (including penalties and
interest) relating to or in connection with the Store, and the business
conducted thereat relating to the period on or after the Closing Date or
any transfer taxes to be paid by the Buyer pursuant to Section 11.6 arising
out of the transaction contemplated by this Agreement.
10.3 Participation.
(a) If a claim pursuant to Section 10.1 or 10.2 of
this Agreement shall arise, the indemnified party promptly shall give notice
thereof to the indemnifying party setting forth the amount of the claim and the
terms of any proposed payment or settlement thereof; provided, that any failure
or delay to give such notice shall not affect an indemnified party's right to
receive indemnification hereunder unless the indemnifying party shall be
materially prejudiced thereby. The indemnifying party shall have thirty (30)
days from the date of such notice (or such shorter period as may be required to
avoid a default judgment, penalty or other material adverse consequence arising
from the passage of time) (the "Notice Period"), at its election, either (i) to
agree to make such payment or settlement or (ii) to agree to assume the defense
of and to commence the defense of such claim. The indemnifying party shall
give the indemnified party notice of its election within the Notice Period. If
the indemnifying party shall fail to notify the indemnified party of its
election within the Notice Period, the indemnifying party shall be deemed to
have consented to the payment or settlement of such claim as described in such
notice.
32
<PAGE> 37
(b) If the indemnifying party agrees to the proposed
settlement of the claim or to the payment described in the notice or shall have
been deemed to so agree, the indemnifying party shall make such settlement or
payment within fifteen (15) days after the end of the Notice Period and such
settlement or payment shall be binding upon both parties hereto. In the event
the indemnifying party fails to make such settlement or payment within such
fifteen (15) day period, the indemnified party shall have, without further
notice to the indemnifying party, the right to make such payment or settlement
and to offset the amount of such payment or settlement against sums due under
the Note, if any, or if no note is available, or if the Note is insufficient to
cover such payment, the indemnified party shall have all other rights provided
by law.
(c) If the indemnifying party elects to defend such
claim, the indemnifying party shall vigorously pursue such defense. The
indemnifying party thereafter shall have the right and the obligation to
resolve such claim and direct the defense of such claim or any litigation based
thereon at its own cost and expense through counsel of its own choosing and
shall indemnify the indemnified party against and hold the indemnified party
harmless from any cost, loss, damages or other liabilities arising from such
claim, including any damages, judgment or settlement amounts resulting
therefrom. The indemnified party shall also have the right, however, to
participate in the settlement of any such claim or in any such litigation so
long as its participation is at its own expense and with the understanding that
the indemnifying party shall retain the right to determine, in its sole
discretion, whether to settle any claim or dispute and the terms on which any
settlement shall be made. The indemnifying party shall pay any amounts owed to
or on behalf of the indemnified party as a result of any damages, judgment,
settlement amount or like amount within fifteen (15) days after such amount
becomes due. In the event the indemnifying party fails to make such payment
within such fifteen (15) day period, the indemnified party shall have the
right, without further notice to the indemnifying party, to pay such amount and
to offset the amount of such damages, judgment, settlement or like amount
against sums due under the Note, if any, or if no note is available, or if the
Note is insufficient to cover such payment, the indemnified party shall have
all other rights provided by law. In the event the indemnifying party fails to
defend such claim, or fails vigorously to pursue such defense, the indemnified
party shall have the right to pursue such defense or to settle such claim, and
the indemnifying party shall indemnify the indemnified party against, and hold
it harmless from, any costs, expenses, fees, (including actual attorney and
professional fees),
33
<PAGE> 38
damages, judgment or settlement amounts incurred by, imposed on, awarded
against or paid by the indemnified party.
ARTICLE XI
MISCELLANEOUS
11.1 Survival Of Representations and Warranties. All of the
representations and warranties of the respective parties hereto, as contained
herein, or in any certificate or other document delivered pursuant hereto, and
the obligations and provisions set forth in Articles IV and X and Sections 7.3,
7.6, 11.3, 11.4, 11.12 and 11.13 are true and accurate as of the date hereof
and shall be true and accurate as of the Closing Date and shall survive the
Closing hereunder or any termination of this Agreement pursuant to Section 2.6
hereof, notwithstanding any investigations heretofore or hereafter made by or
on behalf of any of the parties hereto, and shall continue in full force and
effect.
11.2 Waiver and Amendment. Any of the provisions of this
Agreement may be waived in writing at any time by the party or parties entitled
to the benefit of such provision (upon the authority of the respective Board of
Directors of the party making the waiver). Any of the provisions of this
Agreement may be amended at any time by written agreement authorized by the
Boards of Directors of the Seller and of the Buyer.
11.3 Covenant Not To Compete.
11.3.1 The Seller agrees that, for the period specified in
Section 11.3.2 below, the Seller shall not, directly or indirectly (whether
through any of its subsidiaries or affiliates, through any partnership of
which it is a member, through any trust in which it is a beneficiary or
trustee, or through any corporation or other association in which the
Seller has any interest, legal or equitable, or in any other capacity
whatsoever, whether for its own account or on behalf of any other party),
compete with the Buyer by operating or having any economic interest in the
operation of any business that operates primarily as a retail beer and wine
sales business (the "Warehouse Beverage Business") anywhere in the United
States of America; provided, however, that this agreement not to compete
shall not prohibit the Seller from selling beer, wine and related products
in its supermarkets.
34
<PAGE> 39
11.3.2 The covenant not to compete set forth in this Section
11.3 shall extend from the date hereof and for the greater of (i) a period
of five (5) years hereafter or (ii) for as long as the Buyer continues to
operate the Store primarily as a Warehouse Beverage Business.
11.3.3 The parties hereto agree that the scope of business,
duration and geographic areas for which the covenant not to compete set
forth in this Section is to be effective are reasonable. In the event that
any court determines that any of the provisions of this Section 11.3 exceed
the scope of business, duration or geographic limitations permitted by
applicable law, then such provisions will be and hereby are reformed to the
maximum scope of business, duration or geographic limitations permitted by
such applicable law. The parties intend that this covenant not to compete
shall be deemed to be a series of separate covenants, one for each and
every geographic area referred to in Sections 11.3.1 and 11.3.2. The
Seller agrees that damages are an inadequate remedy for any breach of this
covenant and that the Buyer shall, whether or not it is pursuing any
potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other security upon
any actual or threatened breach of this covenant.
11.3.4 The parties hereto acknowledge that the covenant not
to compete set forth in this Section 11.3 has not been bargained for
separate and apart from the Closing Purchase Price and that no part of such
purchase price is allocable to this covenant not to compete.
11.3.5 The Seller shall not, and shall cause its affiliates
and subsidiaries not to, use the name "Total Beverage" or the Total
Beverage Trademark after the Closing Date.
11.4 Further Assurances. From time to time after the Closing
Date with respect to the Purchased Assets, at the request of either party
hereto and without further consideration, each party shall execute and deliver
to the other party, or procure the execution and delivery to the other party
of, such other and further instruments of assignment and transfer and shall
take such other action as may be reasonably necessary to complete more
effectively the sale and transfers hereunder and to give further assurances to
the other party with respect to title to the Purchased Assets. The Seller
shall take all actions reasonably
35
<PAGE> 40
requested by the Buyer to allow the Buyer to operate under the "Total Beverage"
name.
11.5 Fees and Expenses. Except as otherwise provided herein,
the Seller and the Buyer, respectively, shall bear their own costs and expenses
incurred in connection herewith and with the transaction contemplated hereby,
whether or not the sale of any of the Purchased Assets hereunder shall be
consummated or the Agreement subsequently shall be terminated.
11.6 Transfer Taxes, Etc. Except as otherwise provided herein,
the Buyer and the Seller shall divide equally any and all taxes, fees or
charges imposed by any governmental authority on the assignment and/or transfer
of the Purchased Assets to the Buyer hereunder, including, without limitation,
any recording costs, transfer taxes, sales and/or use taxes, documentary stamps
or similar taxes, fees or charges which may arise as the result of the transfer
or assignment of any of the Purchased Assets to the Buyer hereunder. The
Seller and the Buyer agree to cooperate with each other and to take such
actions as reasonably requested by either party to limit or reduce any such
taxes, fees, or charges which may be incurred as a result of the sale and
transfer of the Purchased Assets.
11.7 Notices. Any notice which either party hereto may desire
or may be required hereunder to give to the other party hereto shall be in
writing and shall be deemed to be duly given when received by personal
delivery, with receipt acknowledged, by registered or certified mail (postage
prepaid, return receipt requested) or by air courier, with receipt
acknowledged, addressed to such other party as follows:
SELLER: Total Beverage VA Corp.
c/o Shoppers Food Warehouse Corp.
4600 Forbes Boulevard
Lanham, Maryland 20706
Attn: Robert N. Herman
Copy to: Total Beverage VA Corp.
c/o Shoppers Food Warehouse Corp.
4600 Forbes Boulevard
Lanham, Maryland 20706
Attn: Jack Binder
BUYER: Total Beverage G.B., Inc.
3300 75th Avenue
Landover, Maryland 20785
Attn: Chief Financial Officer
36
<PAGE> 41
Copy to: Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
ATTN: J. Keith Morgan, Esq.
or to such other address as any party hereto hereafter may designate to the
other party in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery, or if none, on the date
actually received.
11.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original hereto and
all of which together shall constitute but one instrument.
11.9 Headings. The headings of the Sections hereof are inserted
for convenience only and shall not constitute a part hereof.
11.10 Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. The Seller shall
have no right to assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the Buyer. The Buyer shall have
the right to assign this Agreement, in whole or in part, to any Affiliate of
the Buyer and the provisions of Section 4.6 hereof shall not apply to such sale
or assignment. The Buyer shall also have the right to assign this Agreement,
in whole or in part, to any other person without the consent of the Seller;
provided, however, that the Buyer shall not have the right to assign its rights
under the provisions of sections 4.5 and 4.6 of this Agreement to such person.
Subject to the immediately two (2) preceding sentences, all transfer documents
shall contain an acknowledgment from successors or assignees that the Store is
transferred subject to all of the terms and conditions of this Agreement, and
that such transferee agrees to be bound thereby and assume from and after the
Closing Date all obligations of the assignor with respect to the Store.
11.11 Time of Essence. Time is of the essence with respect to
this Agreement and all of the terms, provisions, covenants and conditions
hereof.
11.12 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
11.13 Entire Agreement; Construction. This Agreement constitutes
the entire agreement between the parties hereto and supersedes all prior and
contemporaneous agreements and
37
<PAGE> 42
undertakings of the parties pertaining to the subject matter hereof. For
purposes of construction, neither party shall be deemed to have drafted this
Agreement.
11.14 Exhibits and Schedules. All Exhibits and Schedules to this
Agreement are hereby incorporated by this reference into and made a part of
this Agreement.
11.15 Severability. If any of the terms and provisions specified
herein is held by a court of law to be in violation of any applicable local,
state or federal ordinance, statute, law, administrative or judicial decision,
or public policy, and if such court should declare such term or provision to be
illegal, invalid, unlawful, void, voidable or unenforceable as written, then
such provision shall be given full force and effect to the fullest possible
extent that it is legal, valid and enforceable, and the remainder of the terms
and provisions hereof shall be construed as if such illegal, invalid, unlawful,
void, voidable or unenforceable term or provision was not contained herein, and
the rights, obligations and interest of the Seller and the Buyer under the
remainder of this Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Purchase Agreement to be duly executed the day and year first above written.
SELLER:
TOTAL BEVERAGE VA CORP., a
Virginia corporation
By: /S/ ROBERT N. HERMAN
-------------------------
Name: Robert N. Herman
Title: Executive Vice President
BUYER:
TOTAL BEVERAGE G.B., INC., a
Delaware corporation
By: /S/ RON MARSHALL
-------------------------
Name: Ron Marshall
Title: Chief Financial Officer
38
<PAGE> 43
EXHIBITS AND SCHEDULES
Exhibit "A": Assignment and Assumption Agreement
Exhibit "B": Trademark Assignment Agreement
Exhibit "C": Note
Exhibit "D": Landlord Consent
Exhibit "E": Seller's Closing Certificate
Exhibit "F": Nondisturbance Agreement
Exhibit "G": Landlord Estoppel Certificate
Exhibit "H": Tenant Estoppel Certificate
Exhibit "I": Bill of Sale
Schedule 2.1: Purchased Assets
Schedule 2.2: Excluded Accounts Receivable
Schedule 2.3: Assumed Liabilities
Schedule 5.4: Licenses and Permits
Schedule 5.7: Pending Litigation
Schedule 5.14: Employees
Schedule 5.17: Personalty
Schedule 5.21: Total Beverage Trademarks
39
<PAGE> 44
THIS PROMISSORY NOTE IS EXPRESSLY SUBJECT TO AND GOVERNED BY THAT CERTAIN ASSET
PURCHASE AGREEMENT BY AND BETWEEN TOTAL BEVERAGE VA CORP. AND TOTAL BEVERAGE
G.B., INC., DATED FEBRUARY 27, 1993.
PROMISSORY NOTE
$1,493,000.00 Chantilly, Virginia
February 27, 1993
FOR VALUE RECEIVED, TOTAL BEVERAGE G.B., INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of TOTAL
BEVERAGE VA CORP., a Virginia corporation (the "Lender"), at the office of the
Lender at 4600 Forbes Boulevard, Lanham, Maryland 20706, or at such other place
as the Lender may from time to time designate, in lawful money of the United
States, the principal sum of One Million Four Hundred Ninety-Three Thousand and
No/100 Dollars ($1,493,000.00), as such principal balance may from time to time
be adjusted by the rights of offset set forth in Section 4.4 and other sections
of the Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof. Interest shall accrue on the unpaid principal
balance of this Note in the manner set forth in Section 1 hereof. Principal
and interest on the unpaid principal balance of this Note shall be payable as
set forth in Section 2 hereof.
1. Interest Rate. Interest shall accrue on the unpaid
principal balance of this Note at a rate equal to the prime rate as published
in The Wall Street Journal from time to time (the "Interest Rate"). Interest
shall be calculated on the basis of a 360-day year, actual days elapsed.
Notwithstanding any provisions or terms of this Note to the contrary, the
Interest Rate shall not exceed the maximum permitted by law. In the event that
and for as long as the Interest Rate exceeds from time to time the maximum
permitted by law, the Interest Rate shall be the maximum permitted by law.
2. Repayment of Note. Interest on the unpaid balance of
this Note shall be payable on a quarterly basis, in arrears. The first such
interest payment shall be due on July 31, 1993 and on each October 31, January
31, April 30 and July 31 thereafter. The principal amount of this Note
together with any accrued but unpaid interest shall be payable in full on the
date that is two (2) years from the date of this Note (the "Maturity Date").
3. Asset Purchase Agreement. This Note is issued
pursuant to and is expressly governed by and subject to that certain Asset
Purchase Agreement by and between the Borrower and the Lender, dated February
27, 1993 (the "Agreement), which is incorporated herein in its entirety by this
reference.
4. Prepayment. The outstanding principal balance of
this Note may be prepaid in whole or in part (together with accrued interest
with respect to such prepayment to the date of such prepayment) at any time and
from time to time without premium or penalty.
<PAGE> 45
5. Payment on Nonbusiness Days. If any payment of
principal or interest on this Note shall become due on a Saturday, Sunday, or
legal holiday under the laws of the State of New York, such payment shall be
made on the next succeeding business day, and any such extended time of the
payment of principal shall be included in computing the amount of accrued
interest at the rate this Note bears in connection with such payment.
6. Governing Law. This Note shall be construed and
enforced in accordance with, and governed by, the laws of the State of New
York.
7. Amendment. The terms of this Note are subject to
amendment or waiver only in the manner provided in the Agreement.
8. Successors, Assignment. This Note shall be binding
upon and inure to the benefit of the heirs, successors, and assigns of the
parties, provided however, that this Note may not be assigned by either party
without the prior written consent of the other party.
9. Consents; Waivers. The Borrower expressly consents
to renewals and extensions of time at or after the maturity hereof, without
notice, and expressly waives diligence, presentment, protest, demand, and
notice of every kind now or hereafter required by applicable law and, to the
full extent permitted by law, the right to plead any statute of limitations as
a defense to any demand hereunder.
10. Severability. Every provision of this Note is
intended to be severable. In the event any term or portion hereof is declared
to be illegal or invalid for any reason whatsoever by a court of competent
jurisdiction, such illegality or invalidity shall not affect any other term or
portion of this Note, which shall remain binding and enforceable.
TOTAL BEVERAGE G.B., INC.,
a Delaware corporation
By: /s/ RON MARSHALL
--------------------------
Name: Ron Marshall
------------------------
Title: Chief Financial Officer
------------------------
2
<PAGE> 1
DART GROUP CORPORATION*
BY LAWS
ARTICLE I
OFFICES
The Corporation may have such office(s) at such place(s), both within
and without the State of Delaware, as the Board of Directors from time to time
determines or as the business of the Corporation from time to time requires.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Subject to Section 2 of this Article, all meetings of the
stockholders for the election of directors shall be held at such time and
place, within or without the State of Delaware, as may be fixed from time to
time by the Board of Directors. Meetings of stockholders for any other purpose
may be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
SECTION 2. Annual meetings of stockholders shall be held on such date
in the month of June of each year and at such place (within or without the
State of Delaware) as is designated from time to time by the Board of directors
and stated in the notice of the meeting. At each annual meeting the
stockholders shall elect a Board of Directors and shall transact such other
business as may properly be brought before the meeting.
- ----------------------------------
* Amended and restated as of September 14, 1993.
<PAGE> 2
SECTION 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days prior to the meeting.
SECTION 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) (but nor more than fifty
(50)) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order,
showing the address of and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
during ordinary business hours, for a period of at least ten (10) days prior to
the election, either at a place within the city, town or village where the
election is to be held and which place shall be specified in the notice of the
meeting, or, if not specified, at the place where said meeting is to be held,
and the list shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any stockholder
who may be present.
SECTION 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Chairman of the Board or the President and
shall be called by the Chairman of the Board or the President or Secretary at
the request in writing of a majority of the Board of Directors, or at the
request in writing of stockholders owning at least 25% in amount of the entire
capital stock of the Corporation issued and
<PAGE> 3
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 6. Written notice of a special meeting of stockholders,
stating the time, place and object thereof, shall be given to each stockholder
entitled to vote at such meeting not less than ten (10) nor more than sixty
(60) days prior to the meeting.
SECTION 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meetings as
originally notified.
SECTION 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any
<PAGE> 4
question brought before such meeting, unless the question is one upon which by
express provision of the statutes or of the Certificate of Incorporation, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
SECTION 10. Each stockholder shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted after three years from its date, unless such the proxy provides
for a longer period, and, except where the transfer books of the corporation
have been closed or a date has been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall be
voted at any election for directors which has been transferred on the books of
the Corporation within twenty (20) days next preceding such election of
directors.
SECTION 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the Certificate of Incorporation, the
meeting and vote of stockholders may be dispensed with, if all the stockholders
who would have been entitled to vote upon the action if such meeting were held,
shall consent in writing to such corporate action being taken.
ARTICLE III
DIRECTORS
<PAGE> 5
SECTION 1. The number of directors shall be determined by the Board
of Directors from time to time. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, and the directors
so chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
SECTION 3. The business of the Corporation shall be managed by its
Board of Directors which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
<PAGE> 6
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 7. Special meetings of the Board may be called by the
Chairman of the Board or the President with two (2) days' notice to each
director, either personally or by mail or by telegram or telecopy; special
meetings shall be called by the Chairman of the Board or the President or
Secretary in like manner and with like notice on the written request of two
directors.
<PAGE> 7
SECTION 8. At all meetings of the Board a majority of
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the Board or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
COMMITTEES OF DIRECTORS
SECTION 10. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal the Corporation to be affixed to all
papers which may require it. Such committee or
<PAGE> 8
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
SECTION 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram or telecopy.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether
<PAGE> 9
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the Corporation shall be chosen by the
Board of Directors and shall consist of a Chairman of the Board, a President,
one or more Vice Presidents (if and to the extent required by law or if not
required, if the Board of Directors from time to time appoints a Vice President
or Vice Presidents), a Secretary and a Treasurer. The Board of Directors also
may choose one or more Assistant Secretaries and/or Assistant Treasurers and
such other officers and/or agents as the board from time to time deems
necessary or appropriate. The Board of Directors may delegate to the chairman
of the Board and/or the President of the Corporation the authority to appoint
any officer or agent of the Corporation and to fill a vacancy other than the
Chairman of the Board, President, Secretary or Treasurer. The election or
appointment of any officer of the Corporation in itself shall not create
contract rights for any such officer. All officers of the Corporation shall
exercise such powers and perform such duties as from time to time shall be
determined the Board of Directors.
SECTION 2. Each officer of the Corporation shall hold office at the
pleasure of the Board of Directors and any officer may be removed, with or
without cause, at any time by the affirmative vote of a majority of the
directors then in office, provided that any officer appointed by the Chairman
of the Board
<PAGE> 10
or the President pursuant to authority delegated to the Chairman of the Board
or the President by the Board of Directors may be removed, with or without
cause, at any time whenever the Chairman of the Board or the President in his
absolute discretion shall consider that the best interests of the Corporation
shall be served by such removal. Removal of an officer by the Board of
Directors, the Chairman of the Board or the President, as the case may be,
shall not prejudice the contract rights, if any, of the person so removed.
Vacancies (however caused) in any office may be filled for the unexpired
portion of the terms by the Board of Directors (or by the Chairman of the Board
or the President in the case of a vacancy occurring in an office to which the
Chairman of the Board or the President has been delegated the authority to make
appointments).
SECTION 3. The salaries of all officers of the Corporation shall be
fixed from time to time by the Board of Directors, and no officer shall be
prevented from receiving a salary by reason of the fact that he also receives
from the Corporation compensation in any other capacity.
CHAIRMAN OF THE BOARD
SECTION 4. The Chairman of the Board shall be the chief executive
officer of the Corporation and, subject to the direction of the Board of
Directors, shall have general charge of the business, affairs and property of
the Corporation and general supervision over its other officers and agents. In
general, the Chairman of the Board shall perform all duties incident to the
office of the chief executive officer of a stock corporation and
<PAGE> 11
shall see that all orders and resolutions of the Board of Directors are carried
into effect. Unless otherwise prescribed by the Board of Directors, the
Chairman of the Board shall have full power and authority on behalf of the
Corporation to attend, act and vote at any meeting of security holders of other
corporations in which the Corporation may hold securities. At any such meeting
the Chairman of the Board shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the Corporation
possesses and has the power to exercise. The Board of Directors from time to
time may confer like powers upon any other person or persons. The Chairman of
the Board, if present, shall preside at all meetings of the Corporation's
stockholders and at all meetings of the Board of Directors.
PRESIDENT
SECTION 5. The President shall be the chief operating officer of the
Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as from
time to time may be assigned to him by the Board of Directors. Unless the
Chairman of the Board of the Corporation is present at such meeting (in person
or by proxy), the President shall have the same power and authority as the
Chairman of the Board to attend, act and vote on behalf of the Corporation at
any meeting of security holders of other corporations in which the Corporation
may hold securities. The President, if the Chairman of the Board is not
present, shall
<PAGE> 12
preside at all meetings of the Corporation's stockholders and at all meetings
of the Board of Directors.
VICE PRESIDENT
SECTION 6. In the absence or disability of the President, the Vice
President, if any (or in the event there is more than one, the Vice Presidents
in the order designated, or in the absence of any designation, in the order of
their election), shall perform the duties and exercise the powers of the
President; provided however, that unless specifically authorized by the Board
of Directors no Vice President shall have the authority or power to attend, act
or vote on behalf of the Corporation at any meeting of security holders of
other corporations in which the Corporation may hold securities. The Vice
President(s) shall also generally assist the President and shall perform such
other duties and have such other powers as from time to time may be prescribed
by the Chairman of the Board, the President or the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
SECTION 7. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders and shall record all votes and the
proceedings of all meetings in a book to be kept for such purposes. The
Secretary also shall perform like duties for the executive committee or other
committees, if required by any such committee. The Secretary shall give (or
cause to be given) notice of all meetings of the stockholders and all special
meetings of the Board of Directors and shall perform such other duties as from
time to time may be prescribed by the Board of
<PAGE> 13
Directors, the Chairman of the Board or the President. The secretary shall
have custody of the seal of the Corporation, shall have authority (as shall any
Assistant Secretary) to affix the same to any instrument requiring it, and to
attest the seal by his signature. The Board of Directors may give general
authority to officers other than the Secretary or any Assistant Secretary to
affix the seal of the Corporation and to attest the affixing thereof by his
signature.
SECTION 8. The Assistant Secretary, if any (or in the event there is
more than one, the Assistant Secretaries in the order designated, or in the
absence of any designation, in the order of their election), in the absence or
disability of the Secretary, shall perform the duties and exercise the powers
of the Secretary. An Assistant Secretary shall perform such other duties and
have such other powers as from time to time may be prescribed by the Board of
Directors, the Chairman of the Board or the President.
TREASURER AND ASSISTANT TREASURER
SECTION 9. The Treasurer shall have the custody of the corporate
funds, securities, other similar valuable effects, and evidences of
indebtedness, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as from time to time may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
in such manner as may be ordered by the Board of
<PAGE> 14
Directors from time to time and shall render to the Chairman of the Board, the
President and the Board of Directors, at regular meetings of the Board of
Directors or whenever any of them may so require, an account of all
transactions and of the financial condition of the Corporation.
SECTION 10. The Assistant Treasurer, if any (or in the event there is
more than one, the Assistant Treasurers in the order designated, or in the
absence of any designation, in the order of their election), in the absence or
disability of the Treasurer, shall perform the duties and exercise the powers
of the Treasurer. The Assistant Treasurer(s) shall perform such other duties
and have such other powers as from time to time may be prescribed by the Board
of Directors, the Chairman of the Board or the President.
ARTICLE VI
STOCK CERTIFICATES
SECTION 1. Every stockholder in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
Chairman of the Board or the President or a Vice-President, or the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. Where a certificate is signed (1) by a transfer agent or
an assistant transfer agent or (2) by a transfer clerk acting on behalf of the
Corporation and a registrar, the signature of any such Chairman of the Board,
President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant
<PAGE> 15
Secretary may be by facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificate shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation.
LOST CERTIFICATES
SECTION 3. The Secretary or Treasurer may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Secretary or Treasurer may, in such
officer's discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as such officer
shall require and/or to give the Corporation a bond in such sum as such officer
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost or
destroyed.
<PAGE> 16
TRANSFERS OF STOCK
SECTION 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
SECTION 5. The Board of Directors may close the stock transfer books
of the Corporation for a period not less than ten (10) nor more than sixty (60)
days preceding the date of any meeting of stockholders or the date for payment
of any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect or for a
period not less than ten (10) nor more than sixty (6) days in connection with
obtaining the consent of stockholders for any purpose. In lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not less than ten (10) nor more than sixty (60) days preceding the date
of any meeting of stockholders, or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive
<PAGE> 17
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent, and in such case such stockholders and
only such stockholders as shall be entitled to such notice of, and to vote at,
such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment or rights, or to exercise such rights,
or to give such consent, as the case may be notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
REGISTERED STOCKHOLDERS
SECTION 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the General
Corporation law of the State of Delaware.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION.
(a) 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,
<PAGE> 18
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 or she is
or was or has agreed to become a director, officer, employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her or on his or
her behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he or she acted in good faith and in a manner he or she
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 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, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she 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
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any
<PAGE> 19
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 or
she is or was or has agreed to become a director, officer, employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees) actually and
reasonably incurred by him or her or on his or her behalf in connection with
the defense or settlement of such action or suit and any appeal therefrom, if
he or she acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Corporation and 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
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such costs, charges and expenses which the Court of
Chancery or such other court shall deem proper.
<PAGE> 20
(c) Notwithstanding the other provisions of Section 1 of
Article VII of these Bylaws, to the extent that a director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, in
defense of any action, suit or proceeding referred to in Section 1(a) and (b)
of Article VII of these Bylaws, or in defense of any claim, issue or matter
therein, he or she shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or her or
on his or her behalf in connection therewith.
(d) Any indemnification under Section 1(a) and (b) of
Article VII of these Bylaws (unless ordered by a court) shall be paid by the
Corporation unless a determination is made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or (3) by the stockholders, that
indemnification of the director, officer, employee or agent is not proper in
the circumstances because he or she has not met the applicable standards of
conduct set forth in Section 1(a) and (b) of Article VII of these Bylaws.
(e) Costs, charges, and expenses (including attorneys'
fees) incurred by a person referred to in Section 1(a) and (b) of Article VII
of these Bylaws in defending a civil or criminal action, suit or proceeding
(including investigations by any
<PAGE> 21
government agency and all costs, charges and expenses incurred in preparing for
any threatened action, suit or proceeding) shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
all amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified by the Corporation pursuant to
this Article VII. No security shall be required for such undertaking and such
undertaking shall be accepted without reference to the recipient's financial
ability to make repayment. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board
deems appropriate. The Board of Directors may, in the manner set forth above,
and subject to the approval of such director, officer, employee or agent of the
Corporation, authorize the Corporation's counsel to represent such person, in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
(f) Any indemnification under Section 1(a), (b) or (c) of
Article VII or advance of costs, charges and expenses under Section 1(e) of
Article VII of these Bylaws shall be made promptly, and in any event within
sixty (60) days, upon the written request of the director, officer, employee or
agent directed to the Secretary of the Corporation. The right to
indemnification or advances as granted by this Article VII shall be enforceable
by the director, officer, employee or agent in any court of competent
jurisdiction if the Corporation denies such
<PAGE> 22
request in whole or in part, or if no disposition thereof is made within sixty
(60) days. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification or advances, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce
a claim for the advance of costs, charges and expenses under Section 1(e) of
Article VII of these Bylaws where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Section 1(a) or (b) of Article VII of these Bylaws, but
the burden of proving that such standard of conduct has not been met shall be
on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in Section 1(a) and
(b) of Article VII of these Bylaws, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standards of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(g) The indemnification and advancement of expenses
provided by, or granted pursuant to, other Sections of this
<PAGE> 23
Article VII shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of costs, charges and expenses may be
entitled under any law (common or statutory), bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office or while employed by or acting as agent for the Corporation, 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 the estate, heirs, executors and
administrators of such person. All rights to indemnification under Article VII
of these Bylaws shall be deemed to be a contract between the Corporation and
each director, officer, employee or agent of the Corporation who serves or
served in such capacity at any time while Article VII of these Bylaws is in
effect. No amendment or repeal of this Article VII of these Bylaws or any
relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall adversely affect or deny to any director, officer,
employee or agent any rights to indemnification which such person may have, or
change or release any obligations of the Corporation, under Article VII of
these Bylaws with respect to any costs, charges, expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement which arise out of an
action, suit or proceeding based in whole or substantial part on any act or
failure to act, actual or alleged, which takes place before or while Section 1
of Article VII of these Bylaws is in effect. The provisions of this sub-
section (g) shall apply to
<PAGE> 24
any such action, suit or proceeding whenever commenced, including any such
action, suit or proceeding commenced after any amendment or repeal of Article
VII of these Bylaws.
(h) For purposes of this Article VII, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VII with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this Article VII, references to
"other enterprises" shall include employee benefit plans including but not
limited to any employee benefit plan of the Corporation; references to "fines"
shall include any penalties and any excise or similar taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves service by, such director,
<PAGE> 25
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries including acting as a fiduciary thereof; a
person who acted in good faith and in a manner he or she 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 VII; and service
as a partner, trustee or member of management or similar committee of a
partnership or joint venture, or as a director, officer, employee or agent of a
corporation which is a partner, trustee or joint venturer, shall be considered
service as a director, officer, employee or agent of the partnership, joint
venture, trust or other enterprise.
SECTION 2. INSURANCE FOR INDEMNIFICATION. The Corporation may
purchase and maintain insurance on behalf of any person who is or was or has
agreed to become 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 any liability asserted against him or her and
incurred by him or her or on his or her behalf in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him or her against such liability under the provisions of Section
145 of the Delaware General Corporation Law and these Bylaws, provided that
such insurance is available on acceptable terms as determined by a vote of a
majority of the entire Board of Directors.
<PAGE> 26
ARTICLE VIII
INTERESTED DIRECTORS; QUORUM
SECTION 1. COMMON OR INTERESTED OFFICERS AND DIRECTORS. The officers
and directors shall exercise their powers and duties in good faith and with a
view to the best interests of the Corporation. No contract or other
transaction between the Corporation and one or more of its officers or
directors, or between the Corporation and any corporation, firm, association,
or other entity in which one or more of the officers or directors of the
Corporation are officers or directors, or are pecuniarily or otherwise
interested, shall be either void or voidable because of such common
directorate, officership or interest, because such officers or directors are
present at the meeting of the Board of Directors or any committee thereof which
authorizes, approves or ratifies the contract or transaction, or because his,
her or their votes are counted for such purpose, if (unless otherwise
prohibited by law) any of the conditions specified in the following paragraphs
exist:
(a) the material facts of the common directorate or interest
or contract or transaction are disclosed or known to the Board of Directors or
committee thereof and the Board or committee authorizes or ratifies such
contract or transaction in good faith by the affirmative vote of a majority of
the disinterested directors, even through the number of such disinterested
directors may be less than a quorum; or
(b) the material facts of the common directorate or interest
or contract or transaction are disclosed or known to the
<PAGE> 27
stockholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) the contract or transaction is fair and commercially
reasonable to the Corporation at the time it is authorized, approved or
ratified by the Board, a committee thereof, or the stockholders, as the case
may be.
SECTION 2. QUORUM. Common or interested directors may be counted in
determining whether a quorum is present at any meeting of the Board of
Directors or committee thereof which authorizes, approves or ratifies any
contract or transaction, and may vote thereat to authorize any contract or
transaction with like force and effect as if he, she or they were not such
officers or directors of such other corporation or were not so interested.
ARTICLE IX
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in
<PAGE> 28
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
SECTION 3. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
CHECKS
SECTION 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
SECTION 5. The fiscal year of the Corporation shall begin
the first day of February of each year or such other date as the Board of
Directors may determine.
SEAL
SECTION 6. The Corporate Seal shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal", and "State of Delaware." The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
<PAGE> 29
STOCK OPTION PLAN
SECTION 7. The Board of Directors shall have the power
to administer in accordance with the respective terms thereof, such Stock
Option Plan as may from time to time be approved by the Board of Directors or
the stockholders and to take such action as the Board of Directors may deem fit
to carry out the purposes of such Plan.
ARTICLE X
AMENDMENTS
SECTION 1. These Bylaws may be amended or repealed at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such amendment or repeal is contained in the notice of such special meeting.
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement dated August 1, 1993, by and between Ronald
S. Haft ("Employee"), and DART GROUP CORPORATION, a Delaware corporation
("Employer").
W I T N E S S E T H:
WHEREAS, the parties hereto desire by this Agreement to
provide for the employment of Employee by Employer;
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, and other good and valuable
consideration, the receipt, sufficiency and adequacy of which the parties
conclusively acknowledge, the parties hereto, intending to be legally bound,
agree as follows:
1. EMPLOYMENT
(a) Duties. Employer hereby employs Employee,
and Employee accepts employment by Employer, as President and Chief
Operating Officer of Employer during the Employment period (as defined in
Section 2), and shall have such duties of an executive nature as may be
assigned to him from time to time by the Chief Executive Officer and the
Board of Directors of the Employer ("the Board of Directors"), and shall
report to the Chief Executive Officer and Board of Directors. Employee
agrees to observe and comply with the rules and regulations of Employer as
adopted by the Board of Directors respecting the performance of his duties
and to carry out and follow the orders, policies and directions stated by
Employer to him from time to time, provided, however, that such regulations
and directions are consistent with the authority and responsibility of the
positions of President and Chief Operating Officer.
It is specifically agreed that nothing in this Agreement
shall prohibit Employee from engaging, directly or indirectly, in activities
with other companies, ventures or investments (including, but not limited to
Combined Properties, Incorporated ("Combined") and any or all of its
affiliated partnerships and corporations) in any capacity whatsoever,
provided only that such activities or any of them do not interfere with
Employee's performance of his duties for Employer. Employer expressly
acknowledges that: (i) Employee has executive duties in connection with his
employment by Combined that may, on occasion, present a potential conflict
of interest with Employee's duties to Employer; (ii) from time to time,
Employee may be presented with investment opportunities arising out of his
employment by or ownership of Combined or otherwise; (iii) Employer will
have no claim to a right of first refusal or any other claim to corporate
opportunities arising from these employment and investment activities of
Employee; and (iv) Employer waives any conflict of interest that may
currently exist or may arise in the future as a result of these employment
and investment activities of Employee.
(b) Board of Directors. Employer agrees that
it will cause Employee to be nominated at each opportunity during the
Employment Period for election as a member of the Board of Directors.
Employer agrees either to furnish Employee with reasonable coverage under a
"directors and officers" insurance policy or to provide indemnification to
Employee in his capacity as a member of the Board of Directors in a manner
<PAGE> 2
substantially similar to that provided to the other members of the Board of
Directors.
(c) Place of Employment and Travel. Employee's
principal place of employment shall be in Landover, Maryland. If Employer's
executive offices are moved from Landover, Maryland, Employee's principal
place of employment shall be changed to the location where such executive
offices are moved. Employee agrees to travel for the performance of his
duties under this Agreement as Employer may request from time to time.
2. TERM
Subject to the termination provisions of Section 7 below,
the term of Employee's employment under this Agreement (the "Employment
period") shall commence as of August 1, 1993 and end on January 31, 1997.
However, Employer and Employee agree that, as of each February 1 during the
course of this employment, the term of this Agreement shall be automatically
extended for an additional twelve (12) month period. For example, as of
February 1, 1994, the term of this Agreement shall be automatically extended
to January 31, 1998. Each twelve (12) month period of employment ending on
January 31 shall be referred to herein as a "year of employment" and the
period of employment ending on January 31, 1994 shall be referred to herein
as the "initial short year of employment."
3. COMPENSATION
(a) Base Salary. Employee's annual base salary
through January 31, 1994 shall be Four Hundred Thousand Dollars ($400,000).
Such base salary shall be prorated during the initial short year of
employment. Effective February 1, 1995 and each February 1 through the term
of the Agreement, Employee's base salary shall be increased as agreed to by
Employee and the Board of Directors following review and performance
appraisal, provided, that in no event shall such increase in base salary be
an amount less than the product of the base salary during the immediately
preceding year of employment times the Consumer price Index (as defined
herein) for the October immediately preceding such February 1 divided by the
Base Index (as defined herein). As used herein, "Consumer Price Index" shall
mean the Consumer Price Index for Urban Wage Earners and Clerical Workers,
All Items, for Washington, D.C. (1967=100). As used herein, the Base Index
shall mean the Consumer Price Index for the October that precedes such
February 1 by fifteen (15) months. For example, in determining the minimum
increase in base salary for the year of employment beginning February 1,
1995, the Consumer price Index for October, 1994 would be the multiplier and
the Consumer price Index for October 1993 would be the divisor. However,
Employee agrees that he may not receive such minimum increase in base salary
with respect to a year of employment for which Employer has established a
policy of no increases in executive compensation for all executives of
Employer. Employee's base salary shall be paid in accordance with
Employer's normal payroll procedure.
(b) Director's Fees. In addition to the base
salary, for each year that Employee is elected to the Board of Directors,
Employer shall pay to Employee the normal director's fee approved by the
Board.
(c) Bonuses. The Employer will pay the
following bonuses to Employee:
<PAGE> 3
(1) Including the fiscal year ending
January 31, 1994, each year during the term of this Employment Agreement,
based on a determination by the Employer's auditors of the Employer's profit
before taxes, the Employer will pay an annual bonus (the "Annual Bonus") to
Employee in an amount equal to one and one-half percent (1.5%) of such
profit before taxes. For purposes of the calculation of the Annual Bonus,
profit before taxes shall not be reduced as a result of transactions which
are not ordinary.
(2) Commencing with the fiscal year
ending January 31, 1997, and each third year thereafter during the term of
this Employment Agreement, the Employer will pay an additional bonus
relating to a three-year period (the "Supplemental Bonus") to Employee in an
amount determined in accordance with the formula set forth in Schedule 1
attached hereto.
(d) Deferred Compensation. The timing and form
of payment of the Base Salary, the Annual Bonus and the Supplemental Bonus
are subject to the following:
(1) Before any fiscal year of the
Employer or a portion thereof, Employee may elect, by notice to the
Employer, to defer, subject to the terms set forth below, all or a specified
amount of his Base Salary for such year or portion, as the case may be.
(2) Before any fiscal year of the
Employer or portion thereof, Employee may elect, by notice to the Employer,
to defer, subject to the terms set forth below, all or a specified fraction
of the Annual Bonus allocable to such year or portion and/or all or a
specified fraction of any Supplemental Bonus allocable to such year or
portion. Annual Bonuses and Supplemental Bonuses shall be deemed to be
earned equally in each day in the period to which they relate.
(3) If Employee elects a deferral of
all or part of his Base Salary or Annual Bonus, the deferral shall be to the
day that is 120 days after the third anniversary of the last day of the
fiscal year to which the subject Base Salary or Annual Bonus relates or
which includes the subject portion. If Employee elects a deferral of all or
part of his Supplemental Bonus, the deferral shall be to the date that is
120 days after the third anniversary of the last day of the last fiscal year
to which the subject Supplemental Bonus relates. In the event of a deferral
of all or part of his Base Salary, Annual Bonus or Supplemental Bonus, the
last date of the aforesaid 120-day periods is referred to in this Employment
Agreement as the "Decision Date"; provided that if Employee ceases to be a
director, officer or employee of the Employer, for any reason, the Decision
Date for all deferrals pursuant to this Section 3(d) will be 30 days after
such cessation.
(4) On or before each Decision Date,
Employee may elect, by notice to the Employer, to receive from the Employer,
in lieu of all or part of the cash otherwise payable to him at such Decision
Date, an option to purchase shares of the Class A common stock of the
Employer, as follows:
(i) The number of shares
subject to an option shall be equal to the amount of the cash otherwise
payable to him divided by the fair market value per share, on the date of
grant, of the rights set forth in the option, as determined by an
independent appraiser selected by the Board of Directors of the Employer.
<PAGE> 4
(ii) The exercise price per
share shall be at least one hundred percent (100%) of the fair market value
of a share on the date the option is granted, as determined by the Board of
Directors. The exercise price of any shares as to which an option is
exercised shall be paid in full in cash or by check upon delivery of the
shares purchased.
(iii) Each option shall expire on
the fifth anniversary of the date of its grant.
(iv) Each option shall be
exercisable as determined by the Board of Directors.
(v) No option may be assigned,
transferred, pledged or otherwise disposed of by the holder to a person who
is not a member of the Employee's immediate family, other than by will or
the laws of descent and distribution.
Instruments evidencing options may
contain such other provisions as the Board of Directors deems advisable.
(5) If Employee elects a deferral
pursuant to this Section 3(d), interest shall accrue on the amount deferred
at the prime rate of interest of NationsBank or the successor thereto, as
announced from time to time. To the extent that at the subject Decision
Date payment in cash is made to Employee, accrued interest shall accompany
such payment. To the extent that at the subject Decision Date an option is
granted by the Employer to Employee, accrued interest shall be included in
determining the value of the option to be granted.
(6) The Employer acknowledges that for
tax purposes an amount deferred pursuant to this Section 3(d) is not
deductible by the Employer until paid in cash by the Employer or until an
option granted on a Decision Date is exercised.
(e) Withholding Tax. All compensation shall be
subject to the customary withholding tax and other employment taxes as
required with respect to compensation paid by a corporation to an employee.
(f) Retirement Plans. In addition, Employer
agrees to contribute to Employer's profit sharing plan or 401(k) plan, or in
combination to both, not less than Fifteen Thousand Dollars ($15,000) on
behalf of Employee with respect to each year of employment after the initial
short year of employment. Employee's participation and rights under such
retirement plans shall be governed by the terms of such plans and applicable
law. In the event that, under the terms of the plans and applicable law,
Employer cannot contribute the aggregate amount of Fifteen Thousand Dollars
($15,000) on behalf of Employee with respect to a year of employment, then
Employer agrees to pay the amount by which such contribution is less than
Fifteen Thousand Dollars ($15,000) to Employee as additional deferred
compensation under Section 3(d) above.
4. CLASS B STOCK OPTION.
(a) Class B Stock Option. In consideration of
the execution of this contract by the Employee and the payment by Employee
of Five Dollars ($5) per share, an aggregate of Nine Hundred Eighty Five
Thousand Two Hundred Forty Dollars ($985,240) (the "Option Purchase
Payment"), Employer hereby grants and sells to Employee the right and option
<PAGE> 5
to purchase one hundred ninety-seven thousand forty-eight (197,048) shares
of the Class B common stock of Employer at a price of eighty-nine dollars
and sixty-five cents ($89.65) per share, such exercise price being one
hundred ten percent (110%) of the reported closing price for shares of the
Class A common stock on the last trading date prior to the authorization of
this Agreement.
Said option shall vest immediately in Employee upon
execution of this contract by both parties and the receipt of the full
Option Purchase Payment by the Employee. This option shall not be
assignable by the Employee to any person, except by the laws of descent and
distribution pursuant to Employee's last will and testament.
Employee may exercise the option in whole or in part at any
time and from time to time within fifteen (15) years of the date such option
vests in Employee. Employee shall exercise any such option by giving notice
to Employer.
Employee shall make payment in cash for such shares
purchased pursuant to the exercise of an option within thirty (30) days of
the date of such notice to Employer.
(b) Employer Loan. Employer agrees to loan to
Employee the amounts of the purchase prices in the event Employee exercises
all or parts of any option to purchase stock of Employer. Any such loan
shall bear interest at the prime rate charged as of the date of the loan by
NationsBank or the successor thereto, as announced from time to time. Said
principal and interest of each such loan shall be separately due and payable
upon the earlier of (i) the sale by Employee of shares purchased with such
loan proceeds; (ii) the fifth anniversary of the date of that loan; or (iii)
within ninety (90) days of the termination of the employment of Employee
hereunder.
(c) Exercise upon Certain Terminations of
Employment. In the event of the termination of Employee's employment
hereunder for any reason other than pursuant to Section 7(c), Employee shall
have the right to exercise on or before the effective date of the
termination of this employment any option which has vested in Employee
hereunder coincident with or prior to the effective date of the termination
of Employee's employment hereunder, subject to the other terms and
conditions of such option plan(s). In addition, in the event of the
termination of Employee's employment due to his death, the personal
representative of Employee shall have the right to exercise any such option
within sixty (60) days of the date of Employee's death.
5. EMPLOYEE BENEFITS.
During the Employment Period, Employer shall provide
Employee with the following benefits:
(a) Executive Health Plan. Employer shall
provide Employee with benefits, including major medical health insurance for
Employee and his immediate family, all in accordance with Employer's
"executive health plan."
(b) Long-Term Disability. Employer shall
provide Employee with long-term disability insurance providing for monthly
payment of sixty-six percent (66%) of Employee's annual base salary during
the period of disability. Employee shall be considered disabled if his
<PAGE> 6
physical or mental condition prevents him from performing the functions of
his position as President and Chief Operating Officer.
(c) Life Insurance. Employer shall provide
Employee with life insurance in the face amount of not less than twice
Employer's then current annual base salary, together with accidental health
and dismemberment benefits. Employee shall be the owner of such policy and
shall have the exclusive right to select the beneficiaries thereunder.
(d) Automobile Allowance. Employer shall pay
to Employee as an automobile allowance the sum of Seven Hundred Dollars
($700.00) per month.
(e) Vacation. Employee shall be entitled to
paid vacation leave of three (3) weeks in every year of employment. Employee
shall not have the right to compensation for any vacation leave he does not
take during the Employment period. All vacation time not taken in a year of
employment will be forfeited.
(f) Business Expense. Employer shall reimburse
Employee pursuant to Employer's policy of employee expense reimbursement of
all items of travel, entertainment and miscellaneous expenses reasonably
incurred by Employee on behalf of Employer and presented to Employer on the
appropriate voucher.
6. PROPRIETARY DATA.
(a) Trade Secrets and Other Confidential
Information. During the Employment period and for three (3) years
thereafter, Employee shall keep confidential any data, documents financial
or other information of a trade secret or confidential nature relating to
Employer's past, present or future operations (the "Proprietary Data"),
shall not disclose the Proprietary Data to any third parties other than
officers, employees or agents of Employer on a "need to know" basis, shall
take all necessary steps to ensure that such officers, employees or agents
keep such proprietary Data confidential, and shall use the Proprietary Data
only in connection with rendering services to Employer. Upon the end of the
Employment Period, Employee shall promptly return to Employer the originals
and all copies of the Proprietary Data in the possession of Employee, and
shall not use any of the Proprietary Data for his own benefit or for the
benefit of any third parties. The covenants contained in this Section 6(a)
shall not apply to Proprietary Data which is or becomes a matter of general
knowledge in the industry otherwise than by a breach of the provisions of
this Section 6 (a).
(b) Injunctive Relief. Employee acknowledges
that the covenants contained in Section 6(a) are necessary for the
protection of the legitimate business interests of Employer and are
reasonable limitations of activities, that the rights of Employer are of a
specialized and unique character, and that immediate and irreparable damage
will result to Employer if Employee fails to or refuses to perform or comply
with such covenants. Therefore, notwithstanding any election by Employer to
claim damages from Employee as a result of any such failure or refusal,
Employer may, in addition to any other remedies and damages available, seek
an injunction in a court of competent jurisdiction to restrain any such
failure or refusal (and no bond or other security shall be required in
connection therewith) as applicable to companies that compete with Employer
or any its subsidiaries and which operate within the same geographic area as
Employer or any of its subsidiaries. In that connection, Employee
<PAGE> 7
represents and warrants that his expertise and capabilities are such that
performance or compliance with the covenants (and the enforcement thereof by
injunction or otherwise) will not prevent him from earning a livelihood. If
a court refuses to enforce the covenants set forth in Section 6(a) because
they are found to be unreasonable, Employee and Employer agree to abide by
any lesser restrictions (for instance, as to duration and geographic area)
that are found to be reasonable.
7. TERMINATION
(a) Death. The Employment Period shall
forthwith terminate upon the death of Employee, whereupon Employer shall not
have any further obligations or liability hereunder except to pay the
Employee's estate the unpaid portion, if any, of Employee's compensation
accrued for the period up to the date of Employee's death and a pro rata
portion of any bonus under Section 3(c) or 3(d) with respect to the year of
employment in which such employment terminates. As provided in Section 4(c)
above, the personal representative of Employee shall also have the right to
exercise any vested stock options.
(b) Total Disability. In the event of the
Total Disability (as that term is hereafter defined) of Employee for a
period of four (4) consecutive calendar months, or for eighty percent (80%)
or more of the normal working days during a period of six (6) consecutive
full calendar months, Employer shall have the right to end the Employment
Period by giving Employee ten (10) days' written notice. Upon the
expiration of such ten (10) days period, the Employment Period shall end and
Employer shall not have any further obligations hereunder except to pay
Employee the unpaid portion, if any, of Employee's compensation accrued for
the period up to the date of termination of Employee's employment, a pro
rata portion of any bonus under Section 3(c) or 3(d) with respect to the
year of employment in which such employment terminates, and the long-term
disability payments under Section 5(b) hereunder. As provided in Section
4(c) above, Employee shall also have the right to exercise any vested stock
options. As used in this Agreement, the term "Total Disability" shall mean
a mental or physical condition which, in the opinion of Employer and in the
opinion of two consulting physicians, renders Employee unable or incompetent
to carry out his obligations hereunder.
(c) With Cause. Employer shall have the right
to terminate the employment of Employee at any time for cause (as
hereinafter defined) upon at least five (5) days' written notice setting
forth the specific details of the action or inaction of Employee which
constitutes cause. For purposes of the foregoing, "cause" shall mean only
(i) Employee's commission of any act which shall be an offense involving
moral turpitude under federal, state or local law; or (ii) Employee's
conviction of a felony. Upon such termination, Employer shall have no
further obligations or liability hereunder except to pay Employee the unpaid
portion, if any, of Employee's compensation accrued for the period up to the
date of termination of Employee's employment.
(d) Dissatisfaction by Employer Without Cause.
If Employer at any time is for any reason dissatisfied with the management
philosophy, financial performance, attitude, compatibility or any other
aspect of Employee's performance hereunder, Employer shall have the right to
terminate the employment of Employee upon at least thirty (30) days' notice
to Employee. If Employer shall terminate the employment of Employee
pursuant to this Section 7(d), the Employment period shall end and Employer
shall not have any further obligations or liability hereunder except to pay
<PAGE> 8
Employee the unpaid portion, if any, of Employee's compensation accrued for
the period up to the date of termination of Employee's employment and a pro
rata portion of any bonus under Section 3(c) or 3(d) with respect to the
year of employment in which such employment terminates, together with an
additional amount of thirty-six (36) months of Employee's then current
monthly base salary. Said thirty-six (36) months' severance payment shall
be payable in accordance with Employer's normal payroll schedule and shall
commence immediately following the effective date of the termination of
Employee's employment hereunder. As provided in Section 4(c) above,
Employee shall also have the right to exercise any vested stock options.
(e) Dissatisfaction by Employee. If Employee
at any time is for any reason dissatisfied with the terms and conditions of
his employment hereunder, Employee shall have the right to terminate his
employment upon no less than sixty (60) days' notice to Employer. If
Employee shall terminate his employment pursuant to this Section 7(e), the
Employment Period shall end at the expiration of the notice period and
Employer shall have no further obligations or liability hereunder except to
pay to Employee the unpaid portion, if any, of Employee's compensation
accrued for the period up to the date of termination. As provided in
Section 4(c) above, Employee shall also have the right to exercise any
vested stock options.
(f) Change in Majority Ownership. In the event
"substantial ownership and effective control" (as defined below) of Employer
shall pass from some combination of Herbert H. Haft and/or the Employee to
one or more other parties, otherwise than by the decision of Employee,
Employee shall have the right to terminate this Agreement by giving notice
to Employer within ninety (90) days of the date that Herbert H. Haft and/or
Employee relinquish substantial ownership and effective control. As used
herein, "substantial ownership and effective control" shall exist while
Herbert H. Haft and/or Employee (including their personal representative in
the even of their death disability) possess the authority to vote a majority
of the outstanding voting shares in Employer. Such notice shall state a
date of termination not less than thirty (30) days from the date of the
notice. Upon such termination, Employer shall have no further obligations
or liability hereunder except to pay the Employee the unpaid portion, if
any, of Employee's compensation accrued for the period up to the date of
termination of Employee's employment, and a pro rata portion of any bonus
under Section 3(c) or 3(d) with respect to the year of employment in which
such employment terminates, plus an additional amount of thirty-six (36)
months of Employee's then current monthly base salary. Said thirty-six (36)
months' severance payment shall be payable in a lump sum on the effective
date of the termination of Employee's employment hereunder. As provided in
Section 4(c) above, Employee shall also have the right to exercise any
vested stock options.
(g) No Participation by Employee. Employee
shall neither participate in nor be entitled to vote on any decision by the
Board of Directors to terminate the employment of Employee pursuant to
Sections 7(b), 7(c) and 7(d).
(h) Pro Rata Portion of Bonus. As used in this
Section 7, the term "pro rata portion of any bonus under Section 3(c) or
3(d) with respect to the year of employment in which such employment
terminates" shall mean an amount equal to the bonus that would otherwise be
due to Employee hereunder with respect to a fiscal year of Employer prorated
in accordance with the number of days during such fiscal year that Employee
<PAGE> 9
is employed hereunder. Any such bonus shall be payable as provided under
Section 3(c) or 3(d).
8. MISCELLANEOUS
(a) Governing Law. This Agreement shall be
governed by the laws of the State of Delaware applicable to employment
agreements made by and to be performed by Delaware corporations.
(b) Amendment of Agreement. No amendment or
variation of the terms of this Agreement, with or without consideration,
shall be valid unless made in writing and signed by the Employee and a duly
authorized representative of the Employer (other than Employee).
(c) Waiver of Conditions. A waiver of any of
the terms and conditions hereof shall not be construed as a general waiver
by Employer, and Employer shall be free to reinstate any such term or
condition, with or without notice to Employee.
(d) Entire Agreement. This Agreement contains
the entire agreement between the parties and supersedes all prior oral and
written agreements, understandings, commitments, and practices between the
parties, whether or not fully performed by Employee before the date of this
Agreement.
(e) Headings. The section headings of this
Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement.
(f) Notice. All notices, requests and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or upon receipt when sent by an express mail
service, provided that in each case a copy is mailed by first-class,
registered mail, return receipt requested, addressed as follows (or as may
otherwise have been specified by the intended recipient by notice as herein
provided);
If to Employee:
Mr. Ronald S. Haft
2435 California Street, N.W.
Washington, D.C. 20008
If to Employer:
Mr. Herbert H. Haft
Dart Group Corporation
3300 75th Avenue
Landover, Maryland 20785
(g) Severability. If any provision of this
Agreement is held invalid or unenforceable, the remainder of this Agreement
shall nevertheless remain in full force and effect. If any provision is
held invalid or unenforceable with respect to particular circumstances, it
shall nevertheless remain in full force and effect in all other
circumstances.
(h) Merger or Consolidation. This Agreement
shall not be terminated by any merger, consolidation, transfer of all or
<PAGE> 10
substantially all of the assets of the Employer or voluntary or involuntary
dissolution of the Employer. In the event of a merger or consolidation or
upon the transfer of assets, the surviving or resulting corporation or the
transferee of the Employer's assets shall be bound by and shall have the
benefit of the provisions of this Agreement, subject to the provisions of
Section 7(f) above, and the Employer shall take all actions necessary to
ensure that such corporations or transferee is bound by the provisions of
this Agreement.
(i) No Covenants. Employee hereby represents
and warrants that he is not subject to or bound by any employment contract,
restrictive covenant or other agreement or any order or decree that prevents
him from entering into this Agreement or from performing his
responsibilities as contemplated by this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by a duly
authorized officer of Employer and by Employee as of the date first above-
written.
DART GROUP CORPORATION
BY: /s/ Herbert H. Haft
-----------------------------
HERBERT H. HAFT, Chairman and
Chief Executive Officer
BY: /s/ Ronald S. Haft
------------------
RONALD S. HAFT
<PAGE> 11
SCHEDULE 1
The amount of the Supplemental Bonus is the greatest of the
following:
(a) Employee's Base Salary and Annual Bonus for
the last year of the subject three-year period;
(b) Three percent of any excess in the
aggregate market value of the Employer's Class A common stock (based on the
closing price) on the last day of the subject three-year period over such
market value on the first day of such period;
(c) Three percent of any excess in the
Employer's consolidated stockholders' equity (based on generally accepted
accounting principles) on the last day of the subject three-year period over
such stockholders' equity on the first day of such period; provided that,
for purposes of this calculation, the Employer's consolidated stockholders'
equity shall not be reduced as a result of transactions which are not
ordinary; or
(d) Three percent of the sum of the Employer's
consolidated net income (based on generally accepted accounting principles)
during the three years in the subject period; provided that, for purposes of
this calculation, the Employer's net income shall not be reduced as a result
of transactions which are not ordinary.
<PAGE> 1
FIRST AMENDMENT OF LEASE
GREENBRIAR TOWN CENTER
TOTAL BEVERAGE VA CORP.
THIS FIRST AMENDMENT OF LEASE (hereinafter "Amendment"), made as of this 15th
day of February 1993 by and between Combined Properties/Greenbriar Limited
Partnership (hereinafter "Landlord") and Total Beverage VA Corp., successor
- -in-interest to Total Beverage Corp. trading as Total Beverage (hereinafter
"Tenant") provides:
RECITALS
WHEREAS, by virtue of that certain Lease dated April 2,1991, as
amended by Assignment, Assumption and Release Agreement dated August 25, 1992
(hereinafter collectively referred to as "Lease"), Landlord leased to Tenant a
portion of real property situated in Fairfax, Virginia, known as Store No. 41
in Greenbriar Town Center Shopping Center and also known as 13055 Lee Jackson
Memorial Highway, Suite C, Fairfax, Virginia 22030 ("Premises"), and more
particularly described in the Lease; and
WHEREAS, pursuant to Section 6 of the Lease, Landlord and Tenant
agreed to amend the Lease by changing the square footage and adjusting the
Minimum Guaranteed Rent and all other rent, costs and charges due under the
lease in the event the Premises was determined by Landlord's architect or
engineer to contain an amount of gross ground floor area different than 25,000
square feet as set forth in the Lease; and
WHEREAS, the parties have determined that the size of the Premises is
actually 25,024.87 square feet; and
WHEREAS, the Commencement Date and Rent Commencement Date of the Lease
having been determined and Tenant having accepted the Premises, the parties now
desire to confirm the Commencement Date, Rent Commencement Date and Expiration
Date of the Original Term of the Lease and acknowledge that the Premises are in
the condition called for under the Lease in accordance with the provisions of
Section 25 of the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in accordance
with the provisions contained in Sections 6 and 25 thereof.
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and the sum of One Dollar ($1.00) in hand paid each to the
other, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto covenant and agree as follows:
FIRST: The Premises defined and referred to on the top portion of
page 1 of the Lease as "Space No. 41, Greenbriar Town Center, Chantilly,
Virginia" shall be deemed to refer, and is hereby changed to:
(b) Premises: Greenbriar Town Center
Store No. 41
13055 Lee Jackson Memorial Highway
Suite C
Fairfax, Virginia 22030
<PAGE> 2
SECOND: Section 1 (a) of the Lease is hereby deleted in its entirety
and replaced by the following:
(a) Premises: Store No. 41, approximately 25,024.87 square
feet in size, located on the lower level of a
building in the Shopping Center as shown on
Exhibit "A".
THIRD: It is hereby agreed by the parties hereto that all references
in the Lease, including Exhibits, to the Premises containing approximately
25,000 square feet shall be deemed to refer, and are hereby changed to
"25,024.87 square feet".
FOURTH: Section 1 (c) of the Lease is hereby deleted in its entirety
and replaced by the following:
(c) Original Lease Term:Ten (10) years.
FIFTH: Section 1(d) of the Lease is hereby deleted in its entirety
and replaced by the following:
(d) Commencement Date: September 1, 1992.
SIXTH: Section 1 (e) of the Lease is hereby deleted in its entirety
and replaced by the following:
(e) Rent Commencement Date: October 21, 1992.
SEVENTH: Section 1(f) of the Lease is hereby deleted in its entirety
and replaced by the following:
(f) Expiration Date: August 31, 2002.
EIGHTH: Section 1(k) of the Lease is hereby deleted in its entirety
and replaced by the following:
(k) Annual Minimum Two Hundred Thousand One Hundred Ninety-
Eight and
Guaranteed Rent: 96/100 Dollars ($200,198.00), subject to
adjustment pursuant to Section 6 and
Section 3(b) of the Lease.
NINTH: Section 1(1) of the Lease is hereby deleted in its entirety
and replaced by the following:
(1) Minimum Basis of Sales: Twenty Million Nineteen Thousand
Eight Hundred Ninety-Six Dollars
($20,019,896), subject to adjustment
pursuant to Section 9 and Section 3
(b) of the Lease.
TENTH: The second paragraph of Section 3 (b) of the Lease is hereby
deleted in its entirety and replaced by the following:
All of the terms and conditions of this Lease shall remain in full
force and effect during the Option Term, except there shall not be any
additional option to renew this Lease beyond what is provided for
hereinabove, and Minimum Guaranteed Rent and Minimum Basis of Sales
for the Option Term shall be as set forth in the following schedule:
<TABLE>
<CAPTION>
Option Term Rate Per Annual Minimum Monthly Minimum Minimum Basis
Period Square Foot Guaranteed Rent Guaranteed Rent of Sales
<S> <C> <C> <C> <C>
9/1/2001 -
8/31/2007 $10.58 $264,763.12 $22,063.59 $26,476,312.00
9/1/2007 -
8/31/2012 $12.16 $304,302.41 $25,358.53 $30,430,241.00
</TABLE>
ELEVENTH: Section 6 (b) of the Lease is hereby deleted in its
entirety and replaced by the following:
The Minimum Guaranteed Rent shall be payable for the periods set forth
below in the following annual and monthly amounts:
<TABLE>
<S> <C> <C> <C>
Option Term Rate Per Annual Minimum Monthly Minimum
Period Square Foot Guaranteed Rent Guaranteed Rent
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
9/1/92 -
8/31/97 $8.00 $200,198.96 $16,683.24
9/1/97 -
8/31/2002 $9.20 $230,228.80 $19,185.73
</TABLE>
TWELFTH: The fifth sentence of Section 7(a) of the Lease is
hereby deleted in its entirety and replaced by the
following:
Tenant shall initially make estimated payments in the amount of Forty
Six Thousand Forty Five and 76/100 Dollars ($46,045.76) annually to be
paid in equal monthly installments in the amount of Three Thousand
Eight Hundred Thirty Seven and 14/100 Dollars ($3,837.14). without
set-off or deduction.
THIRTEENTH: The second sentence of Section 8 of the Lease is
hereby deleted in its entirety and replaced by the following:
Commencing on the Rent Commencement Date, Tenant shall pay to
Landlord, on an estimated basis, the sum of Forty Three Thousand Seven
Hundred Ninety Three and 52/100 Dollars ($43,793.52) to be paid in
equal monthly installments in the amount of Three Thousand Six Hundred
Forty Nine and 46/100 Dollars ($3,649.46), on the first day of each
month, in advance, along with Tenant's payment of Minimum Guaranteed
Rent.
FOURTEENTH: Section 9 (b) of the Lease is hereby deleted in its
entirety and replaced by the following:
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
Original Minimum Basis
Lease Term Period of Sales
<S> <C>
9/1/92 through 8/31/97 $20,019,896.00
9/1/97 through 8/31/2002 $23,022,880.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject of
appropriate proration as follows. In the event of any partial
calendar year during the term hereof, the Minimum Basis of
Sales shall be adjusted based on the number of months in such
partial year. No "deemed" sales shall be included in the
Gross Sales for any partial years.
FIFTEENTH: Along with Tenant's next payment of rental coming due
under this Lease, Tenant covenants and agrees to pay Landlord, as additional
rental, the amount of $32.48, representing the additional amount due Landlord
with respect to Minimum Guaranteed Rent and other charges under the Lease for
the period commencing October 21, 1992 and ending December 31, 1992
attributable to the difference in the amount of gross floor area in accordance
with this Amendment.
SIXTEENTH: Tenant hereby acknowledges and confirms that it has
accepted the Premises and the Premises are in the condition called for under
the lease.
SEVENTEENTH: Except as modified by this Amendment, the Lease shall
continue in full force and effect in accordance with the terms thereof.
EIGHTEENTH: All the rights and obligations of the parties under
this Amendment shall bind and inure to the benefit of their respective personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on the date first above written.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES/GREENBRIAR LIMITED
PARTNERSHIP, A District of Columbia
Limited Partnership
By: CM/CP GREENBRIAR RETAIL JOINT
VENTURE, A Delaware Joint Venture,
General Partner
By: CP/Greenbriar Retail
Investments Limited
Partnership, A Virginia
Limited Partnership,
Joint Venturer
WITNESS: By: CP/Greenbriar Retail, Inc.,
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
A Virginia Corporation,
General Partner
/s/ THOMAS B. MCKEE By: Ronald S. Haft
- ----------------------- ------------------------------
Ronald S. Haft
President
WITNESS: TENANT:
TOTAL BEVERAGE VA CORP.
By: ROBERT N. HERMAN
- ----------------------------- --------------------------------------------
Its Its: Executive Vice President
-------------------------- -------------------------------------------
[Corporate Seal]
WITNESS: GUARANTOR:
SHOPPERS FOOD WAREHOUSE CORP.
By: ROBERT N. HERMAN
- ----------------------------- --------------------------------------------
Its: Its: Executive Vice President
------------------------- -------------------------------------------
[Corporate Seal]
</TABLE>
<PAGE> 5
LEASE
AGREEMENT
LOCATION: GREENBRIAR TOWN CENTER
DATED: -----------------------------
LANDLORD: COMBINED PROPERTIES/GREENBRIAR
LIMITED PARTNERSHIP
TENANT: TOTAL BEVERAGE CORP.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. BASIC LEASE INFORMATION ............................................ 1
2. PREMISES............................................................ 3
3. TERM................................................................ 3
4. RENTAL DEPOSIT - INTENTIONALLY DELETED.............................. 4
5. SECURITY DEPOSIT - INTENTIONALLY DELETED............................ 4
6. MINIMUM GUARANTEED RENT............................................. 4
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES......................... 4
8. REAL ESTATE TAXES................................................... 5
9. PERCENTAGE RENT..................................................... 6
10. PAYMENT OF PERCENTAGE RENT.......................................... 7
11. GROSS SALES......................................................... 7
12. SALES REPORTS....................................................... 7
13. AUDIT OF SALES REPORTS.............................................. 8
14. RECORDS............................................................. 8
15. DISCLAIMER OF JOINT VENTURE......................................... 8
16. RENTAL OCCUPANCY TAX................................................ 8
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE............................. 8
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS.................. 9
19. UTILITIES........................................................... 9
20. TENANT'S SIGNS...................................................... 9
21. CONSTRUCTION OF THE PREMISES........................................ 11
22. COMPLETION AND DELIVERY OF THE PREMISES............................. 11
23. MAINTENANCE AND USE OF COMMON AREAS................................. 11
24. TENANT'S WORK ...................................................... 12
25. FIXTURING TENANT'S STORE; OPENING................................... 12
26. OCCUPANCY AND OPERATING HOURS....................................... 13
27. REPAIRS............................................................. 13
28. ALTERATIONS BY TENANT............................................... 14
29. DAMAGE TO PREMISES OR IMPROVEMENTS.................................. 14
30. USE OF PREMISES..................................................... 14
31. OPERATION BY TENANT................................................. 14
32. EXTRA HAZARDS....................................................... 15
33. PLUMBING............................................................ 15
34. DISPLAY LIGHTING.................................................... 15
35. ROOF AND WALLS...................................................... 15
36. LIENS AND INDEMNITY................................................. 16
37. TENANT'S FIXTURES................................................... 16
38. INSPECTION BY LANDLORD.............................................. 16
39. COVENANT TO HOLD HARMLESS........................................... 16
40. PUBLIC LIABILITY.................................................... 17
41. LIMITATION OF LANDLORD'S LIABILITY.................................. 17
42. DAMAGE TO PREMISES.................................................. 17
43. CONDEMNATION........................................................ 18
44. BANKRUPTCY.......................................................... 18
45. BANKRUPTCY-USE OF PREMISES.......................................... 19
46. DEFAULT............................................................. 19
47. WAIVER.............................................................. 19
48. SUBORDINATION....................................................... 20
49. RECORDATION......................................................... 20
50. MERCHANTS ASSOCIATION;PROMOTIONAL FUND.............................. 20
51. ASSIGNMENT AND SUBLEASE............................................. 20
52. TERMINATION......................................................... 21
53. HOLDING OVER........................................................ 21
54. FOR RENT SIGNS...................................................... 21
55. QUIET ENJOYMENT..................................................... 21
56. ADDRESSES AND NOTICES............................................... 22
57. ESTOPPEL CERTIFICATES............................................... 22
58. MISCELLANEOUS....................................................... 22
59. WAIVER OF SUBROGATION............................................... 24
60. HAZARDOUS MATERIALS................................................. 24
61. PRIMARY USE PROTECTION.............................................. 25
62. GUARANTY OF PERFORMANCE............................................. 25
EXHIBIT A - SITE PLAN OF SHOPPING CENTER AND PREMISES
EXHIBIT B - TENANT'S SIGN SPECIFICATIONS
EXHIBIT C - DESCRIPTION OF LANDLORD'S WORK
EXHIBIT D - TENANT'S SPECIFICATIONS REQUIREMENTS MANUAL
EXHIBIT E - USE OF PREMISES RESTRICTIONS
EXHIBIT F - GUARANTY OF PERFORMANCE
EXHIBIT G - COMMENCEMENT AND ENDING AGREEMENT
</TABLE>
<PAGE> 7
LEASE AGREEMENT
DATE: APRIL 2, 1991
LANDLORD: COMBINED PROPERTIES/GREENBRIAR
LIMITED PARTNERSHIP
1899 L STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20036
TENANT: TOTAL BEVERAGE CORP.
(A DELAWARE CORPORATION)
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
PREMISES: SPACE NO. 41
GREENBRIAR TOWN CENTER
CHANTILLY, VIRGINIA
In consideration of the covenants contained herein, this Lease
Agreement is made as of the date above written by and between Landlord and
Tenant under the following terms, conditions and provisions:
1. BASIC LEASE INFORMATION
The following Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any information and
definitions contained in the Basic Lease Information shall mean and refer to
the information and definitions hereinafter set forth. If there is any
conflict between the terms of the Lease and the following Basic Lease
Information, the terms of the Lease shall prevail.
(a) PREMISES: Store No. 41, approximately 25,000
square feet in size, located on the lower
level of a building in the Shopping Center as
shown on Exhibit "A".
(b) SHOPPING CENTER: The shopping center commonly known as
Greenbriar Town Center, as shown on Exhibit
"A:, as the same may be modified from time to
time, in accordance with the terms hereof.
(c) ORIGINAL LEASE TERM: Ten (10) years, plus that part of the month,
if any, from the Commencement Date to the
first day of the first full calendar month in
the term.
(d) COMMENCEMENT DATE: The Delivery Date as provided in Section 25.
(e) RENT COMMENCEMENT DATE: That date which is One Hundred Twenty (120)
days after the Commencement Date, or the date
Tenant opens for business in the Premises,
whichever is earlier.
(f) EXPIRATION DATE: The last day of the 240th full calendar
month after the Commencement Date.
(g) OPTION TERM: One (1) option term of Ten (10) years.
(h) LEASE YEAR: A period of twelve (12) full calendar
months beginning on January 1 and ending on
the following December 31. The first and last
"lease year" of the lease term, if beginning
or ending on dates other than January 1 and
December 31, shall be calculated on a
proportionate basis.
(i) RENTAL DEPOSIT: None
(j) SECURITY DEPOSIT: None
<PAGE> 8
(k) ANNUAL MINIMUM Two Hundred Thousand Dollars ($200,000.00),
GUARANTEED RENT: subject to adjustment pursuant to Sections 6
and 3 (b) of the Lease.
(l) MINIMUM BASIS OF SALES: Twenty Million Dollars ($20,000,000.00),
subject to adjustment pursuant to Sections 9
and 3 (b) of the Lease.
(m) PERCENTAGE RENT RATE: One Percent (1%)
(n) CONSUMER PRICE INDEX: The "Consumer Price Index for Urban Wage
Earners and Clerical Workers (1982-84=100)
for all Items, U.S. City Average", issued by
the Bureau of Labor Statistics of the United
States Department of Labor. In the event the
Consumer Price Index is not available, or is
discontinued, then any successor or substitute
index shall be used for the computations
herein set forth. In computing the increase
in the Consumer Price Index, the amount of
increase shall be based upon the percentage
increase in the Consumer Price Index from the
date of the Lease through to the date of
adjustment.
(o) TENANT'S PERMITTED USE: The retail sale of primarily containerized
beverages for off-premises consumption,
including without limitation wine, beer,
bottled water, carbonated and non-carbonated
soft drinks, soda and seltzer waters, and
juices; tobacco products; snack-food items,
candy and paper goods (subject to item (k) on
Exhibit E); and related items and for no other
use.
(p) PROMOTIONAL CHARGE: A monthly charge in the amount of $83.33.
(q) LANDLORD'S ADDRESS FOR c/o Combined Properties Incorporated
NOTICES: 1899 L Street, N.W., 9th Floor
Washington, D.C. 20036
Attention: Legal Department
(r) TENANT'S ADDRESS FOR c/o Shoppers Food Warehouse Corp.
NOTICES: 3129 Pennsy Drive
Landover, MD 20785
Attention: Robert N. Herman
(u) WITH A COPY TO: Shoppers Food Warehouse Corp.
3129 Pennsy Drive
Landover, MD 20785
Attention: Jack Binder
(s) BROKER: None
(t) GUARANTOR: Shoppers Food Warehouse Corp.
(u) EXHIBITS:
Exhibit "A" Site Plan
Exhibit "B" Sign Regulations
Exhibit "C" Landlord's Work
Exhibit "D" Tenant's Specifications Requirements Manual
Exhibit "E" Use of Premises Restrictions
Exhibit "F" Guaranty of Performance
Exhibit "G" Commencement and Ending Agreement
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases form
Landlord, the Premises as shown on Exhibit "A". The Premises will be located
substantially as shown in relation to other improvements on Exhibit "A". The
Shopping Center layout shown on said Exhibit "A" has not been fully approved by
all governmental authorities and is, therefore, subject to modification and
revision based on the requirements of such governmental authorities. No
representation is made as to
<PAGE> 9
the accuracy of Exhibit "A" and the Shopping Center layout shown on said
Exhibit "A" is preliminary and subject to modification and revision and no
representation is made as to the occupancy, types of business or any tenant
shown on the same. Together with he premises demised hereby, Landlord grants
to Tenant, on a non-exclusive basis, the right to use, in common with others,
the parking areas, roadways, means of ingress and egress and service areas of
the Shopping Center. Tenant acknowledges that Landlord has the right and power
to erect free standing buildings or other structures or facilities in the
common areas or elsewhere in the Shopping Center, to manage and operate the
common areas, including all means of exit and entrance and approaches thereto
within the Shopping Center, and Landlord shall at all times have the right, at
Landlord's sole discretion, from time to time, to erect free standing buildings
or other structures or facilities, to determine and change the common areas and
parking plan for the Shopping Center, and the arrangement of entrances, exits
and approaches thereto, providing same meets governmental codes. Landlord
further reserves the right to modify, remove, delete, add to, expand or
otherwise reconfigure existing and future buildings, structures and facilities
in the Common Areas or elsewhere in the Shopping Center, provided same meets
governmental codes. Landlord reserves the right to change the name of the
Shopping Center.
In addition, Landlord will maintain at all time the existing entrance
to the Shopping Center from Plaza Lane (Virginia Route 7163) as shown on
Exhibit A attached hereto, unless closed by condemnation, court order or other
legal proceeding, and except for any temporary closures for maintenance and
repair or to avoid a public dedication of the Shopping Center Common Areas.
Notwithstanding anything to the contrary contained herein, Landlord
shall not construct any leasable improvements in the "No Build Area #1" shown
on Exhibit "A" , nor shall Landlord reduce the number of parking spaces in the
"No Build Area #1", except as the same might be reduced by certain landscape
areas and/or open spaces that might be required by appropriate governmental
codes and authorities from time to time. Further, Landlord shall not construct
any leasable structure in the "No Build Area #2" shown on Exhibit "A" other
than one (1) building which shall not exceed 3,000 square feet of gross
leasable floor area in size, nor shall Landlord reduce the number of parking
spaces in the "No Build Area #2" except as the result of the construction of
such permitted building and except as the same may be reduced by certain
landscape areas and/or open spaces that might be required by appropriate
governmental codes and authorities from time to time.
3. TERM
(a) ORIGINAL TERM. This Lease shall be effective upon
full execution by and delivery of a copy hereof to the parties hereto. The
term of this Lease shall commence on the Commencement Date and end on the
Expiration Date, unless sooner terminated as provided herein.
(b) OPTION TERM. Provided Tenant is open for business
and operating in the Premises (subject to Force Majeure Events), and provided
Tenant is not in default beyond any applicable cure period at the time of
exercise of this option, and further provided Tenant has not assigned this
Lease or sublet the Premise, or any part thereof (other than to another
beverage store use), then Tenant shall have the option to renew this Lease for
one (1) additional ten (10) year period commending at the expiration of the
original lease term. Said option shall be automatically exercised by Tenant
unless Tenant gives Landlord at lease twelve (12) months prior to the
expiration of the original term. Such notice must be given in accordance with
Section 56 of this Lease.
All of the terms and conditions of this Lease shall remain in full
force and effect during the option term, except there shall not be any
additional option to renew this Lease beyond what is provided for hereinabove,
and Minimum Guaranteed Rent and the Minimum Basis of Sales for the option Term
shall be as set both in the following schedule:
<TABLE>
<CAPTION>
OPTION TERM RATE PER ANNUAL MINIMUM MONTHLY MINIMUM MINIMUM BASIS
PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT OF SALES
- ----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Lease Years
1-5 $10.58 $264,500.00 $22,041.67 $26,450,000.00
Lease Years
6-10 $12.16 $304,175.00 $25,347.91 $30,417,500.00
</TABLE>
4. RENTAL DEPOSIT - INTENTIONALLY DELETED
5. SECURITY DEPOSIT - INTENTIONALLY DELETED
<PAGE> 10
6. MINIMUM GUARANTEED RENT
(a) Commencing on the Rent Commencement Date, Tenant covenants and
agrees to pay to Landlord without notice or prior demand the Minimum Guaranteed
Rent with no offsets or abatements whatsoever in lawful money of the United
States of America, to be paid in equal monthly payments on the first day of
each month, in advance, as such place as shall be designated by Landlord within
the continental United States. If the Rent Commencement Date shall occur on a
day other than the first day of the month, then the first rental payment shall
be pro-rated accordingly.
(b) The Minimum Guaranteed Rent shall be payable for the periods
set forth below in the following annual and monthly amounts:
<TABLE>
<CAPTION>
RATE PER ANNUAL MINIMUM MONTHLY MINIMUM
LEASE TERM PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT
- ----------------- ----------- --------------- ---------------
<S> <C> <C> <C>
Lease Years 1-5 $8.00 $200,000.00 $16,666.67
Lease Years 6-10 $9.20 $230,000.00 $19,166.67
</TABLE>
The aforesaid Minimum Guaranteed Rent and equal monthly installments
have been based upon a Premises containing 25,000 square feet of gross floor
area. Said Premises shall be upon completion measured by Landlord's architect
or engineer and in the event the premises shall contain an amount of gross
floor area different than 25,000 square feet said rentals shall be
proportionately adjusted based upon the square foot rental rate designated
hereinabove. The Premises shall be deemed to extend to and include the
exterior faces of all exterior walls, the full thickness of common area walls,
and to the center line of any walls separating the Premises from adjacent
tenant premises and the exterior line of the store front as shown on Exhibit
"A:. In computing the square footage of the Premises, the area dedicated to
any mezzanine and adjacent exterior cart corral area shall not be included.
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES
(a) Commencing on the Rent Commencement Date Tenant agrees to pay
to Landlord as additional rent for each Calendar Year during the term hereof,
in equal monthly installments at the same time as the Minimum Guaranteed Rent
(and prorata for any portion of a month), an estimated payment toward Tenant's
proportionate share of the Shopping Center's Common Areas Operating cost
(hereinafter defined). Tenant's proportionate share of the Shopping Center's
Common Areas Operating Cost, shall be determined for each calendar year by
multiplying such costs by a fraction, the numerator of which shall be the floor
area of the Premises and the denominator shall be the total leasable floor area
of Shopping Center as of December 31 of such calendar year. Tenant shall pay,
on an estimated basis, its prorata share based on the previous year's actual
costs, as billed to Tenant by Landlord on a monthly basis, with an annual
reconciliation; any overpayments by Tenant shall be credited to Tenant's rental
account (or refunded to Tenant if the term of this Lease has expired or been
terminated); any underpayment shall be treated as provided in subparagraph (b)
below. Landlord's initial estimate of the Shopping Center's Common Area
Operating Cost is One and 84/100 Dollars ($1.84) per square foot of leasable
floor area. Therefore Tenant shall initially make estimated payments in the
amount of Forty-Six Thousand Dollars ($46,000.00) annually to be paid in equal
monthly installments in the amount of Three Thousand Eight Hundred Thirty-Three
and 33/100 Dollars ($3,833.33) without set-off or deduction. For the purpose
of this subsection (a), the Shopping Center's Common Areas Operating Cost means
the total cost and expense incurred in maintaining, managing, operating,
repairing and replacing the parking areas, curbs, sidewalks and other exterior
common areas, the roof and the exterior walls of the buildings in the Shopping
Center which house mechanical, electrical or other equipment or are otherwise
determined by Landlord from time to time to be used in operating or maintaining
the Shopping Center, specifically including but not limited to, if provided and
without limitation, the cost of maintaining, operating, repairing, replacing
and repaving the common areas, gardening and landscaping, the cost of fire and
extended coverage insurance (relative to the buildings and insurable structures
in the Shopping Center and not to any personal property of any tenant) and
public liability (relative to the Common Areas only) and property damage
insurance, water and sewer charges, repairs, lighting, security, sanitary
control, removal of ice, snow, trash, rubbish, garbage and other refuse,
cleaning, painting, directional signs, pavement markings, parking lot striping,
depreciation on machinery, equipment and furnishings used in such operation and
maintenance, the cost of personnel to implement such services, the cost of
personnel to direct parking, and legal fees, accounting fees and other
professional fees incurred by Landlord in connection with the protection or
enforcement of rights and/or obligations relative to the common areas of the
Shopping Center, plus ten percent (10%) of all of the aforementioned (excluding
any management fees paid to third parties, insurance premiums and real estate
taxes) as overhead and administrative expenses.
Notwithstanding the foregoing, if in any one (1) year, Landlord shall
replace all or any portion of the parking area in the Shopping Center and the
cost of such replacement exceeds Fifty Thousand Dollars ($50,000.00), the costs
of such replacement shall be amortized evenly over a five (5) year period,
commencing with the year in which such cost is incurred. Further, the Shopping
Center's Common Area Operating Cost shall not include (i) the depreciation of
any
<PAGE> 11
item the cost of which has been included in full in the Shopping Center's
Common Area Operating Cost; nor (ii) the cost of any of Landlord's
"home-office" managerial personnel; nor (iii) the payment of any carrying costs
(i.e., principal and/or interest payments) on any loan made by Landlord; nor
(iv) any costs to repair, rebuild or restore any portions of the common areas
to the extent such costs are covered by and reimbursed to Landlord by proceeds
from insurance policies carried by Landlord and the premises for which are
included as a component of the Shopping Center's Common Area Operating Costs;
nor (v) any amounts for costs and expenses which would otherwise be includable
hereunder, but which are recovered by Landlord (i) from tenants or third
parties as a result of any act, omission, default or negligence on the part of
such tenants or third parties relative to the common areas, or (ii) as a result
of breaches by tenants of their respective leases relative to the common areas
(other than recoveries from tenants pursuant to cost-sharing and recovery
provisions in their leases similar to this Section 7 (a)).
(b) Upon the commencement of each Lease Year during the term
hereof, Tenant's Common Area contribution shall be increased based upon an
amount, if any, equal to Tenant's proportionate share of the excess costs, as
hereinafter defined.
If in any Lease year or portion thereof, the aforesaid total costs and
expenses comprising the Shopping Center's Common Areas Operating Costs exceed
One and 84/100 Dollars ($1.84) per square foot times the number of total number
of square feet of leasable floor area in the Shopping Center after deducting
any amounts paid by any tenants located on floor levels which are not
"on-grade" and therefore not included in the denominator as set forth in the
next paragraph (such excess being referred to as "excess costs"), then, and so
often as such event shall occur, Tenant's proportionate share of such excess
costs shall be calculated as follows:
a. - With respect to the said Shopping Center's Common Areas
Operating Cost, said excess costs shall be multiplied by a fraction, the
numerator of which is the square foot area of the Premises and the denominator
of which is the total number of square feet of leasable on-grade floor area in
the Shopping Center. For greater certainty, the premises above Tenant's
Premises, initially intended to operate as a "Kiddie City" store is deemed to
be an on-grade store.
Within thirty (30) days from the date of billing by Landlord, tenant
shall pay Tenant's proportionate share of such excess costs for the immediately
preceding calendar year; thereafter Tenant's proportionate share of the
shopping Center's Common Areas Operating Cost shall be equal to the combined
amount of such excess costs and the prior calendar year's estimated
proportionate contribution, the combined amount being Tenant's new estimated
proportionate Common Area contribution, until further adjusted as herein
provided, and shall be payable in equal monthly installments with off-set.
Nothing contained with this Section 7 shall be construed as limiting
or precluding the Tenant's obligations under Section 31 or other Tenant
obligations under this Lease.
Landlord shall upon written request notify Tenant annually of the
total number of leasable on-grade square feet in the Shopping Center. Landlord
shall maintain and keep adequate records to substantiate the above Cost and
Tenant shall have the right to examine the books and perform an audit on the
same terms and conditions as Tenant must account for its Gross Sales.
8. REAL ESTATE TAXES
In addition to and as a part of the rental set forth herein, Tenant
agrees to pay to the Landlord for each calendar year during the term, Tenant's
share (as computed in accordance with the terms of this Section 8) of all
general and special real property taxes and assessments ("Real Estate Taxes")
levied or assessed against the Shopping Center and the underlying land and
improvements (including, but not limited to common areas). Commencing on the
Rent Commencement Date, Tenant shall pay to Landlord on an estimated basis, the
sum of Forty Three Thousand Seven Hundred Fifty and 00/100 Dollars ($43,750.00)
to be paid in equal monthly installment in the amount of Three Thousand Six
Hundred Forty-Five and 83/100 Dollars ($3,645.83), on the first day of each
month, in advance, along with Tenant's payment of Minimum Guaranteed Rent.
Said sum represents Tenant's prorata contribution toward the Real estate Taxes,
based upon current estate taxes (calendar year 1990) on the Shopping Center.
In the event the Real Estate Taxes shall be increased or decreased in any tax
year during the term of this Lease, by reason of an increase or decrease in the
tax rate or the assessed valuation, over the amount of taxes due and payable
for calendar year 1990 then Tenant shall pay to Landlord as additional rent, or
Landlord shall reimburse to Tenant, within thirty (30) days after receiving
notice that such taxes are payable, its proportionate share of said increases
and, thereafter, Tenant shall pay said increases on a monthly basis along with
other payments called for herein. Tenant's share of the aforesaid increases
shall be calculated by multiplying said increase by a fraction, the numerator
of which is the square floor area of the Premises and the denominator of which
is the total number of square feet of leasable on-grade floor area in the
Shopping Center, after deducting any contributions to Real Estate Taxes paid by
any tenants located on
<PAGE> 12
floor levels which are not "on-grade" and therefore not included in the
denominator.
Landlord shall furnish to Tenant upon written request a copy of the
tax bill and the computation of Tenant's proportionate share. Provided that
Tenant shall first consent in writing to the protest by Landlord of any real
estate taxes, reasonable expenses, including attorneys' fees, expert witness
fees and similar costs, incurred by Landlord in obtaining or attempting to
obtain such reduction of any real estate taxes shall be prorated and added to
an included in the amount of any such real estate taxes. Real estate taxes
which are being contested by Landlord and which are required to be paid in
order to avoid penalties, interest or imposition of any tax lien on the
Shopping Center, shall nevertheless be included for purposes of the computation
of the liability of Tenant under the above paragraph, provided, however, that
in the event that Tenant shall have paid any amount of increased rent pursuant
to this Article 8 and the Landlord shall thereafter receive a refund of any
portion of any real estate taxes on which such payment shall have been based,
Landlord shall pay to Tenant the prorata share of such refund. Landlord shall
have no obligation to contest, object or litigate the levying or impositions or
any real estate taxes and may settle, compromise, consent to, waive or
otherwise determine in its discretion to abandon any contest with respect to
the amount of any real estate taxes with consent or approval of the Tenant.
The term "Real Estate Taxes" means the total of all taxes and
assessments, general and special, ordinary and extraordinary, foreseen and
unforeseen, including assessments for public improvements and betterments,
assessed, levied or imposed with respect to the land and improvements included
within the Shopping Center. If at any time during the term of this Lease, the
present method of taxation shall be changed so that in lieu of the whole or any
part of any Real Estate Taxes levied, assessed or imposed on real estate and
the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charges measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings in the Shopping Center, then all such taxes, assessments, levies or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "Taxes" for the purposes hereof.
Notwithstanding anything to the contrary contained in the foregoing,
Tenant shall have no responsibility for any share of any increase of Real
Estate Taxes which is brought about, in whole or in part, by any sale, lease,
encumbrance or other transfer of all or any part of the Shopping Center or any
interest therein, or other sale or other transfer of an interest of any entity
now or hereafter constituting Landlord, in other than an arm's length
transaction.
9. PERCENTAGE RENT
(a) Commencing with the first calendar month hereunder, and in
addition to the other payment called for herein, Tenant further agrees that,
with respect to any Lease Year during the term hereof in which the Gross Sales
of Tenant in, upon or from the Premises shall exceed the Minimum Basis of Sales
(Minimum Basis of Sales shall be prorated in accordance with Section 9 (b) for
any period of less than twelve (12) calendar months), Tenant shall pay to
Landlord, as percentage rent, a sum equal to the Percentage Rent Rate
multiplied by Gross Sales for such year in excess of the Minimum Basis of
Sales. In the event Section 30 is amended and/or Section 45 or Section 51
invoked, Landlord expressly reserves the right to change the Percentage Rent
Rate hereinabove set forth.
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
MINIMUM BASIS
LEASE TERM PERIOD OF SALES
----------------- -------------
<S> <C>
Lease Years 1-5 $20,000,000.00
Lease Years 6-10 $23,000,000.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject to
appropriate proration as follows. In the event of any partial calendar year
during the term hereof, the Minimum Basis of Sales shall be adjusted based on
the number of months in such partial year. No "deemed" sales shall be included
in the Gross Sales for any partial years.
(c) It is acknowledged and agreed that Tenant is not hereby
covenanting to operate the Demised Premises other than as expressly set out in
the Lease and is not making any representation or warranty in respect of the
sales to be made at the Demise Premises other than as expressly set out in the
Lease.
10. PAYMENT OF PERCENTAGE RENT
The reporting of Gross Sales and the determination and payment of
percentage rent hereunder shall be made annually on the basis of a calendar
year. Commencing with the first Lease Year of the term hereof, and continuing
throughout the remainder of the lease term, the percentage rent due under this
Lease shall be determined and paid by Tenant to Landlord on or before February
<PAGE> 13
15th following the close of each calendar year.
The first Lease Year for these purposes shall commence on the first
day of the term and shall end on December 31st; thereafter the Lease Year shall
consist of consecutive periods of twelve (12) full calendar months ending on
December 31st. Percentage rent for the first and last Lease Years of the
Lease, if less than twelve (12) months, will be calculated on a proportional
basis.
11. GROSS SALES
The term "Gross Sales" as used herein shall be construed to include
the entire amount of the actual sales price, whether for cash or otherwise, of
all sales of merchandise and/or service and any other receipt whatsoever of all
business conducted in or from the Premises, including, but not limited to, mail
orders, telephone orders, and/or other orders in whatever manner received or
filled whether in whole or in part at the Premises; orders taken in or from the
Premises, although said orders may be filled elsewhere; receipts from vending
machines in the Premises; and sales by any subtenant, concessionaire, licensee
or other person in said Premises, provided that nothing herein shall prevent
Landlord from requiring an additional or different percentage rent as a
condition to approval of any subtenant, concessionaire or licensee of Tenant
hereunder which is engaged in a use other than Tenant's Permitted Use which
percentage rent shall be in accordance with guidelines as issued by the
International Council of Shopping Centers or such other guidelines as may be
available from time to time. Said term shall not include, however, (1) any
sales tax, use tax or any other tax collected from a customer by Tenant and
paid by Tenant to any duly constituted governmental authority; (2) the exchange
of merchandise between the stores of Tenant, if any, where such exchange of
goods or merchandise is made solely for the convenient operation of the
business of Tenant and not for the purpose of consummating a sale which had
theretofore been made at, in, from or upon the Premises and/or for the purpose
of depriving Landlord of the benefit of a sale which otherwise would be made
at, in, from or upon the premises; (3) the amount of returns to shippers of
manufacturers; (4) the amount of any cash or credit refund made upon any sale
where the merchandise sold, or some part thereof, is thereafter returned by the
purchaser and accepted by Tenant; (5) sales of Tenant's store fixtures; (6) the
amount of cashier shortages but not to exceed $10,000.00 in any lease Year; (7)
receipts from sales at a discount at the Demised Premises to non-profit
organizations, but not to exceed $25,000.00 in any Lease Year; (8) the gross
receipts from vending machine sales of cigarettes, candy and soft drinks at the
Demised Premises; (9) receipts from pay telephones; (10) additional discounts
to customers at the Demised Premises by special promotion coupons to the extent
same are redeemed at the Demised Premises by customers, or cash refunds to
customers (it being understood and agreed that said special promotion coupons
are not Tenant's principal method of selling on the Demised Premises); (11)
container tax or container deposits not retained by Tenant; (12) bad check
losses at the Demised Premises to the extent and at the time sales are
written-off as such by Tenant but not to exceed one-quarter of one percent
(.25%) of gross receipts; (13) voided orders; (14) lottery sales and money
order sales in excess of commissions received by Tenant; (15) receipts from the
sale of postage stamps at cost to Tenant; (16) any fees or costs paid by
customers to a third party other than Landlord as a result of any transaction
at an "automatic teller machine" located in or on the Demised premises, but
only to the extent such fees or costs are included in"gross receipts" under
this Section; and (17) gross receipts from the sale of cigarettes.
12. SALES REPORTS
Tenant shall submit to Landlord by February 15th at the place where
the rent herein reserved is then payable, a preliminary statement signed by an
officer of Tenant, showing in all reasonable detail the amount of Gross Sales
made from the Premises during the prior Calendar Year. Within ninety (90) days
after the end of each Calendar Year Tenant shall deliver to Landlord a final
and complete statement of Gross Sales for the entire Calendar Year certified by
Tenant's chief financial officer. Tenant shall require of its subtenants,
concessionaires and licensees, if any, to furnish similar statements to
Landlord within the same periods specified. For the last month of the last
Lease Year, the monthly report shall be due by no later than thirty (30) days
following the Expiration Date.
13. AUDIT OF SALES REPORTS
In the event Landlord is not satisfied with any of the statements as
submitted by Tenant and/or its subtenants, or others, or if Tenant or any other
person herein obligated fails to furnish the statements required herein, then
and in that event Landlord shall have the right, no more often than once
annually, to make an audit of Tenant's and its subtenant's, etc., books and
records pertaining to sales on, or in connection with, the Premises leased
herein. If any such statement is found to be incorrect to an extent of more
than two percent (2%) in amount over the figures submitted by Tenant and its
subtenant, etc., or if such statements are not furnished, Tenant shall promptly
pay for such audit and the deficiency in rent at the same time and in addition
to the next payment of Minimum Guaranteed Rent, and, if such audit proves
Tenant's and subtenant's statements to be correct, or together to vary not more
than two percent (2%) from the results of the special audit, then the expense
of such audit shall be borne by Landlord. Landlord's right to examine shall be
available to Landlord only for
<PAGE> 14
a two-year period after the last statement for such Lease Year period shall
have been furnished to Landlord.
14. RECORDS
Tenant shall and hereby agrees that it and its subtenants,
concessionaires and licensees, if any, will keep in the Premises, or at the
location identified as Tenant's Address for Notices, for a period of not less
than three (3) years following the end of each Lease Year, a permanent and
accurate set of books and records of all Gross Sales of the business conducted
in said Premises, and all supporting records, including taxes.
15. DISCLAIMER OF JOINT VENTURE
Any intention to create a joint venture or partnership between the
parties hereto is hereby expressly disclaimed. The provisions of this Lease in
regard to the payment by Tenant and the acceptance by Landlord of a percentage
of the Gross Sales of Tenant and others is a reservation of rent for the use of
the Premises.
16. RENTAL OCCUPANCY TAX
In addition to the payments required to be made by Tenant for Real
Estate Taxes pursuant to Section 8 of this Lease, Tenant shall pay, as
additional rent, any privilege, license, sales, gross income, excess,
occupancy, use or any other tax (as distinguished from Federal or State Income
Taxes) at any time imposed upon the rent payments or Tenant's occupancy or use
of the Premises, or upon Landlord in an amount based upon such rent payments,
Tenant's occupancy or use of the Premises, or the common areas in the Shopping
Center (hereinafter referred to as "Rental Occupancy Tax") whether the
imposition of such Rental Occupancy Tax shall be made by the Federal
Government, the State Government or any agency, subdivision or municipality
thereof. Tenant shall pay said additional Rental Occupancy Tax monthly to the
Landlord, or at other intervals as determined by Landlord from time to time.
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE
Tenant will promptly pay all Minimum Guaranteed Rent, additional rent
and other payments called for herein when and as the same shall become due and
payable. All sums of money or charges payable by Tenant to Landlord under this
Lease shall be paid when due, without any deductions, abatements or offsets
whatsoever, and the failure to pay such sum or charges carries the same
consequences as Tenant's failure to pay rent. Any payments of rental or other
charges by Tenant, or acceptance by Landlord of a lesser amount than shall be
due from Tenant to Landlord, shall be treated as a payment on account. The
acceptance by Landlord of a check for a lesser amount with any endorsement or
statement thereon, or upon any letter accompanying such check, that such lesser
amount is payment in full, shall be given no effect, and Landlord may accept
such check without prejudice to any other rights or remedies which Landlord may
have against Tenant.
In the event Landlord shall fail to receive any payment of rent
required under this Lease when due, Landlord shall give Tenant written notice
of such failure, and in such event Landlord shall make reasonable efforts to
advise Tenant's chief accounting officer by telephone of such failure. In the
event Tenant fails to pay within two (2) business days following receipt by
Tenant of written notice any payment of rent when due more than one time in any
lease year, Tenant agrees to pay commencing with the second late payment in
each lease year, a late penalty charge in an amount equal to Two Hundred Fifty
Dollars ($250.00), if Landlord shall fail to receive same within two (2)
business days following receipt by Tenant of written notice. Further,
commencing with the second late payment in any lease year during the term
hereof, late payments of rent not received with the aforesaid two (2) business
day period shall bear interest from the date due at the annual rate of twelve
percent (12%) per annum or two percent (2%) over the prime lending rate of
Riggs Bank, N.A., whichever is higher.
The provisions of this Section are cumulative and shall in no way
restrict the other remedies available to Landlord in the event of Tenant's
default as provided for under this Lease.
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS
Landlord shall be responsible for providing fire and extended coverage
insurance for the Shopping Center and the Premises in an amount not less than
80% of the full replacement cost (excluding insurance on Tenant's inventory,
equipment, furniture and fixtures, and other contents within the Premises) and
such cost shall be included in the Shopping Center Operating Costs in
accordance with Section 7 of this Lease. Landlord shall self-insure for any
amounts less than 100% of the full replacement cost.
Tenant, at its sole cost and expense, shall be responsible for
providing a policy of fire and extended coverage insurance, insuring Tenant's
inventory, equipment, furniture and fixtures, and all other contents in the
Premises. Tenant shall also maintain, at its sole cost and expense, a policy
of plate glass insurance naming both Tenant and Landlord as insureds, with a
standard mortgagee
<PAGE> 15
endorsement satisfactory to Landlord's mortgagee, for the full replacement cost
of repairing an/or restoring all of the plate glass in the Premises. In lieu
of such plate glass insurance, Tenant may be self-insured, provided Tenant
replaces any damaged glass with glass of like kind and quality at Tenant's
expense with due diligence after the damage occurs from any cause whatsoever.
Failure to replace any damaged glass as herein provided shall constitute a
default under this Lease. Tenant's insurance policies shall provide that they
may not be canceled without at least thirty (30) days prior written notice to
Landlord of such cancellation and Tenant shall deposit certificates of such
insurance policies with Landlord upon the commencement of the term of this
Lease.
19. UTILITIES
Tenant shall, at its own cost and expense, pay promptly all charges
when due for water, gas, electricity, heat, sewer rentals or service charges,
and any other utility charges rendered or furnished to the Premises or incurred
by Tenant in its use and occupancy thereof, including charge incurred during
Tenant's "fixturing" period under Section 25 herein.
If Landlord is required to supply water, gas, electricity, heat, sewer
rentals or service charges, or any other utility service, for the Shopping
Center and/or the Premises, then Tenant agrees to purchase same from Landlord
at the then prevailing local rates and charges, and to pay promptly the charges
therefor when bills are rendered to Tenant. Tenant shall use reasonable
diligence in conservation of these utilities.
Landlord shall provide and install environmental heating and
air-conditioning equipment in the Premises and Tenant shall, at its sole cost
and expense, operate, maintain and repair the heating and air-conditioning
equipment herein referred to, including the making of all necessary
replacements thereto, throughout the term of this Lease and any renewal
thereof. Tenant shall pay for all fuel, water, gas and electricity consumed in
such operation. Landlord shall under no circumstances be liable to Tenant for
damages or otherwise for any interruption in service of water, electricity,
heating and/or air-conditioning or other utilities and services caused by the
making of any necessary repairs, replacements and/or improvements thereto, or
by any cause beyond Landlord's reasonable control, unless caused by the
negligence of Landlord, its agents or servants.
20. TENANT'S SIGNS
In order to obtain a harmonious appearance in the Shopping Center,
Landlord has established specifications and regulations for exterior signs.
Marked Exhibit "B", attached hereto and made a part hereof, is a copy of
Landlord's Sign Regulations, setting forth Landlord's specifications for
Tenant's sign(s) to be placed on the exterior of Tenant's store.
Tenant is required to install prior to opening for business in the
Premises and at all times thereafter maintain in good condition and repair,
including keeping same lighted, as hereinafter set forth, and exterior sign(s)
above Tenant's storefront and, upon Landlord's request, an exterior
under-canopy sign in front of Tenant's storefront in the area designated and as
approved by Landlord. All said storefront signs shall be kept illuminated
during the hours from at least dusk until 9:00 P.M., Monday through Saturday,
and at all other times the Tenant is open for business. Tenant shall comply
with all applicable requirements of governmental authorities having
jurisdiction and Tenant shall be responsible for obtaining all necessary
permits. Tenant shall make all repairs required by reason of the installation,
maintenance and removal of its sign(s). Tenant shall not maintain or display
any sign, lettering or lights on the interior or exterior surfaces of windows
of the Premises and shall not attach any non-permanent sign to the inside of
any window of the Premises which may be visible through such window from the
outside other than temporary signs which have been professional prepared.
Tenant shall be entitled to install and shall thereafter maintain in
good condition and repair, including keeping the same lighted, as hereinafter
required, an exterior sign on the architectural tower of the building in which
the Premises is located (which tower will be part of the upper level of such
building and will be located in the general area shown on Exhibit "A") in
accordance with plans and specifications approved by Landlord, which approval
shall not be unreasonably withheld.
In accordance with Exhibit "B", prior to fabrication or installation
of Tenant's sign(s) Tenant shall submit Tenant's sign plan to Landlord for
approval, which approval shall not be unreasonably withheld providing Tenant's
sign plan conforms to Exhibit "B" and providing Tenant's sign plan is not in
violation of governmental codes. Landlord will need a minimum of four (4)
copies of said plan for approval.
Upon approval by Landlord of Tenant's sign plan, a copy of said plan
shall be identified at TENANT'S FINAL APPROVED SIGN PLAN, marked FINAL EXHIBIT
"B", and be attached and made a part hereof. Tenant shall be in default
hereunder if Tenant installs a sign which has not been first approved by
Landlord, and any sign installed without such prior written approval may be
removed by Landlord at Tenant's cost and expense.
<PAGE> 16
Notwithstanding the foregoing, Tenant agrees that Landlord has the
right, at Landlord's discretion, at any time during the lease term, to remodel
or change the mansard and/or other exterior surfaces of the Shopping Center.
Tenant understands that during such remodeling, it might be necessary to remove
Tenant's existing sign(s) and that said sign(s) may not be suitable for
reinstallation after the remodeling is completed. Said sign(s), or parts
thereof, which Tenant had installed, shall remain the property of Tenant, but
Landlord is hereby released from any and all liability for damage to said
sign(s) during its removal, providing said removal is conducted with reasonable
care. Landlord shall give Tenant notification as to the approximate date that
said remodeling will commence, as well as the anticipated completion date. If
such remodeling occurs during the first five (5) years of the lease term,
Landlord shall pay for any new signage required by Landlord. During the
remodeling, Tenant agrees to cooperate with Landlord and execute any necessary
documentation required to facilitate the remodeling process. It may be
necessary to erect scaffolds or other construction equipment during the
remodeling, but free and easy customer access to the Premises shall not be
unreasonably impaired, nor shall such access be denied.
In the event the aforesaid remodeling requires the Landlord to install
a sign box or a raceway, with or without lettering (both hereinafter referred
to as "sign box"), then Tenant shall, at its sole cost and expense, including
all permits and governmental approval(s), supply to Landlord its sign face
which has been approved by Landlord in accordance herewith and either Landlord
or Tenant shall install Tenant's sign face in the sign box. It is understood
that the sign box shall remain the property of the Landlord and the sign face
shall remain the property of the Tenant. In the event the remodeling requires
the Tenant to install a sign comprised of individual, internally illuminated
letters, then Tenant shall, at its sole cost and expense, including all permits
and governmental approval(s), cause its sign, which has been approved by
Landlord in accordance with this Section 20, to be installed in the area
designated by Landlord. Additionally, the Shopping Center's sign plan and
criteria may call for under- canopy signs and Tenant will be required to have
its under-canopy sign installed, maintained, removed, etc., at its expense,
consistent with Landlord's criteria and the provisions of this Section 20 and
with Landlord's approval.
At the expiration of Tenant's occupancy of the Premises, Tenant shall
be responsible for removing Tenant's sign face from the sign box and replacing
same with a blank coordinating plate or removing Tenant's individual lettered
sign and satisfactorily restoring the surfaces damaged by the sign removal. In
the event the Tenant does not remove its sign face or individual lettered sign,
whichever the case may be, upon the expiration of its occupancy of the
Premises, then Landlord may cause the removal of said sign(s) in accordance
with the foregoing, at the sole cost and expense of Tenant. In such event, the
sign(s) shall be deemed abandoned and Landlord by dispose of same as it sees
fit.
Tenant shall be responsible for the day-to-day maintenance of its
sign, including but not limited to the replacement of light bulbs, and for the
maintenance, repair and replacement of its sign face, and for the utility
charges necessary to illuminate the sign. Damage to the sign by any cause
shall be the responsibility of Tenant unless caused by Landlord, its agents or
employees, in which event Landlord shall repair or replace the sign.
Without limiting the foregoing, the same shall not be construed as a
representation that Landlord will be remodeling the Shopping Center.
21. CONSTRUCTION OF THE PREMISES
Landlord shall construct, at its expense, the Premises substantially
in accordance with the general specification entitled "Description of
Landlord's Work", as set forth or referred to in Exhibit "C" attached hereto
and made a part of this Lease. After construction by Landlord, Tenant shall
maintain and be responsible for the Premises, its equipment and interior
finishes as set forth on Exhibit "C".
22. COMPLETION AND DELIVERY OF THE PREMISES
Landlord shall use commercially reasonable efforts to substantially
complete construction of the Premises on or before September 1992; provided,
however, that in the event Landlord shall be delayed in the performance of such
construction by reason of strikes, lockouts, labor troubles, inability to
procure materials, delays in construction, failure of power, governmental
restrictions, rules, regulations, ordinances, laws, approvals or permits or
reasons of a similar nature not the fault of Landlord, then such performance by
Landlord shall be excused for the period of any such delay or delays and the
period for the performance and substantial completion of such construction
shall be automatically extended herein for a period equivalent to the
cumulative period of such delay or delays. In the event construction of the
Premises has not been substantially completed within thirty (30) months from
the date of this Lease, then at anytime after said thirty (30) months either
Landlord or Tenant, upon written notice to the other, may terminate this Lease
with no further liability or obligation by or against either party hereto, and
Landlord shall not be liable to Tenant for any loss or damage caused by such
delay(s) or otherwise. Tenant may negate Landlord's termination of this Lease
under this Section 22 by giving Landlord notice with ten (10) days after
Landlord notifies Tenant of Landlord's
<PAGE> 17
termination of the Lease under this Section, which notice from Tenant will
include and shall be deemed to be an undertaking by Tenant to (i) complete the
work at Tenant's sole cost and expense and (ii) open for business within six
(6) months after Tenant's notice to Landlord. Tenant's failure to do so after
giving such notice will give Landlord the absolute, unavoidable right to
terminate this Lease immediately upon notice to Tenant. Should Tenant complete
the work and open for business within six (6) months after Tenant's notice to
Landlord, Landlord shall pay to Tenant, within ten (10) days after (i) Tenant
opens for business, and (ii) Tenant delivers a copy of its non-residential use
permit authorizing Tenant's use and occupancy of the Premise, and appropriate
lien waivers and releases, the balance of the contract price that would have
been paid to Landlord's contractor had the work been completed according to
Landlord's contract with such contractor for the construction of the Premises
in accordance with Exhibit "C" attached hereto. Landlord shall deliver to
Tenant together said payment a full copy of the construction contract with
Landlord's contractor. From and after the delivery of the Premises to Tenant,
all repairs and/or replacements to the Premises and the items set forth in
Exhibit"C: shall be the responsibility of Tenant at its sole cost and expense,
except for latent defects and structural defects. Any latent defect must be
reported in writing within thirty (30) days after Tenant discovered or should
have discovered such defect. Upon delivery of the Premises, Tenant shall be
responsible for applying and/or having all utilities transferred to its name
for billing purposes and Tenant shall be responsible for payment of same.
23. MAINTENANCE AND USE OF COMMON AREAS
Landlord will construct and the Shopping Center will include a parking
area, or areas, together with the access roads, as required by governmental
authorities. Landlord hereby grants to Tenant and Tenant's invitees a right,
during the term hereof, to use in common with others entitled to the use
thereof, in which such areas and facilities shall be maintained, and the
expenditures therefor, shall be at the reasonable discretion of Landlord and as
is customary in the industry in order to maintain such areas and facilities in
a reasonable good and clean order and condition consistent with "first class"
standards of other similar shopping centers located in the Washington, D.C.
metropolitan area, the use of such parking areas and other common area
facilities shall be subject to such reasonable regulations as Landlord may make
from time to time. Any such rules shall not discriminate against Tenant or
materially alter Tenant's obligations under this Lease.
Tenant shall direct and instruct its employees to use only such
parking areas provided by Landlord from time to time for employee parking, and
not to use the areas provided for customer parking. Tenant shall not at any
time allow any trucks or any other vehicles servicing its store to stand or
park in the access roads or areas provided for customer parking.
Notwithstanding the foregoing, Landlord recognizes that on occasion certain
trucks and other vehicles servicing Tenant's store may be required to stand or
park in the access roads or parking areas on a temporary basis (i.e., while
waiting for other trucks or vehicles to complete their unloading at Tenant's
loading dock facility). All deliveries of goods, wares, merchandise, etc.,
shall be at the rear of the Premises, unless, for any reason, access to the
rear of the Premises is obstructed on a temporary or permanent basis, in which
event, Tenant shall have the right to make its deliveries through the front of
the Premises. Further, on an incidental basis, small vans or other vehicles
may make deliveries of goods, wares, merchandise, etc. through the front doors
of Tenant's store.
Notwithstanding anything else contained in this Lease, if Landlord
fails to maintain the Common Areas or its other obligations under this lease,
after expiration of thirty (30) days following written notice to Landlord,
Tenant shall be entitled to enforce its rights at law, and the party prevailing
in any such action, as determined by the court, shall be entitled to recover
all reasonable expenses incurred in such action, including reasonable
attorney's fees and court costs.
Landlord is required to keep the parking lot illuminated until at
least one-half hour after Tenant closes its store for business, but not later
than 11:00 p.m.
The Shopping Center may be constructed in stages or it may be
determined that alterations are to be made and construction of later stages or
future alterations may necessitate the rearrangement and alteration of some or
all of the then existing common areas. Landlord, therefore, reserves the right
in its sole discretion to change, rearrange, alter, modify or supplement any or
all of the areas designed for the common use and convenience of all tenants,
excepting the "No Build Area" shown on Exhibit "A", so long as adequate common
area facilities are made available to the Tenant herein.
24. TENANT'S WORK
(a) Tenant covenants, warrants and represents that it shall design
and maintain the interior decor and fixturization of the Premises in a manner
consistent with the high standards of the retailing industry.
(b) It is understood and agreed that any work required for Tenant
to open and operate its store for business from the Premises or required by
Tenant to the
<PAGE> 18
extent that it will be in addition to the Description of Landlord's Work, as
outlined in Exhibit "C" hereof or elsewhere herein, shall be performed and paid
for wholly by tenant. Landlord undertakes no responsibility for the
performance and/or payment of Tenant's work.
(c) Tenant agrees to secure, pay for and maintain, or cause its
contractor(s) to secure, pay for and maintain during the continuance of
construction and fixturing work on or about the Demised Premises an "All Risk
Physical Loss" Builders Risk policy, Comprehensive General Liability Insurance
(including Protective Liability) with a combined single limit of $1,000,000 and
Workmen's Compensation Employer's Liability Insurance as required by law.
25. FIXTURING TENANT'S STORE OPENING
Landlord shall give Tenant written notice ("Notice of Substantial
Completion") by certified mail at lease forty-five (45) days prior to the date
(the "Delivery Date") that Landlord's work will be substantially complete and
the Premises will be available for Tenant to commence its work. Notice of
Substantial Completion shall be based on an architect's or engineer's
certification that will certify, among other things, except for minor punch
list items, that the following items are or will be complete by the Delivery
Date: the roof is completed and watertight; the building is secure; all walls,
and partition walls(s) are completed; the exterior glass is installed; the
exterior doors are installed and operating; the loading docks are completed;
the ceiling is completely installed; flooring (including floor and floor
covering) is completed; the plumbing rough-in and electrical rough-in are
completed; and the mezzanine (if any) is completed. From and after the
Delivery Date, and prior to the Rent Commencement Date, Tenant shall have the
privilege, rent free, of working in the premises for the purpose of installing
its own sales, lighting and trade fixtures, machinery, if any, and any other
equipment, to be done at Tenant's own cost and expense. Tenant agrees that
during this "fixturing" period any and all utilities will be Tenant's cost and
expense. Prior to taking occupancy of the Premises, Tenant shall submit to
Landlord insurance certificate(s) as called for under Sections 18, 24 (d) and
40 herein. Within ninety (90) days following the Notice of Substantial
Completion, the (1) Shopping Center entrances and exits will be clearly marked
and in place, (2) the Shopping Center parking areas will be paved, lighted and
striped, if required, (3) the delivery area for the Premises will be paved and
easily accessible for stocking the Premises, (4) utilities that are servicing
the Premises will be connected and available for use or consumption, and that
electric, water and drain lines will be connected to (i) the equipment provided
by Landlord in the Premises and (ii) the trade fixtures and refrigerated cases
supplied by Tenant, and (5) Landlord shall have performed all work required of
Landlord under this Lease in order for Tenant to obtain a final use and
occupancy permit; Landlord will cooperate and assist Tenant in securing a final
use and occupancy permit for the Premises (in the event that all these
conditions have not been fulfilled and Tenant had not commenced business to the
public, the Commencement Date shall be deferred for an additional period of
time equal to the number of days from the date Tenant is ready to open for
business and the date that all these conditions are fulfilled). Tenant shall
open its store for business on or before the Rent Commencement Date. At
Landlord's request, Tenant shall enter into a short form agreement confirming
the Commencement Date, the Rent Commencement Date and the Termination Date in
the form attached hereto as Exhibit "G".
26. OCCUPANCY AND OPERATING HOURS
Upon entry into the Premises, Tenant thereby accepts and acknowledges
that the said Premises are in the condition required by this Lease subject to
latent defects. Tenant hereby covenants, warrants and represents that subject
to force majeure delays and any express right Tenant may have hereunder to
cease operations, it will occupy the Premises promptly upon the commencement of
the term, and at all times during the first five (5) years of the lease term,
Tenant shall continuously and uninterruptedly operate its business from the
Premises for the uses set forth in Section 30 of this Lease (this being a
material inducement for Landlord to enter into this Lease) during all normal
hours of Tenant's operations. Tenant shall operate and be open for business,
at a minimum, during the hours of 10:00 a.m. to 9:00 p.m., Monday through
Saturday. Tenant understands and agrees that it shall, throughout the term
hereof, reasonably stock its store and maintain the same all in keeping with
the high standards of the retailing industry. The failure of Tenant to operate
its Premises in accordance with this provision, or the abandonment or vacating
of any substantial portion of the Premises, shall constitute a material breach
of Lease giving rise to the remedies provided in this Lease and by law and, in
addition, Landlord shall be entitled among its other remedies to enjoin
Tenant's use of the Premises by seeding injunctive relief or other appropriate
remedy. Tenant shall conduct no distress sales, such as "going out of
business", fire or bankruptcy sales, on the Premises or elsewhere in the
Shopping Center, and a default by reason of Tenant's conducting such a sale
shall constitute a default under the Lease entitle Landlord to the remedies of
Tenant's conducting such a sale shall constitute a default under this Lease
entitling Landlord to the remedies provided in this Lease and by law including,
but not limited to, injunctive relief or other appropriate remedy.
After the expiration of the first five (5) years of the lease term,
Tenant shall have the right at any time to discontinue operating and go dark
from the
<PAGE> 19
Demised Premises provided Tenant has given Landlord at lease nine (9) months
prior notice in writing by certified mail that it intends to discontinue its
operation and go dark and specifying in said notice its intended last day of
operation.
Landlord shall be entitle to terminate this Lease effective as of the
date of Tenant's intended last day of operation by giving written notice of
such termination to Tenant at any time following Tenant's aforesaid notice,
provided said written notice of termination is given Tenant at least thirty
(30) days prior to the date of tenant's intended last day of operation and
prior to the Landlord receiving any Tenant's Transfer Notice under Section 51.
27. REPAIRS
(a) Landlord shall keep the foundation, roof, roof supports,
gutters, the outer walls and utility lines outside the Premises (excluding
doors, windows, glass ceiling, mechanical, electrical and plumbing equipment,
and utility lines located outside the Premises which service only the Premises)
of Tenant's Premises in good repair, except that Landlord shall not be called
on to make any such repairs occasioned by the act or negligence of Tenant, its
agents, contractors, invitees, customers or employees, and Tenant shall pay its
pro-rata share of such expenses which are includable as a Shopping Center's
Common Areas Operating Cost under Section 7 of this Lease. Landlord shall not
be liable to maintain or make any other improvements, repairs or replacements
of any kind upon the Premises, unless caused by the negligence of Landlord, its
agents, servants or employees, or unless specifically provided elsewhere in
this Lease.
(b) Except for the repairs that Landlord is obligated to make, Tenant,
at its expense, shall at all times be responsible for promptly making all
repairs and replacements and performing all maintenance work in and to the
Premises necessary and required to keep said Premises and its equipment in good
condition and repair, and also in a clean, sanitary and safe condition in
accordance with all directions, rules and regulations of the health officer,
fire marshal, building inspector or other proper officers of the governmental
agencies having jurisdiction. Tenant shall comply with all requirements of
law, ordinances and otherwise affecting the premises, and shall permit no
waste, damage or injury to said Premises. Tenant shall also initiate and carry
out a program of regular maintenance and repair of the Premises, including, but
not limited to, the painting or refinishing of all areas of the interior, and
the maintaining or replacing of all trade fixtures and equipment, ceiling tile,
flooring and other items of display used in the conduct of Tenant's business,
so as to impede, to the extent reasonably possible, deterioration by ordinary
wear and tear and to keep the same in attractive condition throughout the lease
term. Tenant shall at its own cost and expense replace any broken or cracked
glass windows and doors in the Premises, and shall maintain and be responsible
for the items set forth in Exhibit "C" attached hereto and made a part hereof,
unless such damage is caused by the negligent act or omission of Landlord, its
agents or employees, in which case Landlord shall repair such damage at its own
cost and expense.
(c) Landlord shall have a reasonable time after receipt of written
notice from Tenant to commence and complete repairs required of Landlord
hereunder. Notwithstanding anything else contained in this Lease, if Landlord
fails to use due diligence in making such repairs, Tenant, at its option, may
make such repairs and Landlord shall reimburse Tenant for the cost of such
repairs within thirty (30) days from the date Tenant bills Landlord.
28. ALTERATIONS BY TENANT
Tenant will not alter the exterior of the Premises (including the
storefront and/or signs) and will not make any structural alterations to the
exterior or interior of the Premises or any part thereof without first
obtaining Landlord's written approval of such alterations which approval shall
not be unreasonably withheld or delayed. Tenant agrees that any such
improvements made by it shall immediately become the property of Landlord and
shall remain upon the Premises in the absence of agreement to the contrary.
Tenant further will not, except for installation of fixtures and other work to
be performed by it under Section 24 and in accordance with Tenant's plans
approved by Landlord, if any, cut or drill into or secure any fixture,
apparatus or equipment of any kind to any part of the Premises or make any roof
penetration without first obtaining Landlord's written consent, which consent
may be withheld in Landlord's sole and absolute discretion.
29. DAMAGE TO PREMISES OR IMPROVEMENTS
Tenant will repair promptly at its expense any damage to the Premises
or any other part of the Shopping Center, caused by bringing into the Premises
or onto the Shopping Center any item, material property or other thing for
Tenant's use or benefit, or by the installation or removal of such item,
material, property or thing, regardless of fault or by whom such damage shall
be caused unless caused by Landlord, its agents, employees or contractors; and
in default of such repairs by Tenant, Landlord may make the same and Tenant
agrees to pay, as an additional charge, the cost thereof to Landlord promptly
upon Landlord's demand therefore.
30. USE OF PREMISES
<PAGE> 20
The Premises shall be used by Tenant solely for the purpose of
conducting therein the business of Tenant's Permitted Use (as defined in
Section 1) trading as "Total Beverage", and for no other use or purpose.
(Percentage Rent under Section 9 is based expressly upon this Use of Premises).
Tenant hereby covenants and agrees that the use of the Premises is
subject to the Use of Premises Restrictions as listed in Exhibit "E" attached
hereto and made a part hereof.
31. OPERATION BY TENANT
In regard to use and occupancy of the Premises and common areas,
Tenant will: (a) keep the inside and outside of all glass in the doors and
windows of the Premises clean; (b) keep all exterior storefront surfaces of the
Premises clean, including removal of ice and snow; (c) keep the Premises and
the sidewalks adjacent thereto which are under its control clean at all times,
including removal of ice, snow, debris and loose trash; (d) replace promptly,
at its expense, any cracked or broken plate or window glass of the Premises
with glass of like kind and quality unless caused by the negligent act or
omission of Landlord, its agents or employees; (e) maintain the Premises at its
expense in a clean, orderly and sanitary condition and free of insects,
rodents, vermin and other pests; (f) keep any garbage, trash, rubbish or refuse
in the Premises or on the sidewalk immediately adjacent thereto removed at its
expense on a regular basis; (g) keep all mechanical apparatus located inside
the Premises or exclusively serving the Premises and under the control of
tenant free of vibration and noise which may be transmitted beyond the
Premises; (h) comply with all laws, ordinances, rules and regulations of
governmental authorities and use commercially reasonable efforts to comply with
all recommendations of the Fire Underwriters Rating Bureau now or hereafter in
effect; (i) use reasonable efforts to keep its grocery carts out of or removed
from the common areas (excluding Tenant's cart corral); (j) conduct its
business in all respects in a dignified manner in accordance with high
standards of store operation. Tenant will not place, maintain or store any
merchandise, signs (other than exterior signage permitted under Section 20 of
this Lease), or other articles on the footwalks adjacent thereto or elsewhere
on the exterior of the Premises or common areas; use or permit the use of any
objectionable (in Landlord's sole determination) advertising medium such as,
without limitation, spot lights or search lights, loud speakers, phonographs,
public address systems, sound amplifiers, radio or video broadcasts within the
Shopping Center which is in any manner audible or visible outside of the
Premises; permit the placement or installation of any video, pinball or
amusement devices within the Premises or the common areas; permit undue
accumulations of garbage, trash, rubbish or other refuse within or without the
Premises or the common areas adjacent thereto; cause or permit objectionable
(in Landlord's sole determination) odors to emanate or be dispelled from the
Premises; solicit business in the parking or other common areas; distribute
handbills or other advertising matter to, in or upon any automobiles parked in
the parking areas or in any other common area; permit the parking of delivery
vehicles so as to interfere with the use of any driveway, walk, parking area or
other common area in the Shopping Center unless Tenant's regular loading
facility has been blocked by Landlord or is not otherwise available to Tenant;
erect, place or maintain any aerial or antenna on the roof or exterior walls of
the Premises.
Tenant shall locate its trash compactor in such area approved by
Landlord.
32. EXTRA HAZARDS
Tenant will not knowingly or recklessly do or suffer to be done, or
keep or suffer to be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage by fire or other
hazards (including, without limitation, public liability) or which will prevent
Landlord from procuring such policies in companies acceptable to Landlord. If
Tenant shall cause anything to be done, omitted to be done or suffered to be
done by Tenant, or if any item, material or thing is kept or suffered by Tenant
to be kept in, upon or about the Premises, which causes the rate of fire or
other insurance of the Premises or other property of Landlord, as determined by
insurance companies acceptable to Landlord, to be increased beyond the minimum
rate from time to time applicable to the Premises for the use permitted under
this Lease or to any other property for the use made thereof, Tenant shall pay
as an additional charge the amount of any such increase upon Landlord's demand
thereof. Provided, however, Tenant shall not be liable for any increase in the
premium for casualty insurance carried by Landlord under this lease due to
other tenant's use of its respective premises. Further, Tenant shall not
install any electric equipment that overloads the lines in the Premises
provided Landlord has constructed the Premises with sufficient electrical power
to satisfy the needs of tenant as shown on the plans approved by Landlord and
Tenant pursuant to Exhibit "B"; nor keep on said Premises in an inappropriate
or unsafe container any inflammable, combustible, hazardous or other dangerous
materials; nor handle, store or dispose of any chemical, environmentally unsafe
or other hazardous waste or material except in strict accordance with all
applicable federal, state and local laws, ordinances and regulations.
33. PLUMBING
The plumbing facilities shall not be used for any purpose other than
that
<PAGE> 21
for which they are constructed and no foreign substance of any kind shall be
thrown therein, and the expense of any breakage, stoppage or damage resulting
from a violation of this provision shall be the Tenant's liability.
34. DISPLAY LIGHTING
If requested by Landlord, Tenant shall keep the display windows in the
Premises well lighted from dusk until 9:00 P.M., or such later time as Tenant
may be open for business, during each and every weekday except Sundays and
holidays during the term of this Lease.
35. ROOF AND WALLS
Landlord shall have the exclusive right to use all or any part of any
leasable areas over the Premises and the roof of the building in which the
Premises is located for any purpose; to erect additional stories or other
structures over all or any part of the Premises; to erect in connection with he
construction thereof scaffolds and other aids to construction on the exterior
of the Premises provided that free and easy customer access to the Premises
shall not be unreasonably impaired nor shall such access be denied; and to
install, maintain, use, repair and replace within the Premises pipes, ducts,
conduits, wires and all other mechanical equipment serving other parts of the
Shopping Center, the same to be in locations within the Premises as will not
materially interfere with Tenant's use thereof. Landlord shall use reasonable
efforts not to interfere with Tenant's business operations in the Premises.
Landlord may make any use it desires of the side or rear walls of the
Premises, and the area over the Premises, provided that such use shall not
encroach on the interior of or materially or unreasonably restrict the service
access to the Premises.
36. LIENS AND INDEMNITY
(a) Tenant covenants and agrees that any construction and
improvements as required of Tenant under this Lease (sometimes herein referred
to as "Tenant's work"), and any maintenance and repair work, alterations and
the like, shall be of good quality, leaving the Premises at all times free of
liens for labor and materials. In the event any mechanic's lien shall at any
time be filed against the Premises by reason of work, labor, services or
materials performed or furnished to Tenant or to anyone holding the Premises
through or under Tenant, Tenant shall forthwith cause the same to be bonded or
discharged of record. If Tenant shall fail to cause such lien to be so bonded
or discharged within thirty (30) days after being notified of the filing
thereof, then Tenant shall be in default under this Lease, and in addition to
any other right of remedy of Landlord, under the terms of this Lease and at
law, Landlord may, but shall not be obligated to, discharge the same by paying
the amount reclaimed to be due, and the amount so paid by Landlord and all
costs and expenses, including reasonable attorneys' fees incurred by Landlord
in procuring the discharge of such lien, shall be due and payable by Tenant to
Landlord as additional rental on the first day of the next following month.
(b) Tenant agrees to indemnify and hold harmless Landlord, its
successors, assigns, agents, employees and Landlord's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Tenant, its
agents, employees or contractors in the performance of any work performed by or
for Tenant on or about the Premises, provided there is no negligence on the
part of Landlord, its employees or agents.
(c) Landlord agrees to indemnify and hold harmless Tenant, its
successors, assigns, agents, employees and Tenant's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Landlord, its
agents, employees or contractors in the performance of any work performed by or
for Landlord on or about the Premises, provided there is no negligence on the
part of Tenant, its employees or agents.
37. TENANT'S FIXTURES
All trade fixtures and apparatus owned, leased or conditionally
purchased by Tenant and installed in the Premises shall be considered personal
property and shall remain the property of Tenant and shall be removable from
time to time and also at the expiration of the term of this Lease, or any
renewal or extension thereof, or other termination thereof, provided Tenant
shall not at such time be in default under any covenant or agreement contained
herein beyond any applicable cure period; and if in default, Landlord shall
have a lien on said trade fixtures and apparatus as security against loss or
damage resulting from any such default by Tenant and said trade fixtures and
apparatus shall not be removable by Tenant until such default is cured.
38. INSPECTION BY LANDLORD
Landlord shall have the right to enter upon the Premises without
notice at all reasonable hours for the purpose of inspecting the same, or for
making
<PAGE> 22
repairs, additions or alterations to the Premises or any property owned or
controlled by Landlord. Landlord shall use reasonable efforts not to interfere
with Tenant's business operations in the Premises. If Landlord deems that any
repairs or maintenance to the Premises are required to be made, which are the
Tenant's responsibility under this Lease, it may demand that Tenant make the
same forthwith and if Tenant refuses or neglects to commence such repairs or
maintenance and complete the same with reasonable dispatch, Landlord may make
or cause such repairs or maintenance to be made, and shall not be responsible
to Tenant for any loss or damage that may accrue to its stock or business by
reason thereof, other than as caused by Landlord's negligent act or omission.
If Landlord makes or causes such repairs or maintenance to be made, Tenant
agrees that it will forthwith, on demand, pay to Landlord the reasonable cost
thereof along with the next installment of rental.
39. COVENANT TO HOLD HARMLESS
(a) Tenant shall indemnify and hold Landlord, its partners,
officers, directors, agents and employees harmless from and against all
liability, claims, actions. damages and expense, including reasonable
attorney's fees and court costs, in connection with the loss of life, personal
injury or damage to property, including but not limited to the person and
property of Tenant, Tenant's employees and any person or any property in or
upon said Premises, and the sidewalks adjoining same that are under Tenant's
control (such as, but not limited to, a cart corral area), and any loading
platform area allocated to the use of Tenant, who is or are present at Tenant's
implicit or explicit invitation or with Tenant's implicit or explicit consent,
provided there is no negligence on the part of Landlord, its employees or
agents. Provided, however, that Tenant's indemnity relative to the sidewalks
adjoining the Premises that are under Tenant's control shall be strictly
limited to those circumstances resulting from a breach by Tenant of its
obligations, covenants and responsibilities under this Lease and /or the
negligent or wilful act or omission of Tenant, its employees, agents, or
contractors. It is understood and agreed that all property kept, stored or
maintained in the Premises shall be so kept, stored or maintained at the risk
of Tenant only. Tenant shall not suffer or give cause for the filing of any
lien against said Premises.
(b) Tenant shall be defended in court or otherwise and held
harmless by Landlord from any liability for damages to any person or any
property in or upon the Common Areas of the Shopping Center, provided there is
no negligence on the part of Tenant, its employees or servants.
40. PUBLIC LIABILITY
(a) Tenant shall keep in full force and effect a policy of
comprehensive commercial general public liability insurance with respect to the
Premises and the business operated by Tenant, and/or any subtenant,
concessionaire or licensee of Tenant in the Premises, with a company licensed
in the State of Maryland and insures a majority of Tenant's other stores in
said State, in which Landlord, and Landlord's mortgagee shall be all named as
additional insureds, and in which the limits of liability shall not be less
than One Million Dollars ($1,000,000.00) combined single limit coverage per
occurrence for personal injury, death and property damage. Tenant shall
furnish Landlord with a certificate or certificates of insurance or other
acceptable evidence that such insurance is in force at all times during the
lease term. Tenant shall obtain and maintain an insurance policy against
damage by reason of the operation and maintenance of the sprinkler system, if
any, installed within the Premises. In lieu of such sprinkler insurance,
Tenant may self-insure. Tenant shall maintain such system. Tenant understands
that the sprinkler system requires semiannual maintenance and that failure to
maintain the system will result in loss of insurance or benefits under said
insurance policy.
(b) Landlord shall cause to be issued and shall keep in full force
and effect a public liability insurance policy with respect to the common areas
of the Shopping Center which will provide protection to Landlord and the
tenants in the Shopping Center, and which the limits of liability shall not be
less the One Million Dollars ($1,000,000.00) single limit coverage for personal
injury and property damage. The cost of such insurance policy shall be a
Shopping Center Common Area Operating Cost. Landlord shall, upon written
request, deliver to Tenant a certificate of insurance or other acceptable
evidence that such insurance is in full force and effect at all times during
the lease term.
41. LIMITATION OF LANDLORD'S LIABILITY
Landlord shall not be liable to Tenant for Tenant's loss of business,
or other consequential loss or damage, whether resulting from failure of
utilities, services or otherwise unless caused by the negligent act or omission
of Landlord, its agents, servants or employees. It is understood and agreed
that the liability hereunder shall be limited solely to the assets and property
of the Shopping Center; that no general partner of Landlord, nor any officer,
director, agent or employee of Landlord shall be personally liable with respect
to any claim arising out of or related to this Lease; and that a deficit
capital account of a partner of Landlord shall not be deemed an asset or
property of the Shopping Center.
42. DAMAGE TO PREMISES
<PAGE> 23
If the permanent improvements of Tenant's Premises shall be partially
destroyed by fire, or other casualty, insurable under full standard risk
insurance, whereby the Premises shall be rendered untenantable only in part,
the Landlord shall promptly at its own expense (and with the use of any
insurance proceeds), cause the damage to be repaired, except as hereinafter
provided, and the Minimum Guaranteed Rent and other payments herein, meanwhile
shall be abated proportionately as to that portion of the Premises rendered
untenantable. If by reason of said fire or other casualty the Premises shall
be rendered wholly untenantable, Landlord shall promptly, at its own expense,
cause such damage to be repaired, except as hereinafter provided, and the
Minimum Guarantee Rent and other payments herein shall be abated in whole until
said Premises are restored, unless within ninety (90) days after said
occurrence Landlord shall give Tenant written notice that it has elected not to
reconstruct the destroyed Premises, in which event this Lease and the tenancy
hereby created shall cease as of the date of said occurrence, the Minimum
Guaranteed Rent, the percentage rent and other payments herein to be adjusted
as of such date. Notwithstanding the foregoing, if other portions of the
Shopping Center (in addition to or instead of the Premises) are at any time
during the term hereof damaged by fire or other casualty to such an extent that
the Landlord or the then first mortgagee of the Shopping Center determines that
the Shopping Center shall not be repaired or restored, then, and in any of such
events, the Landlord shall have the right to terminate this Lease upon written
notice to the Tenant at any time within ninety (90) days following such fire or
other casualty, whereupon the Lease shall be terminated and the parties shall
be relieved of any further obligation hereunder, with the Minimum Guaranteed
Rent, the percentage rent and all other payments of the Tenant to be adjusted
as of the date set in Landlord's notice of termination.
In the event Landlord shall exercise its right to cancel the Lease as
a result of such damage and shall commence the repair or reconstruction of the
Premises for the same use as provided in Section 30 in within eighteen (18)
months of the date Landlord gives notice to Tenant of such lease cancellations,
Landlord shall give Tenant written notice within thirty (30) days of the date
of such commencement of repair or reconstruction and Tenant shall have the
option, by giving written notice to Landlord within sixty (60) days of the date
of Landlord's notice, to reinstate this Lease at the same rental and on the
same terms and conditions as contained in this Lease for the period commencing
from the date of completion of the reconstruction or repair of the Premises
through the end of the original term of this Lease. This paragraph shall
survive Landlord's termination of the Lease.
43. CONDEMNATION
If the whole or any part of the Tenant's Premises shall be taken under
the power of eminent domain or under threat of condemnation, then this Lease
shall terminate as to the part so taken as of the day Tenant is required to
yield possession thereof, and Landlord shall make such repairs and alterations
as may be necessary in order to restore the part not taken to useful condition;
and the Minimum Guaranteed Rent shall be reduce proportionately as to the
portion of the Premises so taken. If (i) the amount of said Premises so taken
is more than fifteen percent (15%) of Tenant's sales area, or if (ii) more than
45% of the Common Areas are so taken, or if (iii) 25% of the two No Build Areas
shown on Exhibit "A" is so taken, then Tenant in the case of (i), (ii) or
(iii), or either Tenant or Landlord in the case of (ii) , by giving sixty (60)
days written notice to the other, shall have the option to terminate this Lease
as of the date Tenant is required to yield possession. All compensation
awarded for such taking of the fee and the leasehold shall belong to and be the
property of the Landlord; provide, however, that the Landlord shall not be
entitled to any portion of any award made to the Tenant specifically for the
cost of removal of stock and fixtures.
Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be separately
awarded or recoverable by Tenant in Tenant's own right on account of any and
all damage to Tenant's business by reason of any condemnation and for or on
account of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture, fixtures and equipment provided that any such award
does not reduce any award to which Landlord may be entitled.
44. BANKRUPTCY
In the event the estate created hereby shall be taken in execution or
by other process of law, or if Tenant shall be adjudicated insolvent or
bankrupt pursuant to the provisions of any state or federal insolvency or
bankruptcy act, or if a receiver or trustee of the property of Tenant shall be
appointed by reason of Tenant's insolvency or inability to pay its debts, or if
any assignment shall be made of Tenant's property for the benefit of creditors,
then and in any of such events, Landlord may, at its option and in addition to
any other remedy available to Landlord, terminate this Lease and all rights of
Tenant hereunder by giving to Tenant written notice of the Landlord's election
to terminate.
In the event the trustee of the Tenant, or Tenant as debtor in
possession, shall timely assume this Lease under the Bankruptcy Code and
continue in possession of the Premises, it shall be the responsibility of the
trustee or debtor in possession to cure or give adequate assurance that all
defaults under the provisions of this Lease shall be promptly cured, to fully
compensate or
<PAGE> 24
provide adequate assurance that all conditions of this Lease shall be performed
in the future, including but not limited to:
(A) Adequate assurance of the payment of rent and other
consideration due under this Lease.
(B) Adequate assurance that percentage rent due will not
decline substantially.
(C) Adequate assurance that assumption or assignment will
not breach substantially any provisions such as
radius, location or use or exclusivity provisions in
other lease, financing or master agreements.
(D) Adequate assurance that assumption or assignment will
not disrupt substantially any tenant mix or balance.
In no event, will Landlord be required to provide additional services
or supplies under this Lease unless fully compensated by the trustee or debtor
in possession.
In the event that any new insolvency or receivership should occur
after the closing of the bankruptcy case, the Landlord may at its option, and
in addition to any other remedy available to Landlord, terminate this Lease and
all rights of the Tenant hereunder by giving to Tenant Written notice of the
Landlord's election to terminate.
45. BANKRUPTCY-USE OF PREMISES
In the event the trustee for Tenant, or Tenant as debtor in
possession, exercises certain rights as called for in Section 44 hereof which
would result in the Premises being used for a business other than that called
for under Section 30 herein (Use of Premises), then Landlord expressly reserves
the right to change or modify the Percentage Rent Rate and the Minimum Basis of
Sales as called for under Section 9 herein. Such change or modification shall
be in accordance with guidelines as issued by the International Council of
Shopping Centers or such other guidelines as may be available from time to
time.
46. DEFAULT
If any rental payable by Tenant to Landlord shall be and remain unpaid
for more than ten (10) business days after written notice from Landlord that
the same is due and payable, or if Tenant shall violate or be in default of any
of the other covenants, agreements, stipulations or conditions herein, and such
violation or default shall continue for a period of thirty (30) days after
written notice of such violation or default, unless Tenant has diligently begun
to correct such violation or default, in which case Tenant shall be given a
reasonable period of time in which to correct such violation or default with
due diligence, then it shall be optional for Landlord to declare this Lease
forfeited and said term ended, and to reenter the Premises, with or without
process of law, using such force as may be necessary to remove all persons or
chattels therefrom, and Landlord shall not be liable for damages by reason of
such reentry or forfeiture (but notwithstanding such reentry or forfeiture,
Tenant shall remain liable for any rent or damages which may be due or
sustained prior thereto and for any and all expenses which Landlord may incur
in reentering the Premises and preparing the same for reletting, including, but
not limited to, allocable overhead, alterations to the Premises necessary to
remove Tenant's improvements, repairs to the same and leasing, construction,
architectural and other professional fees); and, regardless of whether Landlord
elects to declare this Lease forfeited or not, Tenant shall continue to pay the
amount of rent reserved under this Lease at the times herein stipulated for
payment of rent for the balance of the term, less any amount received by
Landlord during such period from others to whom the Premises may be rented on
such terms and conditions and at such rentals as Landlord in its sole
discretion shall deem proper. Upon the judicial determination of Tenant's
default under this Lease, Tenant shall execute and deliver to Landlord a
power-of-attorney or other appropriate documentation sufficient to allow
Landlord to appear on Tenant's behalf in a court of competent jurisdiction and
confess judgement for all rent due to Landlord as and when such rent comes due,
plus reasonable attorney's fees and costs. The receipt by Landlord of any rent
after Tenant's default of any covenant or condition hereunder or during the
pendency of any action for possession (other than payment in full of all
amounts owed to Landlord by Tenant pursuant to this Lease) shall not be deemed
a waiver of such default or of such covenant or conditions, or of Landlord's
right to recover possession of the Premises. It is further understood the
Tenant shall pay all costs and expenses of collection and reasonable attorney's
fees and court costs in the event the Tenant fails to pay rent or fails to
promptly and fully perform and comply with each and every condition and
covenant hereunder and the matter is turned over to Landlord's attorney,
whether suit is instituted or not. Nothing herein shall be or constitute a
waiver by Tenant of any statutory right of redemption.
47. WAIVER
One or more waivers of any breach of a covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, or of the covenant or condition itself, and the consent
or approval by Landlord to, or of, any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent or approval
<PAGE> 25
to, or of, any subsequent similar act by Tenant.
48. SUBORDINATION
Tenant agrees that this Lease shall be subordinate to any mortgages or
trust deeds that may now or hereafter be placed upon the Shopping Center and to
any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, and extensions thereof, providing the mortgagee or
trustee named in said mortgages or trust deeds shall agree to recognize the
Lease of Tenant in a non-disturbance agreement suitable to Tenant in the event
of foreclosure if Tenant is not then in default beyond any applicable cure
period. Tenant shall provide any and all document reasonably requested by any
mortgagee or trustee. In the event of any mortgagee or trustee elects to have
the Lease a prior lien to its mortgage or deed or trust, then and in such an
event, upon such mortgagee or trustee notifying Tenant to that effect, this
Lease shall be deemed prior in lien to the said mortgage or trust deed, whether
or not this Lease is dated prior to or subsequent to the date of said mortgage
or trust deed. Landlord agrees to secure a non-disturbance and attornment
agreement from any existing lender for Tenant's behalf.
49. RECORDATION
Tenant shall not record the Lease and/or its Exhibits without first
obtaining written permission from Landlord, which permission may be withheld at
Landlord's sole option. In the event it is a requirement of Landlord's
mortgagee that this Lease be recorded as a protection for both Landlord and
Tenant, then Landlord shall bear such recordation charges. Upon the request of
either party, the other party shall join in the execution of a memorandum or
so-called "short form" of this Lease, to be recorded at the cost of the
requesting party.
50. MERCHANTS ASSOCIATION; PROMOTIONAL FUND
Landlord intends to establish a promotional program to furnish and
maintain advertising and sales promotions which, in Landlord's sole judgement,
will benefit the Shopping Center. All costs and expenses incurred by Landlord,
or others of Landlord's behalf, in establishing, furnishing, operating and
maintaining the promotional program (hereinafter called "Promotional Costs")
shall be charged in the manner hereinafter set forth. Such Promotional Costs
shall include all costs and expenses of every kind and nature as may be paid or
incurred by Landlord with respect to said promotional program. Upon the
establishment of such program, Tenant shall pay, as its share of the cost of
the promotional program, the Promotional Charge with no offsets, on the first
day of each month, in advance, along with Tenant's payment of rental. For
greater certainty, the maximum amount chargeable to Tenant under this Section
50 shall be the amount specified in Section 1(p).
Nothing contained in this Lease shall require landlord to expend more
in any calendar year in performing the promotional program than Landlord
collects from tenants or occupants of the Shopping Center in such calendar
year. However, Landlord may, but shall not be obligated to, advance funds to
the promotional program and any funds so advanced shall be repaid to Landlord
when available.
51. ASSIGNMENT AND SUBLEASE
(a) Tenant shall not assign this Lease in whole or in part, nor
sublet all or any part of the Premises, nor mortgage, hypothecate or encumber
this Lease and/or Tenant's leasehold interest in the Premises (any and all of
such acts being herein referred to as an "assignment"), without the prior
written consent of Landlord in each instance, which consent may be given or
withheld in Landlord's sole and absolute discretion. The withholding of
Landlord's consent is subject to Section 51(c) below. The consent by Landlord
to any assignment shall not constitute a waiver of the necessity for such
consent to any subsequent assignment. This prohibition against assigning shall
be construed to include a prohibition against any assignment by operation of
law. If this Lease be assigned, or if the Premises or any part thereof be
occupied by anybody other than Tenant, Landlord may collect rent from the
assignee or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee or occupant as
tenant, or a release of Tenant from the further performance by Tenant for the
provisions on its part to be observed or performed herein. Notwithstanding any
assignment, Tenant shall remain fully liable on this Lease and shall not be
released from performing any of the terms, covenants and conditions of this
Lease. Tenant shall continue to be entitled to notice of default and shall be
entitled to cure any defaults of the assignee.
(b) Notwithstanding any provision contained in this Article 51 to
the contrary, Tenant may, without the consent of Landlord assign this Lease or
sublet all or any part of the Premises to any corporation or other entity which
assumes in writing all of Tenant's obligations hereunder and either (i)
controls, is controlled by, or under common control with Tenant or (ii) merges
or consolidates with Tenant or (iii) acquires substantially all of the assets
or stock of Tenant or the Guarantor hereof. Notwithstanding any of the
foregoing permitted assignments, it is expressly recognized and agreed that the
liability of Tenant and the Guarantor hereunder shall continue in full force
and effect at all times
<PAGE> 26
during the remainder of the Lease term, including any renewal or extended terms
hereto.
(c) Notwithstanding the provision of Section 51(a) above, in the
event Tenant desires either to assign or transfer this Lease or sublet
substantially all of the Premises (such assignment or subletting collectively
hereinafter referred to as the "Transfer"), to a party other than a transferee
permitted under Section 51(b) above, Tenant shall provide to Landlord:
1. No later than sixty (60) days prior to the proposed Transfer, with
written notice that Tenant desires either to assign or transfer this
Lease or sublet substantially all of the Premises, and further,
2. No later than thirty-five (35) days prior to the proposed
effective date of such Transfer (the "Effective Date") with written
notice ("Tenant's Transfer Notice") of (i) the name and address of the
proposed transferee and (ii) the amount of rent.
The tender of the Tenant's Transfer Notice shall entitle Landlord to
terminate this Lease effective as of the date of the proposed assignment or
subletting. Landlord's right of termination shall be exercisable by written
notice delivered to Tenant at any time during the first thirty (30) day period
following receipt by Landlord of the Tenant's Transfer Notice. In the event
Landlord shall not desire to terminate this Lease, Landlord agrees to consent
to the proposed Transfer within the aforesaid thirty (30) day period and
failure to furnish written consent within said thirty (30) days shall be deemed
written consent.
52. TERMINATION
Upon the Expiration Date or earlier termination of this Lease, or any
extension thereof, Tenant shall quit and surrender the Premises, without the
necessity of nay notice from either Landlord or Tenant, and Tenant hereby
waives notice to quit or vacate said Premises, and agrees that Landlord shall
be entitled to the benefit of all provisions of law respecting the summary
recovery of possession of said Premises from a tenant holding over to the same
extent as if statutory notice had been given. Tenant shall quit and surrender
the Premises in as good a state and condition as they were when entered into,
reasonable use and wear thereof and unavoided accident and acts of God
excepted. All alterations, additions, erections or improvements in our upon
said Premises at the expiration or early termination of this Lease, which are
not wanted by Landlord (and any personal property, furniture, trade fixtures
and equipment) shall be removed by Tenant at Tenant's sole cost and expense and
Tenant shall repair all damage caused by such removal and return the Premises
to the condition in which it was prior to the installation of the articles so
removed. Any personal property, furniture, trade fixtures, and equipment not
so removed shall be deemed abandoned, and Landlord shall have the right to
retain or dispose of the same as Landlord sees fit. Any alterations,
additions, erections or improvements which are wanted by Landlord, which shall
be evidenced in writing, shall remain a part of the Premises and shall be
surrendered with said Premises at the Expiration Date of this Lease.
53. HOLDING OVER
In the event Tenant remains in possession of the Premises after the
Expiration Date or earlier termination of this Lease without the written
permission of Landlord, and without the execution of a new lease, Tenant shall
be deemed occupying the Premises as a tenant from month-to-month subject to all
the conditions, provisions and obligations of this Lease insofar as the same
are applicable to a month-to-month tenancy. Rental shall be, during any such
hold over period, One Hundred Ten Percent (110%) of the Minimum Guaranteed Rent
and other payments called for herein which are in effect for the last month of
the term hereof.
54. FOR RENT SIGNS
For the period six (6) months prior to the expiration of the original
term of this Lease or any renewal or extension thereof, Landlord shall have the
right to display on the exterior of said Premises (but not in any window or
doorway thereof) the customary "For Rent" sign, and during such period Landlord
may show the Premises and all parts thereof to prospective tenants between the
hours of 9:00 A.M. and 5:00 P.M. on any day except Sunday and any legal holiday
on which Tenant shall not be open for business.
55. QUIET ENJOYMENT
Landlord hereby warrants that it has fee simple title to the Premises
and the Shopping Center; that Landlord has the full right to lease the Premises
for the term aforesaid; and that Landlord will put or agreements that would
restrict Tenant's Permitted Use of the Premises other than as shown on Exhibit
"E" attached hereto. Landlord covenants and agrees that Tenant, during the
term hereof, shall freely, peaceably and quietly occupy and enjoy the full
possession of the Premise, along with the improvements and appurtenances
thereto and the rights and privileges herein granted, without molestation,
hinderance or
<PAGE> 27
ejectment by the Landlord, its successors or assigns, provided Tenant is not in
default of any provision of this Lease. Each of the parties hereto represents
and warrants that there are no brokerage commissions or finder's fees of any
kind due to anyone other than the Broker in connection with the execution of
this Lease, and agrees to indemnify the other against, and hold it harmless
from, all liabilities arising from any such claim (including, without
limitation, the cost of counsel fees in connection therewith).
In the event of a foreclosure of the Shopping Center, which results in
the termination of this Lease by any party succeeding to the interests of the
Landlord hereunder, the Landlord shall be responsible for and pay to Tenant a
sum of money equal to the amortized book value of the leasehold improvements
which Tenant has made in the Demised Premises. Furthermore, the unamortized
book value of the leasehold improvements shall be computed in accordance with
generally accepted accounting procedures.
56. ADDRESSES AND NOTICES
Until further notification in writing by Landlord to Tenant, all
payments called for herein shall be made payable to Landlord and delivered to
Landlord's Address for Rent Notices.
All notices required under this Lease shall be in writing and deemed
to be properly served if hand delivered to the intended recipient or sent by
registered or certified mail or by reputable overnight courier service (which
routinely secures a written receipt evidencing delivery) to the intended
recipient at the relevant Address for Notices listed in Section 1 above, or to
any subsequent address in the continental United States which Landlord, Tenant
and/or Guarantor shall designate in writing by registered or certified mail.
57. ESTOPPEL CERTIFICATES
Tenant agrees that at any time, and from time to time at reasonable
intervals, within ten (10) days after written request by Landlord, Tenant will
execute, acknowledge and deliver to Landlord or and assignee or lender
designated by Landlord, a writing ratifying this Lease and certifying, among
other things, if true:
(a) that Tenant has entered into occupancy of the Premises and the
date of such entry, if such is the case; and
(b) that this Lease is in full force and effect, and has not been
assigned, modified, supplemented or amended in any way (or if
there has been any assignment, modification, supplement or
amendment identifying the same); and
(c) that this Lease represents the entire agreement between
Landlord and Tenant; and
(d) the date of the commencement and expiration of the term; and
(e) that all conditions under this Lease to be performed by
Landlord have been satisfied; and
(f) that no default exists in the performance or observance of any
term, covenant or condition of this Lease on the part of
Landlord and that there are no defenses or offsets in
connection therewith.
Tenant agrees that at any time, and from time to time as reasonably
requested by Landlord, Tenant will execute such documents as are necessary in
connection with any financing or sale of the Shopping Center or any part
thereof, within ten (10) days after said request, provided such documents do
not adversely alter the rights and obligations of the parties hereto.
The Landlord agrees that at any time, and from time to time as
reasonably requested by Tenant, within ten (10) days after written request by
Tenant, to execute such real property waivers or subordinations and other
related documents which will permit Tenant to finance the purchase or lease of
equipment, fixtures or personal property for use in conducting its business in
the Premises.
58. MISCELLANEOUS
58.01 This Lease and the covenants and conditions herein contained,
shall inure to the benefit of and be binding upon Landlord, its successors and
assigns, and shall be binding upon Tenant, its successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom
the assignment by Tenant is permitted hereunder.
58.02 The submission of this Lease for examination does not
constitute a reservation of, or option for, the Premises, and this Lease shall
become effective only upon execution by all parties hereto and delivery of a
fully executed copy thereof by Landlord to Tenant.
58.03 This Lease sets forth the entire agreement between the parties.
There are no oral agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous agreements,
representations, promises, warranties and understandings between the parties
hereto or displayed by Landlord to Tenant with respect to the subject matter
thereof, and none thereof shall be used to interpret or construe this Lease.
Each party hereby expressly acknowledges that no representations, warranties,
inducements or promises with respect to the Shopping Center or the Premises
have
<PAGE> 28
been made to that party except as herein expressly set forth.
58.04 Tenant acknowledges that, unless otherwise herein specifically
provided, it does not have any exclusive rights in the Shopping Center with
respect to the sale of its merchandise or the provision of its services.
58.05 Every agreement contained in this Lease is, and shall be
construed as, a separate and independent agreement. If any term of this Lease
or the application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
58.06 The covenants, conditions and provisions of this Lease shall be
construed under the laws of the state or district in which the Shopping Center
is located.
58.07 There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Premises or any part thereof
by reason of the fact that the same person may acquire or hold, directly or
indirectly, this Lease or the Leasehold estate hereby created or any interest
in this Lease or in such leasehold estate as well as the fee estate in the
Premises or any interest in such fee estate. In the event of a voluntary or
other surrender of this Lease, or a mutual cancellation hereof, Landlord may,
at its option, terminate all subleases, or treat such surrender or cancellation
as an assignment of such subleases.
58.08 Whenever a period of time is herein prescribed for action to be
taken by Landlord or Tenant other than the payment of or other monetary amounts
hereunder, such party shall not be liable or responsible for, and there shall
be excluded from the computation for any such period of time, any delays due to
strikes, riots, acts of God, shortages of labor or materials, war, governmental
laws, regulations or restrictions, or any other cause of any kind whatsoever
which is beyond the reasonable control of the Landlord.
58.09 The section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
various and several sections hereof. Words of any gender used in this Lease
shall include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
58.10 If there be more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several, and all agreements and
covenants herein contained shall be binding upon the respective heirs, personal
representatives, successors and, to the extent permitted under this Lease,
assigns of the parties hereto.
58.11 No rights, easements or licenses are acquired by Tenant under
this Lease by implication or otherwise except as expressly set forth in this
Lease.
58.12 No amendment or modification of this Lease shall be binding or
valid unless expressed in a writing executed by both Landlord and Tenant.
58.13 Each of the persons executing this Lease on behalf of Tenant
represents and warrants that Tenant has complied with all applicable laws,
rules and governmental regulations relative to its right to do business in the
Shopping Center, that such entity has the full right and authority to enter
into this Lease, and that all persons signing on behalf of the Tenant were
authorized to do so by any and all necessary or appropriate actions.
58.14 Tenant shall, and shall cause Tenant's subtenants, agents,
employees, invitees, licensees, clients and guests to, use commercially
reasonable efforts to comply with and observe all reasonable rules and
regulations concerning the use, management, operation, safety and good order of
the Premises and the Shopping Center which may from time to time be promulgated
by Landlord, provided that such rules and regulations are of general
applicability to all tenants in the Shopping Center, and are not inconsistent
with the provisions of this Lease, and do not interfere with Tenant's business
in the Premises as otherwise permitted under this Lease.
59. WAIVER OF SUBROGATION
Notwithstanding any contrary provision of this Lease, each party
hereby releases the other party from any liability or responsibility for any or
damage to the releasing party's property insured under valid and collectible
insurance, subject to the limitation this release shall only apply when
permitted by the applicable policy of insurance pursuant to a waiver of
subrogation clause. It is the intention of the Section that neither party
shall be liable to the other party or to any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage to
the other party's property where such waiver is permitted by the applicable
insurance policy. If Landlord elects to insure the Shopping Center in an
amount less than one hundred percent (100%) of replacement cost, Landlord shall
self insure for the difference between the insured amount and the one hundred
percent (100%) replacement coverage. Each party shall obtain policies
containing an express waiver of any right or
<PAGE> 29
subrogation by the insurance company against the other party if same is
available, provided, however that in the event there shall be an increased
premium for such coverage imposed by either party's insurer, than and in such
event the party who is responsible for payment of such increased costs shall
not be required to obtain the waiver of subrogation provisions unless the other
agrees to bear such additional costs. The release set forth in the first
sentence of this Section shall apply even if the loss or damage shall have been
cause by the negligence of the other party, the other party shall furnish the
requesting party with evidence of the inclusion of such waiver of subrogation
clause or endorsement in such policies, and either party shall notify the other
party if such clause or endorsement is thereafter deleted from such policies or
any renewals thereof.
60. HAZARDOUS MATERIALS
(a) Landlord represents and warrants that if there are any
Hazardous Materials (hereinafter defined) contained within the Premises or in
the land on which the Premises sits prior to the delivery of possession,
Landlord shall be responsible for the removal of such Hazardous Materials.
Landlord represents and warrants that neither Landlord, nor to Landlord's best
knowledge, any former owner or occupant of the Premises or the land upon which
the Premises sits has used Hazardous Materials on, from, or affecting the
Premises or the land upon which the Premises sits in any manner which violates
federal, state, or local laws, ordinances, rules, regulations, or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801, et seq.),
the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Sections 6901, et seq.), and in the regulations adopted publications
promulgated environmental laws, ordinances, rules, or regulations
(collectively, the "Environmental Laws").
(b) Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no obligation to clean-up, to comply with any law
regarding, or to indemnify, defend or hold Landlord harmless with respect to,
and Hazardous Materials which were not used, stored, disposed of, transported
from or manufactured within the Premises by Tenant or its agents, contractors,
employees, invitees, or assigns, and Landlord waives any right of contribution
against Tenant with respect to any such monitoring, clean-up, or compliance
costs (collectively "Hazardous Material Costs") incurred by Landlord with
respect to any such Hazardous Materials.
(c) Landlord shall indemnify and hold Tenant harmless from and
against any and all Hazardous Material Costs resulting from the presence of
Hazardous Materials in the Premises or in the land on which the Premises sits
incurred by or assessed against Tenant to the extent such costs arise out of or
result from the presence of Hazardous Materials in the Premises or in the Land
on which the Premises sits which exist at or prior to the delivery of
possession or which are subsequently brought into the Premises or the land upon
which the Premises sits by Landlord. Tenant shall indemnify and hold Landlord
harmless from and against any costs, claims or liability arising out of or
resulting from the presence of any Hazardous Materials introduced by Tenant or
from the actions of Tenant, its contractors, employees or agents in connection
therewith. Each party agrees to provide the other party with copies of any
notices pertaining to any governmental proceedings or actions (including
requests or demands for entry onto the Premises for purposes of inspection)
regarding the handling, disposal, or clean-up of Hazardous Materials or claims,
penalties, fines or assessment for such clean-up costs within five (5) business
days after receipt thereof.
(d) For purposes of this Section, the term "Hazardous Materials"
includes, without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances, or
related materials defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, amended (42 U.S.C. Section 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. Section 6901, et seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state, or
local environmental laws, ordinances, rules or regulations.
61. PRIMARY USE PROTECTION
Landlord hereby covenants that for the term of this Lease and provided
(i) Tenant is not in default of this Lease beyond any applicable cure period;
and (ii) Tenant has not assigned or sublet this Lease either in whole or in
part (except to a beverage store similar in operation to Tenant's operation in
the Premises); and (iii) Tenant, or Tenant's assigns or sub-tenants operating
from the Premises a business substantially similar to that of Tenant, is in
possession of the Premises and has not discontinued its operation from the
Premises; and (iv) Tenant's Permitted Use has not been modified; and (v) this
Lease in full force and effect, Landlord shall not enter into a new lease
during the term hereof within the Shopping Center with a future tenant for any
space in the Shopping Center which authorizes or permits as its primary use the
sale at retail of containerized beverages (i.e., wine, beer, soda, bottled
water and juices) for
<PAGE> 30
off-premises consumption. Provided, however, this Section 61 shall not
prohibit Landlord from entering into such a lease during the last six (6)
months of the term of this Lease provided Tenant has given Landlord the notice
of non-renewal under Section 3(b); nor shall this restriction prohibit Landlord
from leasing any portion of the Shopping Center to a Liquor store, grocery
store, convenience store restaurant, bar, lounge, delicatessen, carry-out or
food delivery service; nor shall this restriction affect the use and occupancy
of any existing tenant in the Shopping Center, its successor and/or assigns, or
any replacement tenants thereof having the same use.
<PAGE> 31
62. GUARANTY OF PERFORMANCE
Attached hereto as Exhibit "F" and incorporated herein by reference is
a Guaranty of Performance which has been executed by Shoppers Food Warehouse
Corp.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS LEASE
AGREEMENT UNDER THEIR RESPECTIVE SEALS AS OF THE DAY AND YEAR FIRST ABOVE
WRITTEN.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES/GREENBRIAR
LIMITED PARTNERSHIP
THOMAS B. MCKEE BY: HERBERT H. HAFT
- ------------------------- ------------------------- (SEAL)
NAME: HERBERT H. HAFT
TITLE: GENERAL PARTNER
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
ROBERT N. HERMAN KENNETH HERMAN
- ------------------------- BY:------------------------- (SEAL)
ROBERT N. HERMAN NAME: KENNETH HERMAN
EXECUTIVE VICE PRESIDENT TITLE: PRESIDENT
</TABLE>
<PAGE> 32
EXHIBIT "A"
PROJECT: Greenbriar Town Center
LANDLORD: Combined Properties/Greenbriar Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #41 = approx. 25,000 square feet
LEASE DATED: 4/02/91
<PAGE> 33
EXHIBIT "B"
LANDLORD'S SIGN REGULATIONS AND SPECIFICATIONS
Consisting of four (4) pages, attached to and made a part of Lease dated
4/02/91 between Combined Properties/Greenbriar Limited Partnership (Landlord)
and Total Beverage Corp. (Tenant) for Store # 41 in the Greenbriar Town Center
(Shopping Center). Size of Store approx. 25,000 sq. ft. (Square Feet)
In accordance with Paragraph 20 of said Lease, all permanent Tenant
signs, both as to design and shop drawings, must receive written approval by
Landlord before fabrication and installation; and any sign(s) installed without
such written approval may be removed by Landlord at Tenant's expense. For
purposes hereof and until further notice to Tenant, the Landlord's Architect is
hereby given authority to review and pass upon all signs, and the design and
shop drawings therefor, and Landlord's approval or disapproval will be based
upon such review by Architect.
Approval shall be based on: (a) Conformity to sign
regulations.
(b) Harmony of the proposed sign
with the design standard of the
Shopping Center.
Landlord has the specific right to refuse approval of any sign which,
in his opinion, is not harmonious with the design standards of the Shopping
Center Whether or not such sign conforms to the specific sign criteria set out
below.
To secure Landlord's approval, a design sketch of the proposed sign is
to be submitted to Landlord. After approval of design sketch in writing by
Landlord, six (6) prints of each shop drawing of all signs must be submitted to
Landlord for final approval. The shop drawings must indicate the type and
sizes of all lettering and background panels, their locations on the facade in
relation to valance panels, floor levels and soffits and store divider and
building lines. Proposed location of license, union and fabrications labels
must be indicated. A schematic section through the sign will be required where
necessary to show its form, colors and finishes of all materials, and wattages
and light intensity must be specified. All "Approved as Noted" drawings must
be resubmitted until marked "Approved" by Landlord. Incomplete drawings will
be returned to Tenant without approval.
In addition to the necessity for conforming of all signs with the
general design standards of the Shopping Center, all signs must conform to the
specific criteria, requirements and limitations hereinafter set forth:
1. The advertising or informative content of all signs shall be
limited to letters designating the store name and/or type of store
only and shall contain no advertising devices, slogans, symbols or
marks (other than the store name/or type of store as aforesaid).
Crests and/or corporate shields shall be permitted in certain
instances.
2. The letters on all sign shall be either in script and/or
block; the size of the letters shall be in proportion to the size of
the sign, as determined in accordance with the provisions of Paragraph
4 of this Exhibit "B"; and if the letters are back-illuminated, the
lamps therefore shall be contained wholly within the depth structure
of the letters.
3. The character, design, color and layout of all signs shall be
subject to the approval of the Landlord which shall endeavor to
establish uniform standards consonant with an integrated sign control
policy for the Shopping Center, and which, however, shall give proper
consideration to the style, design and character of signs used by
tenants of the Shopping Center.
Page 1 of 4 Pages
<PAGE> 34
4. All signs shall be in accordance with the following
requirements:
(a) The signs and any part or parts thereof, except as
otherwise provided in subparagraph (c) of this Paragraph 4,
shall be located within the physical limits of the storefront
of the Premises of the Tenant, but in no case less than two
feet (2') from any leasehold line.
(b) Signs shall not project beyond the line of the
Demised Premises bordering "common area" more than two inches
(2''), if less than eight feet (8') above finished floor line,
or more than four inches (4''), if above eight feet (8').
(c) The maximum total area of each sign shall be
determined by the following formula and provided same conforms
to applicable codes and the requirements of governmental
authorities.
Area of Sign (in square feet) = foot frontage of the
store multiplied by one (1)
(d) All signs shall be fabricated and installed in
compliance with all applicable building and electrical codes
and bear a U.L. Label.
(e) Letters for signs facing the Common Area may be as
large as permitted by applicable code.
(f) Stores having storefronts on the Common Area shall be
permitted to erect a sign on the facade exposed to the Common
Area. These signs shall be limited to store name and/or store
type, only, and shall conform to all applicable limitations
set forth in this Exhibit. No portion of such signs shall be
mounted above the fascia.
The area of the sign is defined as the area of a
rectangle surrounding all of the letters on the sign.
Where upper lower case letters are used, the average
height of the letters shall be used to determine the
height of the rectangle.
Foot frontage of the store is defined as the length
of facade measured between lease lines separating the
store from common areas or other stores.
(g) Corner stores, which have two (2) or more facades
facing or opening in different directions into different
portions of the Common Area may have signs on each facade,
subject to the requirements of this Exhibit and the written
approval of Landlord.
5. The fabrication, installation and operation of all signs shall
be subject to the following restrictions:
(a) No exposed neon, fluorescent and/or incandescent
tubing or lamps, raceways, ballast boxes and/or electrical
transformers, crossovers, conduit and/or sign cabinets shall
be permitted.
(b) No flashing, moving, flickering and/or blinking
illumination, animation, moving lights and/or floodlight
illumination shall be permitted.
(c) The name and/or stamp of the sign contractor or sign
company or both shall not be exposed to view, unless required
by law.
Page 2 of 4 Pages
EXHIBIT "B"
<PAGE> 35
DIMENSION CHART
A STORE FRONT LENGTH
B 18'' MIN. SPACING FROM ADJ. TENANT TO BE EQUAL ON BOTH SIDES.
C EQUAL SPACING SIGN TO BE SPACED FROM TOP TO BOTTOM.
D LETTER HEIGHT. 16'' MINIMUM.
<PAGE> 36
6. The following type signs are prohibited:
(a) Paper signs and/or stickers utilized as signs.
(b) Signs of a temporary character or purpose, except
"For Rent" signs placed or approved by the Landlord and except
signs required for emergency situations, irrespective of the
composition of the sign or material used therefor, provided
that any sign permitted hereunder shall be lettered and
designed to be in keeping with the character and quality of
the Shopping Center and signs otherwise permitted therein.
(c) Printed signs, except, however, non-illuminated,
small-scale "signature sign" (one (1) such signature sign only
being permitted to be placed at each entrance to the Demised
Premises), which is lettered on the glass portion of a
storefront of Tenant and/or affixed to each storefront
surface, provided such sign does not project more than two
inches (2'') from the storefront surface.
(d) Moving signs.
(e) Signs not lighted by electricity which have luminous
or reflecting letters.
7. Notwithstanding the foregoing provisions of this Exhibit,
non-illuminated or non-luminous signs of metal and/or wood located
within show windows or the interior of the stores shall be permitted,
provided:
(a) Such signs are not affixed or attached to windows.
(b) Such signs contain only designations of merchandise
or brand names and/or prices.
(c) Such signs are located proximate to merchandise on
display within the show windows or the interior of stores, as
the case may be.
(d) For the purposes intended, such signs are reasonably
sized, designed and displayed.
8. The provisions of Section 20 of this Lease shall control over
the provisions of this Exhibit "B".
Page 3 of 4 Pages
EXHIBIT "B"
<PAGE> 37
EXHIBIT "C"
DESCRIPTION OF LANDLORD'S WORK
Landlord agrees, at its sole cost and expense, to construct the
Premises in accordance with plans and specifications to be agreed upon by the
parties (Landlord's Work). The plans and specifications shall be substantially
similar to those of a "Shoppers Food Warehouse" current prototype modified as
reasonably necessary to conform and adapt to Tenant's Permitted Use and the
physical characteristics of the Premises. It is the intention of the parties
that the Landlord's Work will be in total preparation of Premises for the
operation of a retail store operated for Tenant's Permitted Use, other than the
purchase and installation of: (i) Tenant's trade fixtures and equipment; (ii)
refrigerated boxes to be located inside the Premises along the back wall and
one side wall of the sales area. Tenant shall supply and set any desired trade
fixtures and equipment in the Premises in accordance with the preliminary plans
to be submitted to Landlord by Tenant and the construction working drawings
subsequently approved by Tenant. Tenant shall furnish, install and connect any
necessary refrigeration lines to the appropriate fixtures and equipment, and
shall evacuate, test and make all final connections of such refrigeration lines
to the appropriate fixtures and equipment. Tenant shall be solely responsible
for all refrigeration lines and systems and related HVAC coils. Landlord shall
construct, install and connect any necessary electrical and water supply or
fixture drain lines required for the operation of Tenant's trade fixtures and
refrigerated equipment, as provided for in the construction working drawings
approved by Tenant. Landlord and Tenant have mutually agreed to use their best
efforts to minimize Landlord's cost to construct the Premises.
Within sixty (60) days following receipt by Tenant of an approved
perimeter drawing (footprint) of the Demised Premises, in accordance with
Section 24, Tenant shall provide Landlord with Tenant's preliminary plans
showing in detail all of Tenant's electrical, plumbing and partitioning
requirements necessary in order for Landlord to prepare construction working
drawings necessary to complete the Landlord's Work. Tenant's preliminary plans
indicate work only for diagrammatic purposes. It is intended that the work of
every trade be installed in accordance with all local, state or other
ordinances rules and regulations governing the construction and installation of
any of this work. Tenant assumes no responsibility if greater requirements are
called for by any regulations in excess of Tenant's requirements and any such
requirements will be done by Landlord at no cost to Tenant. Such drawings
shall be prepared by Landlord's architects within ninety (90) days following
delivery by Tenant of preliminary plans. Tenant shall review and either
approve the construction working drawings within fourteen (14) days following
delivery of same to Tenant or advise Landlord in writhing of any objection
thereto.
The construction working drawings following approval by both Landlord
and Tenant are hereinbelow referred to as the "Construction Working Drawings".
Notwithstanding the above, Tenant shall not be responsible for errors or
omissions by Landlord's architects or engineers, and Landlord shall be
responsible for all items omitted from the signed preliminary plans without
Tenant's consent, or which do not conform with written changes and corrections
which have been agreed to by Landlord and Tenant prior to the preparations of
final construction drawings.
Landlord will deliver to Tenant a written construction schedule prior
to the commencement of the Landlord's Work.
Landlord's Work will be performed in accordance with, and include the
items and requirements contained in, Tenant's specifications requirements
manual attached hereto as Exhibit "D". Said manual will become part of the bid
package of Landlord's general contractor.
Page 1 of 2
<PAGE> 38
All equipment purchased and installed by Landlord for the Premises
shall be UL (Underwriters Laboratories) approved.
The construction Working Drawings will include the sprinkler system
hydraulic calculation and sprinkler system blueprint for the Premises.
Where during the course of construction Tenant request changes and/or
substitutions in the Construction Working Drawing which increase the total cost
of Landlord's Work. Landlord shall so inform Tenant and shall promptly deliver
to Tenant an estimate, with supporting data, of the cost of each such requested
change and Tenant will be permitted to make such changes upon agreeing with
Landlord to pay the increased costs to Landlord attributable to such changes.
If Landlord's Work is not commenced within one year from the date hereof or
within six months from the approval date of Construction Working Drawings,
Tenant will have the right to change the layout and finish of the Premises,
including without limitation, the number, location and type of utility
connections, partition wall and lighting fixtures, and Landlord will
incorporate such changes into the Construction Working Drawings and construct
same at Landlord's cost and expense.
Landlord will deliver the Premises to Tenant in compliance with and
free of any notice of violation of governmental ordinances, rules, laws,
regulations and the like, and shall assign to Tenant all applicable contractor,
manufacturer and supplier warranties. Landlord and Tenant shall cooperate and
work together to secure all use and occupancy permits for the Premises.
EXHIBIT "C"
PROJECT: Greenbriar Town Center
LANDLORD: Combined Properties/Greenbriar Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #41 = approx. 25,000 square feet
LEASE DATED: 4/02/91
Page 2 of 2
<PAGE> 39
EXHIBIT "D"
TENANT'S SPECIFICATIONS REQUIREMENTS MANUAL
DATED: ---------------------------
IS HEREBY INCORPORATED BY REFERENCE
EXHIBIT "D"
PROJECT: Greenbriar Town Center
LANDLORD: Combined Properties/Greenbriar Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #41 = approx. 25,000 square feet
LEASE DATED: 4/02/91
<PAGE> 40
USE OF PREMISES RESTRICTIONS
Tenant hereby covenants that throughout the term of its Lease, any
renewals or extensions thereof, the Demised Premises, in whole or part, will
not be used or operated directly or indirectly for the business of:
(a) Entertainment or recreational facility, including but not
limited to, a bowling alley, skating rink, theater, billiard
room, health spa or studio, gymnasium, amusement center or
other place of public amusement or assembly.
(b) Training or education facility, including but not limited to,
a beauty school, barber college, reading room, place of
instruction or any other operation catering primarily to
students to trainees rather than to customers.
(c) Store which regularly sells merchandise commonly known as "odd
lot", "close out", "clearance", "discontinued",
"cancellation", "second", "factory reject", "sample", "floor
model", "demonstrator", "obsolescent", "overstock",
"distressed", "bankruptcy", "fire sales", or "damaged".
(d) Adult bookstore or off-track betting facility.
(e) Motel or tourist court.
(f) Restaurant.
(g) Pet store devoting more than two hundred (200) square feet of
sales area for the sale and display of pet foods.
(h) Consumer finance services excluding a bank, savings and loan
or savings association.
(i) Drugstore or for the sale of medicines requiring the presence
of a registered pharmacist.
(j) Dry Cleaner.
(k) Supermarket, or a store which devotes more than 10% of its
selling space (or in the case of a drugstore, 10% of its gross
space), for the retail sale of meat, groceries, produce,
fruit, vegetables, seafood, dairy, poultry, bakery products
and/or any combinations thereof for off-premises consumption.
(l) Sale of eyewear or optometric services.
(m) Store selling linens, bedding, towels and bath and kitchen
accessories.
(n) Sale of men's, women's or children's footwear.
EXHIBIT "E"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between COMBINED PROPERTIES/GREENBRIAR LIMITED PARTNERSHIP,
LANDLORD and TOTAL BEVERAGE CORP., TENANT, dated 4/02/91.
(53) Greenbriar Town Center
<PAGE> 41
EXHIBIT "F"
GUARANTY OF PERFORMANCE
In order to induce Combined Properties/Greenbriar Limited Partnership,
as Landlord, to enter into a certain Lease Agreement being executed
simultaneously herewith, with Total Beverage Corp,. as Tenant, the undersigned,
namely Shoppers Food Warehouse Corp., having its principal place of business at
3129 Pennsy Drive, Landover, Maryland 20785, absolutely and unconditionally
guarantees the performance of the Tenant of all payments, obligations and
covenants binding upon Tenant in said Lease Agreement which accrue or are
required during the term of the Lease Agreement, and Guarantor hereby waives
notice of any default under said Lease Agreement. The undersigned further
agrees that its liability under this guaranty shall be primary, and that in any
right or action which shall accrue to Landlord under the within Lease Agreement
during the Original Lease Term of the Lease Agreement, Landlord may, at its
option, proceed against the undersigned and Tenant jointly or severally,
without having commenced any action against or having obtained a judgement
against Tenant. Guarantor hereby waives trial by jury in any action,
proceeding or counterclaim brought by Landlord, Tenant and/or Guarantor with
respect to any matter arising out of or in any way connected with the Lease or
the use and occupancy of the Premises.
In the event said Lease Agreement shall be terminated prior to the
lease termination date by reason of a court order in a proceeding under the
Bankruptcy Act, then Guarantor agrees that it shall nonetheless remain liable
for all payments, obligations and covenants under said Lease Agreement, as if
it had been the tenant in the first instance and as if said Lease Agreement had
not been prematurely terminated.
It is agreed that no modification, extension or indulgence granted to
Tenant, its successors and/or assign, shall release the undersigned from this
Guaranty of Performance, and that this Guaranty of Performance shall continue
in full force and effect for the Original Lease term of the Lease and not any
renewals or extensions thereof. Nothing herein shall modify any requirement in
said Lease Agreement for the giving of notice of default to Tenant.
Any one or more successive or concurrent actions or proceedings may be
brought against Guarantor under this Guaranty for the performance of the
obligations in separate actions or proceedings, as often as Landlord may deem
expedient or advisable, and without constituting an election of remedies or a
bar to any other remedies available to Landlord.
Guarantor hereby expressly waives (i) presentment and demand for
payment and protest of non-payment; (ii) notice of acceptance by Landlord of
this Guaranty Agreement and of presentment, demand and protest thereof; (iii)
notice of all indulgences; (iv) demand for observance, performance of
enforcement of any of the terms or provisions of this Guaranty Agreement or the
Lease; and (v) any right or claim of right to cause a marshalling of the assets
of the Tenant.
This Guaranty and the Guarantor's liability hereunder shall continue
unaffected by an assignment or assignments of the Lease (in whole or in part)
or by any sublettings in whole or in part of the premises demised thereunder,
made from time to time, whether or not notice thereof is give to Guarantor.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty of
Performance to be executed by its duly authorized officer on this -2nd--- day
of --------April----------------, 1991.
ATTEST: GUARANTOR:
SHOPPERS FOOD WAREHOUSE CORP.
(a Delaware corporation)
Robert N. Herman By: Kenneth Herman (seal)
- ----------------------------- ------------------------------
Robert N. Herman, Kenneth Herman, President
Executive Vice President
[Corporate Seal]
EXHIBIT "F"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between Combined Properties/Greenbriar Limited Partnership,
LANDLORD, and Total Beverage Corp., TENANT, dated 4/02/91.
<PAGE> 42
EXHIBIT "G"
COMMENCEMENT AND ENDING AGREEMENT
THIS AGREEMENT, made this ---- day of ----------, 19---, by and
between Combined Properties/Greenbriar Limited Partnership (hereinafter
referred to as "LANDLORD"), and Total Beverage Corp., (hereinafter referred to
as "TENANT").
W I T N E S S E T H :
THAT, in accordance with that certain Lease Agreement between the
parties hereto dated ----------------------------------, 19----, (hereinafter
referred to as "Lease"), covering that certain premises in the Greenbriar Town
Center as more particularly described and set forth under the Lease
(hereinafter referred to as "Premises"), LANDLORD and TENANT hereby agree that
the Commencement Date of said Lease shall be set at
- ---------------------------, that the Rent Commencement Date shall be
- --------------------------, and that the Expiration Date shall be
- -----------------------, for total lease term of approximately ten (10) years.
IN WITNESS WHEREOF, the LANDLORD and TENANT have each caused this
Agreement to be executed on its behalf and its duly authorized seal affixed
thereto on the day and year first above written.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES/GREENBRIAR
LIMITED PARTNERSHIP
- ------------------------------- By:---------------------------------
Ronald S. Haft
General Partner
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
- ------------------------------- By:---------------------------------
Title Title
[Corporate Seal]
</TABLE>
<PAGE> 43
ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT ("Assignment") dated
and effective as of August 25, 1992, by and among TOTAL BEVERAGE CORP., a
Delaware corporation ("Assignor"), TOTAL BEVERABE VA CORP., a Virginia
corporation ("Assignee"), SHOPPERS FOOD WAREHOUSE CORP., a Delaware
corporation ("Guarantor"), and COMBINED PROPERTIES/GREENBRIAR LIMITED
PARTNERSHIP ("Landlord").
WHEREAS:
A. Assignor is the tenant, and Guarantor is the guarantor of Assignor's
performance, under lease agreement (the"Lease") dated April 2, 1991 between
Assignor and Landlord for premises located in the Greenbriar Town Center,
Chantilly, Virginia, having an area of approximately 25,000 square feet, on all
of the terms and conditions contained in the Lease; and
B. Assignor desires to assign to Assignee all of Assignor's right, title
and interest in, to and under the Lease, and Assignee desires to take same by
assignment and assume all existing and future obligations, liabilities and
duties of Assignor in respect of the Lease; and
C. Guarantor desires to consent to the herein assignment and to continue
to guarantee Assignee's performance under the Lease in accordance with the
Guaranty of Performance attached to the Lease as Exhibit "F"; and
D. Landlord desires to consent to the herein assignment and to release
Assignor from all existing and future obligations, liabilities and duties on
Assignor's part to be performed in respect of the Lease the date of this
Assignment.
NOW, THEREFORE, in consideration of the sum of twenty-five dollars (25.00) now
given by each of the parties to each of others, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Preamble. The Preamble shall be deemed to be a part hereof as if
fully recited herein.
2. Assignment. Assignor hereby assigns and transfers to Assignee all of
Assignor's right, title and interest in, to and under the Lease. Assignee
hereby accepts the assignment and transfer of all of Assignor's right, title
and interest in, to and under the Lease, and agrees to pay, fulfill and/or
perform any and all liabilities, obligations and/or duties of Assignor now
existing or hereinafter arising out of the Lease.
3. Attorney-in-Fact. Assignor hereby constitutes and appoints Assignee,
its successors, nominees and assigns, as its true and lawful attorney with full
power of substitution and in the name of Assignor, or otherwise, but on behalf
of and for the benefit of Assignee, its successors, nominees and assigns to (i)
demand, enforce, sue for, collect and receive, from time to time, andy and all
rights hereby assigned and transferred; (ii) institute and prosecute, in the
name of Assignor or otherwise, any and all proceedings at law and equity or
otherwise which Assignee, its successors, nominees or assigns may deem
advisable; (iii) assert or enforce any right, title or interest hereby assigned
or transferred; and (iv) do any and all acts and things in relation to the
foregoing that Assignee, its successors, nominees or assigns shall deem
advisable. Assignor hereby declares that the foregoing powers are coupled with
an interest and are irrevocable.
4. Guarantor. Guarantor hereby consents to the herein assignment and
agrees that it shall guarantee the performance of Assignee under the Lease in
accordance with the Guaranty of Performance attached to the Lease as Exhibit
"F".
5. Release. In consideration of Assignee's assumption of all of
Assignor's responsibilities pursuant to Paragraph 2 of this Agreement, Landlord
hereby absolutely and unconditionally releases Assignor from any and all
obligations, liabilities, and duties now existing or hereinafter arising out of
the Lease.
6. Notices. Any notice required to be given under this Agreement shall
be given in accordance with the notice provisions contained in the Lease.
Notices to Assignee shall be addressed as follows:
Total Beverage VA Corp.
4600 Forbes Boulevard
Lanham, Maryland 20706
Attention: Robert Herman, Executive Vice President
with a duplicate original under separate cover to the Assignee at the above
address but to the attention of Jack Binder, Senior Vice President, Finance.
IN WITNESS WHEREOF, parties have executed this Assignment and Release
as of the date first above written.
<PAGE> 44
<TABLE>
<S> <C>
WITNESS TOTAL BEVERAGE CORP.
Thomas B. McKee Robert Herman
- ------------------------ ------------------------
Robert N. Herman
Executive Vice President
WITNESS TOTAL BEVERAGE VA CORP.
Thomas B. McKee Robert Herman
- ------------------------ ------------------------
Robert N. Herman
Executive Vice President
WITNESS SHOPPERS FOOD WAREHOUSE CORP.
Thomas B. McKee Robert Herman
- ------------------------ ------------------------
Robert N. Herman
Executive Vice President
WITNESS COMBINED PROPERTIES/GREENBRIAR
LIMITED PARTNERSHIP, a District of
Columbia Limited Partnership
By: CM/CP GREENBRIAR RETAIL JOINT
VENTURE, a Delaware Joint
Venture, General Partner
By: CP/Greenbriar Retail
Investments Limited Partnership
A Virginia Limited Partnership
Joint Venturer
By: CP/Greenbriar Retail, Inc.
A Virginia Corporation,
General Partner
By: Ronald S. Haft
----------------------------
Ronald S. Haft
President
</TABLE>
<PAGE> 1
FIRST AMENDMENT OF LEASE
PLAZA AT LANDMARK
TOTAL BEVERAGE CORP.
THIS FIRST AMENDMENT OF LEASE (hereinafter "Amendment"), made as of this 7th
day of February 1994 by and between Combined Properties Limited Partnership
(hereinafter "Landlord") and Total Beverage Corp., trading as Total Beverage
(hereinafter "Tenant") provides:
RECITALS
WHEREAS, by virtue of that certain Lease dated August 16, 1993, as
amended by Agreement dated February 7, 1994 (hereinafter collectively referred
to as "Lease"), Landlord leased to Tenant a portion of real property situated
in Alexandria, Virginia, known as Store No. 18A-18C in Plaza at Landmark
Shopping Center and also known as 6240 Little River Turnpike, Alexandria,
Virginia 22312 ("Premises"), and more particularly described in the Lease; and
WHEREAS, pursuant to Section 6 of the Lease, Landlord and Tenant
agreed to amend the Lease by changing the square footage and adjusting the
Minimum Guaranteed Rent and all other rent, costs and charges due under the
lease in the event the Premises was determined by Landlord's architect or
engineer to contain an amount of gross ground floor area different than 25,000
square feet as set forth in the Lease; and
WHEREAS, the parties have determined, pursuant to Section 6(b) of the
Lease, that the size of the Premises is actually 26,377 square feet; and
WHEREAS, the Tenant having accepted the Premises, the parties now
desire to confirm that the Premises are in the condition called for under the
Lease in accordance with the provisions of Section 25 of the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in accordance
with the provisions contained in Sections 6 and 25 thereof.
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and the sum of One Dollar ($1.00) in hand paid each to the
other, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto covenant and agree as follows:
FIRST: Section 1 (b) of the Lease is hereby deleted in its entirety
and replaced by the following:
(b) Premises: Store No. 18A-18C, approximately
26,377 square feet in size, located
in the Shopping Center as shown on
Exhibit "A".
SECOND: It is hereby agreed by the parties hereto that all references
in the Lease, including Exhibits, to the Premises containing approximately
25,000 square feet shall be deemed to refer, and are hereby changed to "26,377
square feet".
THIRD: Section 1 (1) of the Lease is hereby deleted in its entirety
and replaced by the following:
(1) Annual Minimum Three Hundred Ninety-Five
Guaranteed Rent: Thousand Six Hundred Fifty-Five
and 00/100 Dollars
($395,655.00), subject to
adjustment pursuant to Section
<PAGE> 2
6 and Section 3 (b) of the Lease.
FOURTH: Section 1 (m) of the Lease is hereby deleted in its entirety
and replaced by the following:
(m) Minimum Basis of Sales: Thirty-Nine Million Five Hundred
Sixty-Five Thousand Five Hundred
and 00/100 Dollars ($39,565,500.00),
subject to adjustment pursuant to
Section 9 and Section 3 (b) of the
Lease.
FIFTH: The second paragraph of Section 3 (b) of the Lease is hereby
deleted in its entirety and replaced by the following:
All of the terms and conditions of this Lease shall remain in full
force and effect during the Option Term except there shall not be any
additional option to renew this lease beyond what is provided for
hereinabove, and Minimum Guaranteed Rent and Minimum Basis of Sales
for the Option Term shall be as set forth in the following schedule:
<TABLE>
<CAPTION>
Option Term Rate Per Annual Minimum Monthly Minimum Minimum Basis
Period Square Foot Guaranteed Rent Guaranteed Rent of Sales
----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
11/1/2003 through
10/31/2008 $19.41 $511,977.57 $42,664.80 $51,197,757.00
11/1/2008 through
10/31/2013 $22.32 $588,734.64 $49,061.22 $58,873,464.00
</TABLE>
SIXTH: Section 6 (b) of the Lease is hereby deleted in its entirety
and replaced by the following:
The Minimum Guaranteed Rent shall be payable for the periods set forth
below in the following annual and monthly amounts:
<TABLE>
<CAPTION>
Original Rate Per Annual Minimum Monthly Minimum
Lease Term Period Square Foot Guaranteed Rent Guaranteed Rent
----------------- ----------- --------------- ---------------
<S> <C> <C> <C>
10/21/93 through
10/31/93 $15.00 $395,655.00 $32,971.25
11/1/98 through
10/31/2003 $16.88 $445,243.76 $37,103.65
</TABLE>
SEVENTH: The fifth sentence of Section 7 (a) of the Lease is
hereby deleted in its entirety and replaced by the following:
Tenant shall initially make estimated payments in the amount of
Forty-Eight Thousand Two Hundred Sixty-Nine and 91/100 Dollars
(48,269.91) annually to be paid in equal monthly installments in the
amount of Four Thousand Twenty-Two and 49/100 Dollars ($4,022.49),
without set-off or deduction.
EIGHTH: The second sentence of Section 8 of the Lease is hereby
deleted in its entirety and replaced by the following:
Commencing on the Rent Commencement Date, Tenant shall pay to
Landlord, on an estimated basis, the sum of Twenty-Four Thousand Five
Hundred Thirty and 61/100 Dollars ($24,530.61) to be paid in equal
monthly installment sin the amount of Two Thousand Forty-Four and
22/100 Dollars ($2,044.22),
<PAGE> 3
on the first day of each month, in advance, along with Tenant's
payment of Minimum Guaranteed Rent.
NINTH: Section 9 (b) of the Lease is hereby deleted in its entirety
and replaced by the following:
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
Original Minimum Basis
Lease Term Period of Sales
----------------- -------------
<S> <C>
10/21/93 through 10/31/98 $39,565,500.00
11/1/98 through 10/31/2003 $44,524,376.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject to
appropriate proration as follows. In the event of any partial
calendar year during the term hereof, the Minimum Basis of
Sales shall be adjusted based on the number of months in such
partial year. No "deemed" sales shall be included in the
Gross Sales for any partial years.
TENTH: Tenant hereby acknowledges and confirms that it has
accepted the Premises and the Premises are in the condition called for under
the Lease.
ELEVENTH: Except as modified by this Amendment, the Lease shall
continue in full force and effect in accordance with the terms thereof.
TWELFTH: All the rights and obligations of the parties under
this Amendment shall bind and inure to the benefit of their respective personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on the date first above written.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES
LIMITED PARTNERSHIP
Thomas B. McKee By: Ronald S. Haft
- ----------------------------- -------------------------------------------
Ronald S. Haft
General Partner
WITNESS: TENANT:
TOTAL BEVERAGE CORP.
Dennis Bodley By: Dennis N. Weiss
- ----------------------------- --------------------------------------------
Its Associate Counsel Its: Executive Vice President
-------------------------- -------------------------------------------
[Corporate Seal]
WITNESS: GUARANTOR:
DART GROUP CORP.
Dennis Bodley By: Dennis N. Weiss
- ----------------------------- --------------------------------------------
Its: Associate Counsel Its: Executive Vice President
------------------------- -------------------------------------------
[Corporate Seal]
</TABLE>
<PAGE> 4
LEASE
AGREEMENT
LOCATION: PLAZA AT LANDMARK
DATED: AUGUST 16, 1993
LANDLORD: COMBINED PROPERTIES LIMITED PARTNERSHIP
TENANT: TOTAL BEVERAGE CORP.
<PAGE> 5
TABLE OF CONTENT
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. BASIC LEASE INFORMATION ............................................ 1
2. PREMISES............................................................ 3
3. TERM................................................................ 3
4. RENTAL DEPOSIT...................................................... 4
5. SECURITY DEPOSIT.................................................... 4
6. MINIMUM GUARANTEED RENT............................................. 4
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES......................... 4
8. REAL ESTATE TAXES................................................... 5
9. PERCENTAGE RENT..................................................... 6
10. PAYMENT OF PERCENTAGE RENT.......................................... 7
11. GROSS SALES......................................................... 7
12. SALES REPORTS....................................................... 7
13. AUDIT OF SALES REPORTS.............................................. 8
14. RECORDS............................................................. 8
15. DISCLAIMER OF JOINT VENTURE......................................... 8
16. RENTAL OCCUPANCY TAX................................................ 8
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE............................. 8
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS.................. 9
19. UTILITIES........................................................... 9
20. TENANT'S SIGNS...................................................... 9
21. CONSTRUCTION OF THE PREMISES - INTENTIONALLY OMITTED................ 11
22. TENANT'S ACCEPTANCE OF PREMISES..................................... 11
23. MAINTENANCE AND USE OF COMMON AREAS................................. 11
24. TENANT'S WORK (EXHIBIT "D")......................................... 12
25. FIXTURING TENANT'S STORE; OPENING................................... 12
26. OCCUPANCY AND OPERATING HOURS....................................... 13
27. REPAIRS............................................................. 13
28. ALTERATIONS BY TENANT............................................... 14
29. DAMAGE TO PREMISES OR IMPROVEMENTS.................................. 14
30. USE OF PREMISES..................................................... 14
31. OPERATION BY TENANT................................................. 14
32. EXTRA HAZARDS....................................................... 15
33. PLUMBING............................................................ 15
34. DISPLAY LIGHTING.................................................... 15
35. ROOF AND WALLS...................................................... 15
36. LIENS AND INDEMNITY................................................. 16
37. TENANT'S FIXTURES................................................... 16
38. INSPECTION BY LANDLORD.............................................. 16
39. COVENANT TO HOLD HARMLESS........................................... 16
40. PUBLIC LIABILITY-TENANT............................................. 17
41. LIMITATION OF LANDLORD'S LIABILITY.................................. 17
42. DAMAGE TO PREMISES.................................................. 17
43. CONDEMNATION........................................................ 18
44. BANKRUPTCY.......................................................... 18
45. BANKRUPTCY-USE OF PREMISES.......................................... 19
46. DEFAULT............................................................. 19
47. WAIVER.............................................................. 19
48. SUBORDINATION....................................................... 19
49. RECORDATION......................................................... 20
50. PROMOTIONAL FUND.................................................... 20
51. ASSIGNMENT AND SUBLEASE............................................. 20
52. TERMINATION......................................................... 21
53. HOLDING OVER........................................................ 21
54. FOR RENT SIGNS...................................................... 21
55. QUIET ENJOYMENT..................................................... 21
56. ADDRESSES AND NOTICES............................................... 22
57. ESTOPPEL CERTIFICATES............................................... 22
58. WAIVER OF JURY TRIAL................................................ 22
59. MISCELLANEOUS....................................................... 24
60. HAZARDOUS MATERIALS................................................. 24
61. PRIMARY USE PROTECTION.............................................. 25
62. GUARANTY OF PERFORMANCE............................................ 25
63. EXISTING TENANT..................................................... 25
64. MARKETING AND PROMOTIONAL ALLOWANCE................................. 25
EXHIBIT A - SITE PLAN
EXHIBIT B - SIGN REGULATIONS
EXHIBIT C - LANDLORD'S WORK
EXHIBIT C-1 - LANDLORD'S WORK
EXHIBIT C-2 - TENANT'S WORK
EXHIBIT D - TENANT'S SPECIFICATIONS REQUIREMENTS MANUAL
EXHIBIT E - USE OF PREMISES RESTRICTIONS
EXHIBIT F - GUARANTY OF PERFORMANCE
EXHIBIT G - COMMENCEMENT AND ENDING AGREEMENT
</TABLE>
<PAGE> 6
LEASE AGREEMENT
DATE: AUGUST 16, 1993
LANDLORD: COMBINED PROPERTIES LIMITED PARTNERSHIP
1899 L STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20036
TENANT: TOTAL BEVERAGE CORP.
A DELAWARE CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
PREMISES: SPACE NO. 18A-18C
PLAZA AT LANDMARK
6240 LITTLE RIVER TURNPIKE
ALEXANDRIA, VIRGINIA 22312
In consideration of the covenants contained herein, this Lease
Agreement is made as of the date above written by and between Landlord and
Tenant under the following terms, conditions and provisions:
1. BASIC LEASE INFORMATION
The following Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any information and
definitions contained in the Basic Lease Information shall mean and refer to
the information and definitions hereinafter set forth. If there is any
conflict between the terms of the Lease and the following Basic Lease
Information, the terms of the Lease shall prevail.
(A) TENANT'S TRADE NAME: Total Beverage
(B) PREMISES: Store No. 18A-18C,
approximately 25,000
square feet in size, located
in the Shopping Center as
shown on Exhibit "A". (See
also Section 6).
(C) SHOPPING CENTER: The shopping center commonly
known as Plaza at
Landmark, as shown on Exhibit
"A:, as the same may be
modified from time to time,
in accordance with the terms
hereof.
(D) ORIGINAL LEASE TERM: Ten (10) years, plus that
part of the month, if
any, from the Commencement
Date to the first day of the
first full calendar month in
the term.
(E) COMMENCEMENT DATE: The Delivery Date as
provided in Section 25.
(F) RENT COMMENCEMENT DATE: That date which is One
Hundred Twenty (120)
days after the Commencement
Date, or the date Tenant
opens for business in the
Premises, whichever is
earlier.
(G) EXPIRATION DATE: The last day of the 120th
full calendar month
after the Commencement Date.
(H) OPTION TERM: One (1) option term of Ten
(10) years.
(I) LEASE YEAR: The first Lease Year shall
be the period commencing
with the commencement Date
and ending upon the
expiration of twelve (12)
full calendar months
thereafter. Commencing upon
the expiration of twelve (12)
full calendar months
following the Commencement
Date, each Lease year shall
consist of consecutive twelve
(12) full calendar month
periods.
(J) RENTAL DEPOSIT: None
<PAGE> 7
(K) SECURITY DEPOSIT: None
(L) ANNUAL MINIMUM Three Hundred Seventy Five
GUARANTEED RENT: Thousand and 00/100
Dollars ($375,000.00),
subject to adjustment
pursuant to Sections 9 and
3 (b) of the Lease.
(M) MINIMUM BASIS OF SALES: Thirty Seven Million Five
Hundred Thousand and
00/100 ($37,500,000.00),
subject to adjustment
pursuant to Sections 9 and 3
(b) of the Lease.
(N) PERCENTAGE RENT RATE: One Percent (1%)
(O) CONSUMER PRICE INDEX: The "Consumer Price Index
for Urban Wage Earners
and Clerical Workers (1982-
84=100) for all Items, U.S.
City Average", issued by the
Bureau of Labor Statistics of
the United States Department
of Labor. In the event the
Consumer Price Index is not
available, or is
discontinued, then any
successor or substitute index
shall be used for the
computations herein set
forth. In computing the
increase in the Consumer
Price Index, the amount of
increase shall be based upon
the percentage increase in
the Consumer Price Index from
the date of the Lease through
to the date of adjustment.
(P) TENANT'S PERMITTED USE: The retail sale of primarily
containerized beverages
for off-premises consumption,
including without limitation
wine, beer, bottled water,
carbonated and non-carbonated
soft drinks, soda and seltzer
waters, and juices; tobacco
products; snack-food items,
candy and paper goods and
related items and for no
other use.
(Q) PROMOTIONAL CHARGE: A monthly charge in the
amount of $83.33.
(R) LANDLORD'S ADDRESS FOR Combined Properties Limited
RENTAL PAYMENTS: Partnership
Post Office Box 2753
Merrifield, VA 22116
(S) LANDLORD'S ADDRESS FOR Combined Properties Limited
NOTICES: Partnership
c/o Combined Properties
Incorporated
1899 L Street, N.W., 9th
Floor
Washington, D.C. 20036
Attention: Legal Department
(T) TENANT'S ADDRESS FOR Total Beverage Corp.
NOTICES: 3300 75th Avenue
Landover, MD 20785
Attention: Legal Department
(U) WITH A COPY TO: Dart Group Corporation
3300 75th Avenue
Landover, MD 20785
(V) BROKER: None
(W) GUARANTOR: Dart Group Corporation
3300 75th Avenue
Landover, MD 20785
(X) EXHIBITS:
Exhibit "A" Site Plan
Exhibit "B" Sign Regulations
Exhibit "C" Landlord's Work
Exhibit "C-1" Landlord's Work
Exhibit "C-2" Tenant's Work
Exhibit "D" Tenant's Specifications
Requirements Manual
Exhibit "E" Use of Premises Restrictions
Exhibit "F" Guaranty of Performance
Exhibit "G" Commencement and Ending
Agreement
<PAGE> 8
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, the Premises as shown on Exhibit "A". The Premises will be located
substantially as shown in relation to other improvements on Exhibit "A". No
representation is made as to the accuracy of Exhibit "A" and the Shopping
Center layout shown on said Exhibit "A" is preliminary and subject to
modification and revision and no representation is made as to the occupancy,
types of business or any tenant shown on the same. Together with he premises
demised hereby, Landlord grants to Tenant, on a non-exclusive basis, the right
to use, in common with others, the parking areas, roadways, means of ingress
and egress and service areas of the Shopping Center. Tenant acknowledges that
Landlord has the right and power to erect free standing buildings or other
structures or facilities in the common areas or elsewhere in the Shopping
Center, to manage and operate the common areas, including all means of exit and
entrance and approaches thereto within the Shopping Center, and Landlord shall
at all times have the right, at Landlord's sole discretion, from time to time,
to erect free standing buildings or other structures or facilities, to
determine and change the common areas and parking plan for the Shopping Center,
and the arrangement of entrances, exits and approaches thereto, providing same
meets governmental codes. Landlord further reserves the right to modify,
remove, delete, add to, expand or otherwise reconfigure existing and future
buildings, structures and facilities in the Common Areas or elsewhere in the
Shopping Center, provided same meets governmental codes. Landlord reserves the
right to change the name of the Shopping Center.
In addition, Landlord will maintain at all time the existing entrance
to the Shopping Center from Sudley Manor Drive designated by cross-hatching on
Exhibit "A" attached hereto, unless closed by condemnation, court order or
other legal proceeding, and except for any temporary closures for maintenance
and repair or to avoid a public dedication of the Shopping Center Common Areas.
Notwithstanding anything to the contrary contained herein, Landlord
shall not construct any leasable improvements in the No Build Area" except as
the same might be reduced by certain landscape areas and/or open spaces in the
"No Build Area", except as the same might be required by appropriate
governmental codes and authorities from time to time.
3. TERM
(a) ORIGINAL TERM. This Lease shall be effective upon
full execution by and delivery of a copy hereof to the parties hereto. The
term of this Lease shall commence on the Commencement Date and end on the
Expiration Date, unless sooner terminated as provided herein.
(b) OPTION TERM. Provided Tenant is open for business
and operating in the Premises (subject to Force Majeure Events), and provided
Tenant is not in default beyond any applicable cure period at the time of
exercise of this option, then Tenant shall have the option to renew this Lease
for one (1) additional ten (10) year period commencing at the expiration of the
original lease term. Said option shall be automatically exercised by Tenant
unless Tenant gives Landlord notice of Tenant's intention not to renew this
Lease which notice must be received by Landlord at lease twelve (12) months
prior to the expiration of the original term provided, however, that in the
event Tenant fails to give such option exercise notice, Tenant shall not be
deemed to have waived the right to the option until Landlord gives Tenant
written notice of Tenant's failure to exercise the option and affords Tenant a
period of ten (10) days after receipt of such notice to exercise the option by
giving Landlord written notice thereof. Such notice must be given in
accordance with Section 56 of this Lease.
All of the terms and conditions of this Lease shall remain in full
force and effect during the option term, except there shall not be any
additional option to renew this Lease beyond what is provided for hereinabove,
and Minimum Guaranteed Rent and the Minimum Basis of Sales for the option Term
shall be as set both in the following schedule:
<TABLE>
<CAPTION>
OPTION TERM RATE PER ANNUAL MINIMUM MONTHLY MINIMUM MINIMUM BASIS
PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT OF SALES
- ----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Lease Years
1-5 $19.41 $485,250.00 $40,437.50 $48,525,000.00
Lease Years
6-10 $22.32 $558,000.00 $46,500.00 $55,800,000.00
</TABLE>
4. RENTAL DEPOSIT - INTENTIONALLY DELETED
5. SECURITY DEPOSIT - INTENTIONALLY DELETED
<PAGE> 9
6. MINIMUM GUARANTEED RENT
(a) Commencing on the Rent Commencement Date, Tenant covenants and
agrees to pay to Landlord without notice or prior demand the Minimum Guaranteed
Rent with no offsets or abatements whatsoever in lawful money of the united
States of America, to be paid in equal monthly payments on the first day of
each month, in advance, as such place as shall be designated by Landlord within
the continental United States. If the Rent Commencement Date shall occur on a
day other than the first day of the month, then the first rental payment shall
be pro-rated accordingly.
(b) The Minimum Guaranteed Rent shall be payable for the periods
set forth below in the following annual and monthly amounts:
<TABLE>
<CAPTION>
RATE PER ANNUAL MINIMUM MONTHLY MINIMUM
LEASE TERM PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT
- ----------------- ----------- --------------- ---------------
<S> <C> <C> <C>
Lease Years 1-5 $15.00 $375,000.00 $31,250.00
Lease Years 6-10 $16.88 $422,000.00 $35,166.66
</TABLE>
The aforesaid Minimum Guaranteed Rent and equal monthly installments
have been based upon a Premises containing 25,000 square feet of gross floor
area. Said Premises shall be upon completion measured by Landlord's architect
or engineer and in the event the premises shall contain an amount of gross
floor area different than 25,000 square feet said rentals shall be
proportionately adjusted based upon the square foot rental rate designated
hereinabove; it being understood by the parties that the Premises may contain
more or less than 25,000 square based on either a reconfiguration of the
Premises by Landlord or the availability of more or less area but in no event
shall the Premises contain less than 22,000 square feet. The Premises shall be
deemed to extend to and include the exterior faces of all exterior walls, the
full thickness of common area walls, and to the center line of any walls
separating the Premises from adjacent tenant premises and the exterior line of
the store front as shown on Exhibit "A:. In computing the square footage of
the Premises, the area dedicated to any mezzanine and adjacent exterior cart
corral area shall not be included but the areas dedicated to Tenant's equipment
located outside the boundaries of the footprint of the Premises (including but
not limited to storage and refrigeration structures) shall be included for the
purpose of calculating Minimum Guaranteed Rent and all other charges at the
rate of fifty percent (50%) of the charges set forth in the Lease.
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES
(a) Commencing on the Rent Commencement Date Tenant agrees to pay
to Landlord as additional rent for each Calendar Year during the term hereof,
in equal monthly installments at the same time as the Minimum Guaranteed Rent
(and prorata for any portion of a month), an estimated payment toward Tenant's
proportionate share of the Shopping Center's Common Areas Operating cost
(hereinafter defined). Tenant's proportionate share of the Shopping Center's
Common Areas Operating Cost, shall be determined for each calendar year by
multiplying such costs by a fraction, the numerator of which shall be the floor
area of the Premises and the denominator shall be the total leasable floor area
of Shopping Center as of December 31 of such calendar year. Tenant shall pay,
on an estimated basis, its prorata share based on the previous year's actual
costs, as billed to Tenant by Landlord on a monthly basis, with an annual
reconciliation; any overpayments by Tenant shall be credited to Tenant's rental
account (or refunded to Tenant if the term of this Lease has expired or been
terminated); any underpayment shall be treated as provided in subparagraph (b)
below. Landlord's initial estimate of the Shopping Center's Common Area
Operating Cost is One and 83/100 Dollars ($1.83) per square foot of leasable
floor area. Therefore Tenant shall initially make estimated payments in the
amount of Forty-Five Thousand Seven Hundred Fifty and 00/100 Dollars
($45,750.00) annually to be paid in equal monthly installments in the amount of
Three Thousand Eight Hundred Twelve and 50/100 Dollars ($3,812.50) without
set-off or deduction. For the purpose of this subsection (a), the Shopping
Center's Common Areas Operating Cost means the total cost and expense incurred
in maintaining, managing, operating, repairing and replacing the parking areas,
curbs, sidewalks and other exterior common areas, the roof and the exterior
walls of the buildings in the Shopping Center which house mechanical,
electrical or other equipment or are otherwise determined by Landlord from time
to time to be used in operating or maintaining the Shopping Center,
specifically including but not limited to, if provided and without limitation,
the cost of maintaining, operating, repairing, replacing and repaving the
common areas, gardening and landscaping, the cost of fire and extended coverage
insurance (relative to the buildings and insurable structures in the Shopping
Center and not to any personal property of any tenant) and public liability
(relative to the Common Areas only) and property damage insurance, water and
sewer charges, repairs, lighting, security, sanitary control, removal of ice,
snow, trash, rubbish, garbage and other refuse, cleaning, painting, directional
signs, pavement markings, parking lot striping, depreciation on machinery,
equipment and furnishings used in such operation and maintenance, the cost of
personnel to implement such services, the cost of personnel to direct parking,
and legal fees, accounting fees and other professional fees incurred by
Landlord in connection with the protection or enforcement of rights and/or
obligations relative to the common areas of the Shopping Center, plus ten
percent (10%) of all of the aforementioned (excluding
<PAGE> 10
any management fees paid to third parties, insurance premiums and real estate
taxes) as overhead and administrative expenses.
Notwithstanding the foregoing, if in any one (1) year, Landlord shall
replace all or any portion of the parking area in the Shopping Center and the
cost of such replacement exceeds Fifty Thousand Dollars ($50,000.00), the costs
of such replacement shall be amortized evenly over a five (5) year period,
commencing with the year in which such cost is incurred. Further, the Shopping
Center's Common Area Operating Cost shall not include (i) the depreciation of
any item the cost of which has been included in full in the Shopping Center's
Common Area Operating Cost; nor (ii) the cost of any of Landlord's
"home-office" managerial personnel; nor (iii) the payment of any carrying costs
(i.e., principal and/or interest payments) on any loan made by Landlord; nor
(iv) any costs to repair, rebuild or restore any portions of the common areas
to the extent such costs are covered by and reimbursed to Landlord by proceeds
from insurance policies carried by Landlord and the premises for which are
included as a component of the Shopping Center's Common Area Operating Costs;
nor (v) any amounts for costs and expenses which would otherwise be includable
hereunder, but which are recovered by Landlord (i) from tenants or third
parties as a result of any act, omission, default or negligence on the part of
such tenants or third parties relative to the common areas, or (ii) as a result
of breaches by tenants of their respective leases relative to the common areas
(other than recoveries from tenants pursuant to cost-sharing and recovery
provisions in their leases similar to this Section 7 (a)).
(b) Upon the commencement of each Lease Year during the term
hereof, Tenant's Common Area contribution shall be increased based upon an
amount, if any, equal to Tenant's proportionate share of the excess costs, as
hereinafter defined.
If in any Lease year or portion thereof, the aforesaid total costs and
expenses comprising the Shopping Center's Common Areas Operating Costs exceed
One and 83/100 Dollars ($1.83) per square foot times the number of total number
of square feet of leasable floor area in the Shopping Center after deducting
any amounts paid by any tenants located on floor levels which are not
"on-grade" and therefore not included in the denominator as set forth in the
next paragraph (such excess being referred to as "excess costs"), then, and so
often as such event shall occur, Tenant's proportionate share of such excess
costs shall be calculated as follows:
a. - With respect to the said Shopping Center's Common Areas
Operating Cost, said excess costs shall be multiplied by a fraction, the
numerator of which is the square foot area of the Premises and the denominator
of which is the total number of square feet of leasable on-grade floor area in
the Shopping Center.
Within thirty (30) days from the date of billing by Landlord, tenant
shall pay Tenant's proportionate share of such excess costs for the immediately
preceding calendar year; thereafter Tenant's proportionate share of the
shopping Center's Common Areas Operating Cost shall be equal to the combined
amount of such excess costs and the prior calendar year's estimated
proportionate contribution, the combined amount being Tenant's new estimated
proportionate Common Area contribution, until further adjusted as herein
provided, and shall be payable in equal monthly installments without off-set.
Nothing contained with this Section 7 shall be construed as limiting
or precluding the Tenant's obligations under Section 31 or other Tenant
obligations under this Lease.
Landlord shall upon written request notify Tenant annually of the
total number of leasable on-grade square feet in the Shopping Center. Landlord
shall maintain and keep adequate records to substantiate the above Cost and
Tenant shall have the right to examine the books and perform an audit on the
same terms and conditions as Tenant must account for its Gross Sales.
8. REAL ESTATE TAXES
In addition to and as a part of the rental set forth herein, Tenant
agrees to pay to the Landlord for each calendar year during the term, Tenant's
share (as computed in accordance with the terms of this Section 8) of all
general and special real property taxes and assessments ("Real Estate Taxes")
levied or assessed against the Shopping Center and the underlying land and
improvements (including, but not limited to common areas). Commencing on the
Rent Commencement Date, Tenant shall pay to Landlord on an estimated basis, the
sum of Twenty Three Thousand Two Hundred Fifty and 00/100 Dollars ($23,250.00)
to be paid in equal monthly installments in the amount of One Thousand nine
Hundred Thirty Seven and 50/100 Dollars ($1,937.50), on the first day of each
month, in advance, along with Tenant's payment of Minimum Guaranteed Rent.
Said sum represents Tenant's prorata contribution toward the Real estate Taxes,
based upon current estate taxes (calendar year 1993) on the Shopping Center.
In the event the Real Estate Taxes shall be increased or decreased in any tax
year during the term of this Lease, by reason of an increase or decrease in the
tax rate or the assessed valuation, over the amount of taxes due and payable
for calendar year 1993 then Tenant shall pay to Landlord as additional rent, or
Landlord shall reimburse to Tenant, within thirty (30) days after receiving
notice that such
<PAGE> 11
taxes are payable, its proportionate share of said increases and, thereafter,
Tenant shall pay said increases on a monthly basis along with other payments
called for herein. Tenant's share of the aforesaid increases shall be
calculated by multiplying said increase by a fraction, the numerator of which
is the square foot area of the Premises and the denominator of which is the
total number of square feet of leasable on-grade floor area in the Shopping
Center, after deducting any contributions to Real Estate Taxes paid by any
tenants located on floor levels which are not "on-grade" and therefore not
included in the denominator.
Landlord shall furnish to Tenant upon written request a copy of the
tax bill and the computation of Tenant's proportionate share. Provided that
Tenant shall first consent in writing to the protest by Landlord of any real
estate taxes, reasonable expenses, including attorneys' fees, expert witness
fees and similar costs, incurred by Landlord in obtaining or attempting to
obtain such reduction of any real estate taxes shall be prorated and added to
an included in the amount of any such real estate taxes. Real estate taxes
which are being contested by Landlord and which are required to be paid in
order to avoid penalties, interest or imposition of any tax lien on the
Shopping Center, shall nevertheless be included for purposes of the computation
of the liability of Tenant under the above paragraph, provided, however, that
in the event that Tenant shall have paid any amount of increased rent pursuant
to this Article 8 and the Landlord shall thereafter receive a refund of any
portion of any real estate taxes on which such payment shall have been based,
Landlord shall pay to Tenant the prorata share of such refund. Landlord shall
have no obligation to contest, object or litigate the levying or impositions or
any real estate taxes and may settle, compromise, consent to, waive or
otherwise determine in its discretion to abandon any contest with respect to
the amount of any real estate taxes with consent or approval of the Tenant.
The term "Real Estate Taxes" means the total of all taxes and
assessments, general and special, ordinary and extraordinary, foreseen and
unforeseen, including assessments for public improvements and betterments,
assessed, levied or imposed with respect to the land and improvements included
within the Shopping Center. If at any time during the term of this Lease, the
present method of taxation shall be changed so that in lieu of the whole or any
part of any Real Estate Taxes levied, assessed or imposed on real estate and
the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charges measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings in the Shopping Center, then all such taxes, assessments, levies or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "Taxes" for the purposes hereof.
Notwithstanding anything to the contrary contained in the foregoing,
Tenant shall have no responsibility for any share of any increase of Real
Estate Taxes which is brought about, in whole or in part, by any sale, lease,
encumbrance or other transfer of all or any part of the Shopping Center or any
interest therein, or other sale or other transfer of an interest of any entity
now or hereafter constituting Landlord, in other than an arm's length
transaction.
9. PERCENTAGE RENT
(a) Commencing with the first calendar month hereunder, and in
addition to the other payment called for herein, Tenant further agrees that,
with respect to any Lease Year during the term hereof in which the Gross Sales
of Tenant in, upon or from the Premises shall exceed the Minimum Basis of Sales
(Minimum Basis of Sales shall be prorated in accordance with Section 9 (b) for
any period of less than twelve (12) calendar months), Tenant shall pay to
Landlord, as percentage rent, a sum equal to the Percentage Rent Rate
multiplied by Gross Sales for such year in excess of the Minimum Basis of
Sales. In the event Section 30 is amended and/or Section 45 or Section 51
invoked, Landlord expressly reserves the right to change the Percentage Rent
Rate hereinabove set forth, which Percentage Rent Rate shall be in accordance
with guidelines as issued by the International Council of Shopping Centers or
such other guidelines as may be available from time to time.
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
MINIMUM BASIS
LEASE TERM PERIOD OF SALES
----------------- -------------
<S> <C>
Lease Years 1-5 $37,500,000.00
Lease Years 6-10 $42,200,000.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject to
appropriate proration as follows. In the event of any partial calendar year
during the term hereof, the Minimum Basis of Sales shall be adjusted based on
the number of months in such partial year. No "deemed" sales shall be included
in the Gross Sales for any partial years.
(c) It is acknowledged and agreed that Tenant is not hereby
covenanting to operate the Demised Premises other than as expressly set out in
the Lease and is not making any representation or warranty in respect of the
sales to be made
<PAGE> 12
at the Demised Premises other than as expressly set out in the Lease.
10. PAYMENT OF PERCENTAGE RENT
The reporting of Gross Sales and the determination and payment of
percentage rent hereunder shall be made annually on the basis of a calendar
year. Commencing with the first Lease Year of the term hereof, and continuing
throughout the remainder of the lease term, the percentage rent due under this
Lease shall be determined and paid by Tenant to Landlord on or before February
15th following the close of each calendar year.
11. GROSS SALES
The term "Gross Sales" as used herein shall be construed to include
the entire amount of the actual sales price, whether for cash or otherwise, of
all sales of merchandise and/or service and any other receipt whatsoever of all
business conducted in or from the Premises, including, but not limited to, mail
orders, telephone orders, and/or other orders in whatever manner received or
filled whether in whole or in part at the Premises; orders taken in or from the
Premises, although said orders may be filled elsewhere; receipts from vending
machines in the Premises; and sales by any subtenant, concessionaire, licensee
or other person in said Premises, provided that nothing herein shall prevent
Landlord from requiring an additional or different percentage rent as a
condition to approval of any subtenant, concessionaire or licensee of Tenant
hereunder which is engaged in a use other than Tenant's Permitted Use which
percentage rent shall be in accordance with guidelines as issued by the
International Council of Shopping Centers or such other guidelines as may be
available from time to time. Said term shall not include, however, (1) any
sales tax, use tax or any other tax collected from a customer by Tenant and
paid by Tenant to any duly constituted governmental authority; (2) the exchange
of merchandise between the stores of Tenant, if any, where such exchange of
goods or merchandise is made solely for the convenient operation of the
business of Tenant and not for the purpose of consummating a sale which had
theretofore been made at, in, from or upon the Premises and/or for the purpose
of depriving Landlord of the benefit of a sale which otherwise would be made
at, in, from or upon the premises; (3) the amount of returns to shippers or
manufacturers; (4) the amount of any cash or credit refund made upon any sale
where the merchandise sold, or some part thereof, is thereafter returned by the
purchaser and accepted by Tenant; (5) sales of Tenant's store fixtures; (6) the
amount of cashier shortages but not to exceed $10,000.00 in any lease Year; (7)
receipts from sales at a discount at the Demised Premises to non-profit
organizations, but not to exceed $25,000.00 in any Lease Year; (8) the gross
receipts from vending machine sales of cigarettes, candy and soft drinks at the
Demised Premises; (9) receipts from pay telephones; (10) additional discounts
to customers at the Demised Premises by special promotion coupons to the extent
same are redeemed at the Demised Premises by customers, or cash refunds to
customers (it being understood and agreed that said special promotion coupons
are not Tenant's principal method of selling on the Demised Premises); (11)
container tax or container deposits not retained by Tenant; (12) bad check
losses at the Demised Premises to the extent and at the time sales are
written-off as such by Tenant but not to exceed one-quarter of one percent
(.25%) of gross receipts; (13) voided orders; (14) lottery sales and money
order sales in excess of commissions received by Tenant; (15) receipts from the
sale of postage stamps at cost to Tenant; (16) any fees or costs paid by
customers to a third party other than Landlord as a result of any transaction
at an "automatic teller machine" located in or on the Demised premises, but
only to the extent such fees or costs are included in"gross receipts" under
this Section; and (17) gross receipts from the sale of cigarettes.
12. SALES REPORTS
Tenant shall submit to Landlord by February 15th at the place where
the rent herein reserved is then payable, a preliminary statement signed by an
officer of Tenant, showing in all reasonable detail the amount of Gross Sales
made from the Premises during the prior Calendar Year. Within ninety (90) days
after the end of each Calendar Year Tenant shall deliver to Landlord a final
and complete statement of Gross Sales for the entire Calendar Year certified by
Tenant's chief financial officer. Tenant shall require of its subtenants,
concessionaires and licensees, if any, to furnish similar statements to
Landlord within the same periods specified. For the last month of the last
Lease Year, the monthly report shall be due by no later than thirty (30) days
following the Expiration Date.
13. AUDIT OF SALES REPORTS
In the event Landlord is not satisfied with any of the statements as
submitted by Tenant and/or its subtenants, or others, or if Tenant or any other
person herein obligated fails to furnish the statements required herein, then
and in that event Landlord shall have the right, no more often than once
annually, to make an audit of Tenant's and its subtenant's, etc., books and
records pertaining to sales on, or in connection with, the Premises leased
herein. If any such statement is found to be incorrect to an extent of more
than two percent
<PAGE> 13
(2%) in amount over the figures submitted by Tenant and its subtenant, etc., or
if such statements are not furnished, Tenant shall promptly pay for such audit
and the deficiency in rent at the same time and in addition to the next payment
of Minimum Guaranteed Rent, and, if such audit proves Tenant's and subtenant's
statements to be correct, or together to vary not more than two percent (2%)
from the results of the special audit, then the expense of such audit shall be
borne by Landlord. Landlord's right to examine Tenant's and its subtenant's
books and records, as hereinbefore set forth, or to make an audit thereof,
shall be available to Landlord only for a two-year period after the last
statement for such Lease Year period shall have been furnished to Landlord.
14. RECORDS
Tenant shall and hereby agrees that it and its subtenants,
concessionaires and licensees, if any, will keep in the Premises, or at the
location identified as Tenant's Address for Notices, for a period of not less
than three (3) years following the end of each Lease Year, a permanent and
accurate set of books and records of all Gross Sales of the business conducted
in said Premises, and all supporting records, including taxes.
15. DISCLAIMER OF JOINT VENTURE
Any intention to create a joint venture or partnership between the
parties hereto is hereby expressly disclaimed. The provisions of this Lease in
regard to the payment by Tenant and the acceptance by Landlord of a percentage
of the Gross Sales of Tenant and others is a reservation of rent for the use of
the Premises.
16. RENTAL OCCUPANCY TAX
In addition to the payments required to be made by Tenant for Real
Estate Taxes pursuant to Section 8 of this Lease, Tenant shall pay, as
additional rent, any privilege, license, sales, gross income, excess,
occupancy, use or any other tax (as distinguished from Federal or State Income
Taxes) at any time imposed upon the rent payments or Tenant's occupancy or use
of the Premises, or upon Landlord in an amount based upon such rent payments,
Tenant's occupancy or use of the Premises, or the common areas in the Shopping
Center (hereinafter referred to as "Rental Occupancy Tax") whether the
imposition of such Rental Occupancy Tax shall be made by the Federal
Government, the State Government or any agency, subdivision or municipality
thereof. Tenant shall pay said additional Rental Occupancy Tax monthly to the
Landlord, or at other intervals as determined by Landlord from time to time.
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE
Tenant will promptly pay all Minimum Guaranteed Rent, additional rent
and other payments called for herein when and as the same shall become due and
payable. All sums of money or charges payable by Tenant to Landlord under this
Lease shall be paid when due, without any deductions, abatements or offsets
whatsoever, and the failure to pay such sum or charges carries the same
consequences as Tenant's failure to pay rent. Any payments of rental or other
charges by Tenant, or acceptance by Landlord of a lesser amount than shall be
due from Tenant to Landlord, shall be treated as a payment on account. The
acceptance by Landlord of a check for a lesser amount with any endorsement or
statement thereon, or upon any letter accompanying such check, that such lesser
amount is payment in full, shall be given no effect, and Landlord may accept
such check without prejudice to any other rights or remedies which Landlord may
have against Tenant.
In the event Landlord shall fail to receive any payment of rent
required under this Lease when due, Landlord shall give Tenant written notice
of such failure, and in such event Landlord shall make reasonable efforts to
advise Tenant's chief accounting officer by telephone of such failure. In the
event Tenant fails to pay within two (2) business days following receipt by
Tenant of written notice any payment of rent when due more than one time in any
lease year, Tenant agrees to pay commencing with the second late payment in
each lease year, a late penalty charge in an amount equal to Two Hundred Fifty
Dollars ($250.00), if Landlord shall fail to receive same within two (2)
business days following receipt by Tenant of written notice. Further,
commencing with the second late payment in any lease year during the term
hereof, late payments of rent not received within the aforesaid two (2)
business day period shall bear interest from the date due at the annual rate of
twelve percent (12%) per annum or two percent (2%) over the prime lending rate
of Riggs Bank, N.A., whichever is higher.
The provisions of this Section are cumulative and shall in no way
restrict the other remedies available to Landlord in the event of Tenant's
default as provided for under this Lease.
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS
Landlord shall be responsible for providing fire and extended coverage
insurance for the Shopping Center and the Premises in an amount not less than
80% of the full replacement cost (excluding insurance on Tenant's inventory,
equipment, furniture and fixtures, and other contents within the Premises) and
<PAGE> 14
such cost shall be included in the Shopping Center Operating Costs in
accordance with Section 7 of this Lease. Landlord shall self- insure for any
amounts less than 100% of the full replacement cost.
Tenant, at its sole cost and expense, shall be responsible for
providing a policy of fire and extended coverage insurance, insuring Tenant's
inventory, equipment, furniture and fixtures, and all other contents in the
Premises. Tenant shall also maintain, at its sole cost and expense, a policy
of plate glass insurance naming both Tenant and Landlord as insureds, with a
standard mortgagee endorsement satisfactory to Landlord's mortgagee, for the
full replacement cost of repairing and/or restoring all of the plate glass in
the Premises. In lieu of such plate glass insurance, Tenant may be
self-insured, provided Tenant replaces any damaged glass with glass of like
kind and quality at Tenant's expense with due diligence after the damage occurs
from any cause whatsoever. Failure to replace any damaged glass as herein
provided shall constitute a default under this Lease. Tenant's insurance
policies shall provide that they may not be canceled without at least thirty
(30) days prior written notice to Landlord of such cancellation and Tenant
shall deposit certificates of such insurance policies with Landlord upon the
commencement of the term of this Lease.
19. UTILITIES
Tenant shall, at its own cost and expense, pay promptly all charges
when due for water, gas, electricity, heat, sewer rentals or service charges,
and any other utility charges rendered or furnished to the Premises or incurred
by Tenant in its use and occupancy thereof, including charges incurred during
Tenant's "fixturing" period under Section 25 herein.
If Landlord is required to supply water, gas, electricity, heat, sewer
rentals or service charges, or any other utility service, for the Shopping
Center and/or the Premises, then Tenant agrees to purchase same from Landlord
at the then prevailing local rates and charges, and to pay promptly the charges
therefor when bills are rendered to Tenant. Tenant shall use reasonable
diligence in conservation of these utilities.
Landlord shall provide and install environmental heating and
air-conditioning equipment in the Premises and Tenant shall, at its sole cost
and expense, operate, maintain and repair the heating and air-conditioning
equipment herein referred to, including the making of all necessary
replacements thereto, throughout the term of this Lease and any renewal
thereof. Tenant shall pay for all fuel, water, gas and electricity consumed in
such operation. Landlord shall under no circumstances be liable to Tenant for
damages or otherwise for any interruption in service of water, electricity,
heating and/or air-conditioning or other utilities and services caused by the
making of any necessary repairs, replacements and/or improvements thereto, or
by any cause beyond Landlord's reasonable control, unless caused by the
negligence of Landlord, its agents or servants.
20. TENANT'S SIGNS
In order to obtain a harmonious appearance in the Shopping Center,
Landlord has established specifications and regulations for exterior signs.
Marked Exhibit "B", attached hereto and made a part hereof, is a copy of
Landlord's Sign Regulations, setting forth Landlord's specifications for
Tenant's sign(s) to be placed on the exterior of Tenant's store.
Tenant is required to install prior to opening for business in the
Premises and at all times thereafter maintain in good condition and repair,
including keeping same lighted, as hereinafter set forth, and exterior sign(s)
above Tenant's storefront and, upon Landlord's request, an exterior
under-canopy sign in front of Tenant's storefront in the area designated and as
approved by Landlord. All said storefront signs shall be kept illuminated
during the hours from at least dusk until 9:00 P.M., Monday through Saturday,
and at all other times the Tenant is open for business. Tenant shall comply
with all applicable requirements of governmental authorities having
jurisdiction and Tenant shall be responsible for obtaining all necessary
permits. Tenant shall make all repairs required by reason of the installation,
maintenance and removal of its sign(s). Tenant shall not maintain or display
any sign, lettering or lights on the interior or exterior surfaces of windows
of the Premises and shall not attach any non-permanent sign to the inside of
any window of the Premises which may be visible through such window from the
outside other than temporary signs which have been professional prepared.
In accordance with Exhibit "B", prior to fabrication or installation
of Tenant's sign(s) Tenant shall submit Tenant's sign plan to Landlord for
approval, which approval shall not be unreasonably withheld providing Tenant's
sign plan conforms to Exhibit "B" and providing Tenant's sign plan is not in
violation of governmental codes. Landlord will need a minimum of four (4)
copies of said plan for approval.
Upon approval by Landlord of Tenant's sign plan, a copy of said plan
shall be identified at TENANT'S FINAL APPROVED SIGN PLAN, marked FINAL EXHIBIT
"B", and be attached and made a part hereof. Tenant shall be in default
hereunder if Tenant installs a sign which has not been first approved by
Landlord, and any sign installed without such prior written approval may be
removed by Landlord at
<PAGE> 15
Tenant's cost and expense.
Notwithstanding the foregoing, Tenant agrees that Landlord has the
right, at Landlord's discretion, at any time during the lease term, to remodel
or change the mansard and/or other exterior surfaces of the Shopping Center.
Tenant understands that during such remodeling, it might be necessary to remove
Tenant's existing sign(s) and that said sign(s) may not be suitable for
reinstallation after the remodeling is completed. Said sign(s), or parts
thereof, which Tenant had installed, shall remain the property of Tenant, but
Landlord is hereby released from any and all liability for damage to said
sign(s) during its removal, providing said removal is conducted with reasonable
care. Landlord shall give Tenant notification as to the approximate date that
said remodeling will commence, as well as the anticipated completion date. If
such remodeling occurs during the original term, Landlord shall pay for any new
signage required by Landlord. During the remodeling, Tenant agrees to
cooperate with Landlord and execute any necessary documentation required to
facilitate the remodeling process. It may be necessary to erect scaffolds or
other construction equipment during the remodeling, but free and easy customer
access to the Premises shall not be unreasonably impaired, nor shall such
access be denied.
In the event the remodeling requires the Tenant to install a sign
comprised of individual, internally illuminated letters, then Tenant shall, at
its sole cost and expense, including all permits and governmental approval(s),
cause its sign, which has been approved by Landlord in accordance with this
Section 20, to be installed in the area designated by Landlord provided,
however, if the remodeling occurs during the original term, Landlord shall pay
for any new signage required by Landlord. Additionally, the Shopping Center's
sign plan and criteria may call for under-canopy signs and Tenant will be
required to have its under-canopy sign installed, maintained, removed, etc., at
its expense, consistent with Landlord's criteria and the provisions of this
Section 20 and with the Landlord's approval.
At the expiration of Tenant's occupancy of the Premises, Tenant shall
be responsible for removing Tenant's sign face from the sign box and replacing
same with a blank coordinating plate or removing Tenant's individual lettered
sign and satisfactorily restoring the surfaces damaged by the sign removal. In
the event the Tenant does not remove its sign face or individual lettered sign,
whichever the case may be, upon the expiration of its occupancy of the
Premises, then Landlord may cause the removal of said sign(s) in accordance
with the foregoing, at the sole cost and expense of Tenant. In such event, the
sign(s) shall be deemed abandoned and Landlord may dispose of same as it sees
fit.
Tenant shall be responsible for the day-to-day maintenance of its
sign, including but not limited to the replacement of light bulbs, and for the
maintenance, repair and replacement of its sign face, and for the utility
charges necessary to illuminate the sign. Damage to the sign by any cause
shall be the responsibility of Tenant unless caused by Landlord, its agents or
employees, in which event Landlord shall repair or replace the sign.
Without limiting the foregoing, the same shall not be construed as a
representation that Landlord will be remodeling the Shopping Center.
21. CONSTRUCTION OF THE PREMISES
Subject to the provisions contained in Section 22 below and Exhibit
"C" hereof, Landlord shall construct, at its expense, the Premises
substantially in accordance with the general specification entitled
"Description of Landlord's Work", as set forth or referred to in Exhibit "C"
attached hereto and made a part of this Lease. After construction by Landlord,
Tenant shall maintain and be responsible for the Premises, its equipment and
interior finishes as set forth in Exhibit "C".
22. COMPLETION AND DELIVERY OF THE PREMISES
Landlord shall use commercially reasonable efforts to substantially
complete construction of the Premises on or before October 1993; provided,
however, that in the event Landlord shall be delayed in the performance of such
construction by reason of strikes, lockouts, labor troubles, inability to
procure materials, delays in construction, failure of power, governmental
restrictions, rules, regulations, ordinances, laws, approvals or permits or
reasons of a similar nature not the fault of Landlord, then such performance by
Landlord shall be excused for the period of any such delay or delays and the
period for the performance and substantial completion of such construction
shall be automatically extended herein for a period equivalent to the
cumulative period of such delay or delays. In event construction of the
Premises has not been substantially completed within thirty (30) months from
the date of this Lease, then at anytime after said thirty (30) months either
Landlord or Tenant, upon written notice to the other, may terminate this Lease
with no further liability or obligation by or against either party hereto, and
Landlord shall not be liable to Tenant for any loss or damage caused by such
delay(s) or otherwise. Tenant may negate Landlord's termination of this Lease
under this Section 22 by giving Landlord notice with ten (10 days after
Landlord notifies Tenant of Landlord's termination of the Lease under this
Section, which notice from Tenant will include and shall be deemed to be an
undertaking by Tenant to (i) complete the work at Tenant's sole cost and
expense and (ii) open for business within six (6)
<PAGE> 16
months after Tenant's notice to Landlord. Tenant's failure to do so after
giving such notice will give Landlord the absolute, unavoidable right to
terminate this Lease immediately upon notice to Tenant. Should Tenant complete
the work and open for business within six (6) months after Tenant's notice to
Landlord, Landlord shall pay to Tenant, within ten (10) days after (i) Tenant
opens for business, and (ii) Tenant delivers a copy of its non-residential use
permit authorizing Tenant's use and occupancy of the Premises, and appropriate
lien waivers and releases, the balance of the contract price that would have
been paid to Landlord's contractor by Landlord had the work been completed
according to Landlord's contract with such contractor for the construction of
the Premises in accordance with Exhibit "C" attached hereto. Landlord shall
deliver to Tenant together said payment a full copy of the construction
contract with Landlord's contractor. From and after the delivery of the
Premises to Tenant, all repairs and/or replacements to the Premises and the
items set forth in Exhibit"C" shall be the responsibility of Tenant at its sole
cost and expense, except for latent defects and structural defects. Any latent
defect must be reported in writing within thirty (30) days after Tenant
discovered or should have discovered such defect. Upon delivery of the
Premises, Tenant shall be responsible for applying and/or having all utilities
transferred to its name for billing purposes and Tenant shall be responsible
for payment of same.
23. MAINTENANCE AND USE OF COMMON AREAS
Landlord will construct and the Shopping Center will include a parking
area, or areas, together with the access roads, as required by governmental
authorities. Landlord hereby grants to Tenant and Tenant's invitees a right,
during the term here of, to use in common with other entitled to the use
thereof, said parking area, or areas, and the sidewalks and curbs, subject to
the Landlord's rights herein. The manner in which such areas and facilities
shall be maintained, and the expenditures therefor, shall be at the reasonable
discretion of Landlord and as is customary in the industry in order to maintain
such areas and facilities in a reasonable good and clean order and condition
consistent with "first class" standards of their similar shopping centers
located in the Washington, D.C. metropolitan area, the use of such parking
areas and other common area facilities shall be subject to such reasonable
regulations as Landlord may make from time to time. Any such rules shall not
discriminate against Tenant or materially alter Tenant's obligations under this
Lease.
Tenant shall direct and instruct its employees to use only such
parking areas provided by Landlord from time to time for employee parking, and
not to use the areas provided for customer parking. Tenant shall not at any
time allow any trucks or any other vehicles servicing its store to stand or
park in the access roads or areas provided for customer parking.
Notwithstanding the foregoing, Landlord recognizes that on occasion certain
trucks and other vehicles servicing Tenant's store may be required to stand or
park in the access roads or parking areas on a temporary basis (i.e., while
waiting for other trucks or vehicles to complete their unloading at Tenant's
loading dock facility). All deliveries of goods, wares, merchandise, etc.,
shall be at the rear of the Premises, unless, for any reason, access to the
rear of the Premises is obstructed on a temporary or permanent basis, in which
event, Tenant shall have the right to make its deliveries through the front of
the Premises. Further, on an incidental basis, small vans other vehicles may
make deliveries of goods, wares, merchandise, etc. through the front doors of
Tenant's store.
Notwithstanding anything else contained in this Lease, if Landlord
fails to maintain the Common Areas or its other obligations under this lease,
after expiration of thirty (30) days following written notice to Landlord,
Tenant shall be entitled to enforce its rights at law, and the party prevailing
in any such action, as determined by the court, shall be entitled to recover
all reasonable expenses incurred in such action, including reasonable
attorney's fees and court costs.
Landlord is required to keep the parking lot illuminated until at
least one-half hour after Tenant closes its store for business, but not later
than 11:00 p.m.
The Shopping Center may be constructed in stages or it may be
determined that alterations are to be made and construction of later stages or
future alterations may necessitate the rearrangement and alteration of some or
all of the then existing common areas. Landlord, therefore, reserves the right
in its sole discretion to change, rearrange, alter, modify or supplement any or
all of the areas designed for the common use and convenience of all tenants,
excepting the "No Build Area" shown on Exhibit "A", so long as adequate common
area facilities are made available to the Tenant herein.
24. TENANT'S WORK
(a) Tenant covenants, warrants and represents that it shall design
and maintain the interior decor and fixturization of the Premises in a manner
consistent with the high standards of the retailing industry.
(b) It is understood and agreed that any work required for Tenant
to open and operate its store for business from the Premises or required by
Tenant to the extent that it will be in addition to the Description of
Landlord's Work, as outlined in Exhibit "C" hereof or elsewhere herein, shall
be performed and paid
<PAGE> 17
for wholly by tenant. Landlord undertakes no responsibility for the
performance and/or payment of Tenant's work.
(c) Tenant agrees to secure, pay for and maintain, or cause its
contractor(s) to secure, pay for and maintain during the continuance of
construction and fixturing work on or about the Demised Premises, an "All Risk
Physical Loss" Builders Risk policy, Comprehensive General Liability Insurance
(including Protective Liability) with a combined single limit of $1,000,000 and
Workmen's Compensation Employer's Liability Insurance as required by law.
25. FIXTURING TENANT'S STORE: OPENING
Landlord shall give Tenant written notice ("Notice of Substantial
Completion") by certified mail at lease forty-five (45) days prior to the date
(the "Delivery Date") that Landlord's work will be substantially complete and
the Premises will be available for Tenant to commence its work. Substantial
Completion shall mean that except for minor punch list items, the following
items are or will be complete by the Delivery Date: the roof is completed and
watertight; the building is secure; all walls, and partition wall(s) are
completed; the exterior glass is installed; the exterior doors are installed
and operating; the loading docks are completed; the ceiling is completely
installed; flooring (including floor and floor covering) is completed; the
plumbing rough-in and electrical rough-in are completed; and the mezzanine (if
any) is completed. From and after the Delivery Date, and prior to the Rent
Commencement Date, Tenant shall have the privilege, rent free, of working in
the Premises for the sole purpose of installing its own sales, lighting and
trade fixtures, machinery, if any, and any other equipment, to be done at
Tenant's own cost and expense. Tenant agrees that during this "fixturing"
period any and all utilities will be at Tenant's cost and expense. Prior to
taking occupancy of the Premises, Tenant shall submit to Landlord insurance
certificate(s) as called for under Sections 18, 24 (d) and 40 herein. Within
ninety (90) days following the Notice of Substantial Completion, the (1)
Shopping Center entrances and exits will be clearly marked and in place, (2)
the Shopping Center parking areas will be paved, lighted and striped, if
required, (3) the delivery area for the Premises will be easily accessible for
stocking the Premises, (4) utilities that are servicing the Premises will be
connected and available for use or consumption, and that electric, water and
drain lines will be connected to (i) the equipment provided by Landlord in the
Premises and (ii) the trade fixtures and refrigerated cases supplied by Tenant,
and (5) Landlord shall have performed all work required of Landlord under this
Lease in order for Tenant to obtain a final use and occupancy permit; Landlord
will cooperate and assist Tenant in securing a final use and occupancy permit
for the Premises (in the event that all these conditions have not been
fulfilled and Tenant had not commenced business to the public, the
Commencement Date shall be deferred for an additional period of time equal to
the number of days from the date Tenant is ready to open for business and the
date that all these conditions are fulfilled). Tenant shall open its store for
business on or before the Rent Commencement Date. At Landlord's request,
Tenant shall enter into a short form agreement confirming the Commencement
Date, the Rent Commencement Date and the Termination Date in the form attached
hereto as Exhibit "G".
26. OCCUPANCY AND OPERATING HOURS
Upon entry into the Premises, Tenant thereby accepts and acknowledges
that the said Premises are in the condition required by this Lease subject to
latent defects. Tenant hereby covenants, warrants and represents that subject
to force majeure delays and any express right Tenant may have hereunder to
cease operations, it will occupy the Premises promptly upon the commencement of
the term, and at all times during the first five (5) years of the lease term,
Tenant shall continuously and uninterruptedly operate its business from the
Premises for the uses set forth in Section 30 of this Lease (this being a
material inducement for Landlord to enter into this Lease) during all normal
hours of Tenant's operations. Tenant shall operate and be open for business,
at a minimum, during the hours of 10:00 a.m. to 9:00 p.m., Monday through
Saturday. Tenant understands and agrees that it shall, throughout the term
hereof, reasonably stock its store and maintain the same all in keeping with
the high standards of the retailing industry. The failure of Tenant to operate
its Premises in accordance with this provision, or the abandonment or vacating
of any substantial portion of the Premises, shall constitute a material breach
of the Lease giving rise to the remedies provided in this Lease and by law and,
in addition, Landlord shall be entitled among its other remedies to enjoin
Tenant's use of the Premises by seeking injunctive relief or other appropriate
remedy. Tenant shall conduct no distress sales, such as "going out of
business", fire or bankruptcy sales, on the Premises or elsewhere in the
Shopping Center, and a default by reason of Tenant's conducting such a sale
shall constitute a default under this Lease entitling Landlord to the remedies
provided in this Lease and by law including, but not limited to, injunctive
relief or other appropriate remedy.
After the expiration of the first five (5) years of the lease term,
Tenant shall have the right at any time to discontinue operating and go dark
from the Demised Premises provided Tenant has given Landlord at lease nine (9)
months prior notice in writing by certified mail that it intends to discontinue
its operation and go dark and specifying in said notice its intended last day
of operation.
<PAGE> 18
Landlord shall be entitle to terminate this Lease effective as of the
date of Tenant's intended last day of operation by giving written notice of
such termination to Tenant at any time following Tenant's aforesaid notice,
provided said written notice of termination is given Tenant at least thirty
(30) days prior to the date of tenant's intended last day of operation and
prior to the Landlord receiving any Tenant's Transfer Notice under Section 51.
27. REPAIRS
(a) Landlord shall keep the foundation, roof, roof supports,
gutters, the outer walls and utility lines outside the Premises (excluding
doors, windows, glass, ceiling, mechanical, electrical and plumbing equipment,
and utility lines located outside the Premises which service only the Premises)
of Tenant's Premises in good repair, except that Landlord shall not be called
on to make any such repairs occasioned by the act or negligence of Tenant, its
agents, contractors, invitees, customers or employees, and Tenant shall pay its
pro-rata share of such expenses which are includable as a Shopping Center's
Common Areas Operating Cost under Section 7 of this Lease. Landlord shall not
be liable to maintain or make any other improvements, repairs or replacements
of any kind upon the Premises, unless caused by the negligence of Landlord, its
agents, servants or employees, or unless specifically provided elsewhere in
this Lease.
(b) Except for the repairs that Landlord is obligated to make,
Tenant, at its expense, shall at all times be responsible for promptly making
all repairs and replacements and performing all maintenance work in and to the
Premises necessary and required to keep said Premises and its equipment in good
condition and repair, and also in a clean, sanitary and safe condition in
accordance with all directions, rules and regulations of the health officer,
fire marshal, building inspector or other proper officers of the governmental
agencies having jurisdiction. Tenant shall comply with all requirements of
law, ordinances and otherwise affecting the premises, and shall permit no
waste, damage or injury to said Premises. Tenant shall also initiate and carry
out a program of regular maintenance and repair of the Premises, including, but
not limited to, the painting or refinishing of all areas of the interior, and
the maintaining or replacing of all trade fixtures and equipment, ceiling tile,
flooring and other items of display used in the conduct of Tenant's business,
so as to impede, to the extent reasonably possible, deterioration by ordinary
wear and tear and to keep the same in attractive condition throughout the lease
term. Tenant shall at its own cost and expense replace any broken or cracked
windows and doors in the Premises, unless such damage is caused by the
negligent act or omission of Landlord, its agents or employees, in which case
Landlord shall repair such damage at its own cost and expense.
(c) Landlord shall have a reasonable time after receipt of written
notice from Tenant to commence and complete repairs required of Landlord
hereunder. Notwithstanding anything else contained in this Lease, if Landlord
fails to use due diligence in making such repairs, Tenant, at its option, may
make such repairs and Landlord shall reimburse Tenant for the cost of such
repairs within thirty (30) days from the date Tenant bills Landlord.
28. ALTERATIONS BY TENANT
Tenant will not alter the exterior of the Premises (including the
storefront and/or signs) and will not make any structural alterations to the
exterior or interior of the Premises or any part thereof without first
obtaining Landlord's written approval of such alterations which approval shall
not be unreasonably withheld or delayed. Tenant agrees that any such
improvements made by it shall immediately become the property of Landlord shall
remain upon the Premises in the absence of agreement to the contrary. Tenant
further will not, except for installation of fixtures and other work to be
performed by it under Section 24 and in accordance with Tenant's plans approved
by Landlord, if any, cut or drill into or secure any fixture, apparatus or
equipment of any kind to any part of the Premises or make any roof penetration
without first obtaining Landlord's written consent, which consent may be
withheld in Landlord's sole and absolute discretion.
29. DAMAGE TO PREMISES OR IMPROVEMENTS
Tenant will repair promptly at its expense any damage to the Premises
or any other part of the Shopping Center, caused by bringing into the Premises
or onto the Shopping Center any item, material, property or other thing for
Tenant's use or benefit, or by the installation or removal of such item,
material, property or thing, regardless of fault or by whom such damage shall
be caused, unless caused by Landlord, its agents, employees or contractors; and
in default of such repairs by Tenant, Landlord may make the same and Tenant
agrees to pay, as an additional charge, the cost thereof to Landlord promptly
upon Landlord's demand therefore.
30. USE OF PREMISES
The Premises shall be used by Tenant solely for the purpose of
conducting therein the business of Tenant's Permitted Use (as defined in
Section 1) trading as "Total Beverage", and for no other use or purpose.
(Percentage Rent under Section 9 is based expressly upon this Use of Premises).
<PAGE> 19
Tenant hereby covenants and agrees that the use of the Premises is
subject to the Use of Premises Restrictions as listed in Exhibit "E" attached
hereto and made a part hereof.
31. OPERATION BY TENANT
In regard to use and occupancy of the Premises and common areas,
Tenant will: (a) keep the inside and outside of all glass in the doors and
windows of the Premises clean; (b) keep all exterior storefront surfaces of the
Premises clean, including removal of ice and snow; (c) keep the Premises clean
at all times, including removal of debris and loose trash; (d) replace
promptly, at its expense, any cracked or broken plate or window glass of the
Premises with glass of like kind and quality unless caused by the negligent act
or omission of Landlord, its agents or employees; (e) maintain the Premises at
its expense in a clean, orderly and sanitary condition and free of insects,
rodents, vermin and other pests; (f) keep any garbage, trash, rubbish or refuse
in the Premises or on the sidewalk immediately adjacent thereto removed at its
expense on a regular basis; (g) keep all mechanical apparatus located inside
the Premises or exclusively serving the Premises and under the control of
tenant free of vibration and noise which may be transmitted beyond the
Premises; (h) comply with all laws, ordinances, rules and regulations of
governmental authorities and use commercially reasonable efforts to comply with
all recommendations of the Fire Underwriters Rating Bureau now or hereafter in
effect; (i) use reasonable efforts to keep its grocery carts out of or removed
from the common areas (excluding Tenant's cart corral); (j) conduct its
business in all respects in a dignified manner in accordance with high
standards of store operation. Tenant will not place, maintain or store any
merchandise, signs (other than exterior signage permitted under Section 20 of
this Lease), or other articles on the footwalks adjacent thereto or elsewhere
on the exterior of the Premises or common areas; use or permit the use of any
objectionable (in Landlord's sole determination) advertising medium such as,
without limitation, spot lights or search lights, loud speakers, phonographs,
public address systems, sound amplifiers, radio or video broadcasts within the
Shopping Center which is in any manner audible or visible outside of the
Premises permit the placement or installation of any video, pinball or
amusement devices within the Premises or the common areas; permit undue
accumulations of garbage, trash, rubbish or other refuse within or without the
Premises or the common areas adjacent thereto; cause or permit objectionable
(in Landlord's sole determination) odors to emanate or to be dispelled from the
Premises; solicit business in the parking or other common areas; distribute
handbills or other advertising matter to, in or upon any automobiles parked in
the parking areas or in any other common area; permit the parking of delivery
vehicles so as to interfere with the use of any driveway, walk, parking area or
other common area in the Shopping Center unless Tenant's regular loading
facility has been blocked by Landlord or is not otherwise available to Tenant;
erect, place or maintain any aerial or antenna on the roof or exterior walls of
the Premises.
Tenant shall locate its trash compactor in such area approved by
Landlord.
32. EXTRA HAZARDS
Tenant will not knowingly or recklessly do or suffer to be done, or
keep or suffer to be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage by fire or other
hazards (including, without limitation, public liability) or which will prevent
Landlord from procuring such policies in companies acceptable to Landlord. If
Tenant shall cause anything to be done, omitted to be done or suffered to be
done by Tenant, or if any item, material or thing is kept or suffered by Tenant
to be kept in, upon or about the Premises, which causes the rate of fire or
other insurance of the Premises or other property of Landlord, as determined by
insurance companies acceptable to Landlord, to be increased beyond the minimum
rate from time to time applicable to the Premises for the use permitted under
this Lease or to any other property for the use made thereof, Tenant shall pay
as an additional charge the amount of any such increase upon Landlord's demand
thereof. Provided, however, Tenant shall not be liable for any increase in the
premium for casualty insurance carried by Landlord under this lease due to
other tenant's use of its respective premises. Further, Tenant shall not
install any electric equipment that overloads the lines in the Premises
provided Landlord has constructed the Premises with sufficient electrical power
to satisfy the needs of Tenant as shown on the plans approved by Landlord and
Tenant pursuant to Exhibit "B"; nor keep on said Premises in an inappropriate
or unsafe container any inflammable, combustible, hazardous or other dangerous
materials; nor handle, store or dispose of any chemical, environmentally unsafe
or other hazardous waste or material except in strict accordance with all
applicable federal, state and local laws, ordinances and regulations.
33. PLUMBING
The plumbing facilities shall not be used for any purpose other than
that for which they are constructed and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be the Tenant's liability.
<PAGE> 20
34. DISPLAY LIGHTING
If requested by Landlord, Tenant shall keep the display windows in the
Premises well lighted from dusk until 9:00 P.M., or such later time as Tenant
may be open for business, during each and every weekday except Sundays and
holidays during the term of this Lease.
35. ROOF AND WALLS
Landlord shall have the exclusive right to use all or any part of any
leasable areas over the Premises and the roof of the building in which the
Premises is located for any purpose; to erect additional stories or other
structures over all or any part of the Premises; to erect in connection with he
construction thereof scaffolds and other aids to construction on the exterior
of the Premises provided that free and easy customer access to the Premises
shall not be unreasonable impaired nor shall such access be denied; and to
install, maintain, use, repair and replace within the Premises pipes, ducts,
conduits, wires and all other mechanical equipment serving other parts of the
Shopping Center, the same to be in locations within the Premises as will not
materially interfere with Tenant's use thereof. Landlord shall use reasonable
efforts not to interfere with Tenant's business operations in the Premises.
Landlord may make any use it desires of the side or rear walls of the
Premises, and the area over the Premises, provided that such use shall not
encroach on the interior of or materially or unreasonably restrict the service
access to the Premises.
36. LIENS AND INDEMNITY
(a) Tenant covenants and agrees that any construction and
improvements as required of Tenant under this Lease (sometimes herein referred
to as "Tenant's work"), and any maintenance and repair work, alterations and
the like, shall be of good quality, leaving the Premises at all times free of
liens for labor and materials. In the event any mechanic's lien shall at any
time be filed against the Premises by reason of work, labor, services or
materials performed or furnished to Tenant or to anyone holding the Premises
through or under Tenant, Tenant shall forthwith cause the same to be bonded or
discharged of record. If Tenant shall fail to cause such lien to be so bonded
or discharged within thirty (30) days after being notified of the filing
thereof, then Tenant shall be in default under this Lease, and in addition to
any other right or remedy of Landlord, under the terms of this Lease and at
law, Landlord may, but shall not be obligated to, discharge the same by paying
the amount reclaimed to be due, and the amount so paid by Landlord and all
costs and expenses, including reasonable attorneys' fees incurred by Landlord
in procuring the discharge of such lien, shall be due and payable by Tenant to
Landlord as additional rental on the first day of the next following month.
(b) Tenant agrees to indemnify and hold harmless Landlord, its
successors, assigns, agents, employees and Landlord's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Tenant, its
agents, employees or contractors in the performance of any work performed by or
for Tenant on or about the Premises, provided there is no negligence on the
part of Landlord, its employees or agents.
(c) Landlord agrees to indemnify and hold harmless Tenant, its
successors, assigns, agents, employees and Tenant's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Landlord, its
agents, employees or contractors in the performance of any work performed by or
for Landlord on or about the Premises, provided there is no negligence on the
part of Tenant, its employees or agents.
37. TENANT'S FIXTURES
All trade fixtures and apparatus owned, leased or conditionally
purchased by Tenant and installed in the Premises shall be considered personal
property and shall remain the property of Tenant and shall be removable from
time to time and also at the expiration of the term of this Lease, or any
renewal or extension thereof, or other termination thereof, provided Tenant
shall not at such time be in default under any covenant or agreement contained
herein beyond any applicable cure period; and if in default, Landlord shall
have a lien on said trade fixtures and apparatus as security against loss or
damage resulting from any such default by Tenant and said trade fixtures and
apparatus shall not be removable by Tenant until such default is cured.
38. INSPECTION BY LANDLORD
Landlord shall have the right to enter upon the Premises without
notice at all reasonable hours for the purpose of inspecting the same, or for
making repairs, additions or alterations to the Premises or any property owned
or controlled by Landlord. Landlord shall use reasonable efforts not to
interfere with Tenant's business operations in the Premises. If Landlord deems
that any repairs or maintenance to the Premises are required to be made, which
are the
<PAGE> 21
Tenant's responsibility under this Lease, it may demand that Tenant make the
same forthwith and if Tenant refuses or neglects to commence such repairs or
maintenance and complete the same with reasonable dispatch, Landlord may make
or cause such repairs or maintenance to be made, and shall not be responsible
to Tenant for any loss or damage that may accrue to its stock or business by
reason thereof, other than as caused by Landlord's negligent act or omission.
If Landlord makes or causes such repairs or maintenance to be made, Tenant
agrees that it will forthwith, on demand, pay to Landlord the reasonable cost
thereof along with the next installment of rental.
39. COVENANT TO HOLD HARMLESS
(a) Tenant shall indemnify and hold Landlord, its partners,
officers, directors, agents and employees harmless from and against all
liability, claims, actions, damages and expense, including reasonable
attorney's fees and court costs, in connection with the loss of life, personal
injury or damage to property, including but not limited to the person and
property of Tenant, Tenant's employees and any person or any property in or
upon said Premises, and the sidewalks adjoining same that are under Tenant's
control (such as, but not limited to, a cart corral area), and any loading
platform area allocated to the use of Tenant, who is or are present at Tenant's
implicit or explicit invitation or with Tenant's implicit or explicit consent,
provided there is no negligence on the part of Landlord, its employees or
agents. Provided, however, that Tenant's indemnity relative to the sidewalks
adjoining the Premises that are under Tenant's control shall be strictly
limited to those circumstances resulting from a breach by Tenant of its
obligations, covenants and responsibilities under this Lease and /or the
negligent or wilful act or omission of Tenant, its employees, agents, or
contractors. It is understood and agreed that all property kept, stored or
maintained in the Premises shall be so kept, stored or maintained at the risk
of Tenant only. Tenant shall not suffer or give cause for the filing of any
lien against said Premises.
(b) Tenant shall be defended in court or otherwise and held
harmless by Landlord from any liability for damages to any person or any
property in or upon the Common Areas of the Shopping Center, provided there is
no negligence on the part of Tenant, its employees or servants.
40. PUBLIC LIABILITY
(a) Tenant shall keep in full force and effect a policy of
comprehensive commercial general public liability insurance with respect to the
Premises and the business operated by Tenant, and/or any subtenant,
concessionaire or licensee of Tenant in the Premises, with a company licensed
in the State of Virginia and insures a majority of Tenant's other stores in
said State, in which Landlord, and Landlord's mortgagee shall be all named as
additional insureds, and in which the limits of liability shall not be less
than One Million Dollars ($1,000,000.00) combined single limit coverage per
occurrence for personal injury, death and property damage. Tenant shall
furnish Landlord with a certificate or certificates of insurance or other
acceptable evidence that such insurance is in force at all times during the
lease term. Tenant shall obtain and maintain an insurance policy against
damage by reason of the operation and maintenance of the sprinkler system, if
any, installed within the Premises. In lieu of such sprinkler insurance,
Tenant may self-insure. Tenant shall maintain such system. Tenant understands
that the sprinkler system requires semiannual maintenance and that failure to
maintain the system will result in loss of insurance or benefits under said
insurance policy.
(b) Landlord shall cause to be issued and shall keep in full force
and effect a public liability insurance policy with respect to the common areas
of the Shopping Center which will provide protection to Landlord and the
tenants in the Shopping Center, and which the limits of liability shall not be
less then One Million Dollars ($1,000,000.00) single limit coverage for
personal injury and property damage. The cost of such insurance policy shall
be a Shopping Center Common Area Operating Cost. Landlord shall, upon written
request, deliver to Tenant a certificate of insurance or other acceptable
evidence that such insurance is in full force and effect at all times during
the lease term.
41. LIMITATION OF LANDLORD'S LIABILITY
Landlord shall not be liable to Tenant for Tenant's loss of business,
or other consequential loss or damage, whether resulting from failure of
utilities, services or otherwise unless caused by the negligent act or omission
of Landlord, its agents, servants or employees. It is understood and agreed
that the liability of Landlord hereunder shall be limited solely to the assets
and property of the Shopping Center; that no general partner of Landlord, nor
any officer, director, agent or employee of Landlord shall be personally liable
with respect to any claim arising out of or related to this Lease; and that a
deficit capital account of a partner of Landlord shall not be deemed an asset
or property of the Shopping Center.
42. DAMAGE TO PREMISES
If the permanent improvements of Tenant's Premises shall be partially
destroyed by fire, or other casualty, insurable under full standard risk
<PAGE> 22
insurance, whereby the Premises shall be rendered untenantable only in part,
the Landlord shall promptly at its own expense (and with the use of any
insurance proceeds), cause the damage to be repaired, except as hereinafter
provided, and the Minimum Guaranteed Rent and other payments herein, meanwhile
shall be abated proportionately as to that portion of the Premises rendered
untenantable. If by reason of said fire or other casualty the Premises shall
be rendered wholly untenantable, Landlord shall promptly, at its own expense,
cause such damage to be repaired, except as hereinafter provided, and the
Minimum Guarantee Rent and other payments herein shall be abated in whole until
said Premises are restored, unless within ninety (90) days after said
occurrence Landlord shall give Tenant written notice that it has elected not to
reconstruct the destroyed Premises, in which event this Lease and the tenancy
hereby created shall cease as of the date of said occurrence, the Minimum
Guaranteed Rent, the percentage rent and other payments herein to be adjusted
as of such date. Notwithstanding the foregoing, if other portions of the
Shopping Center (in addition to or instead of the Premises) are at any time
during the term hereof damaged by fire or other casualty to such an extent that
the Landlord or the then first mortgagee of the Shopping Center determines that
the Shopping Center shall not be repaired or restored, then, and in any of such
events, the Landlord shall have the right to terminate this Lease (provided all
leases of other tenants occupying spaces in the immediate vicinity of Tenant's
Premises are likewise terminated) upon written notice to the Tenant at any time
within ninety (90) days following such fire or other casualty, whereupon the
Lease shall be terminated and the parties shall be relieved of any further
obligation hereunder, with the Minimum Guaranteed Rent, the percentage rent and
all other payments of the Tenant to be adjusted as of the date set in
Landlord's notice of termination.
In the event Landlord shall exercise its right to cancel the Lease as
a result of such damage and shall commence the repair or reconstruction of the
Premises for the same use as provided in Section 30 in within eighteen (18)
months of the date Landlord gives notice to Tenant of such lease cancellations,
Landlord shall give Tenant written notice within thirty (30) days of the date
of such commencement of repair or reconstruction and Tenant shall have the
option, by giving written notice to Landlord within sixty (60) days of the date
of Landlord's notice, to reinstate this Lease at the same rental and on the
same terms and conditions as contained in this Lease for the period commencing
from the date of completion of the reconstruction or repair of the Premises
through the end of the original term of this Lease and option term, if
exercised by Tenant. This paragraph shall survive Landlord's termination of
the Lease.
43. CONDEMNATION
If the whole or any part of the Tenant's Premises shall be taken under
the power of eminent domain or under threat of condemnation, then this Lease
shall terminate as to the part so taken as of the day Tenant is required to
yield possession thereof, and Landlord shall make such repairs and alterations
as may be necessary in order to restore the part not taken to useful condition;
and the Minimum Guaranteed Rent shall be reduced proportionately as to the
portion of the Premises so taken. If (i) the amount of said Premises so taken
is more than fifteen percent (15%) of Tenant's sales area, or if (ii) more than
45% of the Common Areas are so taken, or if (iii) 25% of the "No Build Area"
shown on Exhibit "A" is so taken, then Tenant in the case of (i), (ii) or
(iii), or either Tenant or Landlord in the case of (ii) , by giving sixty (60)
days written notice to the other, shall have the option to terminate this Lease
as of the date Tenant is required to yield possession. All compensation
awarded for such taking of the fee and the leasehold shall belong to and be the
property of the Landlord; provided, however, that the Landlord shall not be
entitled to any portion of any award made to the Tenant specifically for the
cost of removal of stock and fixtures.
Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be separately
awarded or recoverable by Tenant in Tenant's own right on account of any and
all damage to Tenant's business by reason of any condemnation and for or on
account of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture, fixtures and equipment provided that any such award
does not reduce any award to which Landlord may be entitled.
44. BANKRUPTCY
In the event the estate created hereby shall be taken in execution or
by other process of law, or if Tenant shall be adjudicated insolvent or
bankrupt pursuant to the provisions of any state or federal insolvency or
bankruptcy act, or if a receiver or trustee of the property of Tenant shall be
appointed by reason of Tenant's insolvency or inability to pay its debts, or if
any assignment shall be made of Tenant's property for the benefit of creditors,
then and in any of such events, Landlord may, at its option and in addition to
any other remedy available to Landlord, terminate this Lease and all rights of
Tenant hereunder by giving to Tenant written notice of the Landlord's election
to terminate.
In the event the trustee of the Tenant, or Tenant as debtor in
possession, shall timely assume this Lease under the Bankruptcy Code and
continue in possession of the Premises, it shall be the responsibility of the
trustee or debtor in possession to cure or give adequate assurance that all
defaults under the provisions of this Lease shall be promptly cured, to fully
compensate or
<PAGE> 23
provide adequate assurance of compensation for any and all losses suffered by
Landlord, and to provide adequate assurance that all conditions of this Lease
shall be performed in the future, including but not limited to:
(A) Adequate assurance of the payment of rent and other
consideration due under this Lease.
(B) Adequate assurance that percentage rent due will not
decline substantially.
(C) Adequate assurance that assumption or assignment will
not breach substantially any provisions such as
radius, location or use or exclusivity provisions in
other lease, financing or master agreements.
(D) Adequate assurance that assumption or assignment will
not disrupt substantially any tenant mix or balance.
In no event, will Landlord be required to provide additional services
or supplies under this Lease unless fully compensated by the trustee or debtor
in possession.
In the event that any new insolvency or receivership should occur
after the closing of the bankruptcy case, the Landlord may at its option, and
in addition to any other remedy available to Landlord, terminate this Lease and
all rights of the Tenant hereunder by giving to Tenant Written notice of the
Landlord's election to terminate.
45. BANKRUPTCY-USE OF PREMISES
In the event the trustee for Tenant, or Tenant as debtor in
possession, exercises certain rights as called for in Section 44 hereof which
would result in the Premises being used for a business other than that called
for under Section 30 herein (Use of Premises), then Landlord expressly reserves
the right to change or modify the Percentage Rent Rate and the Minimum Basis of
Sales as called for under Section 9 herein. Such change or modification shall
be in accordance with guidelines as issued by the International Council of
Shopping Centers or such other guidelines as may be available from time to
time.
46. DEFAULT
If any rental payable by Tenant to Landlord shall be and remain unpaid
for more than ten (10) business days after written notice from Landlord that
the same is due and payable, or if Tenant shall violate or be in default of any
of the other covenants, agreements, stipulations or conditions herein, and such
violation or default shall continue for a period of thirty (30) days after
written notice of such violation or default, unless Tenant has diligently begun
to correct such violation or default, in which case Tenant shall be given a
reasonable period of time in which to correct such violation or default with
due diligence, then it shall be optional for Landlord to declare this Lease
forfeited and said term ended, and to reenter the Premises, with process of
law, using such force as may be necessary to remove all persons or chattels
therefrom, and Landlord shall not be liable for damages by reason of such
reentry or forfeiture (but notwithstanding such reentry or forfeiture, Tenant
shall remain liable for any rent or damages which may be due or sustained prior
thereto and for any and all reasonable and necessary expenses which Landlord
may incur in reentering the Premises and preparing the same for reletting,
including, but not limited to, allocable overhead, alterations to the Premises
necessary to remove Tenant's improvements, repairs to the same and leasing,
construction, architectural and other professional fees); and, regardless of
whether Landlord elects to declare this Lease forfeited or not, Tenant shall
continue to pay the amount of rent reserved under this Lease at the times
herein stipulated for payment of rent for the balance of the term, less any
amount received by Landlord during such period from others to whom the Premises
may be rented on such terms and conditions and at such rentals as Landlord in
its sole discretion shall deem proper. In the event of default by Tenant,
Landlord shall have the right to avail itself of all remedies available under
the laws of the Commonwealth of Virginia whether stated in this Lease
specifically or not. The receipt by Landlord of any rent after Tenant's
default of any covenant or condition hereunder or during the pendency of any
action for possession (other than payment in full of all amounts owed to
Landlord by Tenant pursuant to this Lease) shall not be deemed a waiver of such
default or of such covenant or conditions, or of Landlord's right to recover
possession of the Premises. It is further understood the Tenant shall pay all
costs and expenses of collection and reasonable attorney's fees and court costs
in the event the Tenant fails to pay rent or fails to promptly and fully
perform and comply with each and every condition and covenant hereunder and the
matter is turned over to Landlord's attorney, whether suit is instituted or
not. Nothing herein shall be or constitute a waiver by Tenant of any statutory
right of redemption.
47. WAIVER
One or more waivers of any breach of a covenant or condition by either
party shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, or of the covenant or condition itself, and the consent
or approval by either party to, or of, any act requiring the other party's
consent or approval shall not be deemed to waive or render unnecessary consent
or approval to, or of, any subsequent similar act.
<PAGE> 24
48. SUBORDINATION
Tenant agrees that this Lease shall be subordinate to any mortgages or
trust deeds that may now or hereafter be placed upon the Shopping Center and to
any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, and extensions thereof, providing the mortgagee or
trustee named in said mortgages or trust deeds shall agree to recognize the
Lease of Tenant in a non-disturbance agreement suitable to Tenant in the event
of foreclosure if Tenant is not then in default beyond any applicable cure
period. Tenant shall provide any and all document reasonably requested by any
mortgagee or trustee. In the event of any mortgagee or trustee elects to have
the Lease a prior lien to its mortgage or deed or trust, then and in such an
event, upon such mortgagee or trustee notifying Tenant to that effect, this
Lease shall be deemed prior in lien to the said mortgage or trust deed, whether
or not this Lease is dated prior to or subsequent to the date of said mortgage
or trust deed. Landlord agrees to secure a non-disturbance and attornment
agreement from any existing lender for Tenant's behalf upon Tenant's request.
49. RECORDATION
Tenant shall not record this Lease and/or its Exhibits without first
obtaining written permission from Landlord, which permission may be withheld at
Landlord's sole option. In the event it is a requirement of Landlord's
mortgagee that this Lease be recorded as a protection for both Landlord and
Tenant, then Landlord shall bear such recordation charges. Upon the request of
either party, the other party shall join in the execution of a memorandum or
so-called "short form" of this Lease, to be recorded at the cost of the
requesting party.
50. MERCHANTS ASSOCIATION; PROMOTIONAL FUND
Landlord intends to establish a promotional program to furnish and
maintain advertising and sales promotions which, in Landlord's sole judgement,
will benefit the Shopping Center. All costs and expenses incurred by Landlord,
on others on Landlord's behalf, in establishing, furnishing, operating and
maintaining the promotional program (hereinafter called "Promotional Costs")
shall be charged in the manner hereinafter set forth. Such Promotional Costs
shall include all costs and expenses of every kind and nature as may be paid or
incurred by Landlord with respect to said promotional program. Commencing upon
the Rent Commencement Date, Tenant shall pay, as its share of the cost of the
promotional program, the Promotional Charge with no offsets, on the first day
of each month, in advance, along with Tenant's payment of rental. For greater
certainty, the maximum amount chargeable to Tenant under this Section 50 shall
be the amount specified in Section 1(q).
Nothing contained in this Lease shall require landlord to expend more
in any calendar year in performing the promotional program than Landlord
collects from tenants or occupants of the Shopping Center in such calendar
year. However, Landlord may, but shall not be obligated to, advance funds to
the promotional program and any funds so advanced shall be repaid to Landlord
when available.
51. ASSIGNMENT AND SUBLEASE
(a) Tenant shall not assign this Lease in whole or in part, nor
sublet all or any part of the Premises, nor mortgage, hypothecate or encumber
this Lease and/or Tenant's leasehold interest in the Premises (any and all of
such acts being herein referred to as an "assignment"), without the prior
written consent of Landlord in each instance, which consent may be given or
withheld in Landlord's sole and absolute discretion. The withholding of
Landlord's consent is subject to Section 51(c) below. The consent by Landlord
to any assignment shall not constitute a waiver of the necessity for such
consent to any subsequent assignment. This prohibition against assigning shall
be construed to include a prohibition against any assignment by operation of
law. If this Lease be assigned, or if the Premises or any part thereof be
occupied by anybody other than Tenant, Landlord may collect rent from the
assignee or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee or occupant as
tenant, or a release of Tenant from the further performance by Tenant of the
provisions on its part to be observed or performed herein. Notwithstanding any
assignment, Tenant shall remain fully liable on this Lease and shall not be
released from performing any of the terms, covenants and conditions of this
Lease. Tenant shall continue to be entitled to notice of default and shall be
entitled to cure any defaults of the assignee.
(b) Notwithstanding any provision contained in this Article 51 to
the contrary, Tenant may, without the consent of Landlord assign this Lease or
sublet all or any part of the Premises to any corporation or other entity which
assumes in writing all of Tenant's obligations hereunder and either (i)
controls, is controlled by, or under common control with Tenant or (ii) merges
or consolidates with Tenant or (iii) acquires substantially all of the assets
or stock of Tenant or the Guarantor hereof. Notwithstanding any of the
foregoing permitted assignments, it is expressly recognized and agreed that the
liability of Tenant and the Guarantor hereunder shall continue in full force
and effect at all times during the remainder of the Lease term, including any
renewal or extended terms hereto subject to the provisions of this Lease and
the Guaranty of Performance.
<PAGE> 25
(c) Notwithstanding the provision of Section 51(a) above, in the
event Tenant desires either to assign or transfer this Lease or sublet
substantially all of the Premises (such assignment or subletting collectively
hereinafter referred to as the "Transfer"), to a party other than a transferee
permitted under Section 51(b) above, Tenant shall provide to Landlord:
1. No later than sixty (60) days prior to the proposed Transfer, with
written notice that Tenant desires either to assign or transfer this
Lease or sublet substantially all of the Premises, and, further,
2. No later than thirty-five (35) days prior to the proposed
effective date of such Transfer (the "Effective Date") with written
notice ("Tenant's Transfer Notice") of (i) the name and address of the
proposed transferee and (ii) the amount of rent.
The tender of the Tenant's Transfer Notice shall entitle Landlord to
either terminate this Lease, disapprove the proposed assignment or consent to
the proposed assignment, effective as of the date of the proposed assignment or
subletting. Landlord's right of termination or disapproval shall be
exercisable by written notice delivered to Tenant at any time during the first
thirty (30) day period following receipt by Landlord of the Tenant's Transfer
Notice. Failure to respond in any way to Tenant within said thirty (30) days
shall be deemed written consent.
52. TERMINATION
Upon the Expiration Date or earlier termination of this Lease, or any
extension thereof, Tenant shall quit and surrender the Premises, without the
necessity of any notice from either Landlord or Tenant, and Tenant hereby
waives notice to quit or vacate said Premises, and agrees that Landlord shall
be entitled to the benefit of all provisions of law respecting the summary
recovery of possession of said Premises from a tenant holding over to the same
extent as if statutory notice had been given. Tenant shall quit and surrender
the Premises in as good a state and condition as they were when entered into,
reasonable use and wear thereof and unavoided accident and acts of God
excepted. All alterations, additions, erections or improvements in our upon
said Premises at the expiration or early termination of this Lease, which are
not wanted by Landlord (and any personal property, furniture, trade fixtures
and equipment) shall be removed by Tenant at Tenant's sole cost and expense and
Tenant shall repair all damage caused by such removal and return the Premises
to the condition in which it was prior to the installation of the articles so
removed. Any personal property, furniture, trade fixtures, and equipment not
so removed shall be deemed abandoned, and Landlord shall have the right to
retain or dispose of the same as Landlord sees fit. Any alterations,
additions, erections or improvements which are wanted by Landlord, which shall
be evidenced in writing, shall remain a part of the Premises and shall be
surrendered with said Premises at the Expiration Date of this Lease.
53. HOLDING OVER
In the event Tenant remains in possession of the Premises after the
Expiration Date or earlier termination of this Lease without the written
permission of Landlord, and without the execution of a new lease, Tenant shall
be deemed occupying the Premises as a tenant from month-to-month subject to all
the conditions, provisions and obligations of this Lease insofar as the same
are applicable to a month-to-month tenancy. Rental shall be, during any such
hold over period, One Hundred Twenty-Five Percent (125%) of the Minimum
Guaranteed Rent called for herein which are in effect for the last month of the
term hereof.
54. FOR RENT SIGNS
For the period six (6) months prior to the expiration of the original
term of this Lease or any renewal or extension thereof, Landlord shall have the
right to display on the exterior of said Premises (but not in any window or
doorway thereof) the customary "For Rent" sign, and during such period Landlord
may show the Premises and all parts thereof to prospective tenants between the
hours of 9:00 A.M. and 5:00 P.M. on any day except Sunday and any legal holiday
on which Tenant shall not be open for business.
55. QUIET ENJOYMENT
Landlord hereby warrants that it has fee simple title to the Premises
and the Shopping Center; that Landlord has the full right to lease the Premises
for the term aforesaid; and that Landlord shall not enter into any agreements
that would restrict Tenant's Permitted Use of the Premises other than as shown
on Exhibit "E" attached hereto. Landlord covenants and agrees that Tenant,
during the term hereof, shall freely, peaceably and quietly occupy and enjoy
the full possession of the Premises, along with the improvements and
appurtenances thereto and the rights and privileges herein granted, without
molestation, hinderance or ejectment by the Landlord, its successors or
assigns, provided Tenant is not in default of any provision of this Lease
beyond any applicable cure period set forth in this Lease. Each of the parties
hereto represents and warrants that there are no brokerage commissions or
finder's fees of any kind due to anyone other than the Broker in connection
with the execution of this Lease, and agrees
<PAGE> 26
to indemnify the other against, and hold it harmless from, all liabilities
arising from any such claim (including, without limitation, the cost of counsel
fees in connection therewith).
In the event of a foreclosure of the Shopping Center, which results in
the termination of this Lease by any party succeeding to the interests of the
Landlord hereunder, the Landlord shall be responsible for and pay to Tenant a
sum of money equal to the unamortized book value of the leasehold improvements
which Tenant has made in the Demised Premises. Furthermore, the unamortized
book value of the leasehold improvements shall be computed in accordance with
generally accepted accounting procedures.
56. ADDRESSES AND NOTICES
Until further notification in writing by Landlord to Tenant, all
payments called for herein shall be made payable to Landlord and delivered to
Landlord's Address for Rent Payments.
All notices required under this Lease shall be in writing and deemed
to be properly served if hand delivered to the intended recipient or sent by
registered or certified mail or by reputable overnight courier service (which
routinely secures a written receipt evidencing delivery) to the intended
recipient at the relevant Address for Notices listed in Section 1 above, or to
any subsequent address in the continental United States which Landlord, Tenant
and/or Guarantor shall designate in writing by registered or certified mail.
57. ESTOPPEL CERTIFICATES
Tenant agrees that at any time, and from time to time at reasonable
intervals, within ten (10) days after written request by Landlord, Tenant will
execute, acknowledge and deliver to Landlord or and assignee or lender
designated by Landlord, a writing ratifying this Lease and certifying, among
other things, if true:
(a) that Tenant has entered into occupancy of the Premises and the
date of such entry, if such is the case; and
(b) that this Lease is in full force and effect, and has not been
assigned, modified, supplemented or amended in any way (or if
there has been any assignment, modification, supplement or
amendment identifying the same); and
(c) that this Lease represents the entire agreement between
Landlord and Tenant; and
(d) the date of the commencement and expiration of the term; and
(e) that all conditions under this Lease to be performed by
Landlord have been satisfied; and
(f) that no default exists in the performance or observance of any
term, covenant or condition of this Lease on the part of
Landlord and that there are no defenses or offsets in
connection therewith.
Tenant agrees that at any time, and from time to time as reasonably
requested by Landlord, Tenant will execute such documents as are necessary in
connection with any financing or sale of the Shopping Center or any part
thereof, within ten (10) days after said request, provided such documents do
not adversely alter the rights and obligations of the parties hereto.
The Landlord agrees that at any time, and from time to time as
reasonably requested by Tenant, within ten (10) days after written request by
Tenant, to execute such real property waivers or subordinations and other
related documents which will permit Tenant to finance the purchase or lease of
equipment, fixtures or personal property for use in conducting its business in
the Premises.
58. MISCELLANEOUS
58.01 This Lease and the covenants and conditions herein contained,
shall inure to the benefit of and be binding upon Landlord, its successors and
assigns, and shall be binding upon Tenant, its successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom
the assignment by Tenant is permitted hereunder.
58.02 The submission of this Lease for examination does not
constitute a reservation of, or option for, the Premises, and this Lease shall
become effective only upon execution by all parties hereto and delivery of a
fully executed copy thereof by Landlord to Tenant.
58.03 This Lease sets forth the entire agreement between the parties.
There are no oral agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous agreements,
representations, promises, warranties and understandings between the parties
hereto or displayed by Landlord to Tenant with respect to the subject matter
thereof, and none thereof shall be used to interpret or construe this Lease.
Each party hereby expressly acknowledges that no representations, warranties,
inducements or promises with respect to the Shopping Center or the Premises
have been made to that party except as herein expressly set forth.
58.04 Tenant acknowledges that, unless otherwise herein specifically
provided, it does not have any exclusive rights in the Shopping Center with
<PAGE> 27
respect to the sale of its merchandise or the provision of its services.
58.05 Every agreement contained in this Lease is, and shall be
construed as, a separate and independent agreement. If any term of this Lease
or the application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
58.06 The covenants, conditions and provisions of this Lease shall be
construed under the laws of the state or district in which the Shopping Center
is located.
58.07 There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Premises or any part thereof
by reason of the fact that the same person may acquire or hold, directly or
indirectly, this Lease or the leasehold estate hereby created or any interest
in this Lease or in such leasehold estate as well as the fee estate in the
Premises or any interest in such fee estate. In the event of a voluntary or
other surrender of this Lease, or a mutual cancellation hereof, Landlord may,
at its option, terminate all subleases, or treat such surrender or cancellation
as an assignment of such subleases.
58.08 Whenever a period of time is herein prescribed for action to be
taken by Landlord or Tenant other than the payment of rent or other monetary
amounts hereunder, such party shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any other cause of any kind
whatsoever which is beyond the reasonable control of the party required to act.
58.09 The section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
various and several sections hereof. Words of any gender used in this Lease
shall include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
58.10 If there be more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several, and all agreements and
covenants herein contained shall be binding upon the respective heirs, personal
representatives, successors and, to the extent permitted under this Lease,
assigns of the parties hereto.
58.11 No rights, easements or licenses are acquired by Tenant under
this Lease by implication or otherwise except as expressly set forth in this
Lease.
58.12 No amendment or modification of this Lease shall be binding or
valid unless expressed in a writing executed by both Landlord and Tenant.
58.13 Each of the persons executing this Lease on behalf of Tenant
represents and warrants that Tenant has complied with all applicable laws,
rules and governmental regulations relative to its right to do business in the
Shopping Center, that such entity has the full right and authority to enter
into this Lease, and that all persons signing on behalf of the Tenant were
authorized to do so by any and all necessary or appropriate actions.
58.14 Tenant shall, and shall cause Tenant's subtenants, agents,
employees, licensees, clients to, use commercially reasonable efforts to comply
with and observe all reasonable rules and regulations concerning the use,
management, operation, safety and good order of the Premises and the Shopping
Center which may from time to time be promulgated by Landlord, provided that
such rules and regulations are of general applicability to all tenants in the
Shopping Center, and are not inconsistent with the provisions of this Lease,
and do not interfere with Tenant's business in the Premises as otherwise
permitted under this Lease.
59. WAIVER OF SUBROGATION
Notwithstanding any contrary provision of this Lease, each party
hereby releases the other party from any liability or responsibility for any or
damage to the releasing party's property insured under valid and collectible
insurance, subject to the limitation this release shall only apply when
permitted by the applicable policy of insurance pursuant to a waiver of
subrogation clause. It is the intention of the Section that neither party
shall be liable to the other party or to any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage to
the other party's property where such waiver is permitted by the applicable
insurance policy. If Landlord elects to insure the Shopping Center in an
amount less than one hundred percent (100%) of replacement cost, Landlord shall
self insure for the difference between the insured amount and the one hundred
percent (100%) replacement coverage. Each party shall obtain policies
containing an express waiver of any right or subrogation by the insurance
company against the other party if some is available, provided, however that in
the event there shall be an increased premium for such coverage imposed by
either party's insurer, than and in such event the party who is responsible for
payment of such increased costs shall not
<PAGE> 28
be required to obtain the waiver of subrogation provisions unless the other
agrees to bear such additional costs. The release set forth in the first
sentence of this Section shall apply even if the loss or damage shall have been
cause by the negligence of the other party, the other party shall furnish the
requesting party with evidence of the inclusion of such waiver of subrogation
clause or endorsement in such policies, and either party shall notify the other
party if such clause or endorsement is thereafter deleted from such policies or
any renewals thereof.
60. HAZARDOUS MATERIAL
(a) Landlord represents and warrants that if there are any
Hazardous Materials (hereinafter defined) contained within the Premises or in
the land on which the Premises sits prior to the delivery of possession,
Landlord shall be responsible for the removal of such Hazardous Materials.
Landlord represents and warrants that neither Landlord, nor to Landlord's best
knowledge, any former owner or occupant of the Premises or the land upon which
the Premises sits has used Hazardous Materials on, from, or affecting the
Premises or the land upon which the Premises sits in any manner which violates
federal, state, or local laws, ordinances, rules, regulations, or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801, et seq.),
the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Sections 6901, et seq.), and in the regulations adopted publications and
promulgated environmental laws, ordinances, rules, or regulations
(collectively, the "Environmental Laws").
(b) Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no obligation to clean-up, to comply with any law
regarding, or to indemnify, defend or hold Landlord harmless with respect to,
any Hazardous Materials which were not used, stored, disposed of, transported
from or manufactured within the Premises by Tenant or its agents, contractors,
employees, invitees, or assigns, and Landlord waives any right of contribution
against Tenant with respect to any such monitoring, clean-up, or compliance
costs (collectively "Hazardous Material Costs") incurred by Landlord with
respect to any such Hazardous Materials.
(c) Landlord shall indemnify and hold Tenant harmless from and
against any and all Hazardous Material Costs resulting from the presence of
Hazardous Materials in the Premises or in the land on which the Premises sits
incurred by or assessed against Tenant to the extent such costs arise out of or
result from the presence of Hazardous Materials in the Premises or in the Land
on which the Premises sits which exist at or prior to the delivery of
possession or which are subsequently brought into the Premises or the land upon
which the Premises sits by Landlord. Tenant shall indemnify and hold Landlord
harmless from and against any costs, claims or liability arising out of or
resulting from the presence of any Hazardous Materials introduced by Tenant or
from the actions of Tenant, its contractors, employees or agents in connection
therewith. Each party agrees to provide the other party with copies of any
notices pertaining to any governmental proceedings or actions (including
requests or demands for entry onto the Premises for purposes of inspection)
regarding the handling, disposal, or clean-up of Hazardous Materials or claims,
penalties, fines or assessment for such clean-up costs within five (5) business
days after receipt thereof.
(d) For purposes of this Section, the term "Hazardous Materials"
includes, without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances, or
related materials defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, amended (42 U.S.C. Section 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. Section 6901, et seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state, or
local environmental laws, ordinances, rules or regulations.
61. PRIMARY USE PROTECTION
Landlord hereby covenants that for the term of this Lease and provide
(i) Tenant is not in default of this Lease beyond any applicable cure period;
and (ii) Tenant has not assigned or sublet this Lease either in whole or in
part (except to a beverage store similar in operation to Tenant's operation in
the Premises); and (iii) Tenant, or Tenant's assigns or sub-tenants operating
from the Premises a business substantially similar to that of Tenant, is in
possession of the Premises and has not discontinued its operation from the
Premises; and (iv) Tenant's Permitted Use has not been modified; and (v) this
Lease in full force and effect, Landlord shall not enter into a new lease
during the term hereof within the Shopping Center with a future tenant for any
space in the Shopping Center which authorizes or permits as its primary use the
sale at retail of containerized beverages (i.e., wine, beer, soda, bottled
water and juices) for off-premises consumption. Provided, however, this
Section 61 shall not prohibit Landlord from entering into such a lease during
the last six (6) months of the term of this Lease provided Tenant has given
Landlord the notice of non-renewal under Section 3(b); nor shall this
restriction prohibit Landlord from leasing any
<PAGE> 29
portion of the Shopping Center to a Liquor store, grocery store, convenience
store, restaurant, bar, lounge, delicatessen, carry-out or food delivery
service; nor shall this restriction affect the use and occupancy of any
existing tenant in the Shopping Center, its successor and/or assigns, or any
replacement tenants thereof having the same use.
62. GUARANTY OF PERFORMANCE
Attached hereto as Exhibit "F" and incorporated herein by reference is
a Guaranty of Performance which has been executed by Dart Group Corporation.
63. EXISTING TENANT IN POSSESSION
Tenant recognizes that certain leases are in full force and effect for
portions of the area comprising the Premises described herein. Accordingly,
immediately following full execution of this Lease by the parties, Landlord
shall use its best efforts to terminate the existing tenants' right, title and
interest therein and to regain possession of the entire Premises as soon as
possible. After said existing tenants' rights to occupy the areas comprising a
portion of the Premises are terminated and Landlord has regained possession of
the entire Premises, Landlord shall make the same available to the Tenant as
provided for in Sections 21, 22, and 25 and Exhibit "C" hereof. Furthermore,
notwithstanding anything to the contrary contained herein, in the event
Landlord is unable to obtain possession of the entire Premises and commence
construction of the Premises within twenty-four (24) months from the date of
this Lease, either party shall at any time following said twenty-four (24)
month period have the right to terminate this Lease upon written notice to the
other as herein provided.
64. MARKETING AND PROMOTIONAL ALLOWANCE
In consideration for Tenant agreeing to enter into this Lease and
provided Tenant is open for business and not in default of the Lease beyond any
applicable cure period set forth in this Lease, Landlord hereby agrees to pay
Total Beverage VA Corp. the total sum of One Hundred Thousand and 00/100
Dollars($100,000.00) as a marketing and promotional allowance, said payment to
be made in two (2) equal installments in the amount of Fifty Thousand and
00/100 Dollars ($50,000.00), the first of which shall be due and payable to
Tenant from Landlord on the thirtieth (30th) day following the end of the first
Lease Year and the second of which shall be due and payable within thirty (30)
days following the end of the second Lease Year.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement under their respective seals as of the day and year first above
written.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES
LIMITED PARTNERSHIP
Thomas B. McKee BY: Ronald S. Haft (SEAL)
------------------------ ---------------------------
Ronald S. Haft
General Partner
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
BY: Herbert H. Haft (SEAL)
- ------------------------- ---------------------------
Name: Herbert H. Haft
Title: Chairman
</TABLE>
<PAGE> 30
EXHIBIT "A"
PROJECT: Plaza at Landmark
LANDLORD: Combined Properties Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #18A-18C = approx. 25,000 square feet
LEASE DATED: 8/16/93
<PAGE> 31
EXHIBIT "B"
LANDLORD'S SIGN REGULATIONS AND SPECIFICATIONS
Consisting of four (4) pages, attached to and made a part of Lease dated
8/16/93 between Combined Properties Limited Partnership (Landlord) and Total
Beverage Corp. (Tenant) for Store # 18A-18C in the Plaza at Landmark (Shopping
Center) Size of Store approx. 25,000 sq. ft. (Square Feet)
In accordance with Paragraph 20 of said Lease, all permanent Tenant
signs, both as to design and shop drawings, must receive written approval by
Landlord before fabrication and installation; and any sign(s) installed without
such written approval may be removed by Landlord at Tenant's expense. For
purposes hereof and until further notice to Tenant, the Landlord's Architect is
hereby given authority to review and pass upon all signs, and the design and
shop drawings therefor, and Landlord's approval or disapproval will be based
upon such review by Architect.
Approval shall be based on: (a) Conformity to sign
regulations.
(b) Harmony of the proposed sign
with the design standard of the
Shopping Center.
Landlord has the specific right to refuse approval of any sign which,
in his opinion, is not harmonious with the design standards of the Shopping
Center whether or not such sign conforms to the specific sign criteria set out
below.
To secure Landlord's approval, a design sketch of the proposed sign is
to be submitted to Landlord. After approval of design sketch in writing by
Landlord, six (6) prints of each shop drawing of all signs must be submitted to
Landlord for final approval. The shop drawings must indicate the type and
sizes of all lettering and background panels, their locations on the facade in
relation to valance panels, floor levels and soffits and store divider and
building lines. Proposed location of license, union and fabrications labels
must be indicated. A schematic section through the sign will be required where
necessary to show its form, colors and finishes of all materials, and wattages
and light intensity must be specified. All "Approved as Noted" drawings must
be resubmitted until marked "Approved" by Landlord. Incomplete drawings will
be returned to Tenant without approval.
In addition to the necessity for conforming of all signs with the
general design standards of the Shopping Center, all signs must conform to the
specific criteria, requirements and limitations hereinafter set forth:
1. The advertising or informative content of all signs shall be
limited to letters designating the store name and/or type of store
only and shall contain no advertising devices, slogans, symbols or
marks (other than the store name/or type of store as aforesaid).
Crests and/or corporate shields shall be permitted in certain
instances.
2. The letters on all sign shall be either in script and/or
block; the size of the letters shall be in proportion to the size of
the sign, as determined in accordance with the provisions of Paragraph
4 of this Exhibit "B"; and if the letters are back-illuminated, the
lamps therefore shall be contained wholly within the depth structure
of the letters.
3. The character, design, color and layout of all signs shall be
subject to the approval of the Landlord which shall endeavor to
establish uniform standards consonant with an integrated sign control
policy for the Shopping Center, and which, however, shall give proper
consideration to the style, design and character of signs used by
tenants of the Shopping Center.
Page 1 of 4 Pages
<PAGE> 32
4. All signs shall be in accordance with the following
requirements:
(a) The signs and any part or parts thereof, except as
otherwise provided in subparagraph (c) of this Paragraph 4,
shall be located within the physical limits of the storefront
of the Premises of the Tenant, but in no case less than two
feet (2') from any leasehold line.
(b) Signs shall not project beyond the line of the
Demised Premises bordering "common area" more than two inches
(2''), if less than eight feet (8') above finished floor line,
or more than four inches (4''), if above eight feet (8').
(c) The maximum total area of each sign shall conform to
applicable codes and the requirements of governmental
authorities.
(d) All signs shall be fabricated and installed in
compliance with all applicable building and electrical codes
and bear a U.L. Label.
(e) Letters for signs facing the Common Area may be as
large as permitted by applicable code.
(f) Stores having storefronts on the Common Area shall be
permitted to erect a sign on the facade exposed to the Common
Area. These signs shall be limited to store name and/or store
type, only, and shall conform to all applicable limitations
set forth in this Exhibit. No portion of such signs shall be
mounted above the fascia.
The area of the sign is defined as the area of a
rectangle surrounding all of the letters on the sign.
Where upper lower case letters are used, the average
height of the letters shall be used to determine the
height of the rectangle.
Foot frontage of the store is defined as the length
of facade measured between lease lines separating the
store from common areas or other stores.
(g) Corner stores, which have two (2) or more facades
facing or opening in different directions into different
portions of the Common Area may have signs on each facade,
subject to the requirements of this Exhibit and the written
approval of Landlord.
5. The fabrication, installation and operation of all signs shall
be subject to the following restrictions:
(a) No exposed neon, fluorescent and/or incandescent
tubing or lamps, raceways, ballast boxes and/or electrical
transformers, crossovers, conduit and/or sign cabinets shall
be permitted.
(b) No flashing, moving, flickering and/or blinking
illumination, animation, moving lights and/or floodlight
illumination shall be permitted.
(c) The name and/or stamp of the sign contractor or sign
company or both shall not be exposed to view, unless required
by law.
Page 2 of 4 Pages
<PAGE> 33
DIMENSION CHART
A STORE FRONT LENGTH
B 18'' MIN. SPACING FROM ADJ. TENANT TO BE EQUAL ON BOTH SIDES.
C EQUAL SPACING SIGN TO BE SPACED FROM TOP TO BOTTOM.
D LETTER HEIGHT 16'' MINIMUM.
<PAGE> 34
EXHIBIT "B"
6. The following type signs are prohibited:
(a) Paper signs and/or stickers utilized as signs.
(b) Signs of a temporary character or purpose, except
"For Rent" signs placed or approved by the Landlord and except
signs required for emergency situations, irrespective of the
composition of the sign or material used therefor, provided
that any sign permitted hereunder shall be lettered and
designed to be in keeping with the character and quality of
the Shopping Center and signs otherwise permitted therein.
(c) Printed signs, except, however, non-illuminated,
small-scale "signature sign" (one (1) such signature sign only
being permitted to be placed at each entrance to the Demised
Premises), which is lettered on the glass portion of a
storefront of Tenant and/or affixed to each storefront
surface, provided such sign does not project more than two
inches (2'') from the storefront surface.
(d) Moving signs.
(e) Signs not lighted by electricity which have luminous
or reflecting letters.
7. Notwithstanding the foregoing provisions of this Exhibit,
non-illuminated or non-luminous signs of metal and/or wood locate
within show windows or the interior of the stores shall be permitted,
provided:
(a) Such signs are not affixed to windows.
(b) Such signs contain only designations of merchandise
or brand names and/or prices.
(c) Such signs are located proximate to merchandise on
display within the show windows or the interior of stores, as
the case may be.
(d) For the purposes intended, such signs are reasonably
sized, designed and displayed.
8. The provisions of Section 20 of this Lease shall control over
the provisions of this Exhibit "B".
Page 3 of 4 Pages
<PAGE> 35
EXHIBIT "C"
DESCRIPTION OF LANDLORD'S WORK
Subject to the provisions contained herein, Landlord agrees, at its
cost and expense, to construct the Premises in accordance with plans and
specifications to be agreed upon by the parties (Landlord's Work), Landlord's
Work being more generally defined in Exhibit "C-1" attached hereto and hereby
made a part hereof. It is the intention of the parties that the Landlord's
Work will be in total preparation of Premises for the operation of a retail
store operated for Tenant's Permitted Use, other than the purchase and
installation of items to be provided by Tenant as set forth in Exhibit "C-2"
attached hereto and hereby made a part hereof. Tenant shall supply and set any
desired trade fixtures and equipment in the Premises in accordance with the
preliminary plans to be submitted to Landlord by Tenant and the construction
working drawings subsequently approved by Tenant. Landlord shall construct,
install and connect any necessary electrical and water supply or fixture drain
lines required for the operation of Tenant's trade fixtures and refrigerated
equipment, as provided for in the construction working drawings approved by
Tenant. Landlord and Tenant have mutually agreed to use their best efforts to
minimize Landlord's cost to construct the Premises.
Within thirty (30) days following receipt by Tenant of an approved
perimeter drawing (footprint) of the Demised Premises, in accordance with
Section 24, Tenant shall provide Landlord with Tenant's preliminary plans
showing in detail all of Tenant's electrical, plumbing and partitioning
requirements necessary in order for Landlord to prepare construction wording
drawings necessary to complete the Landlord's Work. It is intended that the
work of every trade be installed in accordance with all local, state or other
ordinances rules and regulations governing the construction and installation of
any of this work. Tenant assumes no responsibility if greater requirements are
called for by any regulations in excess of Tenant's requirements and any such
requirements will be done by Landlord at no cost to Tenant. Such drawings
shall be prepared by Landlord's architects within thirty (30) days following
delivery by Tenant of preliminary plans. Tenant shall review and either
approve the construction working drawings within fourteen (14) days following
delivery of same to Tenant or advise Landlord in writing of any objection
thereto.
The construction working drawings following approval by both Landlord
and Tenant are hereinbelow referred to as the "Construction Working Drawings".
Notwithstanding the above, Tenant shall not be responsible for errors or
omissions by Landlord's architects or engineers, and Landlord shall be
responsible for all items omitted from the signed preliminary plans without
Tenant's consent, or which do not conform with written changes and corrections
which have been agreed to by Landlord and Tenant prior to the preparations of
final construction drawings.
Landlord will deliver to Tenant a written construction schedule prior
to the commencement of the Landlord's Work.
Landlord's Work will be performed in accordance with, and include the
items and requirements contained in, Tenant's specifications requirements
manual attached hereto as Exhibit "D". Said manual will become part of the bid
package of Landlord's general contractor.
EXHIBIT "C"
PROJECT: Plaza at Landmark
LANDLORD: Combined Properties Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #18A-18C = approx. 25,000 square feet
LEASE DATED: 8/16/93
Page 1 of 2
<PAGE> 36
All equipment purchased and installed by Landlord for the Premises
shall be UL (Underwriters Laboratories) approved.
The construction Working Drawings will include the sprinkler system
hydraulic calculation and sprinkler system blueprint for the Premises.
Where during the course of construction Tenant request changes and/or
substitutions in the Construction Wording Drawing which increase the total cost
of Landlord's Work, Landlord shall so inform Tenant and shall promptly deliver
to Tenant an estimate, with supporting data, of the cost of each such requested
change and Tenant will be permitted to make such changes upon agreeing with
Landlord to pay the increased costs to Landlord attributable to such changes.
If Landlord's Work is not commenced within one year from the date hereof or
within six months from the approval date of the Construction Working Drawings,
Tenant will have the right to change the layout and finish of the Premises,
including without limitation, the number, location and type of utility
connections, partition wall and lighting fixtures, and Landlord will
incorporate such changes into the Construction Working Drawings and construct
same at Landlord's cost and expense.
Landlord will deliver the Premises to Tenant in compliance with and
free of any notice of violation of governmental ordinances, rules, laws,
regulations and the like, and shall assign to Tenant all applicable contractor,
manufacturer and supplier warranties. Landlord and Tenant shall cooperate and
work together to secure all use and occupancy permits for the Premises.
Page 2 of 2
<PAGE> 37
Exhibit C-1
1) All shell modifications and facade constructions
2) All Site Work
3) All Storefront Modifications and Ingress/Egress Doors as required
4) Loading dock doors, seals, bumpers, dock leveler, and dock lights
5) All HVAC systems
6) All natural gas piping, water piping, sewer piping, plumbing fixtures
7) All high voltage electrical services, wiring, and connections
8) Complete restrooms for men and women, per all applicable codes
9) All flooring, including the cooler floors
10) All ceilings, including the wine cellar ceiling
11) Wine cellar glass and ingress/egress doors
12) All interior and exterior building painting
13) Manager's office, with wiring and counters
14) All cart corral railings
15) Security cage/storage
16) All interior and exterior lighting
17) All employee lockers
18) All door hardware
19) Complete and installed emergency generator
20) Compactor chute opening and door, if required by tenant
21) All required sprinkler work
22) All interior partition walls
23) Telephone trunk line service to building
24) Water service and all connections
25) Sewer service and all connections
26) Gas service and all connections (if available at site)
EXHIBIT "C-1"
PROJECT:Plaza at Landmark
LANDLORD:Combined Properties Limited Partnership
TENANT:Total Beverage Corp
STORE NO:#18A-18C = approx. 25,000 square feet
LEASE DATED:8/16/93
<PAGE> 38
Exhibit C-2
1) Purchase and installation of all refrigerated and walk-in coolers
2) Purchase and installation of all refrigeration piping
3) Purchase and installation of all refrigeration compressors,
condensors, and blower coils
4) All low voltage and control wiring, except for environmental systems
5) All reach-in cooler doors
6) All beer cooler racks
7) All storage racks
8) All trade fixtures
9) All wine cellar wooden fixtures
10) All beer cooler doors
11) All security systems
12) All telephone systems
13) All computer systems
14) All fire monitoring systems and service
15) All intercom systems
16) All interior signage/graphics
17) All exterior signage and connections to power
18) All neon lighting
19) All beer station millwork
20) All wine station millwork
21) Cardboard baler
22) All interior and exterior bumpers
23) Trash dumpsters/compactors
24) All cash registers
25) Supply of cash register coaxial cable only
26) All permits for Tenant's work
Exhibit "C-2"
PROJECT:Plaza at Landmark
LANDLORD:Combined Properties Limited Partnership
TENANT:Total Beverage Corp.
STORE NO:#18A-18C = approx. 25,000 square feet
LEASE DATED:8/16/93
<PAGE> 39
EXHIBIT "D"
TENANT'S SPECIFICATIONS REQUIREMENTS MANUAL
DATED: ---------------------------
IS HEREBY INCORPORATED BY REFERENCE
EXHIBIT "D"
PROJECT: Plaza at Landmark
LANDLORD: Combined Properties Limited Partnership
TENANT: Total Beverage Corp.
STORE NO: #18A-18C = approx. 25,000 square feet
LEASE DATED:8/16/93
<PAGE> 40
USE OF PREMISES RESTRICTIONS
Tenant hereby covenants that throughout the term of its Lease, any
renewals or extensions thereof, the Premises, in whole or part, will not be
used or operated directly or indirectly for the business of:
(a) Restaurant
(b) Greenhouse, nursery or outdoor garden sales store or sale of
trees, shrubs, plants or other nursery products.
(c) Supermarket, which term shall include both a "conventional"
and a "food warehouse" operation.
(d) Store which regularly or with significant frequency sells
merchandise of the type or qualities now commonly known as
"odd lot", "close out", "cancellation", "second", "factory
reject", "obsolescent", "distressed", "bankruptcy", "fire
sales", or "damaged".
(e) General office use, except as ancillary to Tenant's retail
business.
(f) Store larger than fifteen thousand (15,000) square feet for
the primary use, at discount prices, of any three (3) or more
of the following: brand-name clothing, brand-name shoes,
brand-name giftware, brand-name domestics, jewelry or luggage
(new building).
(g) Sale of low fat, dietetic frozen desserts.
(h) Store whose primary use is the sale of linens, bedding,
towels, bath and kitchen accessories.
(i) Store which primarily engages in the sale, service and/or
rental of computer software and hardware.
(j) Primarily engaging in the sale of eyewear and contact lenses
or providing optometric services.
(k) A business whose primary use is a one price-point mini variety
store.
(l) A business which primarily engages in the sale of rotisserie
chicken.
(m) A store whose primary use is the sale of men's big and tall
clothing.
(n) Entertainment or recreational facility, including but not
limited to, a bowling alley, skating rink, theater, billiard
room, health spa or studio, gymnasium, amusement center or
other place of public amusement or assembly; pool hall;
shooting gallery; bingo hall or other gambling establishment;
manufacturing; industrial purposes; warehouse with no retail
use; car wash; auto body shop; lube and oil change shop;
service station; the selling of new or used cars/trucks,
trailers or mobile homes; antique store; auction house;
consignment store; flea market; massage parlor; carnival; or
head shop.
(o) Training or educational facility, including but not limited
to, a beauty school, barber college, reading room, place of
instruction or any other operation catering primarily to
students or trainees rather than to customers; catering hall;
bar; "disco"; night hall; social club; bowling alley;
skating/roller rink; health club; swimming pool; game room;
amusement park; carnival; meeting hall; church; funeral
parlor; dance hall; sporting facility; auditorium or other
place of public access.
(p) A store whose primary business includes the display, sale
and/or rental of records, compact discs, audio tapes, laser
discs and video tapes.
(q) The operation of a residential locator service.
In the event such covenants shall be breached, Tenant agrees to take
those steps necessary to correct any such violation of such covenants and
Landlord shall be entitled to injunctive relief or other appropriate remedy at
law or in equity, by statute or otherwise, as Landlord may elect.
EXHIBIT "E"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between COMBINED PROPERTIES LIMITED PARTNERSHIP, LANDLORD and
TOTAL BEVERAGE CORP., TENANT, dated 8/16/93 (1) Plaza at Landmark
<PAGE> 41
EXHIBIT "F"
GUARANTY OF PERFORMANCE
In order to induce Combined Properties Limited Partnership, as
Landlord, to enter into a certain Lease Agreement being executed simultaneously
herewith, with Total Beverage Corp,. as Tenant, the undersigned, namely Dart
Group Corporation, having its principal place of business at 3300 75th Avenue,
Landover, Maryland 20785, absolutely and unconditionally guarantees the
performance of the Tenant of all payments, obligations and covenants binding
upon Tenant in said Lease Agreement which accrue or are required during the
term of the Lease Agreement, and Guarantor hereby waives notice of any default
under said Lease Agreement. The undersigned further agrees that its liability
under this guaranty shall be primary, and that in any right or action which
shall accrue to Landlord under the within Lease Agreement during the term of
the Lease Agreement, Landlord may, at its option, proceed against the
undersigned and Tenant jointly or severally, without having commenced any
action against or having obtained a judgement against Tenant. Guarantor hereby
waives trial by jury in any action, proceeding or counterclaim brought by
Landlord, Tenant and/or Guarantor with respect to any matter arising out of or
in any way connected with the Lease or the use and occupancy of the Premises.
Notwithstanding any provisions contained in this guaranty to the contrary,
commencing as of the first (1st) day of the sixth (6th) Lease Year and
continuing through the Lease term and any renewals or extensions thereof, the
Guarantors' liability shall be limited to a dollar amount not in excess of
twelve (12) months' total payments of rental (including Minimum Guaranteed Rent
and other costs and charges) and other payments as called for under said Lease
Agreement from and after the date of the default at the time of the default.
The limitation of liability set forth in the preceding sentence, however, shall
not affect the length of this guaranty or any other provision hereof.
In the event said Lease Agreement shall be terminated prior to the
lease termination date by reason of a court order in a proceeding under the
Bankruptcy Act, then Guarantor agrees that it shall nonetheless remain liable
for all payments, obligations and covenants under said Lease Agreement, as if
it had been the tenant in the first instance and as if said Lease Agreement had
not been prematurely terminated. Notwithstanding any provisions contained in
this guaranty to the contrary, commencing as of the first (1st) day of the
sixth (6th) Lease Year and continuing through the Lease term and any renewals
or extensions thereof, the Guarantors' liability shall be limited to a dollar
amount not in excess of twelve (12) months' total payments of rental (including
Minimum Guaranteed Rent and other costs and charges) and other payments as
called for under said Lease Agreement from and after the date of the default at
the time of the default. The limitation of liability set forth in the
preceding sentence, however, shall not affect the length of this guaranty or
any other provision hereof.
It is agreed that no modification, extension or indulgence granted to
Tenant, its successors and/or assign, shall release the undersigned from this
Guaranty of Performance, and that this Guaranty of Performance shall continue
in full force and effect for the term of the Lease and any renewals or
extensions thereof. Nothing herein shall modify any requirement in said Lease
Agreement for the giving of notice of default to Tenant. Notwithstanding
anything contained in this Guaranty of Performance to the contrary, in the
event of an assignment of this Lease or a subletting of the Premises to an
entity not affiliated with the Tenant or Dart Group Corporation, Guarantor
shall not be bound by any modification which increases the obligations of
Guarantor unless Guarantor consent to the same in writing.
Any one or more successive or concurrent actions or proceedings may be
brought against Guarantor under this Guaranty for the performance of the
obligations in separate actions or proceedings, as often as Landlord may deem
expedient or advisable, and without constituting an election of remedies or a
bar to any other remedies available to Landlord.
Guarantor hereby expressly waives (i) presentment and demand for
payment and protest of non-payment; (ii) notice of acceptance by Landlord of
this Guaranty Agreement and of presentment, demand and protest thereof; (iii)
notice of all indulgences; (iv) demand for observance, performance of
enforcement of any of the terms or provisions of this Guaranty Agreement or the
Lease; and (v) any right or claim of right to cause a marshalling of the assets
of the Tenant.
This Guaranty and the Guarantor's liability hereunder shall continue
unaffected by an assignment or assignments of the Lease (in whole or in part)
or by any sublettings in whole or in part of the premises demised thereunder,
made from time to time, whether or not notice thereof is given to Guarantor.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty of
Performance to be executed by its duly authorized officer on this 16th day of
August, 1993.
<TABLE>
<S> <C>
ATTEST: GUARANTOR:
DART GROUP CORPORATION
(a Delaware corporation)
By: Herbert H. Haft (Seal)
- --------------------------- -----------------------------
[Corporate Seal] Its: Chairman
-----------------------------
</TABLE>
<PAGE> 42
EXHIBIT "F"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between Combined Properties Limited Partnership, LANDLORD, and
Total Beverage Corp., TENANT, dated 8/16/93
<PAGE> 43
EXHIBIT "G"
COMMENCEMENT AND ENDING AGREEMENT
THIS AGREEMENT, made this ---- day of ----------, 19---, by and
between Combined Properties Limited Partnership (hereinafter referred to as
"LANDLORD"), and Total Beverage Corp., (hereinafter referred to as "TENANT").
W I T N E S S E T H :
THAT, in accordance with that certain Lease Agreement between the
parties hereto dated ----------------------------------, 19----, (hereinafter
referred to as "Lease"), covering that certain premises in the Plaza at
Landmark Shopping Center as more particularly described and set forth under the
Lease (hereinafter referred to as "Premises"), LANDLORD and TENANT hereby agree
that the Commencement Date of said Lease shall be set at
- ---------------------------, that the Rent Commencement Date shall be
- --------------------------, and that the Expiration Date shall be
- -----------------------, for a total lease term of approximately ten (10)
years.
IN WITNESS WHEREOF, the LANDLORD and TENANT have each caused this
Agreement to be executed on its behalf and its duly authorized seal affixed
thereto on the day and year first above written.
<TABLE>
<S> <C>
ATTEST: LANDLORD:
COMBINED PROPERTIES
LIMITED PARTNERSHIP
By:
- --------------------------------- ---------------------------------
Ronald S. Haft
General Partner
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
By:
- ------------------------------- ---------------------------------
Its:
</TABLE> --------------------------------
<PAGE> 1
FIRST AMENDMENT OF LEASE
BULL RUN PLAZA
TOTAL BEVERAGE CORP.
THIS FIRST AMENDMENT OF LEASE (hereinafter "Amendment"), made as of this 7th
day of February 1994, by and between CM/CP Bull Run Joint Venture (hereinafter
"Landlord") and Total Beverage Corp., trading as Total Beverage (hereinafter
"Tenant") provides:
RECITALS
WHEREAS, by virtue of that certain Lease dated August 16,1993, as
amended Agreement dated February 7, 1994 (hereinafter collectively referred to
as "Lease"), Landlord leased to Tenant a portion of real property situated in
Manassas, Virginia, known as Store No. 42-47 in Bull Run Plaza Shopping Center
and also known as 10630 Sudley Manor Drive, Manassas, Virginia 22110
("Premises"), and more particularly described in the Lease; and
WHEREAS, pursuant to Section 6 of the Lease, Landlord and Tenant
agreed to amend the Lease by changing the square footage and adjusting the
Minimum Guaranteed Rent and all other rent, costs and charges due under the
Lease in the event the Premises was determined by Landlord's architect or
engineer to contain an amount of gross ground floor area different than 32,537
square feet as set forth in the Lease; and
WHEREAS, the parties have determined, pursuant to Section 6(b) of the
Lease, that the size of the Premises is actually 32,286 square feet; and
WHEREAS, the Tenant having accepted the Premises, the parties now
desire to confirm that the Premises are in the condition called for under the
Lease in accordance with the provisions of Section 25 of the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in accordance
with the provisions contained in Sections 6 and 25 thereof.
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and the sum of One Dollar ($1.00) in hand paid each to the
other, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto covenant and agree as follows:
FIRST: Section 1(b) of the Lease is hereby deleted in its entirety
and replaced by the following:
(b) Premises: Store No. 42-47, approximately
32,286 square feet in size, located
in the Shopping Center as shown on
Exhibit "A".
SECOND: It is hereby agreed by the parties hereto that all references
in the Lease, including Exhibits, to the Premises containing approximately
32,537 square feet shall be deemed to refer, and are hereby changed, to "32,286
square feet".
THIRD: Section 1 (1) of the Lease is hereby deleted in its entirety
and replaced by the following:
(1) Annual Minimum Two Hundred Eighty-Two Thousand
Guaranteed Rent: Five Hundred Two and 50/100
Dollars ($282,502.50), subject to
adjustment pursuant to Section 6
and Section 3(b) of the Lease.
<PAGE> 2
FOURTH: Section 1 (m) of the Lease is hereby deleted in its entirety
and replaced by the following:
(m) Minimum Basis of Sales: Twenty-Eight Million Two Hundred Fifty
Thousand Two Hundred Fifty and 00/100 Dollars
($28,250,250.00), subject to adjustment
pursuant to Section 9 and Section 3(b)
of the Lease.
FIFTH: The second paragraph of Section 3(b) of the Lease is hereby
deleted in its entirety and replaced by the following:
All of the terms and conditions of this Lease shall remain in full
force and effect during the Option Term, except there shall not be any
additional option to renew this Lease beyond what is provided for hereinabove,
and Minimum Guaranteed Rent and Minimum Basis of Sales for the Option Term
shall be as set forth in the following schedule:
<TABLE>
<CAPTION>
Option Term Rate Per Annual Minimum Monthly Minimum Minimum Basis
Period Square Foot Guaranteed Rent Guaranteed Rent of Sales
- ------ ----------- --------------- --------------- --------
<S> <C> <C> <C> <C>
11/1/2008 -
10/31/2013 $13.31 $429,726.66 $35,810.56 $42,972,666.00
11/1/2013 -
10/31/2018 $15.31 $494,298.66 $41,191.56 $49,429,866.00
</TABLE>
SIXTH: Section 6 (b) of the Lease is hereby deleted in its entirety
and replaced by the following:
The Minimum Guaranteed Rent shall be payable for the periods set forth
below in the following annual and monthly amounts:
<TABLE>
<CAPTION>
Original Lease Rate Per Annual Minimum Monthly Minimum
Term Period Square Foot Guaranteed Rent Guaranteed Rent
- ----------- ----------- --------------- ---------------
<S> <C> <C> <C>
10/27/93 -
10/31/98 $8.75 $282,502.50 $23,541.88
11/1/98 -
10/31/2003 $10.06 $324,797.16 $27,066.43
11/1/2003 -
10/31/2008 $11.57 $373,549.02 $31,129.09
</TABLE>
SEVENTH: The fifth sentence of Section 7(a) of the Lease is
hereby deleted in its entirety and replaced by the following:
Tenant shall initially make estimated payments in the amount of
Twenty-Nine Thousand Seven Hundred Three and 12/100 Dollars
($29,703.12) annually to be paid in equal monthly installments in the
amount of Two Thousand Four Hundred Seventy-Five and 26/100 Dollars
($2,475.26), without set-off or deduction.
EIGHTH: The second sentence of Section 8 of the Lease is hereby
deleted in its entirety and replaced by the following:
Commencing on the Rent Commencement Date, Tenant shall pay to
Landlord, on an estimated basis, the sum of Twenty-Five Thousand One
Hundred Eighty-Three and 08/100 Dollars ($25,183.08) to be paid in
equal monthly installments in the amount of Two Thousand Ninety-Eight
and 59/100 Dollars ($2,098.59), on the first day of each month, in
advance, along with Tenant's payment of Minimum Guaranteed Rent.
NINTH: Section 9(b) of the Lease is hereby deleted in its entirety
and replaced by the following:
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
Original Minimum Basis
Lease Term Period Of Sales
----------------- --------
<S> <C>
10/27/93 through 10/31/98 $28,250,250.00
11/1/98 through 10/31/2003 $32,479,716.00
11/1/2003 through 10/31/2008 $37,354,902.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject to
appropriate proration as follows. In the event of any partial
<PAGE> 3
calendar year during the term hereof, the Minimum Basis of
Sales shall be adjusted based on the number of months in such
partial year. No "deemed" sales shall be included in the
Gross Sales for any partial years.
TENTH: Tenant hereby acknowledges and confirms that it has accepted
the Premises and the Premises are in the condition called for under the Lease.
ELEVENTH: Except as modifies by this Amendment, the Lease shall
continue in full force and effect in accordance with the terms thereof.
TWELFTH: All the rights and obligations of the parties under
this Amendment shall bind and inure to the benefit of their respective personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on the date first above written.
<TABLE>
<S> <C>
LANDLORD:
CM\CP BULL RUN JOINT VENTURE
A Delaware general partnership
By: CP\BULL RUN LIMITED PARTNERSHIP
A Maryland limited partnership
Joint Venture Partner
WITNESS: By: Bull Run, Inc.
A Maryland Corporation,
General Partner
Thomas B. McKee By: Ronald S. Haft
- ----------------------- ------------------------------
Ronald S. Haft
President
WITNESS: TENANT:
TOTAL BEVERAGE CORP.
Dennis Bodley By: Dennis N. Weiss
- ----------------------------- --------------------------------------------
Its Associate Counsel Its: Executive Vice President
-------------------------- -------------------------------------------
[Corporate Seal]
WITNESS: GUARANTOR:
DART GROUP CORP.
Dennis Bodley By: Dennis N. Weiss
- ----------------------------- --------------------------------------------
Its: Associate Counsel Its: Executive Vice President
------------------------- -------------------------------------------
[Corporate Seal]
</TABLE>
<PAGE> 4
LEASE
AGREEMENT
LOCATION: BULL RUN PLAZA
DATED: AUGUST 16, 1993
--------------------------------------
LANDLORD: CM/CP BULL RUN JOINT VENTURE
TENANT: TOTAL BEVERAGE CORP.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. BASIC LEASE INFORMATION ............................................ 1
2. PREMISES............................................................ 3
3. TERM................................................................ 3
4. RENTAL DEPOSIT...................................................... 4
5. SECURITY DEPOSIT.................................................... 4
6. MINIMUM GUARANTEED RENT............................................. 4
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES......................... 4
8. REAL ESTATE TAXES................................................... 5
9. PERCENTAGE RENT..................................................... 6
10. PAYMENT OF PERCENTAGE RENT.......................................... 7
11. GROSS SALES......................................................... 7
12. SALES REPORTS....................................................... 7
13. AUDIT OF SALES REPORTS.............................................. 8
14. RECORDS............................................................. 8
15. DISCLAIMER OF JOINT VENTURE......................................... 8
16. RENTAL OCCUPANCY TAX................................................ 8
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE............................. 8
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS.................. 9
19. UTILITIES........................................................... 9
20. TENANT'S SIGNS...................................................... 9
21. CONSTRUCTION OF THE PREMISES - INTENTIONALLY OMITTED................ 11
22. TENANT'S ACCEPTANCE OF PREMISES..................................... 11
23. MAINTENANCE AND USE OF COMMON AREAS................................. 11
24. TENANT'S WORK (EXHIBIT "D")......................................... 12
25. FIXTURING TENANT'S STORE; OPENING................................... 12
26. OCCUPANCY AND OPERATING HOURS....................................... 13
27. REPAIRS............................................................. 13
28. ALTERATIONS BY TENANT............................................... 14
29. DAMAGE TO PREMISES OR IMPROVEMENTS.................................. 14
30. USE OF PREMISES..................................................... 14
31. OPERATION BY TENANT................................................. 14
32. EXTRA HAZARDS....................................................... 15
33. PLUMBING............................................................ 15
34. DISPLAY LIGHTING.................................................... 15
35. ROOF AND WALLS...................................................... 15
36. LIENS AND INDEMNITY................................................. 16
37. TENANT'S FIXTURES................................................... 16
38. INSPECTION BY LANDLORD.............................................. 16
39. COVENANT TO HOLD HARMLESS........................................... 16
40. PUBLIC LIABILITY - TENANT........................................... 17
41. LIMITATION OF LANDLORD'S LIABILITY.................................. 17
42. DAMAGE TO PREMISES.................................................. 17
43. CONDEMNATION........................................................ 18
44. BANKRUPTCY.......................................................... 18
45. BANKRUPTCY-USE OF PREMISES.......................................... 19
46. DEFAULT............................................................. 19
47. WAIVER.............................................................. 19
48. SUBORDINATION....................................................... 19
49. RECORDATION......................................................... 20
50. PROMOTIONAL FUND.................................................... 20
51. ASSIGNMENT AND SUBLEASE............................................. 20
52. TERMINATION......................................................... 21
53. HOLDING OVER........................................................ 21
54. FOR RENT SIGNS...................................................... 21
55. QUIET ENJOYMENT..................................................... 21
56. ADDRESSES AND NOTICES............................................... 22
57. ESTOPPEL CERTIFICATES............................................... 22
58 WAIVER OF A JURY TRIAL.............................................. 22
59. MISCELLANEOUS....................................................... 24
60. HAZARDOUS MATERIALS................................................. 24
61. PRIMARY USE PROTECTION.............................................. 25
62. GUARANTY OF PERFORMANCE............................................. 25
63. EXISTING TENANT IN POSSESSION....................................... 25
64. LANDLORD'S NOTICE OF STREET......................................... 25
EXHIBIT A - SITE PLAN
EXHIBIT B - SIGN REGULATIONS
EXHIBIT C - LANDLORD'S WORK
EXHIBIT C-1 - LANDLORD'S WORK
EXHIBIT C-2 - TENANT'S WORK
EXHIBIT D - TENANT'S SPECIFICATIONS REQUIREMENT MANUAL
EXHIBIT E - USE OF PREMISES RESTRICTIONS
EXHIBIT F - GUARANTY OF PERFORMANCE
EXHIBIT G - COMMENCEMENT AND ENDING AGREEMENT
</TABLE>
<PAGE> 6
LEASE AGREEMENT
DATE: AUGUST 16, 1993
LANDLORD: CM/CP BULL RUN JOINT VENTURE
1899 L STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20036
TENANT: TOTAL BEVERAGE CORP.
A DELAWARE CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
PREMISES: SPACE NO. 42-47
BULL RUN PLAZA
*------- SUDLEY MANOR DRIVE
MANASSAS, VIRGINIA 22110
In consideration of the covenants contained herein, this Lease
Agreement is made as of the date above written by and between Landlord and
Tenant under the following terms, conditions and provisions:
1. BASIC LEASE INFORMATION
The following Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any information and
definitions contained in the Basic Lease Information shall mean and refer to
the information and definitions hereinafter set forth. If there is any
conflict between the terms of the Lease and the following Basic Lease
Information, the terms of the Lease shall prevail.
(A) TENANT'S TRADE NAME Total Beverage
(B) PREMISES: Store No. 42-47, approximately 32,537
square feet in size, located in the
Shopping Center as shown on Exhibit
"A". (See also Section 6)
(C) SHOPPING CENTER: The shopping center commonly known as
Bull Run Plaza, as shown on Exhibit
"A", as the same may be modified from
time to time, in accordance with the
terms hereof.
(D) ORIGINAL LEASE TERM: Fifteen (15) years, plus that part of
the month, if any, from the
Commencement Date to the first day of
the first full calendar month in the
term.
(E) COMMENCEMENT DATE: The Delivery Date as provided in
Section 25.
(F) RENT COMMENCEMENT DATE: That date which is One Hundred Twenty
(120) days after the
Commencement Date, or the date Tenant
opens for business in the Premises,
whichever is earlier.
(G) EXPIRATION DATE: The last day of the 180th full
calendar month after the
Commencement Date.
(H) OPTION TERM: One (1) option term of Ten (10)
years.
(I) LEASE YEAR: The first Lease Year shall be the
period commencing with the
Commencement Date and ending upon the
expiration of twelve (12) full
calendar months thereafter. Commencing
upon the expiration of twelve (12)
full calendar months following the
Commencement Date, each Lease Year
shall consist of consecutive twelve
(12) full calendar month periods.
(J) RENTAL DEPOSIT: None
* Landlord shall notify Tenant of the street address assigned to the Premises
in accordance with the provisions of Section 65 hereof.
<PAGE> 7
(K) SECURITY DEPOSIT: None
(L) ANNUAL MINIMUM Two Hundred Eighty Four Thousand Six
GUARANTEED RENT: Hundred Ninety Eight and 75/100
Dollars ($284,698.75), subject
to adjustment pursuant to Sections 6
and 3 (b) of the Lease.
(M) MINIMUM BASIS OF SALES: Twenty Eight Million Four Hundred
Sixty Nine Thousand Eight
Hundred Seventy Five and 00/100
Dollars ($28,469,875.00), subject to
adjustment pursuant to Sections 9 and
3 (b) of the Lease.
(N) PERCENTAGE RENT RATE: One Percent (1%)
(O) CONSUMER PRICE INDEX: The "Consumer Price Index for Urban
Wage Earners and Clerical
Workers (1982-84=100) for All Items,
U.S. City Average", issued by the
Bureau of Labor Statistics of the
United States Department of Labor. In
the event the Consumer Price Index is
not available, or is discontinued,
then any successor or substitute index
shall be used for the computations
herein set forth. In computing the
increase in the Consumer Price Index,
the amount of increase shall be based
upon the percentage increase in the
Consumer Price Index from the date of
the Lease through to the date of
adjustment.
(P) TENANT'S PERMITTED USE: The retail sale of primarily
containerized beverages for
off-premises consumption, including
without limitation wine, beer, bottled
water, carbonated and non-carbonated
soft drinks, soda and seltzer waters,
and juices; tobacco products;
snack-food items, candy and paper
goods and related items and for no
other use.
(Q) PROMOTIONAL CHARGE: A monthly charge in the amount of
$83.33.
(R) LANDLORD'S ADDRESS FOR CM/CP Bull Run Joint Venture
RENTAL PAYMENTS: Post Office Box 3891
Merrifield, VA 22116
(S) LANDLORD'S ADDRESS FOR CM/CP Bull Run Joint Venture
NOTICES: c/o Combined Properties Incorporated
1899 L Street, N.W.
Washington, D.C. 20036
Attention: Legal Department
(T) TENANT'S ADDRESS FOR Total Beverage Corp.
NOTICES: 3300 75th Avenue
Landover, MD 20785
Attention: Legal Department
(U) WITH A COPY TO: Dart Group Corporation
3300 75th Avenue
Landover, MD 20785
(V) BROKER: None
(W) GUARANTOR: Dart Group Corporation
3300 75th Avenue
Landover, MD 20785
(X) EXHIBITS
Exhibit "A" Site Plan
Exhibit "B" Sign Regulations
Exhibit "C" Landlord's Work
Exhibit "C-1" Landlord's Work
Exhibit "C-2" Tenant's Work
Exhibit "D" Tenant's Specifications Requirements
Manual
Exhibit "E" Use of Premises Restrictions
Exhibit "F" Guaranty of Performance
Exhibit "G" Commencement and Ending Agreement
<PAGE> 8
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases form
Landlord, the Premises as shown on Exhibit "A". The Premises will be located
substantially as shown in relation to other improvements on Exhibit "A". No
representation is made as to the accuracy of Exhibit "A" and the Shopping
Center layout shown on said Exhibit "A" is preliminary and subject to
modification and revision and no representation is made as to the occupancy,
types of business or any tenant shown on the same. Together with the premises
demised hereby, Landlord grants to Tenant, on a non-exclusive basis, the right
to use, in common with others, the parking areas, roadways, means of ingress
and egress and service areas of the Shopping Center. Tenant acknowledges that
Landlord has the right and power to erect free standing buildings or other
structures or facilities in the common areas or elsewhere in the Shopping
Center, to manage and operate the common areas, including all means of exit and
entrance and approaches thereto within the Shopping Center, and Landlord shall
at all times have the right, at Landlord's sole discretion, from time to time,
to erect free standing buildings or other structures or facilities, to
determine and change the common areas and parking plan for the Shopping Center,
and the arrangement of entrances, exits and approaches thereto, providing same
meets governmental codes. Landlord further reserves the right to modify,
remove, delete, add to, expand or otherwise reconfigure existing and future
buildings, structures and facilities in the Common Areas or elsewhere in the
Shopping Center, provided same meets governmental codes. Landlord reserves the
right to change the name of the Shopping Center.
In addition, Landlord will maintain at all time the existing entrance
to the Shopping Center from Sudley Manor Drive designated by cross-hatching on
Exhibit "A" attached hereto, unless closed by condemnation, court order or
other legal proceeding, and except for any temporary closures for maintenance
and repair or to avoid a public dedication of the Shopping Center Common Areas.
Notwithstanding anything to the contrary contained herein, Landlord
shall not construct any leasable improvements in the "No Build Area" shown on
Exhibit "A" , nor shall Landlord reduce the number of parking spaces in the "No
Build Area", except as the same might be reduced by certain landscape areas
and/or open spaces in the "No Build Area", except as the same might be required
by appropriate governmental codes and authorities from time to time.
3. TERM
(a) ORIGINAL TERM. This Lease shall be effective upon
full execution by and delivery of a copy hereof to the parties hereto. The
term of this Lease shall commence on the Commencement Date and end on the
Expiration Date, unless sooner terminated as provided herein.
(b) OPTION TERM. Provided Tenant is open for business
and operating in the Premises (subject to Force Majeure Events), and provided
Tenant is not in default beyond any applicable cure period at the time of
exercise of this option, then Tenant shall have the option to renew this Lease
for one (1) additional ten (10) year period commending at the expiration of the
original lease term. Said option shall be automatically exercised by Tenant
unless Tenant gives Landlord notice of Tenant's intention not to renew this
Lease which notice must be received by Landlord at lease twelve (12) months
prior to the expiration of the original term provided, however, that in the
event Tenant fails to give such option exercise notice, Tenant shall not be
deemed to have waived the right to the option until Landlord gives Tenant
written notice of Tenant's failure to exercise the option and affords Tenant a
period of ten (10) days after receipt of such notice to exercise the option by
giving Landlord written notice thereof. Such notice must be given in
accordance with Section 56 of this Lease.
All of the terms and conditions of this Lease shall remain in full
force and effect during the option term, except there shall not be any
additional option to renew this Lease beyond what is provided for hereinabove,
and Minimum Guaranteed Rent and the Minimum Basis of Sales for the Option Term
shall be as set both in the following schedule:
<TABLE>
<CAPTION>
OPTION TERM RATE PER ANNUAL MINIMUM MONTHLY MINIMUM MINIMUM BASIS
PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT OF SALES
- ----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Lease Years
1-5 $13.31 $433,067.47 $36,088.96 $43,306,747.00
Lease Years
6-10 $15.31 $498,141.47 $41,511.79 $49,814,147.00
</TABLE>
4. RENTAL DEPOSIT - INTENTIONALLY DELETED
5. SECURITY DEPOSIT - INTENTIONALLY DELETED
<PAGE> 9
6. MINIMUM GUARANTEED RENT
(a) Commencing on the Rent Commencement Date, Tenant covenants and
agrees to pay to Landlord without notice or prior demand the Minimum Guaranteed
Rent with no offsets or abatements whatsoever in lawful money of the United
States of America, to be paid in equal monthly payments on the first day of
each month, in advance, as such place as shall be designated by Landlord within
the continental United States. If the Rent Commencement Date shall occur on a
day other than the first day of the month, then the first rental payment shall
be pro-rated accordingly.
(b) The Minimum Guaranteed Rent shall be payable for the periods
set forth below in the following annual and monthly amounts:
<TABLE>
<CAPTION>
RATE PER ANNUAL MINIMUM MONTHLY MINIMUM
LEASE TERM PERIOD SQUARE FOOT GUARANTEED RENT GUARANTEED RENT
- ----------------- ----------- --------------- ---------------
<S> <C> <C> <C>
Lease Years 1-5 $ 8.75 $284,698.75 $23,724.90
Lease Years 6-10 $10.06 $327,322.22 $27,276.85
Lease Years 11-15 $11.57 $376,453.09 $31,371.09
</TABLE>
The aforesaid Minimum Guaranteed Rent and equal monthly installments
have been based upon a Premises containing 32,537 square feet of gross floor
area. Said Premises shall be upon completion measured by Landlord's architect
or engineer and in the event the premises shall contain an amount of gross
floor area different than 32,537 square feet said rentals shall be
proportionately adjusted based upon the square foot rental rate designated
hereinabove; it being understood by the parties that the Premises may contain
more or less square footage than 32,537 square feet based on either a
reconfiguration of the Premises by Landlord or the availability of additional
square footage. The Premises shall be deemed to extend to and include the
exterior faces of all exterior walls, the full thickness of common area walls,
and to the center line of any walls separating the Premises from adjacent
tenant premises and the exterior line of the store front as shown on Exhibit
"A". In computing the square footage of the Premises, the area dedicated to
any mezzanine and adjacent exterior cart corral area shall not be included.
7. EXPENSE OF COMMON AREAS AND MALL FACILITIES
(a) Commencing on the Rent Commencement Date Tenant agrees to pay
to Landlord as additional rent for each calendar year during the term hereof,
in equal monthly installments at the same time as the Minimum Guaranteed Rent
(and pro rata for any portion of a month), an estimated payment toward Tenant's
proportionate share of the Shopping Center's Common Areas Operating Cost
(hereinafter defined). Tenant's proportionate share of the Shopping Center's
Common Areas Operating Cost, shall be determined for each calendar year by
multiplying such costs by a fraction, the numerator of which shall be the floor
area of the Premises and the denominator shall be the total leasable floor area
of Shopping Center as of December 31 of such calendar year. Tenant shall pay,
on an estimated basis, its prorata share based on the previous year's actual
costs, as billed to Tenant by Landlord on a monthly basis, with an annual
reconciliation; any overpayments by Tenant shall be credited to Tenant's rental
account (or refunded to Tenant if the term of this Lease has expired or been
terminated); any underpayment shall be treated as provided in subparagraph (b)
below. Landlord's initial estimate of the Shopping Center's Common Area
Operating Cost is No and 92/100 Dollars ($.92) per square foot of leasable
floor area. Therefore Tenant shall initially make estimated payments in the
amount of Twenty-Nine Thousand Nine Hundred Thirty-Four and 04/100 Dollars
($29,934.04) annually to be paid in equal monthly installments in the amount of
Two Thousand Four Hundred Ninety-Four and 50/100 Dollars ($2,494.50) without
set-off or deduction. For the purpose of this subsection (a), the Shopping
Center's Common Areas Operating Cost means the total cost and expense incurred
in maintaining, managing, operating, repairing and replacing the parking areas,
curbs, sidewalks and other exterior common areas, the roof and the exterior
walls of the buildings in the Shopping Center which house mechanical,
electrical or other equipment or are otherwise determined by Landlord from time
to time to be used in operating or maintaining the Shopping Center,
specifically including but not limited to, if provided and without limitation,
the cost of maintaining, operating, repairing, replacing and repaving the
common areas, gardening and landscaping, the cost of fire and extended coverage
insurance (relative to the buildings and insurable structures in the Shopping
Center and not to any personal property of any tenant) and public liability
(relative to the Common Areas only) and property damage insurance, water and
sewer charges, repairs, lighting, security, sanitary control, removal of ice,
snow, trash, rubbish, garbage and other refuse, cleaning, painting, directional
signs, pavement markings, parking lot striping, depreciation on machinery,
equipment and furnishings used in such operation and maintenance, the cost of
personnel to implement such services, the cost of personnel to direct parking,
and legal fees, accounting fees and other professional fees incurred by
Landlord in connection with the protection or enforcement of rights and/or
obligations relative to the common areas of the Shopping Center, plus ten
percent (10%) of all of the aforementioned (excluding any management fees paid
to third parties, insurance premiums and real estate taxes) as overhead and
administrative expenses.
Notwithstanding the foregoing, if in any one (1) year, Landlord shall
replace all or any portion of the parking area in the Shopping Center and the
cost of such replacement exceeds Fifty Thousand Dollars ($50,000.00), the costs
of such replacement shall be amortized evenly over a five (5) year period,
commencing with the year in which such cost is incurred. Further, the Shopping
Center's Common Area Operating Cost shall not include (i) the depreciation of
any item the cost of which has been included in full in the Shopping Center's
Common
<PAGE> 10
Area Operation Cost; nor (ii) the cost of any of Landlord's "home-office"
managerial personnel; nor (iii) the payment of any carrying costs (i.e.,
principal and/or interest payments) on any loan made by Landlord; nor (iv) any
costs to repair, rebuild or restore any portions of the common areas to the
extent such costs are covered by and reimbursed to Landlord by proceeds from
insurance policies carried by Landlord and the premises for which are included
as a component of the Shopping Center's Common Area Operating Costs; nor (v)
any amounts for costs and expenses which would otherwise be includable
hereunder, but which are recovered by Landlord (i) from tenants or third
parties as a result of any act, omission, default or negligence on the part of
such tenants or third parties relative to the common areas, or (ii) as a result
of breaches by tenants of their respective leases relative to the common areas
(other than recoveries from tenants pursuant to cost-sharing and recovery
provisions in their leases similar to this Section 7 (a)).
(b) Upon the commencement of each Lease Year during the term
hereof, Tenant's Common Area contribution shall be increased based upon an
amount, if any, equal to Tenant's proportionate share of the excess costs, as
hereinafter defined.
If in any Lease Year or portion thereof, the aforesaid total costs and
expenses comprising the Shopping Center's Common Areas Operating Costs exceed
No and 92/100 Dollars ($.92) per square foot times the total number of square
feet of leasable floor area in the Shopping Center after deducting any amounts
paid by any tenants located on floor levels which are not "on-grade" and
therefore not included in the denominator as set forth in the next paragraph
(such excess being referred to as "excess costs"), then, and so often as such
event shall occur, Tenant's proportionate share of such excess costs shall be
calculated as follows:
a. - With respect to the said Shopping Center's Common Areas
Operating Cost, said excess costs shall be multiplied by a fraction, the
numerator of which is the square foot area of the Premises and the denominator
of which is the total number of square feet of leasable on-grade floor area in
the Shopping Center.
Within thirty (30) days from the date of billing by Landlord, Tenant
shall pay Tenant's proportionate share of such excess costs for the immediately
preceding calendar year; thereafter Tenant's proportionate share of the
Shopping Center's Common Areas Operating Cost shall be equal to the combined
amount of such excess costs and the prior calendar year's estimated
proportionate contribution, the combined amount being Tenant's new estimated
proportionate Common Area contribution, until further adjusted as herein
provided, and shall be payable in equal monthly installments without off-set.
Nothing contained within this Section 7 shall be construed as limiting
or precluding the Tenant's obligations under Section 31 or other Tenant
obligations under this Lease.
Landlord shall upon written request notify Tenant annually of the
total number of leasable on-grade square feet in the Shopping Center. Landlord
shall maintain and keep adequate records to substantiate the above Cost and
Tenant shall have the right to examine the books and perform an audit on the
same terms and conditions as Tenant must account for its Gross Sales.
8. REAL ESTATE TAXES
In addition to and as a part of the rental set forth herein, Tenant
agrees to pay to the Landlord for each calendar year during the term, Tenant's
share (as computed in accordance with the terms of this Section 8) of all
general and special real property taxes and assessments ("Real Estate Taxes")
levied or assessed against the Shopping Center and the underlying land and
improvements (including, but not limited to, common areas). Commencing on the
Rent Commencement Date, Tenant shall pay to Landlord on an estimated basis, the
sum of Twenty-Five Thousand Three Hundred Seventy-Eight and 86/100 Dollars
($25,378.86) to be paid in equal monthly installment in the amount of Two
Thousand One Hundred Fourteen and 91/100 Dollars ($2,114.91), on the first day
of each month, in advance, along with Tenant's payment of Minimum Guaranteed
Rent. Said sum represents Tenant's prorata contribution toward the Real Estate
Taxes, based upon current estate taxes (calendar year 1993) on the Shopping
Center. In the event the Real Estate Taxes shall be increased or decreased in
any tax year during the term of this Lease, by reason of an increase or
decrease in the tax rate or the assessed valuation, over the amount of taxes
due and payable for calendar year 1993 then Tenant shall pay to Landlord as
additional rent, or Landlord shall reimburse to Tenant, within thirty (30) days
after receiving notice that such taxes are payable, its proportionate share of
said increases and, thereafter, Tenant shall pay said increases on a monthly
basis along with other payments called for herein. Tenant's share of the
aforesaid increases shall be calculated by multiplying said increase by a
fraction, the numerator of which is the square foot area of the Premises and
the denominator of which is the total number of square feet of leasable
on-grade floor area in the Shopping Center, after deducting any contributions
to Real Estate Taxes paid by any tenants located on floor levels which are not
"on-grade" and therefore not included in the denominator.
Landlord shall furnish to Tenant upon written request a copy of the tax
<PAGE> 11
bill and the computation of Tenant's proportionate share. Provided that Tenant
shall first consent in writing to the protest by Landlord of any real estate
taxes, reasonable expenses, including attorneys' fees, expert witness fees and
similar costs, incurred by Landlord in obtaining or attempting to obtain such
reduction of any real estate taxes shall be prorated and added to and included
in the amount of any such real estate taxes. Real estate taxes which are being
contested by Landlord and which are required to be paid in order to avoid
penalties, interest, or imposition of any tax lien on the Shopping Center,
shall nevertheless be included for purposes of the computation of the liability
of Tenant under the above paragraph, provided, however, that in the event that
Tenant shall have paid any amount of increased rent pursuant to this Article 8
and the Landlord shall thereafter receive a refund of any portion of any real
estate taxes on which such payment shall have been based, Landlord shall pay to
Tenant the pro-rata share of such refund. Landlord shall have no obligation to
contest, object or litigate the levying or impositions of any real estate taxes
and may settle, compromise, consent to, waive or otherwise determine in its
discretion to abandon any contest with respect to the amount of any real estate
taxes with consent or approval of the Tenant.
The term "Real Estate Taxes" means the total of all taxes and
assessments, general and special, ordinary and extraordinary, foreseen and
unforeseen, including assessments for public improvements and betterments,
assessed, levied or imposed with respect to the land and improvements included
within the Shopping Center. If at any time during the term of this Lease, the
present method of taxation shall be changed so that in lieu of the whole or any
part of any Real Estate Taxes levied, assessed or imposed on real estate and
the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charges measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings in the Shopping Center, then all such taxes, assessments, levies or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "Taxes" for the purposes hereof.
Notwithstanding anything to the contrary contained in the foregoing,
Tenant shall have no responsibility for any share of any increase of Real
Estate Taxes which is brought about, in whole or in part, by any sale, lease,
encumbrance or other transfer of all or any part of the Shopping Center or any
interest therein, or other sale or other transfer of an interest of any entity
now or hereafter constituting Landlord, in other than an arm's length
transaction.
9. PERCENTAGE RENT
(a) Commencing with the first calendar month hereunder, and in
addition to the other payments called for herein, Tenant further agrees that,
with respect to any Lease Year during the term hereof in which the Gross Sales
of Tenant in, upon or from the Premises shall exceed the Minimum Basis of Sales
(Minimum Basis of Sales shall be prorated in accordance with Section 9 (b) for
any period of less than twelve (12) calendar months), Tenant shall pay to
Landlord, as percentage rent, a sum equal to the Percentage Rent Rate
multiplied by Gross Sales for such year in excess of the Minimum Basis of
Sales. In the event Section 30 is amended and/or Section 45 or Section 51
invoked, Landlord expressly reserves the right to change the Percentage Rent
Rate hereinabove set forth*.
(b) The Minimum Basis of Sales shall be the following amounts for
the periods set forth below:
<TABLE>
<CAPTION>
MINIMUM BASIS
LEASE TERM PERIOD OF SALES
----------------- -------------
<S> <C>
Lease Years 1-5 $28,469,875.00
Lease Years 6-10 $32,732,222.00
Lease Years 11-15 $37,645,309.00
</TABLE>
It is understood that the Minimum Basis of Sales is subject to
appropriate proration as follows. In the event of any partial calendar year
during the term hereof, the Minimum Basis of Sales shall be adjusted based on
the number of months in such partial year. No "deemed" sales shall be included
in the Gross Sales for any partial years.
(c) It is acknowledged and agreed that Tenant is not hereby
covenanting to operate the Demised Premises other than as expressly set out in
the Lease and is not making any representation or warranty in respect of the
sales to be made at the Demise Premises other than as expressly set out in the
Lease.
*which Percentage Rent Rate shall be in accordance with guidelines as issued by
the International Council of Shopping Centers of such other guidelines as may
be available from time to time.
10. PAYMENT OF PERCENTAGE RENT
The reporting of Gross Sales and the determination and payment of
percentage rent hereunder shall be made annually on the basis of a calendar
year.
<PAGE> 12
Commencing with the first Lease Year of the term hereof, and continuing
throughout the remainder of the lease term, the percentage rent due under this
Lease shall be determined and paid by Tenant to Landlord on or before February
15th following the close of each calendar year.
11. GROSS SALES
The term "Gross Sales" as used herein shall be construed to include
the entire amount of the actual sales price, whether for cash or otherwise, of
all sales of merchandise and/or service and any other receipt whatsoever of all
business conducted in or from the Premises, including, but not limited to, mail
orders, telephone orders, and/or other orders in whatever manner received or
filled whether in whole or in part at the Premises; orders taken in or from the
Premises, although said orders may be filled elsewhere; receipts from vending
machines in the Premises; and sales by any subtenant, concessionaire, licensee
or other person in said Premises, provided that nothing herein shall prevent
Landlord from requiring an additional or different percentage rent as a
condition to approval of any subtenant, concessionaire or licensee of Tenant
hereunder which is engaged in a use other than Tenant's Permitted Use which
percentage rent shall be in accordance with guidelines as issued by the
International Council of Shopping Centers or such other guidelines as may be
available from time to time.. Said term shall not include, however, (1) any
sales tax, use tax or any other tax collected from a customer by Tenant and
paid by Tenant to any duly constituted governmental authority; (2) the exchange
of merchandise between the stores of Tenant, if any, where such exchange of
goods or merchandise is made solely for the convenient operation of the
business of Tenant and not for the purpose of consummating a sale which had
theretofore been made at, in, from or upon the Premises and/or for the purpose
of depriving Landlord of the benefit of a sale which otherwise would be made
at, in, from or upon the Premises; (3) the amount of returns to shippers of
manufacturers; (4) the amount of any cash or credit refund made upon any sale
where the merchandise sold, or some part thereof, is thereafter returned by the
purchaser and accepted by Tenant; (5) sales of Tenant's store fixtures; (6) the
amount of cashier shortages but not to exceed $10,000.00 in any Lease Year; (7)
receipts from sales at a discount at the Demised Premises to non-profit
organizations, but not to exceed $25,000.00 in any Lease Year; (8) the gross
receipts from vending machine sales of cigarettes, candy and soft drinks at the
Demised Premises; (9) receipts from pay telephones; (10) additional discounts
to customers at the Demised Premises by special promotion coupons to the extent
same are redeemed at the Demised Premises by customers, or cash refunds to
customers (it being understood and agreed that said special promotion coupons
are not Tenant's principal method of selling on the Demised Premises); (11)
container tax or container deposits not retained by Tenant; (12) bad check
losses at the Demised Premises to the extent and at the time sales are
written-off as such by Tenant but not to exceed one-quarter of one percent
(.25%) of gross receipts; (13) voided orders; (14) lottery sales and money
order sales in excess of commissions received by Tenant; (15) receipts from the
sale of postage stamps at cost to Tenant; (16) any fees or costs paid by
customers to a third party other than Landlord as a result of any transaction
at an "automatic teller machine" located in or on the Demised Premises, but
only to the extent such fees or costs are included in "gross receipts" under
this Section; and (17) gross receipts from the sale of cigarettes.
12. SALES REPORTS
Tenant shall submit to Landlord by February 15th at the place where
the rent herein reserved is then payable, a preliminary statement signed by an
officer of Tenant, showing in all reasonable detail the amount of Gross Sales
made from the Premises during the prior Calendar Year. Within ninety (90) days
after the end of each Calendar Year Tenant shall deliver to Landlord a final
and complete statement of Gross Sales for the entire Calendar Year certified by
Tenant's chief financial officer. Tenant shall require of its subtenants,
concessionaires and licensees, if any, to furnish similar statements to
Landlord within the same periods specified. For the last month of the last
Lease Year, the monthly report shall be due by no later than thirty (30) days
following the Expiration Date.
13. AUDIT OF SALES REPORTS
In the event Landlord is not satisfied with any of the statements as
submitted by Tenant and/or its subtenants, or others, or if Tenant or any other
person herein obligated fails to furnish the statements required herein, then
and in that event Landlord shall have the right, no more often than once
annually, to make an audit of Tenant's and its subtenant's, etc., books and
records pertaining to sales on, or in connection with, the Premises leased
herein. If any such statement is found to be incorrect to an extent of more
than two percent (2%) in amount over the figures submitted by Tenant and its
subtenant, etc., or if such statements are not furnished, Tenant shall promptly
pay for such audit and the deficiency in rent at the same time and in addition
to the next payment of Minimum Guaranteed Rent, and, if such audit proves
Tenant's and subtenant's statements to be correct, or together to vary not
more than two percent (2%) from the results of the special audit, then the
expense of such audit shall be borne by Landlord. Landlord's right to examine
Tenant's and its subtenant's books and records, as hereinbefore set forth, or
to make an audit thereof shall be available to Landlord only for a two-year
period after the last statement for
<PAGE> 13
such Lease Year period shall have been furnished to Landlord.
14. RECORDS
Tenant shall and hereby agrees that it and its subtenants,
concessionaires and licensees, if any, will keep in the Premises, or at the
location identified as Tenant's Address for Notices, for a period of not less
than three (3) years following the end of each Lease Year, a permanent and
accurate set of books and records of all Gross Sales of the business conducted
in said Premises, and all supporting records, including taxes.
15. DISCLAIMER OF JOINT VENTURE
Any intention to create a joint venture or partnership between the
parties hereto is hereby expressly disclaimed. The provisions of this Lease in
regard to the payment by Tenant and the acceptance by Landlord of a percentage
of the Gross Sales of Tenant and others is a reservation of rent for the use of
the Premises.
16. RENTAL OCCUPANCY TAX
In addition to the payments required to be made by Tenant for Real
Estate Taxes pursuant to Section 8 of this Lease, Tenant shall pay, as
additional rent, any privilege, license, sales, gross income, excess,
occupancy, use or any other tax (as distinguished from Federal or State Income
Taxes) at any time imposed upon the rent payments or Tenant's occupancy or use
of the Premises, or upon Landlord in an amount based upon such rent payments,
Tenant's occupancy or use of the Premises, or the common areas in the Shopping
Center (hereinafter referred to as "Rental Occupancy Tax") whether the
imposition of such Rental Occupancy Tax shall be made by the Federal
Government, the State Government or any agency, subdivision or municipality
thereof. Tenant shall pay said additional Rental Occupancy Tax monthly to the
Landlord, or at other intervals as determined by Landlord from time to time.
17. PAYMENT TO LANDLORD AND LATE CHARGE FEE
Tenant will promptly pay all Minimum Guaranteed Rent, additional rent
and other payments called for herein when and as the same shall become due and
payable. All sums of money or charges payable by Tenant to Landlord under this
Lease shall be paid when due, without any deductions, abatements or offsets
whatsoever, and the failure to pay such sum or charges carries the same
consequences as Tenant's failure to pay rent. Any payments of rental or other
charges by Tenant, or acceptance by Landlord of a lesser amount than shall be
due from Tenant to Landlord, shall be treated as a payment on account. The
acceptance by Landlord of a check for a lesser amount with any endorsement or
statement thereon, or upon any letter accompanying such check, that such lesser
amount is payment in full, shall be given no effect, and Landlord may accept
such check without prejudice to any other rights or remedies which Landlord may
have against Tenant.
In the event Landlord shall fail to receive any payment of rent
required under this Lease when due, Landlord shall give Tenant written notice
of such failure, and in such event Landlord shall make reasonable efforts to
advise Tenant's chief accounting officer by telephone of such failure. In the
event Tenant fails to pay within two (2) business days following receipt by
Tenant of written notice any payment of rent when due more than one time in any
lease year, Tenant agrees to pay commencing with the second late payment in
each lease year, a late penalty charge in an amount equal to Two Hundred Fifty
Dollars ($250.00), if Landlord shall fail to receive same within two (2)
business days following receipt by Tenant of written notice. Further,
commencing with the second late payment in any lease year during the term
hereof, late payments of rent not received with the aforesaid two (2) business
day period shall bear interest from the date due at the annual rate of twelve
percent (12%) per annum or two percent (2%) over the prime lending rate of
Riggs Bank, N.A., whichever is higher.
The provisions of this Section are cumulative and shall in no way
restrict the other remedies available to Landlord in the event of Tenant's
default as provided for under this Lease.
18. FIRE AND EXTENDED COVERAGE INSURANCE - PLATE GLASS
Landlord shall be responsible for providing fire and extended coverage
insurance for the Shopping Center and the Premises in an amount not less than
80% of the full replacement cost (excluding insurance on Tenant's inventory,
equipment, furniture and fixtures, and other contents within the Premises) and
such cost shall be included in the Shopping Center Operating Costs in
accordance with Section 7 of this Lease. Landlord shall self-insure for any
amounts less than 100% of the full replacement cost.
Tenant, at its sole cost and expense, shall be responsible for
providing a policy of fire and extended coverage insurance, insuring Tenant's
inventory, equipment, furniture and fixtures, and all other contents in the
Premises. Tenant shall also maintain, at its sole cost and expense, a policy
of plate glass insurance naming both Tenant and Landlord as insureds, with a
standard mortgagee endorsement satisfactory to Landlord's mortgagee, for the
full replacement cost
<PAGE> 14
of repairing an/or restoring all of the plate glass in the Premises. In lieu
of such plate glass insurance, Tenant may be self- insured, provided Tenant
replaces any damaged glass with glass of like kind and quality at Tenant's
expense with due diligence after the damage occurs from any cause whatsoever.
Failure to replace any damaged glass as herein provided shall constitute a
default under this Lease. Tenant's insurance policies shall provide that they
may not be canceled without at least thirty (30) days prior written notice to
Landlord of such cancellation and Tenant shall deposit certificates of such
insurance policies with Landlord upon the commencement of the term of this
Lease.
19. UTILITIES
Tenant shall, at its own cost and expense, pay promptly all charges
when due for water, gas, electricity, heat, sewer rentals or service charges,
and any other utility charges rendered or furnished to the Premises or incurred
by Tenant in its use and occupancy thereof, including charge incurred during
Tenant's "fixturing" period under Section 25 herein.
If Landlord is required to supply water, gas, electricity, heat, sewer
rentals or service charges, or any other utility service, for the Shopping
Center and/or the Premises, then Tenant agrees to purchase same from Landlord
at the then prevailing local rates and charges, and to pay promptly the charges
therefor when bills are rendered to Tenant. Tenant shall use reasonable
diligence in conservation of these utilities.
Landlord shall provide and install environmental heating and
air-conditioning equipment in the Premises and Tenant shall, at its sole cost
and expense, operate, maintain and repair the heating and air-conditioning
equipment herein referred to, including the making of all necessary
replacements thereto, throughout the term of this Lease and any renewal
thereof. Tenant shall pay for all fuel, water, gas and electricity consumed in
such operation. Landlord shall under no circumstances be liable to Tenant for
damages or otherwise for any interruption in service of water, electricity,
heating and/or air-conditioning or other utilities and services caused by the
making of any necessary repairs, replacements and/or improvements thereto, or
by any cause beyond Landlord's reasonable control, unless caused by the
negligence of Landlord, its agents or servants.
20. TENANT'S SIGNS
In order to obtain a harmonious appearance in the Shopping Center,
Landlord has established specifications and regulations for exterior signs.
Marked Exhibit "B", attached hereto and made a part hereof, is a copy of
Landlord's Sign Regulations, setting forth Landlord's specifications for
Tenant's sign(s) to be placed on the exterior of Tenant's store.
Tenant is required to install prior to opening for business in the
Premises and at all times thereafter maintain in good condition and repair,
including keeping same lighted, as hereinafter set forth, and exterior sign(s)
above Tenant's storefront and, upon Landlord's request, an exterior
under-canopy sign in front of Tenant's storefront in the area designated and as
approved by Landlord. All said storefront signs shall be kept illuminated
during the hours from at least dusk until 9:00 P.M., Monday through Saturday,
and at all other times the Tenant is open for business. Tenant shall comply
with all applicable requirements of governmental authorities having
jurisdiction and Tenant shall be responsible for obtaining all necessary
permits. Tenant shall make all repairs required by reason of the installation,
maintenance and removal of its sign(s). Tenant shall not maintain or display
any sign, lettering or lights on the interior or exterior surfaces of windows
of the Premises and shall not attach any non-permanent sign to the inside of
any window of the Premises which may be visible through such window from the
outside other than temporary signs which have been professional prepared.
In accordance with Exhibit "B", prior to fabrication or installation
of Tenant's sign(s) Tenant shall submit Tenant's sign plan to Landlord for
approval, which approval shall not be unreasonably withheld providing Tenant's
sign plan conforms to Exhibit "B" and providing Tenant's sign plan is not in
violation of governmental codes. Landlord will need a minimum of four (4)
copies of said plan for approval.
Upon approval by Landlord of Tenant's sign plan, a copy of said plan
shall be identified at TENANT'S FINAL APPROVED SIGN PLAN, marked FINAL EXHIBIT
"B", and be attached and made a part hereof. Tenant shall be in default
hereunder if Tenant installs a sign which has not been first approved by
Landlord, and any sign installed without such prior written approval may be
removed by Landlord at Tenant's cost and expense.
Notwithstanding the foregoing, Tenant agrees that Landlord has the
right, at Landlord's discretion, at any time during the lease term, to remodel
or change the mansard and/or other exterior surfaces of the Shopping Center.
Tenant understands that during such remodeling, it might be necessary to remove
Tenant's existing sign(s) and that said sign(s) may not be suitable for
reinstallation after the remodeling is completed. Said sign(s), or parts
thereof, which Tenant had installed, shall remain the property of Tenant, but
Landlord is hereby released from any and all liability for damage to said
sign(s) during its
<PAGE> 15
removal, providing said removal is conducted with reasonable care. Landlord
shall give Tenant notification as to the approximate date that said remodeling
will commence, as well as the anticipated completion date. If such remodeling
occurs during the original term, Landlord shall pay for any new signage
required by Landlord. During the remodeling, Tenant agrees to cooperate with
Landlord and execute any necessary documentation required to facilitate the
remodeling process. It may be necessary to erect scaffolds or other
construction equipment during the remodeling, but free and easy customer access
to the Premises shall not be unreasonably impaired, nor shall such access be
denied.
In the event the remodeling requires the Tenant to install a sign
comprised of individual, internally illuminated letters, then Tenant shall, at
its sole cost and expense, including all permits and governmental approval(s),
cause its sign, which has been approved by Landlord in accordance with this
Section 20, to be installed in the area designated by Landlord provided,
however, if the remodeling occurs during the original term, Landlord shall pay
for any new signage required by Landlord. Additionally, the Shopping Center's
sign plan and criteria may call for under-canopy signs and Tenant will be
required to have its under-canopy sign installed, maintained, removed, etc., at
its expense, consistent with Landlord's criteria and the provisions of this
Section 20 and with the Landlord's approval.
At the expiration of Tenant's occupancy of the Premises, Tenant shall
be responsible for removing Tenant's sign face form the sign box and replacing
same with a blank coordinating plate or removing Tenant's individual lettered
sign and satisfactorily restoring the surfaces damaged by the sign removal. In
the event the Tenant does not remove its sign face or individual lettered sign,
whichever the case may be, upon the expiration of its occupancy of the
Premises, then Landlord may cause the removal of said sign(s) in accordance
with the foregoing, at the sole cost and expense of Tenant. In such event, the
sign(s) shall be deemed abandoned and Landlord may dispose of same as it sees
fit.
Tenant shall be responsible for the day-to-day maintenance of its
sign, including but not limited to the replacement of light bulbs, and for the
maintenance, repair and replacement of its sign face, and for the utility
charges necessary to illuminate the sign. Damage to the sign by any cause
shall be the responsibility of Tenant unless caused by Landlord, its agents or
employees, in which event Landlord shall repair or replace the sign.
Without limiting the foregoing, the same shall not be construed as a
representation that Landlord will be remodeling the Shopping Center.
21. CONSTRUCTION OF THE PREMISES
Subject to the provisions contained in Section 22 below and Exhibit
"C" hereof, Landlord shall construct, at its expense, the Premises
substantially in accordance with the general specification entitled
"Description of Landlord's Work", as set forth or referred to in Exhibit "C"
attached hereto and made a part of this Lease. After construction by Landlord,
Tenant shall maintain and be responsible for the Premises, its equipment and
interior finishes as set forth on Exhibit "C".
22. COMPLETION AND DELIVERY OF THE PREMISES
Landlord shall use commercially reasonable efforts to substantially
complete construction of the Premises on or before November 1993; provided,
however, that in the event Landlord shall be delayed in the performance of such
construction by reason of strikes, lockouts, labor troubles, inability to
procure materials, delays in construction, failure of power, governmental
restrictions, rules, regulations, ordinances, laws, approvals or permits or
reasons of a similar nature not the fault of Landlord, then such performance by
Landlord shall be excused for the period of any such delay or delays and the
period for the performance and substantial completion of such construction
shall be automatically extended herein for a period equivalent to the
cumulative period of such delay or delays. In the event construction of the
Premises has not been substantially completed with thirty (30) months from the
date of this Lease, then at anytime after said thirty (30) months either
Landlord or Tenant, upon written notice to the other, may terminate this Lease
with no further liability or obligation by or against either party hereto, and
Landlord shall not be liable to Tenant for any loss or damage caused by such
delay(s) or otherwise. Tenant may negate Landlord's termination of this Lease
under this Section 22 by giving Landlord notice within ten (10) days after
Landlord notifies Tenant of Landlord's termination of the Lease under this
Section, which notice from Tenant will include and shall be deemed to be an
undertaking by Tenant to (i) complete the work at Tenant's sole cost and
expense and (ii) open for business within six (6) months after Tenant's notice
to Landlord. Tenant's failure to do so after giving such notice will give
Landlord the absolute, unavoidable right to terminate this Lease immediately
upon notice to Tenant. Should Tenant complete the work and open for business
within six (6) months after Tenant's notice to Landlord, Landlord shall pay to
Tenant, within ten (10) days after (i) Tenant opens for business, and (ii)
Tenant delivers a copy of its non-residential use permit authorizing Tenant's
use and occupancy of the Premises, and appropriate lien waivers and releases,
the balance of the contract price that would have been paid to Landlord's
contractor by Landlord had the work been completed according to Landlord's
contract with such contractor for the construction of the Premises in
<PAGE> 16
accordance with Exhibit "C" attached hereto. Landlord shall deliver to Tenant
together said payment a full copy of the construction contract with Landlord's
contractor. From and after the delivery of the Premises to Tenant, all repairs
and/or replacements to the Premises and the items set forth in Exhibit"C: shall
be the responsibility of Tenant at its sole cost and expense, except for latent
defects and structural defects. Any latent defect must be reported in writing
within thirty (30) days after Tenant discovered or should have discovered such
defect. Upon delivery of the Premises, Tenant shall be responsible for
applying and/or having all utilities transferred to its name for billing
purposes and Tenant shall be responsible for payment of same.
23. MAINTENANCE AND USE OF COMMON AREAS
Landlord will construct and the Shopping Center will include a parking
area, or areas, together with the access roads, as required by governmental
authorities. Landlord hereby grants to Tenant and Tenant's invitees a right,
during the term hereof, to use in common with other entitled to the use
thereof, said parking area, or areas, and the sidewalks and curbs, subject to
Landlord's rights herein. The manner in which such areas and facilities shall
be maintained, and the expenditures therefor, shall be at the reasonable
discretion of Landlord and as is customary in the industry in order to maintain
such areas and facilities in a reasonable good and clean order and condition
consistent with "first class" standards of other similar shopping centers
located in the Washington, D.C. metropolitan area, the use of such parking
areas and other common area facilities shall be subject to such reasonable
regulations as Landlord may make from time to time. Any such rules shall not
discriminate against Tenant or materially alter Tenant's obligations under this
Lease.
Tenant shall direct and instruct its employees to use only such
parking areas provided by Landlord from time to time for employee parking, and
not to use the areas provided for customer parking. Tenant shall not at any
time allow any trucks or any other vehicles servicing its store to stand or
park in the access roads or areas provided for customer parking.
Notwithstanding the foregoing, Landlord recognizes that on occasion certain
trucks and other vehicles servicing Tenant's store may be required to stand or
park in the access roads or parking areas on a temporary basis (i.e., while
waiting for other trucks or vehicles to complete their unloading at Tenant's
loading dock facility). All deliveries of goods, wares, merchandise, etc.,
shall be at the rear of the Premises, unless, for any reason, access to the
rear of the Premises is obstructed on a temporary or permanent basis, in which
event, Tenant shall have the right to make its deliveries through the front of
the Premises. Further, on an incidental basis, small vans or other vehicles
may make deliveries of goods, wares, merchandise, etc. through the front doors
of Tenant's store.
Notwithstanding anything else contained in this Lease, if Landlord
fails to maintain the Common Areas or its other obligations under this lease,
after expiration of thirty (30) days following written notice to Landlord,
Tenant shall be entitled to enforce its rights at law, and the party prevailing
in any such action, as determined by the court, shall be entitled to recover
all reasonable expenses incurred in such action, including reasonable
attorney's fees and court costs.
Landlord is required to keep the parking lot illuminated until at
least one-half hour after Tenant closes its store for business, but not later
than 11:00 p.m.
The Shopping Center may be constructed in stages or it may be
determined that alterations are to be made and construction of later stages or
future alterations may necessitate the rearrangement and alteration of some or
all of the then existing common areas. Landlord, therefore, reserves the right
in its sole discretion to change, rearrange, alter, modify or supplement any or
all of the areas designed for the common use and convenience of all tenants,
excepting the "No Build Area" shown on Exhibit "A", so long as adequate common
area facilities are made available to the Tenant herein.
24. TENANT'S WORK
(a) Tenant covenants, warrants and represents that it shall design
and maintain the interior decor and fixturization of the Premises in a manner
consistent with the high standards of the retailing industry.
(b) It is understood and agreed that any work required for Tenant
to open and operate its store for business from the Premises or required by
Tenant to the extent that it will be in addition to the Description of
Landlord's Work, as outlined in Exhibit "C" hereof or elsewhere herein, shall
be performed and paid for wholly by tenant. Landlord undertakes no
responsibility for the performance and/or payment of Tenant's work.
(c) Tenant agrees to secure, pay for and maintain, or cause its
contractor(s) to secure, pay for and maintain during the continuance of
construction and fixturing work on or about the Demised Premises, an "All Risk
Physical Loss" Builders Risk policy, Comprehensive General Liability Insurance
(including Protective Liability) with a combined single limit of $1,000,000 and
Workmen's Compensation Employer's Liability Insurance as required by law.
<PAGE> 17
25. FIXTURING TENANT'S STORE: OPENING
Landlord shall give Tenant written notice ("Notice of Substantial
Completion") by certified mail at lease forty-five (45) days prior to the date
(the "Delivery Date") that Landlord's work will be substantially complete and
the Premises will be available for Tenant to commence its work. Substantial
Completion shall mean that except for minor punch list items, the following
items are or will be complete by the Delivery Date: the roof is completed and
watertight; the building is secure; all walls, and partition walls(s) are
completed; the exterior glass is installed; the exterior doors are installed
and operating; the loading docks are completed; the ceiling is completely
installed; flooring (including floor and floor covering) is completed; the
plumbing rough-in and electrical rough-in are completed; and the mezzanine (if
any) is completed. From and after the Delivery Date, and prior to the Rent
Commencement Date, Tenant shall have the privilege, rent free, of working in
the premises for the sole purpose of installing its own sales, lighting and
trade fixtures, machinery, if any, and any other equipment, to be done at
Tenant's own cost and expense. Tenant agrees that during this "fixturing"
period any and all utilities will be at Tenant's cost and expense. Prior to
taking occupancy of the Premises, Tenant shall submit to Landlord insurance
certificate(s) as called for under Sections 18, 24 (d) and 40 herein. Within
ninety (90) days following the Notice of Substantial Completion, the (1)
Shopping Center entrances and exits will be clearly marked and in place, (2)
the Shopping Center parking areas will be paved, lighted and striped, if
required, (3) the delivery area for the Premises will be paved and easily
accessible for stocking the Premises, (4) utilities that are servicing the
Premises will be connected and available for use or consumption, and that
electric, water and drain lines will be connected to (i) the equipment provided
by Landlord in the Premises and (ii) the trade fixtures and refrigerated cases
supplied by Tenant, and (5) Landlord shall have performed all work required of
Landlord under this Lease in order for Tenant to obtain a final use and
occupancy permit; Landlord will cooperate and assist Tenant in securing a final
use and occupancy permit for the Premises (in the event that all these
conditions have not been fulfilled and Tenant had not commenced business to the
public, the Commencement Date shall be deferred for an additional period of
time equal to the number of days from the date Tenant is ready to open for
business and the date that all these conditions are fulfilled). Tenant shall
open its store for business on or before the Rent Commencement Date. At
Landlord's request, Tenant shall enter into a short form agreement confirming
the Commencement Date, the Rent Commencement Date and the Termination Date in
the form attached hereto as Exhibit "G".
26. OCCUPANCY AND OPERATING HOURS
Upon entry into the Premises, Tenant thereby accepts and acknowledges
that the said Premises are in the condition required by this Lease subject to
latent defects. Tenant hereby covenants, warrants and represents that subject
to force majeure delays and any express right Tenant may have hereunder to
cease operations, it will occupy the Premises promptly upon the commencement of
the term, and at all times during the first five (5) years of the lease term,
Tenant shall continuously and uninterruptedly operate its business from the
Premises for the uses set forth in Section 30 of this Lease (this being a
material inducement for Landlord to enter into this Lease) during all normal
hours of Tenant's operations. Tenant shall operate and be open for business,
at a minimum, during the hours of 10:00 a.m. to 9:00 p.m., Monday through
Saturday. Tenant understands and agrees that it shall, throughout the term
hereof, reasonably stock its store and maintain the same all in keeping with
the high standards of the retailing industry. The failure of Tenant to operate
its Premises in accordance with this provision, or the abandonment or vacating
of any substantial portion of the Premises, shall constitute a material breach
of the Lease giving rise to the remedies provided in this Lease and by law and,
in addition, Landlord shall be entitled among its other remedies to enjoin
Tenant's use of the Premises by seeking injunctive relief or other appropriate
remedy. Tenant shall conduct no distress sales, such as "going out of
business", fire or bankruptcy sales, on the Premises or elsewhere in the
Shopping Center, and a default by reason of Tenant's conducting such a sale
shall constitute a default under this Lease entitling Landlord to the remedies
provided in this Lease and by law including, but not limited to, injunctive
relief or other appropriate remedy.
After the expiration of the first five (5) years of the lease term,
Tenant shall have the right at any time to discontinue operating and go dark
from the Demised Premises provided Tenant has given Landlord at lease nine (9)
months prior notice in writing by certified mail that it intends to discontinue
its operation and go dark and specifying in said notice its intended last day
of operation.
Landlord shall be entitle to terminate this Lease effective as of the
date of Tenant's intended last day of operation by giving written notice of
such termination to Tenant at any time following Tenant's aforesaid notice,
provided said written notice of termination is given Tenant at least thirty
(30) days prior to the date of tenant's intended last day of operation and
prior to the Landlord receiving any Tenant's Transfer Notice under Section 51.
<PAGE> 18
27. REPAIRS
(a) Landlord shall keep the foundation, roof, roof supports,
gutters, the outer walls and utility lines outside the Premises (excluding
doors, windows, glass, ceiling, mechanical, electrical and plumbing equipment,
and utility lines located outside the Premises which service only the Premises)
of Tenant's Premises in good repair, except that Landlord shall not be called
on to make any such repairs occasioned by the act or negligence of Tenant, its
agents, contractors, invitees, customers or employees, and Tenant shall pay its
pro-rata share of such expenses which are includable as a Shopping Center's
Common Areas Operating Cost under Section 7 of this Lease. Landlord shall not
be liable to maintain or make any other improvements, repairs or replacements
of any kind upon the Premises, unless caused by the negligence of Landlord, its
agents, servants or employees, or unless specifically provided elsewhere in
this Lease.
(b) Except for the repairs that Landlord is obligated to make, Tenant,
at its expense, shall at all times be responsible for promptly making all
repairs and replacements and performing all maintenance work in and to the
Premises necessary and required to keep said Premises and its equipment in good
condition and repair, and also in a clean, sanitary and safe condition in
accordance with all directions, rules and regulations of the health officer,
fire marshal, building inspector or other proper officers of the governmental
agencies having jurisdiction. Tenant shall comply with all requirements of
law, ordinances and otherwise affecting the premises, and shall permit no
waste, damage or injury to said Premises. Tenant shall also initiate and carry
out a program of regular maintenance and repair of the Premises, including, but
not limited to, the painting or refinishing of all areas of the interior, and
the maintaining or replacing of all trade fixtures and equipment, ceiling tile,
flooring and other items of display used in the conduct of Tenant's business,
so as to impede, to the extent reasonably possible, deterioration by ordinary
wear and tear and to keep the same in attractive condition throughout the lease
term. Tenant shall at its own cost and expense replace any broken or cracked
windows and doors in the Premises, unless such damage is caused by the
negligent act or omission of Landlord, its agents or employees, in which case
Landlord shall repair such damage at its own cost and expense.
(c) Landlord shall have a reasonable time after receipt of written
notice from Tenant to commence and complete repairs required of Landlord
hereunder. Notwithstanding anything else contained in this Lease, if Landlord
fails to use due diligence in making such repairs, Tenant, at its option, may
make such repairs and Landlord shall reimburse Tenant for the cost of such
repairs within thirty (30) days from the date Tenant bills Landlord.
28. ALTERATIONS BY TENANT
Tenant will not alter the exterior of the Premises (including the
storefront and/or signs) and will not make any structural alterations to the
exterior or interior of the Premises or any part thereof without first
obtaining Landlord's written approval of such alterations which approval shall
not be unreasonably withheld or delayed. Tenant agrees that any such
improvements made by it shall immediately become the property of Landlord shall
remain upon the Premises in the absence of agreement to the contrary. Tenant
further will not, except for installation of fixtures and other work to be
performed by it under Section 24 and in accordance with Tenant's plans approved
by Landlord, if any, cut or drill into or secure any fixture, apparatus or
equipment of any kind to any part of the Premises or make any roof penetration
without first obtaining Landlord's written consent, which consent may be
withheld in Landlord's sole and absolute discretion.
29. DAMAGE TO PREMISES OR IMPROVEMENTS
Tenant will repair promptly at its expense any damage to the Premises
or any other part of the Shopping Center, caused by bringing into the Premises
or onto the Shopping Center any item, material, property or other thing for
Tenant's use or benefit, or by the installation or removal of such item,
material, property or thing, regardless of fault or by whom such damage shall
be caused, unless caused by Landlord, its agents, employees or contractors; and
in default of such repairs by Tenant, Landlord may make the same and Tenant
agrees to pay, as an additional charge, the cost thereof to Landlord promptly
upon Landlord's demand therefore.
30. USE OF PREMISES
The Premises shall be used by Tenant solely for the purpose of
conducting therein the business of Tenant's Permitted Use (as defined in
Section 1) trading as "Total Beverage", and for no other use or purpose.
(Percentage Rent under Section 9 is based expressly upon this Use of Premises).
Tenant hereby covenants and agrees that the use of the Premises is
subject to the Use of Premises Restrictions as listed in Exhibit "E" attached
hereto and made a part hereof.
31. OPERATION BY TENANT
<PAGE> 19
In regard to use and occupancy of the Premises and common areas,
Tenant will: (a) keep the inside and outside of all glass in the doors and
windows of the Premises clean; (b) keep all exterior storefront surfaces of the
Premises clean, including removal of ice and snow; (c) keep the Premises clean
at all times, including removal of debris and loose trash; (d) replace
promptly, at its expense, any cracked or broken plate or window glass of the
Premises with glass of like kind and quality unless caused by the negligent act
or omission of Landlord, its agents or employees; (e) maintain the Premises at
its expense in a clean, orderly and sanitary condition and free of insects,
rodents, vermin and other pests; (f) keep any garbage, trash, rubbish or refuse
in the Premises or on the sidewalk immediately adjacent thereto removed at its
expense on a regular basis; (g) keep all mechanical apparatus located inside
the Premises or exclusively serving the Premises and under the control of
tenant free of vibration and noise which may be transmitted beyond the
Premises; (h) comply with all laws, ordinances, rules and regulations of
governmental authorities and use commercially reasonable efforts to comply with
all recommendations of the Fire Underwriters Rating Bureau now or hereafter in
effect; (i) use reasonable efforts to keep its grocery carts out of or removed
from the common areas (excluding Tenant's cart corral); (j) conduct its
business in all respects in a dignified manner in accordance with high
standards of store operation. Tenant will not place, maintain or store any
merchandise, signs (other than exterior signage permitted under Section 20 of
this Lease), or other articles on the footwalks adjacent thereto or elsewhere
on the exterior of the Premises or common areas; use or permit the use of any
objectionable (in Landlord's sole determination) advertising medium such as,
without limitation, spot lights or search lights, loud speakers, phonographs,
public address systems, sound amplifiers, radio or video broadcast within the
Shopping Center which is in any manner audible or visible outside of the
Premises permit the placement or installation of any video, pinball or
amusement devices within the Premises or the common areas; permit undue
accumulations of garbage, trash, rubbish or other refuse within or without the
Premises or the common areas adjacent thereto; cause or permit objectionable
(in Landlord's sole determination) odors to emanate or be dispelled from the
Premises; solicit business in the parking or other common areas; distribute
handbills or other advertising matter to, in or upon any automobiles parked in
the parking areas or in any other common area; permit the parking of delivery
vehicles so as to interfere with the use of any driveway, walk, parking area or
other common area in the Shopping Center unless Tenant's regular loading
facility has been blocked by Landlord or is not otherwise available to Tenant;
erect, place or maintain any aerial or antenna on the roof or exterior walls of
the Premises.
Tenant shall locate its trash compactor in such area approved by
Landlord.
32. EXTRA HAZARDS
Tenant will not knowingly or recklessly do or suffer to be done, or
keep or suffer to be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage by fire or other
hazards (including, without limitation, public liability) or which will prevent
Landlord from procuring such policies in companies acceptable to Landlord. If
Tenant shall cause anything to be done, omitted to be done or suffered to be
done by Tenant, or if any item, material or thing is kept or suffered by Tenant
to be kept in, upon or about the Premises, which causes the rate of fire or
other insurance of the Premises or other property of Landlord, as determined by
insurance companies acceptable to Landlord, to be increased beyond the minimum
rate from time to time applicable to the Premises for the use permitted under
this Lease or to any other property for the use made thereof, Tenant shall pay
as an additional charge the amount of any such increase upon Landlord's demand
thereof. Provided, however, Tenant shall not be liable for any increase in the
premium for casualty insurance carried by Landlord under this lease due to
other tenant's use of its respective premises. Further, Tenant shall not
install any electric equipment that overloads the lines in the Premises
provided Landlord has constructed the Premises with sufficient electrical power
to satisfy the needs of tenant as shown on the plans approved by Landlord and
Tenant pursuant to Exhibit "B"; nor keep on said Premises in an inappropriate
or unsafe container any inflammable, combustible, hazardous or other dangerous
materials; nor handle, store or dispose of any chemical, environmentally unsafe
or other hazardous waste or material except in strict accordance with all
applicable federal, state and local laws, ordinances and regulations.
33. PLUMBING
The plumbing facilities shall not be used for any purpose other than
that for which they are constructed and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be the Tenant's liability.
34. DISPLAY LIGHTING
If requested by Landlord, Tenant shall keep the display windows in the
Premises well lighted from dusk until 9:00 P.M., or such later time as Tenant
may be open for business, during each and every weekday except Sundays and
holidays during the term of this Lease.
<PAGE> 20
35. ROOF AND WALLS
Landlord shall have the exclusive right to use all or any part of any
leasable areas over the Premises and the roof of the building in which the
Premises is located for any purpose; to erect additional stories or other
structures over all or any part of the Premises; to erect in connection with he
construction thereof scaffolds and other aids to construction on the exterior
of the Premises provided that free and easy customer access to the Premises
shall not be unreasonable impaired nor shall such access be denied; and to
install, maintain, use, repair and replace within the Premises pipes, ducts,
conduits, wires and all other mechanical equipment serving other parts of the
Shopping Center, the same to be in locations within the Premises as will not
materially interfere with Tenant's use thereof. Landlord shall use reasonable
efforts not to interfere with Tenant's business operations in the Premises.
Landlord may make any use it desires of the side or rear walls of the
Premises, and the area over the Premises, provided that such use shall not
encroach on the interior of or materially or unreasonably restrict the service
access to the Premises.
36. LIENS AND INDEMNITY
(a) Tenant covenants and agrees that any construction and
improvements as required of Tenant under this Lease (sometimes herein referred
to as "Tenant's work"), and any maintenance and repair work, alterations and
the like, shall be of good quality, leaving the Premises at all times free of
liens for labor and materials. In the event any mechanic's lien shall at any
time be filed against the Premises by reason of work, labor, services or
materials performed or furnished to Tenant or to anyone holding the Premises
through or under Tenant, Tenant shall forthwith cause the same to be bonded or
discharged of record. If Tenant shall fail to cause such lien to be so bonded
or discharged within thirty (30) days after being notified of the filing
thereof, then Tenant shall be in default under this Lease, and in addition to
any other right or remedy of Landlord, under the terms of this Lease and at
law, Landlord may, but shall not be obligated to, discharge the same by paying
the amount claimed to be due, and the amount so paid by Landlord and all costs
and expenses, including reasonable attorneys' fees incurred by Landlord in
procuring the discharge of such lien, shall be due and payable by Tenant to
Landlord as additional rental on the first day of the next following month.
(b) Tenant agrees to indemnify and hold harmless Landlord, its
successors, assigns, agents, employees and Landlord's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Tenant, its
agents, employees or contractors in the performance of any work performed by or
for Tenant on or about the Premises, provided there is no negligence on the
part of Landlord, its employees or agents.
(c) Landlord agrees to indemnify and hold harmless Tenant, its
successors, assigns, agents, employees and Tenant's contractors from and
against any and all claims, actions, losses or damages (including, without
limitation, attorney's fees) resulting from acts or omissions of Landlord, its
agents, employees or contractors in the performance of any work performed by or
for Landlord on or about the Premises, provided there is no negligence on the
part of Tenant, its employees or agents.
37. TENANT'S FIXTURES
All trade fixtures and apparatus owned, leased or conditionally
purchased by Tenant and installed in the Premises shall be considered personal
property and shall remain the property of Tenant and shall be removable from
time to time and also at the expiration of the term of this Lease, or any
renewal or extension thereof, or other termination thereof, provided Tenant
shall not at such time be in default under any covenant or agreement contained
herein beyond any applicable cure period; and if in default, Landlord shall
have a lien on said trade fixtures and apparatus as security against loss or
damage resulting from any such default by Tenant and said trade fixtures and
apparatus shall not be removable by Tenant until such default is cured.
38. INSPECTION BY LANDLORD
Landlord shall have the right to enter upon the Premises without
notice at all reasonable hours for the purpose of inspecting the same, or for
making repairs, additions or alterations to the Premises or any property owned
or controlled by Landlord. Landlord shall use reasonable efforts not to
interfere with Tenant's business operations in the Premises. If Landlord deems
that any repairs or maintenance to the Premises are required to be made, which
are the Tenant's responsibility under this Lease, it may demand that Tenant
make the same forthwith and if Tenant refuses or neglects to commence such
repairs or maintenance and complete the same with reasonable dispatch, Landlord
may make or cause such repairs or maintenance to be made, and shall not be
responsible to Tenant for any loss or damage that may accrue to its stock or
business by reason thereof, other than as caused by Landlord's negligent act or
omission. If Landlord makes or causes such repairs or maintenance to be made,
Tenant agrees that it will forthwith, on demand, pay to Landlord the reasonable
cost thereof
<PAGE> 21
along with the next installment of rental.
39. COVENANT TO HOLD HARMLESS
(a) Tenant shall indemnify and hold Landlord, its partners,
officers, directors, agents and employees harmless from and against all
liability, claims, actions. damages and expense, including reasonable
attorney's fees and court costs, in connection with the loss of life, personal
injury or damage to property, including but not limited to the person and
property of Tenant, Tenant's employees and any person or any property in or
upon said Premises, and the sidewalks adjoining same that are under Tenant's
control (such as, but not limited to, a cart corral area), and any loading
platform area allocated to the use of Tenant, who is or are present at Tenant's
implicit or explicit invitation or with Tenant's implicit or explicit consent,
provided there is no negligence on the part of Landlord, its employees or
agents. Provided, however, that Tenant's indemnity relative to the sidewalks
adjoining the Premises that are under Tenant's control shall be strictly
limited to those circumstances resulting from a breach by Tenant of its
obligations, covenants and responsibilities under this Lease and /or the
negligent or wilful act or omission of Tenant, its employees, agents, or
contractors. It is understood and agreed that all property kept, stored or
maintained in the Premises shall be so kept, stored or maintained at the risk
of Tenant only. Tenant shall not suffer or give cause for the filing of any
lien against said Premises.
(b) Tenant shall be defended in court or otherwise and held
harmless by Landlord from any liability for damages to any person or any
property in or upon the Common Areas of the Shopping Center, provided there is
no negligence on the part of Tenant, its employees or servants.
40. PUBLIC LIABILITY
(a) Tenant shall keep in full force and effect a policy of
comprehensive commercial general public liability insurance with respect to the
Premises and the business operated by Tenant, and/or any subtenant,
concessionaire or licensee of Tenant in the Premises, with a company licensed
in the State of Virginia and insures a majority of Tenant's other stores in
said State, in which Landlord, and Landlord's mortgagee shall be all named as
additional insureds, and in which the limits of liability shall not be less
than One Million Dollars ($1,000,000.00) combined single limit coverage per
occurrence for personal injury, death and property damage. Tenant shall
furnish Landlord with a certificate or certificates of insurance or other
acceptable evidence that such insurance is in force at all times during the
lease term. Tenant shall obtain and maintain an insurance policy against
damage by reason of the operation and maintenance of the sprinkler system, if
any, installed within the Premises. In lieu of such sprinkler insurance,
Tenant may self-insure. Tenant shall maintain such system. Tenant understands
that the sprinkler system requires semiannual maintenance and that failure to
maintain the system will result in loss of insurance or benefits under said
insurance policy.
(b) Landlord shall cause to be issued and shall keep in full force
and effect a public liability insurance policy with respect to the common areas
of the Shopping Center which will provide protection to Landlord and the
tenants in the Shopping Center, and which the limits of liability shall not be
less than One Million Dollars ($1,000,000.00) single limit coverage for
personal injury and property damage. The cost of such insurance policy shall
be a Shopping Center Common Area Operating Cost. Landlord shall, upon written
request, deliver to Tenant a certificate of insurance or other acceptable
evidence that such insurance is in full force and effect at all times during
the lease term.
41. LIMITATION OF LANDLORD'S LIABILITY
Landlord shall not be liable to Tenant for Tenant's loss of business,
or other consequential loss or damage, whether resulting from failure of
utilities, services or otherwise unless caused by the negligent act or omission
of Landlord, its agents, servants or employees. It is understood and agreed
that the liability of Landlord hereunder shall be limited solely to the assets
and property of the Shopping Center; that no general partner of Landlord, nor
any officer, director, agent or employee of Landlord shall be personally liable
with respect to any claim arising out of or related to this Lease; and that a
deficit capital account of a partner of Landlord shall not be deemed an asset
or property of the Shopping Center.
42. DAMAGE TO PREMISES
If the permanent improvements of Tenant's Premises shall be partially
destroyed by fire, or other casualty, insurable under full standard risk
insurance, whereby the Premises shall be rendered untenantable only in part,
the Landlord shall promptly at its own expense (and with the use of any
insurance proceeds), cause the damage to be repaired, except as hereinafter
provided, and the Minimum Guaranteed Rent and other payments herein, meanwhile
shall be abated proportionately as to that portion of the Premises rendered
untenantable. If by reason of said fire or other casualty the Premises shall
be rendered wholly untenantable, Landlord shall promptly, at its own expense,
cause such damage to be repaired, except as hereinafter provided, and the
Minimum Guarantee Rent and
<PAGE> 22
other payments herein shall be abated in whole until said Premises are
restored, unless within ninety (90) days after said occurrence Landlord shall
give Tenant written notice that it has elected not to reconstruct the destroyed
Premises, in which event this Lease and the tenancy hereby created shall cease
as of the date of said occurrence, the Minimum Guaranteed Rent, the percentage
rent and other payments herein to be adjusted as of such date. Notwithstanding
the foregoing, if other portions of the Shopping Center (in addition to or
instead of the Premises) are at any time during the term hereof damaged by fire
or other casualty to such an extent that the Landlord or the then first
mortgagee of the Shopping Center determines that the Shopping Center shall not
be repaired or restored, then, and in any of such events, the Landlord shall
have the right to terminate this Lease (provided all leases of other tenants
occupying spaces in the immediate vicinity of Tenant's Premises are likewise
terminated) upon written notice to the Tenant at any time within ninety (90)
days following such fire or other casualty, whereupon the Lease shall be
terminated and the parties shall be relieved of any further obligation
hereunder, with the Minimum Guaranteed Rent, the percentage rent and all other
payments of the Tenant to be adjusted as of the date set in Landlord's notice
of termination.
In the event Landlord shall exercise its right to cancel the Lease as
a result of such damage and shall commence the repair or reconstruction of the
Premises for the same use as provided in Section 30 in within eighteen (18)
months of the date Landlord gives notice to Tenant of such lease cancellations,
Landlord shall give Tenant written notice within thirty (30) days of the date
of such commencement of repair or reconstruction and Tenant shall have the
option, by giving written notice to Landlord within sixty (60) days of the date
of Landlord's notice, to reinstate this Lease at the same rental and on the
same terms and conditions as contained in this Lease for the period commencing
from the date of completion of the reconstruction or repair of the Premises
through the end of the original term of this Lease and option term, if exercise
by Tenant. This paragraph shall survive Landlord's termination of the Lease.
43. CONDEMNATION
If the whole or any part of the Tenant's Premises shall be taken under
the power of eminent domain or under threat of condemnation, then this Lease
shall terminate as to the part so taken as of the day Tenant is required to
yield possession thereof, and Landlord shall make such repairs and alterations
as may be necessary in order to restore the part not taken to useful condition;
and the Minimum Guaranteed Rent shall be reduced proportionately as to the
portion of the Premises so taken. If (i) the amount of said Premises so taken
is more than fifteen percent (15%) of Tenant's sales area, or if (ii) more than
45% of the Common Areas are so taken, or if (iii) 25% of the "No Build Area"
shown on Exhibit "A" is so taken, then Tenant in the case of (i), (ii) or
(iii), or either Tenant or Landlord in the case of (ii) , by giving sixty (60)
days written notice to the other, shall have the option to terminate this Lease
as of the date Tenant is required to yield possession. All compensation
awarded for such taking of the fee and the leasehold shall belong to and be the
property of the Landlord; provided, however, that the Landlord shall not be
entitled to any portion of any award made to the Tenant specifically for the
cost of removal of stock and fixtures.
Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be separately
awarded or recoverable by Tenant in Tenant's own right on account of any and
all damage to Tenant's business by reason of any condemnation and for or on
account of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture, fixtures and equipment provided that any such award
does not reduce any award to which Landlord may be entitled.
44. BANKRUPTCY
In the event the estate created hereby shall be taken in execution or
by other process of law, or if Tenant shall be adjudicated insolvent or
bankrupt pursuant to the provisions of any state or federal insolvency or
bankruptcy act, or if a receiver or trustee of the property of Tenant shall be
appointed by reason of Tenant's insolvency or inability to pay its debts, or if
any assignment shall be made of Tenant's property for the benefit of creditors,
then and in any of such events, Landlord may, at its option and in addition to
any other remedy available to Landlord, terminate this Lease and all rights of
Tenant hereunder by giving to Tenant written notice of the Landlord's election
to terminate.
In the event the trustee of the Tenant, or Tenant as debtor in
possession, shall timely assume this Lease under the Bankruptcy Code and
continue in possession of the Premises, it shall be the responsibility of the
trustee or debtor in possession to cure or give adequate assurance that all
defaults under the provisions of this Lease shall be promptly cured, to fully
compensate or provide adequate assurance of compensation for any and all losses
suffered by Landlord, and to provide adequate assurance that all conditions of
this Lease shall be performed in the future, including but not limited to:
(A) Adequate assurance of the payment of rent and other
consideration due under this Lease.
(B) Adequate assurance that percentage rent due will not
decline substantially.
<PAGE> 23
(C) Adequate assurance that assumption or assignment will
not breach substantially any provisions such as
radius, location or use or exclusivity provisions in
other lease, financing or master agreements.
(D) Adequate assurance that assumption or assignment will
not disrupt substantially any tenant mix or balance.
In no event, will Landlord be required to provide additional services
or supplies under this Lease unless fully compensated by the trustee or debtor
in possession.
In the event that any new insolvency or receivership should occur
after the closing of the bankruptcy case, the Landlord may at its option, and
in addition to any other remedy available to Landlord, terminate this Lease and
all rights of the Tenant hereunder by giving to Tenant Written notice of the
Landlord's election to terminate.
45. BANKRUPTCY-USE OF PREMISES
In the event the trustee for Tenant, or Tenant as debtor in
possession, exercises certain rights as called for in Section 44 hereof which
would result in the Premises being used for a business other than that called
for under Section 30 herein (Use of Premises), then Landlord expressly reserves
the right to change or modify the Percentage Rent Rate and the Minimum Basis of
Sales as called for under Section 9 herein. Such change or modification shall
be in accordance with guidelines as issued by the International Council of
Shopping Centers or such other guidelines as may be available from time to
time.
46. DEFAULT
If any rental payable by Tenant to Landlord shall be and remain unpaid
for more than ten (10) business days after written notice from Landlord that
the same is due and payable, or if Tenant shall violate or be in default of any
of the other covenants, agreements, stipulations or conditions herein, and such
violation or default shall continue for a period of thirty (30) days after
written notice of such violation or default, unless Tenant has diligently begun
to correct such violation or default, in which case Tenant shall be given a
reasonable period of time in which to correct such violation or default with
due diligence, then it shall be optional for Landlord to declare this Lease
forfeited and said term ended, and to reenter the Premises, with process of
law, using such force as may be necessary to remove all persons or chattels
therefrom, and Landlord shall not be liable for damages by reason of such
reentry or forfeiture (but notwithstanding such reentry or forfeiture, Tenant
shall remain liable for any rent or damages which may be due or sustained prior
thereto and for any and all reasonable and necessary expenses which Landlord
may incur in reentering the Premises and preparing the same for reletting,
including, but not limited to, allocable overhead, alterations to the Premises
necessary to remove Tenant's improvements, repairs to the same and leasing,
construction, architectural and other professional fees); and, regardless of
whether Landlord elects to declare this Lease forfeited or not, Tenant shall
continue to pay the amount of rent reserved under this Lease at the times
herein stipulated for payment of rent for the balance of the term, less any
amount received by Landlord during such period from others to whom the Premises
may be rented on such terms and conditions and at such rentals as Landlord in
its sole discretion shall deem proper. In the event of default by Tenant,
Landlord shall have the right to avail itself of all remedies available under
the laws of the Commonwealth of Virginia whether stated in this Lease
specifically or not. The receipt by Landlord of any rent after Tenant's
default of any covenant or condition hereunder or during the pendency of any
action for possession (other than payment in full of all amounts owed to
Landlord by Tenant pursuant to this Lease) shall not be deemed a waiver of such
default or of such covenant or conditions, or of Landlord's right to recover
possession of the Premises. It is further understood the Tenant shall pay all
costs and expenses of collection and reasonable attorney's fees and court costs
in the event the Tenant fails to pay rent or fails to promptly and fully
perform and comply with each and every condition and covenant hereunder and the
matter is turned over to Landlord's attorney, whether suit is instituted or
not. Nothing herein shall be or constitute a waiver by Tenant of any statutory
right of redemption.
47. WAIVER
One or more waivers of any breach of a covenant or condition by either
party shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, or of the covenant or condition itself, and the consent
or approval by either party to, or of, any act requiring the other party's
consent or approval shall not be deemed to waive or render unnecessary consent
or approval to, or of, any subsequent similar act.
48. SUBORDINATION
Tenant agrees that this Lease shall be subordinate to any mortgages or
trust deeds that may now or hereafter be placed upon the Shopping Center and to
any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, and extensions thereof, providing the mortgagee or
<PAGE> 24
trustee named in said mortgages or trust deeds shall agree to recognize the
Lease of Tenant in a non-disturbance agreement suitable to Tenant in the event
of foreclosure if Tenant is not then in default beyond any applicable cure
period. Tenant shall provide any and all document reasonably requested by any
mortgagee or trustee. In the event of any mortgagee or trustee elects to have
the Lease a prior lien to its mortgage or deed or trust, then and in such an
event, upon such mortgagee or trustee notifying Tenant to that effect, this
Lease shall be deemed prior in lien to the said mortgage or trust deed, whether
or not this Lease is dated prior to or subsequent to the date of said mortgage
or trust deed. Landlord agrees to secure a non-disturbance and attornment
agreement from any existing lender for Tenant's behalf upon Tenant's request.
49. RECORDATION
Tenant shall not record this Lease and/or its Exhibits without first
obtaining written permission from Landlord, which permission may be withheld at
Landlord's sole option. In the event it is a requirement of Landlord's
mortgagee that this Lease be recorded as a protection for both Landlord and
Tenant, then Landlord shall bear such recordation charges. Upon the request of
either party, the other party shall join in the execution of a memorandum or
so-called "short form" of this Lease, to be recorded at the cost of the
requesting party.
50. MERCHANTS ASSOCIATION; PROMOTIONAL FUND
Landlord intends to establish a promotional program to furnish and
maintain advertising and sales promotions which, in Landlord's sole judgement,
will benefit the Shopping Center. All costs and expenses incurred by Landlord,
or others on Landlord's behalf, in establishing, furnishing, operation and
maintaining the promotional program (hereinafter called "Promotional Costs")
shall be charged in the manner hereinafter set forth. Such Promotional Costs
shall include all costs and expenses of every kind and nature as may be paid or
incurred by Landlord with respect to said promotional program. Provided the
Rent Commencement Date shall have occurred, upon the establishment of such
program, Tenant shall pay, as its share of the cost of the promotional program,
the Promotional Charge with no offsets, on the first day of each month, in
advance, along with Tenant's payment of rental. For greater certainty, the
maximum amount chargeable to Tenant under this Section 50 shall be the amount
specified in Section 1(q).
Nothing contained in this Lease shall require landlord to expend more
in any calendar year in performing the promotional program than Landlord
collects from tenants or occupants of the Shopping Center in such calendar
year. However, Landlord may, but shall not be obligated to, advance funds to
the promotional program and any funds so advanced shall be repaid to Landlord
when available.
51. ASSIGNMENT AND SUBLEASE
(a) Tenant shall not assign this Lease in whole or in part, nor
sublet all or any part of the Premises, nor mortgage, hypothecate or encumber
this Lease and/or Tenant's leasehold interest in the Premises (any and all of
such acts being herein referred to as an "assignment"), without the prior
written consent of Landlord in each instance, which consent may be given or
withheld in Landlord's sole and absolute discretion. The withholding of
Landlord's consent is subject to Section 51(c) below. The consent by Landlord
to any assignment shall not constitute a waiver of the necessity for such
consent to any subsequent assignment. This prohibition against assigning shall
be construed to include a prohibition against any assignment by operation of
law. If this Lease be assigned, or if the Premises or any part thereof be
occupied by anybody other than Tenant, Landlord may collect rent from the
assignee or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee or occupant as
tenant, or a release of Tenant from the further performance by Tenant of the
provisions on its part to be observed or performed herein. Notwithstanding any
assignment, Tenant shall remain fully liable on this Lease and shall not be
released from performing any of the terms, covenants and conditions of this
Lease. Tenant shall continue to be entitled to notice of default and shall be
entitled to cure any defaults of the assignee.
(b) Notwithstanding any provision contained in this Article 51 to
the contrary, Tenant may, without the consent of Landlord assign this Lease or
sublet all or any part of the Premises to any corporation or other entity which
assumes in writing all of Tenant's obligations hereunder and either (i)
controls, is controlled by, or under common control with Tenant or (ii) merges
or consolidates with Tenant or (iii) acquires substantially all of the assets
or stock of Tenant or the Guarantor hereof. Notwithstanding any of the
foregoing permitted assignments, it is expressly recognized and agreed that the
liability of Tenant and the Guarantor hereunder shall continue in full force
and effect at all times during the remainder of the Lease term, including any
renewal or extended terms hereto subject to the provisions of this Lease and
the Guaranty of Performance.
(c) Notwithstanding the provision of Section 51(a) above, in the
event Tenant desires either to assign or transfer this Lease or sublet
substantially all of the Premises (such assignment or subletting collectively
hereinafter referred to as the "Transfer"), to a party other than a transferee
permitted under Section 51(b) above, Tenant shall provide to Landlord:
<PAGE> 25
1. No later than sixty (60) days prior to the proposed Transfer, with
written notice that Tenant desires either to assign or transfer this
Lease or sublet substantially all of the Premises, and further,
2. No later than thirty-five (35) days prior to the proposed
effective date of such Transfer (the "Effective Date") with written
notice ("Tenant's Transfer Notice") of (i) the name and address of the
proposed transferee and (ii) the amount of rent.
The tender of the Tenant's Transfer Notice shall entitle Landlord to
either terminate this Lease, disapprove the proposed assignment or consent to
the proposed assignment, effective as of the date of the proposed assignment or
subletting. Landlord's right of termination or disapproval shall be
exercisable by written notice delivered to Tenant at any time during the first
thirty (30) day period following receipt by Landlord of the Tenant's Transfer
Notice. Failure to respond in any way to Tenant within said thirty (30) days
shall be deemed written consent.
52. TERMINATION
Upon the Expiration Date or earlier termination of this Lease, or any
extension thereof, Tenant shall quit and surrender the Premises, without the
necessity of any notice from either Landlord or Tenant, and Tenant hereby
waives notice to quit or vacate said Premises, and agrees that Landlord shall
be entitled to the benefit of all provisions of law respecting the summary
recovery of possession of said Premises from a tenant holding over to the same
extent as if statutory notice had been given. Tenant shall quit and surrender
the Premises in as good a state and condition as they were when entered into,
reasonable use and wear thereof and unavoided accident and acts of God
excepted. All alterations, additions, erections or improvements in our upon
said Premises at the expiration or early termination of this Lease, which are
not wanted by Landlord (and any personal property, furniture, trade fixtures
and equipment) shall be removed by Tenant at Tenant's sole cost and expense and
Tenant shall repair all damage caused by such removal and return the Premises
to the condition in which it was prior to the installation of the articles so
removed. Any personal property, furniture, trade fixtures, and equipment not
so removed shall be deemed abandoned, and Landlord shall have the right to
retain or dispose of the same as Landlord sees fit. Any alterations,
additions, erections or improvements which are wanted by Landlord, which shall
be evidenced in writing, shall remain a part of the Premises and shall be
surrendered with said Premises at the Expiration Date of this Lease.
53. HOLDING OVER
In the event Tenant remains in possession of the Premises after the
Expiration Date or earlier termination of this Lease without the written
permission of Landlord, and without the execution of a new lease, Tenant shall
be deemed occupying the Premises as a tenant from month-to-month subject to all
the conditions, provisions and obligations of this Lease insofar as the same
are applicable to a month-to-month tenancy. Rental shall be, during any such
hold over period, One Hundred Fifty Percent (150%) of the Minimum Guaranteed
Rent called for herein which are in effect for the last month of the term
hereof.
54. FOR RENT SIGNS
For the period six (6) months prior to the expiration of the original
term of this Lease or any renewal or extension thereof, Landlord shall have the
right to display on the exterior of said Premises (but not in any window or
doorway thereof) the customary "For Rent" sign, and during such period Landlord
may show the Premises and all parts thereof to prospective tenants between the
hours of 9:00 A.M. and 5:00 P.M. on any day except Sunday and any legal holiday
on which Tenant shall not be open for business.
55. QUIET ENJOYMENT
Landlord hereby warrants that it has fee simple title to the Premises
and the Shopping Center; that Landlord has the full right to lease the Premises
for the term aforesaid; and that Landlord shall not enter into any agreements
that would restrict Tenant's Permitted Use of the Premises other than as shown
on Exhibit "E" attached hereto. Landlord covenants and agrees that Tenant,
during the term hereof, shall freely, peaceably and quietly occupy and enjoy
the full possession of the Premises, along with the improvements and
appurtenances thereto and the rights and privileges herein granted, without
molestation, hinderance or ejectment by the Landlord, its successors or
assigns, provided Tenant is not in default of any provision of this Lease
beyond any applicable cure period set forth in this Lease. Each of the parties
hereto represents and warrants that there are no brokerage commissions or
finder's fees of any kind due to anyone other than the Broker in connection
with the execution of this Lease, and agrees to indemnify the other against,
and hold it harmless from, all liabilities arising from any such claim
(including, without limitation, the cost of counsel fees in connection
therewith).
In the event of a foreclosure of the Shopping Center, which results in
the termination of this Lease by any party succeeding to the interests of the
<PAGE> 26
Landlord hereunder, the Landlord shall be responsible for and pay to Tenant a
sum of money equal to the unamortized book value of the leasehold improvements
which Tenant has made in the Demised Premises. Furthermore, the unamortized
book value of the leasehold improvements shall be computed in accordance with
generally accepted accounting procedures.
56. ADDRESSES AND NOTICES
Until further notification in writing by Landlord to Tenant, all
payments called for herein shall be made payable to Landlord and delivered to
Landlord's Address for Rent Payments.
All notices required under this Lease shall be in writing and deemed
to be properly served if hand delivered to the intended recipient or sent by
registered or certified mail or by reputable overnight courier service (which
routinely secures a written receipt evidencing delivery) to the intended
recipient at the relevant Address for Notices listed in Section 1 above, or to
any subsequent address in the continental United States which Landlord, Tenant
and/or Guarantor shall designate in writing by registered or certified mail.
57. ESTOPPEL CERTIFICATES
Tenant agrees that at any time, and from time to time at reasonable
intervals, within ten (10) days after written request by Landlord, Tenant will
execute, acknowledge and deliver to Landlord or and assignee or lender
designated by Landlord, a writing ratifying this Lease and certifying, among
other things, if true:
(a) that Tenant has entered into occupancy of the Premises and the
date of such entry, if such is the case; and
(b) that this Lease is in full force and effect, and has not been
assigned, modified, supplemented or amended on any way (or if
there has been any assignment, modification, supplement or
amendment identifying the same); and
(c) that this Lease represents the entire agreement between
Landlord and Tenant; and
(d) the date of the commencement and expiration of the term; and
(e) that all conditions under this Lease to be performed by
Landlord have been satisfied; and
(f) that no default exists in the performance or observance of any
term, covenant or condition of this Lease on the part of
Landlord and that there are no defenses or offsets in
connection therewith.
Tenant agrees that at any time, and from time to time as reasonably
requested by Landlord, Tenant will execute such documents as are necessary in
connection with any financing or sale of the Shopping Center or any part
thereof, within ten (10) days after said request, provided such documents do
not adversely alter the rights and obligations of the parties hereto.
The Landlord agrees that at any time, and from time to time as
reasonably requested by Tenant, within ten (10) days after written request by
Tenant, to execute such real property waivers or subordinations and other
related documents which will permit Tenant to finance the purchase or lease of
equipment, fixtures or personal property for use in conducting its business in
the Premises.
58. MISCELLANEOUS
58.01 This Lease and the covenants and conditions herein contained,
shall inure to the benefit of and be binding upon Landlord, its successors and
assigns, and shall be binding upon Tenant, its successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom
the assignment by Tenant is permitted hereunder.
58.02 The submission of this Lease for examination does not
constitute a reservation of, or option for, the Premises, and this Lease shall
become effective only upon execution by all parties hereto and delivery of a
fully executed copy thereof by Landlord to Tenant.
58.03 This Lease sets forth the entire agreement between the parties.
There are no oral agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous agreements,
representations, promises, warranties and understandings between the parties
hereto or displayed by Landlord to Tenant with respect to the subject matter
thereof, and none thereof shall be used to interpret or construe this Lease.
Each party hereby expressly acknowledges that no representations, warranties,
inducements or promises with respect to the Shopping Center or the Premises
have been made to that party except as herein expressly set forth.
58.04 Tenant acknowledges that, unless otherwise herein specifically
provided, it does not have any exclusive rights in the Shopping Center with
respect to the sale of its merchandise or the provision of its services.
58.05 Every agreement contained in this Lease is, and shall be
construed as, a separate and independent agreement. If any term of this Lease
or the application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
<PAGE> 27
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
58.06 The covenants, conditions and provisions of this Lease shall be
construed under the laws of the state or district in which the Shopping Center
is located.
58.07 There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Premises or any part thereof
by reason of the fact that the same person may acquire or hold, directly or
indirectly, this Lease or the leasehold estate hereby created or any interest
in this Lease or in such leasehold estate as well as the fee estate in the
Premises or any interest in such fee estate. In the event of a voluntary or
other surrender of this Lease, or a mutual cancellation hereof, Landlord may,
at its option, terminate all subleases, or treat such surrender or cancellation
as an assignment of such subleases.
58.08 Whenever a period of time is herein prescribed for action to be
taken by Landlord or Tenant other than the payment of rent or other monetary
amounts hereunder, such party shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any other cause of any kind
whatsoever which is beyond the reasonable control of the party required to act.
58.09 The section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
various and several sections hereof. Words of any gender used in this Lease
shall include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
58.10 If there be more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several, and all agreements and
covenants herein contained shall be binding upon the respective heirs, personal
representatives, successors and, to the extent permitted under this Lease,
assigns of the parties hereto.
58.11 No rights, easements or licenses are acquired by Tenant under
this Lease by implication or otherwise except as expressly set forth in this
Lease.
58.12 No amendment or modification of this Lease shall be binding or
valid unless expressed in a writing executed by both Landlord and Tenant.
58.13 Each of the persons executing this Lease on behalf of Tenant
represents and warrants that Tenant has complied with all applicable laws,
rules and governmental regulations relative to its right to do business in the
Shopping Center, that such entity has the full right and authority to enter
into this Lease, and that all persons signing on behalf of the Tenant were
authorized to do so by any and all necessary or appropriate actions.
58.14 Tenant shall, and shall cause Tenant's subtenants, agents,
employees, licensees, clients to, use commercially reasonable efforts to comply
with and observe all reasonable rules and regulations concerning the use,
management, operation, safety and good order of the Premises and the Shopping
Center which may from time to time be promulgated by Landlord, provided that
such rules and regulations are of general applicability to all tenants in the
Shopping Center, and are not inconsistent with the provisions of this Lease,
and do not interfere with Tenant's business in the Premises as otherwise
permitted under this Lease.
59. WAIVER OF SUBROGATION
Notwithstanding any contrary provision of this Lease, each party
hereby releases the other party from any liability or responsibility for any or
damage to the releasing party's property insured under valid and collectible
insurance, subject to the limitation this release shall only apply when
permitted by the applicable policy of insurance pursuant to a waiver of
subrogation clause. It is the intention of the Section that neither party
shall be liable to the other party or to any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage to
the other party's property where such waiver is permitted by the applicable
insurance policy. If Landlord elects to insure the Shopping Center in an
amount less than one hundred percent (100%) of replacement cost, Landlord shall
self insure for the difference between the insured amount and the one hundred
percent (100%) replacement coverage. Each party shall obtain policies
containing an express waiver of any right or subrogation by the insurance
company against the other party if same is available, provided, however that in
the event there shall be an increased premium for such coverage imposed by
either party's insurer, than and in such event the party who is responsible for
payment of such increased costs shall not be required to obtain the waiver of
subrogation provisions unless the other agrees to bear such additional costs.
The release set forth in the first sentence of this Section shall apply even if
the loss or damage shall have been cause by the negligence of the other party,
the other party shall furnish the requesting party with evidence of the
inclusion of such waiver of subrogation clause or endorsement in such policies,
and either party shall notify the other
<PAGE> 28
party if such clause or endorsement is thereafter deleted from such policies or
any renewals thereof.
60. HAZARDOUS MATERIAL
(a) Landlord represents and warrants that if there are any
Hazardous Materials (hereinafter defined) contained within the Premises or in
the land on which the Premises sits prior to the delivery of possession,
Landlord shall be responsible for the removal of such Hazardous Materials.
Landlord represents and warrants that neither Landlord, nor to Landlord's best
knowledge, any former owner or occupant of the Premises or the land upon which
the Premises sits has used Hazardous Materials on, from, or affecting the
Premises or the land upon which the Premises sits in any manner which violates
federal, state, or local laws, ordinances, rules, regulations, or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801, et seq.),
the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Sections 6901, et seq.), and in the regulations adopted and publications
promulgated environmental laws, ordinances, rules, or regulations
(collectively, the "Environmental Laws").
(b) Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no obligation to clean-up, to comply with any law
regarding, or to indemnify, defend or hold Landlord harmless with respect to,
any Hazardous Materials which were not used, stored, disposed of, transported
from or manufactured within the Premises by Tenant or its agents, contractors,
employees, invitees, or assigns, and Landlord waives any right of contribution
against Tenant with respect to any such monitoring, clean-up, or compliance
costs (collectively "Hazardous Material Costs") incurred by Landlord with
respect to any such Hazardous Materials.
(c) Landlord shall indemnify and hold Tenant harmless from and
against any and all Hazardous Material Costs resulting from the presence of
Hazardous Materials in the Premises or in the land on which the Premises sits
incurred by or assessed against Tenant to the extent such costs arise out of or
result from the presence of Hazardous Materials in the Premises or in the Land
on which the Premises sits which exist at or prior to the delivery of
possession or which are subsequently brought into the Premises or the land upon
which the Premises sits by Landlord. Tenant shall indemnify and hold Landlord
harmless from and against any costs, claims or liability arising out of or
resulting from the presence of any Hazardous Materials introduced by Tenant or
from the actions of Tenant, its contractors, employees or agents in connection
therewith. Each party agrees to provide the other party with copies of any
notices pertaining to any governmental proceedings or actions (including
requests or demands for entry onto the Premises for purposes of inspection)
regarding the handling, disposal, or clean-up of Hazardous Materials or claims,
penalties, fines or assessment for such clean-up costs within five (5) business
days after receipt thereof.
(d) For purposes of this Section, the term "Hazardous Materials"
includes, without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances, or
related materials defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, amended (42 U.S.C. Section 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. Section 6901, et seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state, or
local environmental laws, ordinances, rules or regulations.
61. PRIMARY USE PROTECTION
Landlord hereby covenants that for the term of this Lease and provided
(i) Tenant is not in default of this Lease beyond any applicable cure period;
and (ii) Tenant has not assigned or sublet this Lease either in whole or in
part (except to a beverage store similar in operation to Tenant's operation in
the Premises); and (iii) Tenant, or Tenant's assigns or sub-tenants operating
from the Premises a business substantially similar to that of Tenant, is in
possession of the Premises and has not discontinued its operation from the
Premises; and (iv) Tenant's Permitted Use has not been modified; and (v) this
Lease in full force and effect, Landlord shall not enter into a new lease
during the term hereof within the Shopping Center with a future tenant for any
space in the Shopping Center which authorizes or permits as its primary use the
sale at retail of containerized beverages (i.e., wine, beer, soda, bottled
water and juices) for off-premises consumption. Provided, however, this
Section 61 shall not prohibit Landlord from entering into such a lease during
the last six (6) months of the term of this Lease provided Tenant has given
Landlord the notice of non-renewal under Section 3(b); nor shall this
restriction prohibit Landlord from leasing any portion of the Shopping Center
to a Liquor store, grocery store, convenience store, restaurant, bar, lounge,
delicatessen, carry-out or food delivery service; nor shall this restriction
affect the use and occupancy of any existing tenant in the Shopping Center, its
successor and/or assigns, or any replacement tenants thereof having the same
use.
<PAGE> 29
62. GUARANTY OF PERFORMANCE
Attached hereto as Exhibit "F" and incorporated herein by reference is
a Guaranty of Performance which has been executed by Dart Group Corp.
63. EXISTING TENANTS IN POSSESSION
Tenant recognizes that certain leases are in full force and effect for
portions of the area comprising the Premises described herein. Accordingly,
immediately following full execution of this Lease by the parties, Landlord
shall use its best efforts to terminate the existing tenants' right, title and
interest therein and to regain possession of the entire Premises as soon as
possible. After said existing tenants' rights to occupy the areas comprising a
portion of the Premises are terminated and Landlord has regained possession of
the entire Premises, Landlord shall make the same available to the Tenant as
provided for in Sections 21, 22 and 25 and Exhibit "C" hereof. Furthermore,
notwithstanding anything to the contrary contained herein, in the event
Landlord is unable to obtain possession of the entire Premises and commence
construction of the Premises within twenty four (24) months from the date of
this Lease, either party shall at any time following said twenty four (24)
month period have the right to terminated this Lease upon written notice to the
other as herein provided.
64. LANDLORD'S NOTICE OF STREET ADDRESS
On or before the date Landlord gives Tenant the Notice of Substantial
Completion pursuant to Section 25 hereof, Landlord shall advise Tenant in
writing of the street address assigned to the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement under their respective seals as of the day and year first above
written.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
CM/CP BULL RUN JOINT VENTURE
A DELAWARE GENERAL PARTNERSHIP
BY: CP/BULL RUN LIMITED PARTNERSHIP
JOINT VENTURE PARTNER
A MARYLAND LIMITED PARTNERSHIP
BY: BULL RUN, INC.
GENERAL PARTNER
A MARYLAND CORPORATION
WITNESS:
THOMAS B. MCKEE BY: RONALD S. HAFT (SEAL)
- ------------------------- -------------------------
RONALD S. HAFT
PRESIDENT
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
BY: HERBERT H. HAFT (SEAL)
- ------------------------ ---------------------------
NAME: HERBERT H. HAFT
TITLE: CHAIRMAN
</TABLE>
<PAGE> 30
EXHIBIT "A"
PROJECT: Bull Run Plaza
LANDLORD: CM/CP Bull Run Joint Venture
TENANT: Total Beverage Corp.
STORE NO: #42-47 = approx. 32,537 square feet
LEASE DATED: 8/16/93
<PAGE> 31
EXHIBIT "B"
LANDLORD'S SIGN REGULATIONS AND SPECIFICATIONS
Consisting of four (4) pages, attached to and made a part of Lease dated
8/16/93 between CM/CP Bull Run Joint Venture (Landlord) and Total Beverage
Corp. (Tenant) for Store # 42-47 in the Bull Run Plaza (Shopping Center). Size
of Store approx. 32,537 sq. ft. (Square Feet)
In accordance with Paragraph 20 of said Lease, all permanent Tenant
signs, both as to design and shop drawings, must receive written approval by
Landlord before fabrication and installation; and any sign(s) installed without
such written approval may be removed by Landlord at Tenant's expense. For
purposes hereof and until further notice to Tenant, the Landlord's Architect is
hereby given authority to review and pass upon all signs, and the design and
shop drawings therefor, and Landlord's approval or disapproval will be based
upon such review by Architect.
Approval shall be based on: (a) Conformity to sign
regulations.
(b) Harmony of the proposed sign
with the design standard of the
Shopping Center.
Landlord has the specific right to refuse approval of any sign which,
in his opinion, is not harmonious with the design standards of the Shopping
Center whether or not such sign conforms to the specific sign criteria set out
below.
To secure Landlord's approval, a design sketch of the proposed sign is
to be submitted to Landlord. After approval of design sketch in writing by
Landlord, six (6) prints of each shop drawing of all signs must be submitted to
Landlord for final approval. The shop drawings must indicate the type and
sizes of all lettering and background panels, their locations on the facade in
relation to valance panels, floor levels and soffits and store divider and
building lines. Proposed location of license, union and fabrications labels
must be indicated. A schematic section through the sign will be required where
necessary to show its form, colors and finishes of all materials, and wattages
and light intensity must be specified. All "Approved as Noted" drawings must
be resubmitted until marked "Approved" by Landlord. Incomplete drawings will
be returned to Tenant without approval.
In addition to the necessity for conforming of all signs with the
general design standards of the Shopping Center, all signs must conform to the
specific criteria, requirements and limitations hereinafter set forth:
1. The advertising or informative content of all signs shall be
limited to letters designating the store name and/or type of store
only and shall contain no advertising devices, slogans, symbols or
marks (other than the store name/or type of store as aforesaid).
Crests and/or corporate shields shall be permitted in certain
instances.
2. The letters on all sign shall be either in script and/or
block; the size of the letters shall be in proportion to the size of
the sign, as determined in accordance with the provisions of Paragraph
4 of this Exhibit "B"; and if the letters are back-illuminated, the
lamps therefore shall be contained wholly within the depth structure
of the letters.
3. The character, design, color and layout of all signs shall be
subject to the approval of the Landlord which shall endeavor to
establish uniform standards consonant with an integrated sign control
policy for the Shopping Center, and which, however, shall give proper
consideration to the style, design and character of signs used by
tenants of the Shopping Center.
Page 1 of 4 Pages
<PAGE> 32
4. All signs shall be in accordance with the following
requirements:
(a) The signs and any part or parts thereof, except as
otherwise provided in subparagraph (c) of this Paragraph 4,
shall be located within the physical limits of the storefront
of the Premises of the Tenant, but in no case less than two
feet (2') from any leasehold line.
(b) Signs shall not project beyond the line of the
Demised Premises bordering "common area" more than two inches
(2''), if less than eight feet (8') above finished floor line,
or more than four inches (4''), if above eight feet (8').
(c) The maximum total area of each sign shall conform to
applicable codes and the requirements of governmental
authorities.
(d) All signs shall be fabricated and installed in
compliance with all applicable building and electrical codes
and bear a U.L. Label.
(e) Letters for signs facing the Common Area may be as
large as permitted by applicable code.
(f) Stores having storefronts on the Common Area shall be
permitted to erect a sign on the facade exposed to the Common
Area. These signs shall be limited to store name and/or store
type, only, and shall conform to all applicable limitations
set forth in this Exhibit. No portion of such signs shall be
mounted above the fascia.
The area of the sign is defined as the area of a
rectangle surrounding all of the letters on the sign.
Where upper lower case letters are used, the average
height of the letters shall be used to determine the
height of the rectangle.
Foot frontage of the store is defined as the length
of facade measured between lease lines separating the
store from common areas or other stores.
(g) Corner stores, which have two (2) or more facades
facing or opening in different directions into different
portions of the Common Area may have signs on each facade,
subject to the requirements of this Exhibit and the written
approval of Landlord.
5. The fabrication, installation and operation of all signs shall
be subject to the following restrictions:
(a) No exposed neon, fluorescent and/or incandescent
tubing or lamps, raceways, ballast boxes and/or electrical
transformers, crossovers, conduit and/or sign cabinets shall
be permitted.
(b) No flashing, moving, flickering and/or blinking
illumination, animation, moving lights and/or floodlight
illumination shall be permitted.
(c) The name and/or stamp of the sign contractor or sign
company or both shall not be exposed to view, unless required
by law.
Page 2 of 4 Pages
<PAGE> 33
DIMENSION CHART
A STORE FRONT LENGTH
B 18'' MIN. SPACING FROM ADJ. TENANT TO BE EQUAL ON BOTH SIDES.
C EQUAL SPACING SIGN TO BE SPACED FROM TOP TO BOTTOM.
D LETTER HEIGHT 16'' MINIMUM.
<PAGE> 34
EXHIBIT "B"
6. The following type signs are prohibited:
(a) Paper signs and/or stickers utilized as signs.
(b) Signs of a temporary character or purpose, except
"For Rent" signs placed or approved by the Landlord and except
signs required for emergency situations, irrespective of the
composition of the sign or material used therefor, provided
that any sign permitted hereunder shall be lettered and
designed to be in keeping with the character and quality of
the Shopping Center and signs otherwise permitted therein.
(c) Printed signs, except, however, non-illuminated,
small-scale "signature sign" (one (1) such signature sign only
being permitted to be placed at each entrance to the Demised
Premises), which is lettered on the glass portion of a
storefront of Tenant and/or affixed to each storefront
surface, provided such sign does not project more than two
inches (2'') from the storefront surface.
(d) Moving signs.
(e) Signs not lighted by electricity which have luminous
or reflecting letters.
7. Notwithstanding the foregoing provisions of this Exhibit,
non-illuminated or non-luminous signs of metal and/or wood locate
within show windows or the interior of the stores shall be permitted,
provided:
(a) Such signs are not affixed to windows.
(b) Such signs contain only designations of merchandise
or brand names and/or prices.
(c) Such signs are located proximate to merchandise on
display within the show windows or the interior of stores, as
the case may be.
(d) For the purposes intended, such signs are reasonably
sized, designed and displayed.
8. The provisions of Section 20 of this Lease shall control over
the provisions of this Exhibit "B".
Page 3 of 4 Pages
<PAGE> 35
EXHIBIT "C"
DESCRIPTION OF LANDLORD'S WORK
Subject to the provisions contained herein, Landlord agrees, at its
cost and expense, to construct the Premises in accordance with plans and
specifications to be agreed upon by the parties (Landlord's Work), Landlord's
Work being more generally defined in Exhibit "C-1" attached hereto and hereby
made a part hereof. It is the intention of the parties that the Landlord's
Work will be in total preparation of Premises for the operation of a retail
store operated for Tenant's Permitted Use, other than the purchase and
installation of items to be provided by Tenant as set forth in Exhibit "C-2"
attached hereto and hereby made a part hereof. Tenant shall supply and set any
desired trade fixtures and equipment in the Premises in accordance with the
preliminary plans to be submitted to Landlord by Tenant and the construction
working drawings subsequently approved by Tenant. Landlord shall construct,
install and connect any necessary electrical and water supply or fixture drain
lines required for the operation of Tenant's trade fixtures and refrigerated
equipment, as provided for in the construction working drawings approved by
Tenant. Landlord and Tenant have mutually agreed to use their best efforts to
minimize Landlord's cost to construct the Premises.
Within Thirty (30) days following receipt by Tenant of an approved
perimeter drawing (footprint) of the Demised Premises, in accordance with
Section 24, Tenant shall provide Landlord with Tenant's preliminary plans
showing in detail all of Tenant's electrical, plumbing and partitioning
requirements necessary in order for Landlord to prepare construction wording
drawings necessary to complete the Landlord's Work. It is intended that the
work of every trade be installed in accordance with all local, state or other
ordinances rules and regulations governing the construction and installation of
any of this work. Tenant assumes no responsibility if greater requirements are
called for by any regulations in excess of Tenant's requirements and any such
requirements will be done by Landlord at no cost to Tenant. Such drawings
shall be prepared by Landlord's architects within thirty (30) days following
delivery by Tenant of preliminary plans. Tenant shall review and either
approve the construction working drawings within fourteen (14) days following
delivery of same to Tenant or advise Landlord in writing of any objection
thereto.
The construction working drawings following approval by both Landlord
and Tenant are hereinbelow referred to as the "Construction Working Drawings".
Notwithstanding the above, Tenant shall not be responsible for errors or
omissions by Landlord's architects or engineers, and Landlord shall be
responsible for all items omitted from the signed preliminary plans without
Tenant's consent, or which do not conform with written changes and corrections
which have been agreed to by Landlord and Tenant prior to the preparations of
final construction drawings.
Landlord will deliver to Tenant a written construction schedule prior
to the commencement of the Landlord's Work.
Landlord's Work will be performed in accordance with, and include the
items and requirements contained in, Tenant's specifications requirements
manual attached hereto as Exhibit "D". Said manual will become part of the bid
package of Landlord's general contractor.
EXHIBIT "C"
PROJECT: Bull Run Plaza
LANDLORD: CM/CP Bull Run Joint Venture
TENANT: Total Beverage Corp.
STORE NO: #42-47 = approx. 32,537 square feet
LEASE DATED: 8/16/93
Page 1 of 2
<PAGE> 36
All equipment purchased and installed by Landlord for the Premises
shall be UL (Underwriters Laboratories) approved.
The construction Working Drawings will include the sprinkler system
hydraulic calculation and sprinkler system blueprint for the Premises.
Where during the course of construction Tenant request changes and/or
substitutions in the Construction Wording Drawing which increase the total cost
of Landlord's Work. Landlord shall so inform Tenant and shall promptly deliver
to Tenant an estimate, with supporting data, of the cost of each such requested
change and Tenant will be permitted to make such changes upon agreeing with
Landlord to pay the increased costs to Landlord attributable to such changes.
If Landlord's Work is not commenced within one year from the date hereof or
within six months from the approval date of the Construction Working Drawings,
Tenant will have the right to change the layout and finish of the Premises,
including without limitation, the number, location and type of utility
connections, partition wall and lighting fixtures, and Landlord will
incorporate such changes into the Construction Working Drawings and construct
same at Landlord's cost and expense.
Landlord will deliver the Premises to Tenant in compliance with and
free of any notice of violation of governmental ordinances, rules, laws,
regulations and the like, and shall assign to Tenant all applicable contractor,
manufacturer and supplier warranties. Landlord and Tenant shall cooperate and
work together to secure all use and occupancy permits for the Premises.
Page 2 of 2
<PAGE> 37
Exhibit C-1
1) All shell modifications and facade constructions
2) All Site Work
3) All Storefront Modifications and Ingress/Egress Doors as required
4) Loading dock doors, seals, bumpers, dock leveler, and dock lights
5) All HVAC systems
6) All natural gas piping, water piping, sewer piping, plumbing fixtures
7) All high voltage electrical services, wiring, and connections
8) Complete restrooms for men and women, per all applicable codes
9) All flooring, including the cooler floors
10) All ceilings, including the wine cellar ceiling
11) Wine cellar glass and ingress/egress doors
12) All interior and exterior building painting
13) Manager's office, with wiring and counters
14) All cart corral railings
15) Security cage/storage
16) All interior and exterior lighting
17) All employee lockers
18) All door hardware
19) Complete and installed emergency generator
20) Compactor chute opening and door, if required by tenant
21) All required sprinkler work
22) All interior partition walls
23) Telephone trunk line service to building
24) Water service and all connections
25) Sewer service and all connections
26) Gas service and all connections (if available at site)
EXHIBIT "C-1"
PROJECT:Bull Run Plaza
LANDLORD:CM/CP Bull Run Joint Venture
TENANT:Total Beverage Corp
STORE NO: #42-47 = approx. 32,537 square feet
LEASE DATED:8/16/93
<PAGE> 38
EXHIBIT C-2
1) Purchase and installation of all refrigerated and walk-in coolers
2) Purchase and installation of all refrigeration piping
3) Purchase and installation of all refrigeration compressors,
condensors, and blower coils
4) All low voltage and control wiring, except for environmental systems
5) All reach-in cooler doors
6) All beer cooler racks
7) All storage racks
8) All trade fixtures
9) All wine cellar wooden fixtures
10) All beer cooler doors
11) All security systems
12) All telephone systems
13) All computer systems
14) All fire monitoring systems and service
15) All intercom systems
16) All interior signage/graphics
17) All exterior signage and connections to power
18) All neon lighting
19) All beer station millwork
20) All wine station millwork
21) Cardboard baler
22) All interior and exterior bumpers
23) Trash dumpsters/compactors
24) All cash registers
25) Supply of cash register coaxial cable only
26) All permits for Tenant's work
Exhibit "C-2"
PROJECT:Bull Run Plaza
LANDLORD:CM/CP Bull Run Joint Venture
TENANT:Total Beverage Corp.
STORE NO:#42-47 = approx. 32,537 square feet
LEASE DATED:8/16/93
<PAGE> 39
EXHIBIT "D"
TENANT'S SPECIFICATIONS REQUIREMENTS MANUAL
DATED: ---------------------------
IS HEREBY INCORPORATED BY REFERENCE
EXHIBIT "D"
PROJECT: Bull Run Plaza
LANDLORD: CM/CP Bull Run Joint Venture
TENANT: Total Beverage Corp.
STORE NO: #42-47 = approx. 32,537 square feet
LEASE DATED: 8/16/93
<PAGE> 40
USE OF PREMISES RESTRICTIONS
Tenant hereby covenants that throughout the term of its Lease, any
renewals or extensions thereof, the Premises, in whole or in part, will not be
used or operated directly or indirectly for the business of:
(a) A supermarket which term shall include both a "conventional"
and a "food warehouse" operation, a convenience store, a
delicatessen, any other store for the sale for off-premises
consumption of one or more of the following: groceries, dairy
products, foods, food products, meats, poultry or fish.
(b) A health and beauty aids store, a drug store, a pharmacy
prescription department, a greeting card store, a candy store
and/or a photo processing store or department. The term "drug
store" shall mean a storeroom, a substantial portion of which
is devoted to the sale of medicine, cosmetics or patent
medicines requiring the presence of a registered pharmacist.
The term "pharmacy prescription department" shall include the
dispensing of prescription drugs by physicians, dentist, or
health care practitioners, where such dispensing is for
profit.
(c) A catalogue showroom.
(d) A jewelry store.
(e) A sporting goods store.
(f) A store which sells family shoes in a "rack" or "self-service"
or "self-select" type shoe store.
(g) A store which sells eyeglasses, contact lenses and optical
accessories or administers professional optometric care.
(h) Manufacturing; industrial purposes; warehouse with no retail
use; car wash; auto body shop; lube and oil change shop;
service station; the selling of new or used cars/trucks,
trailers or mobile homes; pool hall; shooting range or
gallery; billiard parlor; bingo hall or other gambling
establishment; amusement center or park; antique store;
auction house; consignment store; closeout, bankruptcy/fire
sales or damaged merchandise store; second hand or used goods
store; flea market; massage parlor; carnival; lumber yard; OTB
operation; head shop; adult bookstore or the sale/exhibition
of pornographic material.
(i) Catering hall; banquet hall; bar; "disco"; night club; social
club; theatre; bowling alley; skating/roller rink; health
club; swimming pool; game room; entertainment facility;
meeting hall; laundromat; church; funeral parlor; dance hall;
sporting facility; medical clinic; auditorium or other place
of public assembly.
(j) Restaurant.
(k) A store which sells flotation sleeping devices.
(l) Sale of firearms, ammunition, or related accessories.
In the event such covenants shall be breached, Tenant agrees to take
those steps necessary to correct any such violation of such covenants and
Landlord shall be entitled to injunctive relief or other appropriate remedy at
law or in equity, by statute or otherwise, as Landlord may elect.
EXHIBIT "E"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between CM/CP BULL RUN JOINT VENTURE, LANDLORD and TOTAL
BEVERAGE CORP., TENANT, dated 8/16/93.
(160) Festival at Bull Run
<PAGE> 41
EXHIBIT "F"
GUARANTY OF PERFORMANCE
In order to induce Combined Properties Limited Partnership, as
Landlord, to enter into a certain Lease Agreement being executed simultaneously
herewith, with Total Beverage Corp,. as Tenant, the undersigned, namely Dart
Group Corporation, having its principal place of business at 3300 75th Avenue,
Landover, Maryland 20785, absolutely and unconditionally guarantees the
performance of the Tenant of all payments, obligations and covenants binding
upon Tenant in said Lease Agreement which accrue or are required during the
term of the Lease Agreement, and Guarantor hereby waives notice of any default
under said Lease Agreement. The undersigned further agrees that its liability
under this guaranty shall be primary, and that in any right or action which
shall accrue to Landlord under the within Lease Agreement during the Term of
the Lease Agreement, Landlord may, at its option, proceed against the
undersigned and Tenant jointly or severally, without having commenced any
action against or having obtained a judgement against Tenant. Guarantor hereby
waives trial by jury in any action, proceeding or counterclaim brought by
Landlord, Tenant and/or Guarantor with respect to any matter arising out of or
in any way connected with the Lease or the use and occupancy of the Premises.
Notwithstanding any provisions contained in this guaranty to the contrary,
commencing as of the first (1st) day of the sixth (6th) Lease Year and
continuing through the lease term and any renewals or extensions thereof, the
Guarantors' liability shall be limited to a dollar amount not in excess of
twelve (12) months' total payments of rental (including Minimum Guaranteed Rent
and other costs and charges) and other payments as called for under said Lease
Agreement from and after the date of the default at the time of the default.
The limitation of liability set forth in the preceding sentence, however, shall
no affect the length of this guaranty of any other provision hereof.
In the event said Lease Agreement shall be terminated prior to the
lease termination date by reason of a court order in a proceeding under the
Bankruptcy Act, then Guarantor agrees that it shall nonetheless remain liable
for all payments, obligations and covenants under said Lease Agreement, as if
it had been the tenant in the first instance and as if said Lease Agreement had
not been prematurely terminated. Notwithstanding any provisions contained in
this guaranty to the contrary, commencing as of the first (1st) day of the
sixth (6th) Lease Year and continuing through the lease term and any renewals
or extensions thereof, the Guarantors' liability shall be limited to a dollar
amount not in excess of twelve (12) months' total payments of rental (including
Minimum Guaranteed Rent and other costs and charges) and other payments as
called for under said Lease Agreement from and after the date of the default at
the time of the default. The limitation of liability set forth in the
preceding sentence, however, shall not affect the length of this guaranty of
any other provision hereof.
It is agreed that no modification, extension or indulgence granted to
Tenant, its successors and/or assign, shall release the undersigned from this
Guaranty of Performance, and that this Guaranty of Performance shall continue
in full force and effect for the term of the Lease and any renewals or
extensions thereof. Nothing herein shall modify any requirement in said Lease
Agreement for the giving of notice of default to Tenant. Not withstanding
anything contained in this Guaranty of Performance to the contrary, in the
event of an assignment of this Lease or a subletting of the Premises to as
entity not affiliated with the Tenant or Dart Group Corporation, Guarantor
shall not be bound by any modification which increases the obligations of
Guarantor unless Guarantor consents to the same in writing.
Any one or more successive or concurrent actions or proceedings may be
brought against Guarantor under this Guaranty for the performance of the
obligations in separate actions or proceedings, as often as Landlord may deem
expedient or advisable, and without constituting an election of remedies or a
bar to any other remedies available to Landlord.
Guarantor hereby expressly waives (i) presentment and demand for
payment and protest of non-payment; (ii) notice of acceptance by Landlord of
this Guaranty Agreement and of presentment, demand and protest thereof; (iii)
notice of all indulgences; (iv) demand for observance, performance of
enforcement of any of the terms or provisions of this Guaranty Agreement or the
Lease; and (v) any right or claim of right to cause a marshalling of the assets
of the Tenant.
This Guaranty and the Guarantor's liability hereunder shall continue
unaffected by an assignment or assignments of the Lease (in whole or in part)
or by any sublettings in whole or in part of the premises demised thereunder,
made from time to time, whether or not notice thereof is give to Guarantor.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty of
Performance to be executed by its duly authorized officer on this 16th day of
August, 1993.
ATTEST: GUARANTOR:
DART GROUP CORPORATION
(a Delaware corporation)
<PAGE> 42
<TABLE>
<S> <C>
By: Herbert H. Haft (Seal)
- ------------------------ -----------------------
Its: Chairman
----------------------------
Herbert H. Haft
[Corporate Seal]
</TABLE>
EXHIBIT "F"
Consisting of one page, attached to and made a part of the Lease
Agreement by and between CM/CP Bull Run Joint Venture, LANDLORD, and Total
Beverage Corp., TENANT, dated 8/16/93.
<PAGE> 43
EXHIBIT "G"
COMMENCEMENT AND ENDING AGREEMENT
THIS AGREEMENT, made this ---- day of ---------, 19---, by and
between CM/CP Bull Run Joint Venture (hereinafter referred to as "LANDLORD"),
and Total Beverage Corp., (hereinafter referred to as "TENANT").
W I T N E S S E T H :
THAT, in accordance with that certain Lease Agreement between the
parties hereto dated ----------------------------------, 19----, (hereinafter
referred to as "Lease"), covering that certain premises in the Bull Run Plaza
Shopping Center as more particularly described and set forth under the Lease
(hereinafter referred to as "Premises"), LANDLORD and TENANT hereby agree that
the Commencement Date of said Lease shall be set at
- ---------------------------, that the Rent Commencement Date shall be
- --------------------------, and that the Expiration Date shall be
- -----------------------, for a total lease term of approximately ten (10)
years.
IN WITNESS WHEREOF, the LANDLORD and TENANT have each caused this
Agreement to be executed on its behalf and its duly authorized seal affixed
thereto on the day and year first above written.
<TABLE>
<S> <C>
LANDLORD:
CM/CP BULL RUN JOINT VENTURE
A Delaware general partnership
By: CP/Bull Run Limited Partnership
Joint Venture Partner
A Maryland limited partnership
By: Bull Run, Inc.
General Partner
A Maryland corporation
ATTEST:
By: (Seal)
- ------------------------------- ---------------------------
Ronald S. Haft
President
ATTEST: TENANT:
TOTAL BEVERAGE CORP.
By:
- ------------------------------- ---------------------------------
Its:
--------------------------------
[Corporate Seal]
</TABLE>
<PAGE> 1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Loan Agreement") is made as of this 21st day of
May, 1993 by and between CABOT-MORGAN REAL ESTATE COMPANY, a Delaware
corporation (hereinafter referred to as "Lender"), and CM/CP BULL RUN JOINT
VENTURE, a Delaware general partnership (hereinafter referred to as
"Borrower").
W I T N E S S E T H:
A. Borrower owns certain real property situated in Prince William
County, Virginia (the "Property").
B. NationsBank of D.C., N.A. has made a loan to Borrower in the
amount of Nine Million Seven Hundred Fifty Thousand and No/100 Dollars
($9,750,000.00) (the "NationsBank Loan").
C. Lender has agreed to advance to Borrower a loan in the
aggregate amount of up to Seven Million Two Hundred Thousand Dollars
($7,200,000.00) (the "Loan"), and has executed and delivered to Lender a
Promissory Note (the "Note") of even date herewith in the aforesaid amount.
D. To secure the Note and Borrower's performance of the terms and
conditions of this Loan Agreement, Borrower has executed and delivered a Second
Deed of Trust (the "Junior Trust") of even date herewith conveying certain real
property and all improvements located thereon, and described on Exhibit A
attached hereto and made a part hereof (the "Property"), to Philip J. Ward and
Laurie S. Fulton, Trustees, which Junior Trust is to be recorded in the Office
of the Clerk of the Circuit Court for Prince William County, Virginia, and
shall be subordinate to that certain First Deed of Trust (the "Senior Trust")
which was granted in order to secure the NationsBank Loan, and to all rights of
the Senior Trustholder (defined herein) as provided in said Senior Trust. The
holder of the NationsBank Loan, as defined in the promissory note securing the
NationsBank Loan or in the Senior Trust, shall hereafter be called the "Senior
Trustholder".
E. Borrower intends to use the proceeds of the Loan to fund the
construction of certain improvements on the Property (the "Improvements") as
outlined in the Improvement Budget attached hereto as Exhibit B and made a part
hereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and of the recitals set forth above, which
are incorporated herein by reference, Lender and Borrower agree as follows:
ARTICLE I - The Loan
1.1 The Loan shall be held by Lender, to be advanced from time to
time for payment of the costs of constructing the Improvements. Subject to the
terms and conditions of this Loan Agreement, Lender agrees to advance the
balance of the Loan to Borrower for the purposes set forth on Exhibit B
attached hereto. All advances of the Loan will be made under the Note and will
be secured by the Junior Trust and such other documents as shall be delivered
by Borrower to Lender in connection with the Loan (the "Loan Documents"). In
no event shall Lender be obligated to advance any amount in excess of Seven
Million Two Hundred Thousand Dollars ($7,200,000.00).
1.2 Changes in the Improvement Budget shall require the consent of
Lender, which shall not be unreasonably withheld. Lender agrees to approve
such proposed changes within ten (10) days of Lender's and of Senior
Trustholder's receipt of a request from Borrower. Notwithstanding the
foregoing, changes in the Improvement Budget or the plans and specifications
which, in the aggregate, involve work costing less than Seven Hundred Twenty
Thousand and No/100 Dollars ($720,000.00) shall not require Lender's and Senior
Trustholder's consent.
1.3 Unless extended pursuant to this Section 1.3, all outstanding
amounts
<PAGE> 2
under the Loan and all accrued and unpaid interest thereon shall be due and
payable on May 21st, 1996 (the "Maturity Date"). Notwithstanding anything to
the contrary contained in this Loan Agreement, Borrower shall have the right,
at its option, to extend the term of the Note for two (2) consecutive periods
of one (1) year each (the "Extension Periods"), in which event the Note shall
be due and payable no later than May 21st, 1998, provided all of the following
conditions shall be satisfied: (i) No Event of Default (as defined below)
shall exist under the Note or any of the other Loan Documents (as hereinafter
defined), nor shall there exist any event, condition, or circumstances which,
with notice and/or the passage of time, would constitute an Event of Default
under the Note or any of the other Loan Documents; (ii) Lender shall not have
received notice of any then-existing default in the performance or observation
of any of the covenants, agreements or conditions to be performed or observed
by Borrower under the NationsBank Loan or Senior Trust, nor of any Event of
Default as defined therein, (iii) Borrower shall give Holder and Senior
Trustholder written notice of its exercise of such option to extend at least
sixty (60) days prior to the then-applicable Maturity Date; (iv) if requested
by Holder, Borrower shall execute an extension agreement in form and content
reasonably acceptable to Holder, and will execute acknowledge and deliver such
other documents, certificates and opinions related thereto as are reasonably
requested by Holder and copies of any and all of which such documents,
certificates and opinions shall be provided to Senior Trustholder; and (v) the
interest rate in effect during each of the Extension Periods shall be as
follows: during the first six (6) months of the first Extension Period, nine
and one-half percent (9.5%), and during the last six (6) months of said period,
ten percent (10%); during the first six (6) months of the second Extension
Period, ten and one-half percent (10.5%), and during the last six (6) months of
said period, eleven percent (11%).
ARTICLE II - Representations, Warranties, and Covenants
2. Borrower represents and warrants to Lender that the proceeds of
the Loan shall be used solely for the payment of the costs of constructing the
Improvements.
2.1 Borrower hereby indemnifies Lender and agrees to hold
Lender free and harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations, and costs or expenses,
including litigation costs and attorneys' fees, except those caused by gross
negligence or willful misconduct of Lender arising from or in any way connected
with construction of the Improvements, including without limitation (i) any act
or omission occurring or happening in or on the Property in connection with
such construction, (ii) any contract, agreement, or instrument entered into by
Borrower relating to construction of the Improvements, and (iii) mechanic's or
supplier's liens filed or asserted in connection with the construction of the
Improvements (subject to Borrower's right, as set forth in the Junior Trust, to
bond off mechanic's and supplier's liens).
ARTICLE III - Advances
3. The following shall be the conditions precedent to each
disbursement of the Loan proceeds (except to the extent waived in writing by
Lender and any such condition waived by Lender as to any particular advance may
be reimposed as a condition of subsequent advances):
3.1 The Borrower's representations and warranties in this
Loan Agreement shall be true and correct in all material respects as of the
date of such advance, as though such representations and warranties were made
on such date.
3.2 There shall not have occurred and be continuing any
default in the performance or observance of any of the covenants, agreements,
or conditions to be performed or observed by Borrower under this Loan Agreement
or the NationsBank Loan or any of the other Loan Documents, nor shall there
have occurred and be continuing any event, fact, or circumstances which, with
the
<PAGE> 3
passage of time, the giving of notice, or both, could constitute such a default
under this Loan or the NationsBank Loan.
3.3 The conditions and requirements set forth in Sections 4.1
and 4.2 have been satisfied.
3.4 The advance shall be for the purpose of paying an expense
contemplated and authorized in the Improvement Budget.
3.5 The sum of (i) the amount of the Loan then outstanding,
and (ii) the amount of the NationsBank Loan then outstanding shall not exceed
sixty percent (60%) of the value of the Property and improvements thereon as of
the date of the Draw Request (as defined below). It is understood and agreed
that this provision may not be waived or amended by Lender without the prior
written consent of the holder of the Senior Trust, in its sole discretion.
3.6 Borrower shall not be entitled to receive an advance more
frequently than once during every thirty (30) day period.
3.7 Lenders shall not have received notice of any
then-existing default in the performance or observance of any of the covenants,
agreements or conditions to be performed or observed by Borrower under the
NationsBank Loan or Senior Trust, nor of any Event of Default as defined
therein.
3.8 Borrower shall separate fully all Improvements upon
portions of the Property on which demolition will precede reconstruction and
finishings ("Category 1 Improvement") from those Improvements upon portions of
the Property on which the Improvements will not include any demolition
("Category 2 Improvements"). All work to be performed in portions of the
Property where demolition is to occur will be included in the Category 1
Improvements, whether the work of said contractors, suppliers, or materialmen
is directly demolition- related or not.
ARTICLE IV - Procedure for Advances
4. Advances under the Note pursuant to this Loan Agreement shall be
made in accordance with the following procedure and requirements:
4.1 Borrower shall sign and submit to Lender a Letter
requesting an advance (a "Draw Request"). Each Draw Request shall be
accompanied by such information as may be reasonably required by Lender and
shall constitute a representation that all prior advances have been used and
applied for the purposes stated in prior Draw Requests, and that all work to be
paid for by the advance has been completed. Lender reserves the right prior to
each advance to inspect the work performed to date. Lender agrees to disburse
advances to Borrower within ten (10) days after Lender's receipt of a Draw
Request. Borrower shall submit separate Draw Requests for Category 1
Improvements and Category 2 Improvements. Senior Trustholder shall receive
complete copies of lien waivers executed by all contractors, subcontractors,
suppliers and materialmen having lien rights pursuant to law, such that Senior
Trustholder has in its possession complete lien waivers that are effective
through a date not more than thirty (30) days prior to the date of each Draw
Request.
4.2 Upon receipt of each Draw Request, Chicago Title
Insurance Company (the "Title Insurer") shall be requested by Lender to update
its title search and to issue an endorsement to Lender's title insurance policy
certifying and insuring to Lender and Senior Trustholder that title to the
Property is in the name of Borrower and that there are no liens on the Property
other than those previously approved by Lender and Senior Trustholder and
permitted encumbrances set forth on the title commitment (the "Permitted
Encumbrances"). Such endorsement shall increase the coverage under the title
insurance policy by the amount requested in the Draw Request, and shall extend
the effective date of such policy to the date of disbursement of the advance so
requested.
<PAGE> 4
4.3 If the improvements situated on the Property suffer
damage or destruction, Lender may, without liability, refuse to make any
advances of funds until satisfactory arrangements for restoration or
replacement of such improvements have been made.
4.4 Upon the occurrence of an Event of Default, or any
condition which the giving of notice or the passage of time or both would
constitute and Event of Default, Lender may, in its sole discretion, advance
proceeds of the Loan in order to satisfy the conditions hereof, and may advance
funds directly on Borrower's account, and amounts so applied shall be part of
the obligation evidenced by the Note and shall be secured by the Junior Trust.
ARTICLE V - Loan Commitment
5. Lender hereby covenants and agrees that, in the event that
Borrower exercises its option to extend the term of the Note pursuant to the
provisions of Section 1.3 hereof, it will advance additional funds in order to
fully refinance the NationsBank Loan on or before May 21st, 1996. In the event
that Lender is notified at least sixty (60) days prior to the maturity of the
NationsBank Loan, in accordance with the above, Lender will advance the sum of
Nine Million Seven Hundred Fifty Thousand Dollars ($9,750,000) subject to the
following conditions precedent.
5.1 Upon the refinancing of the NationsBank Loan, Lender will
acquire a first priority lien on the Property. This may be accomplished
through (i) a purchase of the NationsBank Note, (ii) by making an additional
advance under the Junior Trust and the payoff of the NationsBank Loan, or (iii)
any other manner reasonably requested by Lender. In all events, Lender must
receive a "bring down" certificate relating to the Property and a valid
mortgagee title insurance policy insuring Lender's first lien priority on the
day the funds are to by advanced and that there are no liens on the Property
other than those previously approved by Lender and permitted encumbrances set
forth on the title commitment.
5.2 The interest rate and maturity date for the additional
funds to be advanced under this Article V are to be the same as those contained
in the Note.
5.3 In no event shall the sum of (i) the amount of the Loan
then outstanding and (ii) the amount to be advanced under this Article V to
refinance the NationsBank Loan exceed sixty percent (60%) of the value of the
Property and improvements thereon as of the date of the refinancing.
5.4 Borrower shall have delivered to the Lender either an
amendment to the Note and the Junior Trust relating to the additional advances
refinancing the NationsBank Loan or (ii) an assumption agreement and amendment
to the NationsBank Loan documents reflecting the assignment thereof to Lender.
In addition, Borrower shall deliver to Lender such other documentation as is
reasonably requested by Lender to reflect the above transaction.
5.5 The terms and conditions of the Lender's commitment to
refinance the NationsBank Loan are not limited to the above terms and
conditions and this Agreement does not set forth in full all such requirements
and conditions to refinance the NationsBank Loan. Those matters which are not
covered by the above outline are subject to mutual agreement of the parties,
and all matters are subject to amplification in the final documents to be
executed pursuant to the provisions of Section 5.4 above.
5.6 Borrower shall be liable for and shall promptly pay all
fees, expenses and charges incurred in connection with the refinancing of the
NationsBank Loan.
5.7 Lender's obligation to refinance the NationsBank Loan may
only be terminated by Lender in the event there shall have occurred and be
continuing
<PAGE> 5
any default in the performance or observance of any of the covenants,
agreements or conditions to be performed or observed by Borrower under this
Loan Agreement or the NationsBank Loan or any of the other loan documents, or
there shall have occurred and be continuing any event, fact or circumstances
which, with the passage of time, the giving of notice, or both, could
constitute such a default under this Loan or the NationsBank Loan. In such
event, Lender shall give written notice in writing to Borrower prior to
closing.
ARTICLE VI - Events of Default
6. The occurrence of any one or more of the following shall
constitute an Event of Default under this Loan Agreement ("Event of Default"):
6.1 The failure of Borrower to pay any sums properly due and
owing to a contractor, subcontractor, or supplier within thirty (30) days after
such payment is due, unless such payment is contested by Borrower and such
contest does not result in a lien on the Property, or if any lien is filed, if
the same is bonded off or otherwise removed to Lender's reasonable
satisfaction.
6.2 The existence of any Event of Default by Borrower under
any of the Loan Documents, which default continues beyond the applicable grace
period.
6.3 The existence of any Event of Default under the
NationsBank Loan or the Senior Trust (as defined therein).
ARTICLE VII - Remedies
7.1 Upon the occurrence of an Event of Default, Lender shall
provide written notice thereof to Senior Trustholder and, subject to the Senior
Trust and the rights of the Senior Trustholder (it being understood and agreed
that such notice to the Senior Trustholder shall not grant the Senior
Trustholder any rights to cure, shall not be deemed to extend any applicable
cure periods and cannot be relied upon by Borrower for any reason whatsoever),
Lender shall have all of the rights and remedies that Lender has as the result
of a default under the Note, the Junior Trust, any other Loan Documents, or at
law or in equity.
7.2 Upon the occurrence of an Event of Default and the
expiration of any applicable cure period, or at any time thereafter, upon
written request by Lender, Borrower shall deliver to Lender and Lender shall be
entitled to use, without cost or obligation to Lender, and without any
representation by Borrower, all of Borrower's rights, title and interest in any
plans, specifications, schematic designs, engineering data, information
regarding utilities serving the Property, topographical information, aerial or
field surveys of photographs, models, samples, renderings, contracts,
statements, agreements, and all other materials relating to or required in
connection with Borrower's construction of the Improvements.
7.3 If a default or an Event of Default shall occur
hereunder, Lender shall have no obligation to make any further advances to
Borrower hereunder. In addition, Lender reserves the right to withhold making
any advance while Borrower is exercising its rights, if any, to cure a default
during any applicable grace or cure period.
ARTICLE VIII - Miscellaneous Provisions
8.1 Borrower shall not, without the prior written consent of
Lender or Senior Trustholder, which consents Lender or Senior Trustholder may
withhold in their respective sole discretion, assign or transfer (i) this Loan
Agreement or any of the other Loan Documents, (ii) any of Borrower's rights or
obligations under any of the Loan Documents, (iii) any portion of the Loan
proceeds, or (iv) Borrower's interest in the Property; provided, however,
Borrower shall have the right to make any transfers allowed under the Senior
Trust without the written consent of Lender or the Senior Trustholder.
<PAGE> 6
8.2 No failure or delay by Lender in the exercise of any
rights or remedies available to its hereunder, under the Note, or at law or in
equity shall operate as a waiver thereof, nor shall any single or partial
exercise by Lender of any such right or remedy preclude any further exercise
thereof or of any other right or remedy. The remedies provided herein and in
the Note, or which are available at law or in equity are cumulative and not
alternative.
8.3 All notices, Draw Requests, and other communications
hereunder shall be sent by hand or by first class mail, postage prepaid, or by
overnight delivery service, and addressed as follows:
To Borrower: CM/CP Bull Run Joint Venture
c/o Combined Properties, Inc.
1899 L Street, N.W.
Washington, D.C. 20036
Attn: David Roodberg
To Lender: Cabot Morgan Real Estate Company
c/o Dart Group Corp.
3300 75th Avenue
Landover, Maryland 20785
Attn: Ron Marshall
Either party may change its address for the giving of notice or the person to
whose attention such notice is to be directed by giving written notice of such
change in the manner hereinabove provided. The party receiving a change of
address notice agrees to acknowledge receipt of the same in writing.
Notwithstanding the foregoing, notices of default or Event of Default shall be
given in the manner provided in the Junior Trust.
8.4 This Loan Agreement and the Note shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
8.5 Neither this Loan Agreement nor any of the other Loan
Documents may be modified, amended, waived, or discharged except by a written
instrument duly executed by the party against whom such modification,
amendment, waiver, or discharge is sought to be enforced.
8.6 The parties hereto expressly declare that it is their
joint and mutual intention that this Loan Agreement and the transactions
contemplated hereby shall not be construed as creating a third party
beneficiary contract, and neither this Loan Agreement nor any of the other Loan
Documents shall be construed as giving or conferring any rights or benefits
whatsoever to or upon any other persons or entities other than Borrower and
Lender.
8.7 The descriptive headings of the sections of this Loan
Agreement are only for convenience of reference and shall not be used in
interpreting this Loan Agreement.
8.8 This Loan Agreement, the Note, the Junior Trust and the
Loan Documents are intended to be construed as part of the same transaction,
and all of the rights, remedies, covenants, agreements, conditions, terms, and
provisions contained in any one of the Loan Documents shall be deemed to be
included in each of the other Loan Documents with the same force and effect as
though set forth in full therein. In the event any of the provisions of this
Loan Agreement are in conflict with or inconsistent with the provisions of the
Junior Trust, this Loan Agreement shall govern and control.
8.9 In the event any provision of this Loan Agreement is held
to be invalid or unenforceable as applied to a specific set of circumstances,
then, at Lender's option, (i) all of the other provisions of this Loan
Agreement, including such unenforceable provision as applied to any other
circumstances, shall continue in full force and effect; or (ii) such invalid or
unenforceable provision shall be treated as though not contained herein and
shall not effect
<PAGE> 7
any other provisions or the remaining part of any effective provision, and this
Loan Agreement shall be construed as if such invalid or unenforceable provision
or part thereof had never been contained herein.
8.10 This Loan Agreement and all of the other Loan Documents
shall be binding upon Borrower, and (subject to the restrictions on assignment
or transfer contained herein) upon its successors, assigns, and legal
representatives, and shall inure to the benefit of Lender and its successors
and assigns.
8.11 Any capitalized terms used herein for which no
definition is provided shall have the same meaning given to that term in the
Note, the Deed of Trust and all of the other Loan Documents.
8.12 This Loan Agreement may be executed in counterpart
copies, each of which shall constitute an original, and all of which together
shall constitute an original, and all or which together shall constitute one
and the same document.
8.13 Time is of the essence of this Loan Agreement and of
each and every term, covenant, and condition herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the day and year first above written.
<TABLE>
<S> <C>
BORROWER:
---------
CM/CP BULL RUN JOINT VENTURE,
a Delaware general partnership
By: CP/BULL RUN LIMITED PARTNERSHIP,
a Maryland limited partnership,
general partner
By: BULL RUN, INC.,
a Maryland corporation,
Witness: general partner
By: Ronald S. Haft
- -------------------------- -------------------------
Title: President
----------------------
Witness: By: CABOT-MORGAN REAL ESTATE COMPANY,
a Delaware corporation,
general partner
By: Herbert H. Haft
- -------------------------- -------------------------------
Title: Chairman
----------------------------
LENDER:
-------
Witness: CABOT-MORGAN REAL ESTATE COMPANY,
a Delaware corporation
By: Herbert H. Haft
- -------------------------- ------------------------------------
Title: Chairman
---------------------------------
</TABLE>
<PAGE> 8
THIS IS A CREDIT LINE DEED OF TRUST
------------------------------------------------------------
SECOND DEED OF TRUST AND SECURITY AGREEMENT
from
CM/CP BULL RUN JOINT VENTURE
to
Philip J. Ward
and
Laurie S. Fulton, as Trustees
for the benefit of
CABOT-MORGAN REAL ESTATE COMPANY
dated as of
May 21, 1993
------------------------------------------------------------
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Particular Covenants and Agreements of the
Borrower ....................................... 4
Section 1.01. Payment of the Obligations; Title, etc. ........ 4
Section 1.02. Documents and Certifications ................... 5
Section 1.03. Compliance with Legal Requirements ............. 6
Section 1.04. Repair; Utilities; Required Insurance .......... 7
Section 1.05. Insurance Proceeds ............................. 8
Section 1.06. Assignments of Policies Upon Foreclosures ...... 8
Section 1.07. Indemnification ................................ 8
Section 1.08. Impositions .................................... 9
Section 1.09. Condemnation ................................... 10
Section 1.10. Additional Security ............................ 10
Section 1.11. Renewals ....................................... 10
Section 1.12. Fees and Expenses .............................. 11
ARTICLE II Security Agreement ............................. 11
Section 2.01. Creation of Security Interest in the
Trust Estate ................................... 11
Section 2.02. Representations and Warranties of the
Borrower ....................................... 12
ARTICLE III Remedies ....................................... 12
Section 3.01. Remedies ....................................... 12
Section 3.02. Application of Proceeds ........................ 16
Section 3.03. Right to Sue ................................... 17
Section 3.04. Powers of the Trustee and the Lender ........... 18
Section 3.05. Event of Default ............................... 19
ARTICLE IV The Trustee .................................... 20
Section 4.01. Acceptance by Trustee .......................... 20
Section 4.02. Action in Accordance With Instructions ......... 20
Section 4.03. Resignation .................................... 20
Section 4.04. Successor Trustee .............................. 21
ARTICLE V Miscellaneous .................................. 21
Section 5.01. Reconveyance by Trustee ........................ 21
Section 5.02. Notices ........................................ 21
Section 5.03. Amendments, Waivers, etc. ...................... 22
Section 5.04. Successors and Assigns ......................... 22
Section 5.05. Severability ................................... 23
Section 5.06. Limitation of Interest ......................... 23
Section 5.07. Trust is Irrevocable ........................... 23
Section 5.08. Governing Law .................................. 23
Section 5.09. Statutory Provisions ........................... 24
</TABLE>
<PAGE> 10
SECOND DEED OF TRUST AND SECURITY AGREEMENT
THIS IS A CREDIT LINE DEED OF TRUST
THIS SECOND DEED OF TRUST AND SECURITY AGREEMENT dated as of May
21,1993, from CM/CP BULL RUN JOINT VENTURE, a Delaware general partnership (the
"Borrower"), to Philip J. Ward and Laurie S. Fulton, residing in Fairfax
County, Virginia (individually and collectively, the "Trustee"), for the
benefit of Cabot-Morgan Real Estate Company, a Delaware corporation (the
"Lender").
W I T N E S S E T H
WHEREAS, the Borrower has executed and delivered to the Lender a
certain Promissory Note of even date herewith in the principal sum of up to
Seven Million Two Hundred Thousand Dollars ($7,200,000.00) (the "Note") and
that certain Loan Agreement of even date herewith evidencing a loan from the
Lender to the Borrower of like principal amount (the "Loan"); and
WHEREAS, as a condition precedent to the Lender's obligation to make
the Loan, and in order to secure all of the Obligations (as hereinafter
defined) of the Borrower, the Borrower has agreed to execute, acknowledge and
deliver this Second Deed of Trust and Security Agreement (hereinafter referred
to as this "Deed of Trust"), which Deed of Trust shall be subject and
subordinate only to the lien, operation and effect of, and the rights and
remedies of the beneficiary under, that certain Deed of Trust, Assignment,
Security Agreement and Financing Statement executed by the Borrower for the
benefit of NationsBank of D.C., N.A., its successors and assigns (collectively,
the "Senior Lienholder"), dated as of even date herewith and recorded among the
land records of Prince William County, Virginia (collectively, the "Senior
Lien"), as well as to all Leases (as defined in the Senior Lien) for the
purpose of securing the following (collectively, the "Obligations") : (i) the
payment of the Loan, (ii) the payment of interest and of all other sums payable
by the Borrower under the Note and (iii) the payment and performance of any
other obligations owing by the Borrower hereunder or under the Note
(collectively, the Note and Deed of Trust shall be referred to as the "Loan
Documents");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and FOR THE PURPOSE OF SECURING
the Obligations and the full and punctual performance and observance by the
Borrower of all of the covenants, agreements, terms and conditions set forth in
any and all of the Loan Documents, the Borrower does hereby irrevocably grant,
bargain, sell, release, convey, warrant, assign, transfer, mortgage, pledge,
set over and confirm unto the Trustee, its successors and assigns, IN TRUST,
WITH POWER OF SALE, for the benefit and security of the Lender, under and
subject to the terms and conditions hereinafter set forth, all of the right,
title and interest of the Borrower in and to the lands and premises more
particularly described in Exhibit A (such lands and premises being hereinafter
collectively called the "Property");
TOGETHER WITH all interests, estates or other claims, both in
law and in equity, which the Borrower now has or may hereafter acquire
in (i) the Property, (ii) all easements, rights-of-way and rights used
in connection therewith or as a means of access thereto and (iii) all
tenements, hereditaments and appurtenances in any wise belonging,
relating or appertaining thereto;
TOGETHER WITH all estate, right, title and interest of the
Borrower, now owned or hereafter acquired, in and to any land lying
within the right-of-way of any street, open or proposed, adjoining the
Property, and any and all sidewalks, alleys, strips of land and gores
adjacent to or used in connection therewith;
TOGETHER WITH all estate, right, title and interest of the
Borrower, if any, now owned or hereafter acquired, in and to any and
all buildings and other improvements of every kind and description now
or hereafter
<PAGE> 11
erected on the Property (collectively, the "Improvements");
TOGETHER WITH all contract rights, general intangibles,
actions and rights of action relating to the Property or the
construction of the Improvements thereon or to the construction,
development, renovation, expansion, repair, modification or sale
thereof, or of any part thereof, including without limitation all of
the Borrower's right, title and interest in and to all water and sewer
taps, all plans and specifications, contracts with architects,
contractors, subcontractors, surveyors, engineers and other persons or
entities providing services relating in any way to the construction,
development, renovation, expansion, repair, modification or sale of
the Property or any part thereof, and all demolition, grading,
excavating, building and other permits, licenses and authorizations
issued or to be issued by any governmental authority and relating to
the Property, or the construction of the Improvements thereon or the
construction, development, renovation, expansion, repair, modification
or sale of any of the foregoing, together with all security deposits,
revenues, down payments, issues, earnings, profits or income now due
to the Borrower or hereafter to become due with respect thereto;
TOGETHER WITH all estate, right, title and interest of the
Borrower, if any, now owned or hereafter acquired, in and to all
inventory, machinery, apparatus, equipment, fittings, fixtures and
articles of personal property now or hereafter located on or at the
Property or used in connection therewith (including in connection with
the construction, renovation or improvement thereof) and all
additions, and accessions thereto, replacements therefor and proceeds
and profits thereof (collectively, the Personal Property");
TOGETHER WITH all reversion or reversions, remainder or
remainders, rents, revenues, proceeds, issues, profits, royalties,
income and other benefits of the Property, the Improvements and the
Personal Property, and the Lender is hereby authorized to collect an
receive the same, to give proper receipts and acquittances therefor
and to apply the same to the payment of the Obligations,
notwithstanding the fact that the same may not then be due and
payable; subject, however, to the right of the Borrower to receive and
use the same unless and until an Event of Default shall have occurred
and be continuing;
TOGETHER WITH all additions to the foregoing, and all products
and proceeds thereof and replacements and substitutions therefor,
including without limitation all proceeds of the insurance required to
be maintained under section 1.04 of this Deed of Trust and all awards
heretofore or hereafter made to the Borrower with respect to any part
of the Property, the Improvements of the Personal Property as the
result of the exercise of the power of eminent domain, including any
awards for changes of the grades of streets, or as the result of any
other damage to any part of the Property, the Improvements or the
Personal Property for which compensation shall be given by any
governmental authority (a "Condemnation"), and the Trustee is hereby
authorized to collect and receive the proceeds thereof, to give proper
receipts and acquittances thereof, to give proper receipts and
acquittances therefor and, to apply the same in accordance with
sections 1.05 and 1.09);
TOGETHER WITH any and all rights, development rights, zoning
rights or other similar rights or interests which benefit or are
appurtenant to the Property or the Improvements or both and any
proceeds arising therefrom;
Permitting the said Borrower to use and occupy the Property
and the Improvements and to receive the rents, issues and profits
thereof, until an Event of Default shall have occurred and be
continuing;
All of the foregoing property is sometimes herein referred to
as the
<PAGE> 12
"Trust Estate".
TO HAVE AND TO HOLD the Trust Estate, with all privileges and
appurtenances thereunto belonging, to the Trustee and its successors
in trust and, for the benefit of the Lender and its successors and
assigns forever, subject only to the Senior Lien.
PROVIDED ALWAYS, if the Obligations shall be paid in full
according to the terms and provisions hereof and of Note, then this
Deed of Trust and the lien and estate hereby granted shall cease,
determine and be void.
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, THE BORROWER HEREBY
COVENANTS AND AGREES AS FOLLOWS:
ARTICLE I
Particular Covenants and
Agreements of the Borrower
Section 1.01. Payment of the Obligations; Title, etc.
(a) The Borrower shall pay the Obligations according to
terms hereof and of the Note. The Borrower warrants and represents that the
Borrower (i) is lawfully possessed of a fee simple estate in the Property and
is lawfully possessed of a fee title in and to the Improvements and the
Personal Property, subject to the Senior Lien and (ii) has full power and
lawful authority to grant, bargain, sell, release, convey, warrant, assign,
transfer, mortgage, pledge, let over and confirm unto the Trustee and the
Lender all right, title and interest of the Borrower in and to the Trust
Estate, subject to the Senior Lien. The Borrower also warrants and represents
that this Deed of Trust is given to secure indebtedness incurred in connection
with the carrying on of a commercial enterprise. The Borrower shall forever
warrant specially and defend the title of the Trustee in and to the Trust
Estate and the validity and stated priority of the lien and estate hereof
against the claims and demands of all persons whomsoever, subject to the rights
of the holder of the Senior Lien.
(b) If the Borrower shall sell, convey, transfer, assign
or otherwise relinquish the Property or any part thereof or any interest
therein, without the prior written consent of the Lender, then at the option of
the Lender, the Obligations evidenced by the Note secured by this Deed of Trust
shall become immediately due and payable; provided, however, the grant, in the
ordinary course of business, of a leasehold interest, not containing a right or
option to purchase and not in contravention of any provision of any Loan
Document shall not require Lender's consent.
(c) If there is a sale, pledge, encumbrance, assignment
or transfer, voluntarily or involuntarily, whether by operation of law or
otherwise, of any interest in Borrower, without the prior written consent of
the Lender (except that ownership interests of Borrower may be transferred (i)
from one existing partner to any other existing partner, (ii) from one existing
partner to Robert Haft, Linda Haft and/or Ronald Haft or any entity controlled
by them, without Lender's consent), then at the option of Lender, the
obligations induced by the Note secured by this Deed of Trust shall become
immediately due and payable.
Section 1.02. Documents and Certifications.
(a) The Borrower shall execute and deliver to Lender,
from time to time, such financing statements, and continuation statements with
respect to the Loan (collectively, "UCC Documents") reasonably requested by the
Trustee or the Lender for the purpose of perfecting and continuing the
perfection of the Lender's security interest under the Uniform Commercial Code.
(b) The Borrower shall pay all filing, registration and
recording
<PAGE> 13
fees, all refiling, re-registration and rerecording fees, and all expenses
incident to the execution, acknowledgment and delivery of the Deed of Trust and
the UCC Documents, and all Federal, State, county and municipal stamp taxes and
other taxes, duties, imposts, assessments and charges arising out of or in
connection with the execution, acknowledgement and delivery of the Deed of
Trust and the UCC Documents.
(c) The Borrower shall on or prior to the date of this
Deed of Trust have delivered to the Lender an estoppel certificate and consent
to encumbrance from the holder of the Senior Lien in form and substance
satisfactory to the Lender.
(d) Except as provided in that certain Environmental
Report prepared by Envirotest, Inc., dated December 15, 1992, the Borrower
warrants to the Lender that the Borrower has not conducted or permitted to be
conducted any activities upon the Property which involve the disposal of
Hazardous Wastes (as defined below) or the use of Toxic Substances (as defined
below) and has disclosed to the Lender all pending and known threatened
litigation regarding Hazardous Wastes or Toxic Substances on the Property. Any
building materials or other items located in, on or around the Property which
qualify as Hazardous Wastes or Toxic Substances shall immediately be removed
from the Property at the Borrower's cost and expense. The Lender shall have no
obligation to inspect for or to discover such building materials or other
items. As used herein, "Hazardous Wastes" shall mean all waste materials
subject to regulation under the Comprehensive Environmental Response,
Compensation and Liability Act (Superfund or CERCLA), 42 U.S.C. section 9601 et
seq., the Resource Conservation and Recovery Act (the Solid Waste Disposal Act
or RCRA), 42 U.S.C. section 6901 et seq., or any other applicable Federal or
state laws now in force or hereinafter enacted related to hazardous waste
disposal. As used herein, "Toxic Substances" includes any materials present
in, on or around the Property which have been shown to have significant adverse
effects on human health or which are subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. section 2601 et seq., or any other
applicable Federal or state laws now in force of hereinafter enacted relating
to toxic substances. The term "Toxic Substances" includes but is not limited
to asbestos, polychlorinated biphenyls and lead-based paints, but does not
include small quantities of such materials present on the Property in retail
containers.
Section 1.03. Compliance with Legal Requirements.
(a) The Borrower shall comply with all enforceable laws,
ordinances, rules, regulations, covenants, conditions and restrictions now or
hereafter afflicting the Borrower or the Trust Estate or any part thereof
(collectively, "Legal Requirements"); provided, however, that the Borrower may
contest in good faith and by appropriate proceedings the validity or
applicability of any Legal Requirement so long as such contest will not result
in the imposition of a lien on the Property and, to the extent the failure to
so comply does or will have a material adverse effect on the business,
operations, prospects, assets, property or financial condition of the Borrower,
the Borrower sets aside on its books reserves which are in conformity with
generally accepted accounting principles and which the Borrower and the Lender
deem adequate with respect thereto.
(b) The Borrower shall at its expense cause the
recordation of this Deed of Trust and of any other instrument evidencing or
securing the Note wherever such recording would or might be required in order
to protect the lien and priority of this Deed of Trust or such instrument
against the claims of third parties. The Borrower shall at its expense take
such other action and execute and record such other instruments as may be
necessary or desirable to preserve and protect the lien and priority of this
Deed of Trust and all other instruments evidencing or securing the Note.
Section 1.04. Repair; Utilities; Required Insurance.
<PAGE> 14
The Borrower shall keep and maintain the Property in good condition and repair
and shall promptly restore all damage or destruction to the Property upon the
occurrence of any casualty whatsoever. Without the prior written consent of
the Lender, which consent shall not be unreasonably withheld or delayed, the
Borrower shall not, except as provided in the Loan Agreement, remove, destroy,
demolish or substantially alter (except as may be required by law) any of the
Improvements now or hereafter constructed on the Property. The Borrower shall
not knowingly commit or permit any waste or deterioration of or to the Property
and shall constantly keep and maintain all improvements and abutting grounds,
sidewalks, roads, parking areas and landscaped areas in good and neat order and
repair. The Borrower shall not commit, suffer or permit any act to be done in
or upon the Property in violation of any law, ordinance or regulation. The
Borrower shall at all times effect, maintain and keep in force policies of
insurance on all insurable property of the Trust Estate against loss by fire,
casualty and such other hazards as may from time to time be reasonably required
by the Trustee or the Lender. The Borrower shall maintain such builder's risk,
public liability and indemnity insurance as may from time to time be reasonably
required by the Trustee or the Lender. All such insurance shall be written in
forms, amounts and by companies reasonably satisfactory to the Trustee and the
Lender. All insurance policies required by this Section 1.04 shall:
a. name the Lender as insured and shall provide that
losses shall be payable to the Lender and to such other secured
parties with a security interest in the property with respect to which
such losses are payable as their respective interest may appear and in
the priority of their respective security interests; and
b. provide that no policy shall be cancelled or the
amount of the coverage reduced unless the Lender receives 30 days
prior written notice of such cancellation or reduction.
A copy of each certificate of renewal and substitute certificate of insurance
shall be delivered to the Lender, premiums paid, at least 30 days before
termination of the policies theretofore delivered to the Lender.
Notwithstanding the foregoing, any insurance policy or insurance company that
is satisfactory to the holder of the Senior Lien shall be deemed satisfactory
to the Lender and the Lender shall not impose any insurance requirements that
are greater than those imposed by the holder of the Senior Lien.
Section 1.05. Insurance Proceeds. After the occurrence of any
casualty or damage to the Property, the Improvements or the Personal Property
or any part thereof, the Borrower shall give prompt notice thereof to the
Lender and the Trustee.
Section 1.06. Assignments of Policies upon Foreclosures. In the
event of foreclosure of this Deed of Trust or other transfer of title or
assignment of the Trust Estate in extinguishment, in whole or in part, of the
Obligations, all right, title and interest of the Borrower in and to all
policies of insurance required hereunder shall inure to the benefit of and pass
to the successors in interest to the Borrower or the purchaser or grantee of
the Trust Estate or any part thereof.
Section 1.07. Indemnification.
(a) If the Trustee or the Lender is made a party defendant to any
litigation concerning this Deed of Trust or the Trust Estate or any part
thereof or interest therein, or concerning the occupancy thereof by the
Borrower, then the Borrower shall indemnify, defend and hold the Trustee or the
Lender, as the case may be, harmless from and against all claims, demands,
obligations and liabilities arising from or related to said litigation,
including without limitation reasonable attorneys' fees and expenses incurred
in any such litigation by the Trustee or the Lender, whether or not such
litigation is prosecuted to judgment; provided, however, that Borrower shall
have no obligation to indemnify, defend and hold harmless any liability arising
out of
<PAGE> 15
the willful misconduct or gross negligence of the Trustee or the Lender. If
the Trustee or the Lender in good faith commences an action against the
Borrower to enforce any of the terms hereof because of the breach by the
Borrower, or for the recovery of any of the Obligations, then the Borrower
shall, to the extent permitted by law, pay to the Trustee or the Lender, as the
case may be, its reasonable attorneys' fees and expenses, and the right to such
attorneys' fees and expenses, and the right to such attorneys' fees and
expenses shell be deemed to have accrued on the commencement of such action,
and shall be enforceable whether or not such action is prosecuted to judgment.
If an Event of Default shall occur and be continuing, the Trustee or the Lender
may employ an attorney or attorneys to protect its rights hereunder, and in the
event of such employment following any Default by the Borrower, the Borrower
shall, to the extent permitted by law, pay the reasonable attorneys' fees and
expenses incurred by the Trustee or the Lender, as the case may be, whether or
not an action is actually commenced against the Borrower by the reason of such
Event of Default.
(b) The Borrower hereby waives any and all right to claim or
recover against the Trustee or the Lender, or their respective officers,
employees, agents and representatives, for loss of or damage to the Borrower,
the Trust Estate, the property of the Borrower or the property of others under
the control of the Borrower from any cause insured against or required to be
insured against under this Deed of Trust.
(c) The Borrower agrees that all payments due under the Note shall
be made when due without any set-off or deduction whatsoever, the Borrower
agrees that it will no interpose, and hereby waives its right to interpose, any
plea of recoupment, counterclaim (except for compulsory counter claims) offset
or claim for deduction in any action to enforce collection of the Note or to
foreclose on this Deed of Trust. Any claim which the Borrower may have against
the Lender that arises under any of the Loan Documents or any other agreement
between the Borrower and the Lender, or that arises out of any dispute or
controversy of any nature whatsoever between the Borrower and the Lender, shall
be pursued by the Borrower in a separate and independent action, it being the
express intent of this provision that the Borrower's covenant to pay the Note
is independent of such other agreements or obligations, and any alleged or
asserted claims or rights of the Borrower against the Lender shall not excuse
the Borrower from its obligation to pay all sums due and payable under the Note
in accordance with the terms thereof.
Section 1.08. Impositions. The Borrower shall pay, before any fine,
penalty, interest or cost attaches thereto, all taxes, assessments, water and
sewer rates, utility charges and all other governmental or nongovernmental
charges or levies now or hereafter assessed or levied against the Property, the
Improvements, the Personal Property or any other part of the Trust Estate or
upon the lien or estate of the Trustee of the Lender therein (collectively,
"Impositions"), as well as all claims for labor, materials or supplies which,
if unpaid, might by law become a prior lien thereon, and as soon as possible
after request by the Trustee or the Lender shall cause receipts showing payment
of any of the foregoing to be exhibited; provided, however, that if by law any
Imposition may be paid in installments (whether or not interest shall accrue on
the unpaid balance therefor) such Imposition may be paid in installments
(together with accrued interest on the unpaid balance thereof) as the same
respectively become due, before any fine, penalty or cost attaches thereto;
provided, further, however, that the Borrower may contest in good faith and by
appropriate proceedings the validity or applicability of any Imposition so long
as the Borrower pays such Imposition prior to the due date thereof.
Section 1.09. Condemnation.
(a) If the Property, the Improvements or the Personal Property or
any part thereof or interest therein, are taken or damaged by reason of any
Condemnation, or if the Borrower receives any notice or other information
regarding such proceeding or the threatened commencement of any such
proceeding, the Borrower shall give prompt notice thereof to the Lender and the
Trustee. The
<PAGE> 16
Borrower hereby assigns, transfers and sets over to the Lender, subject to the
rights of the holder of the Senior Lien, all rights of the Borrower to any
compensation, award or other payment or relief in any condemnation less
Borrower's cost of collecting such award (collectively, "Condemnation
Proceeds") received in respect of any Condemnation or any agreement in
anticipation thereof. The Borrower hereby agrees to file and prosecute its
claim or claims for any such Condemnation Proceeds in good faith and with due
diligence and to cause the same to be collected and to be paid over to the
Lender, and the Borrower hereby irrevocably authorizes and empowers the Lender,
in the name of the Borrower or otherwise, to collect such Condemnation
Proceeds. In the event the Borrower fails to act diligently, or if an Event of
Default has occurred and is continuing hereunder, the Borrower hereby
authorizes and empowers the Lender to file and prosecute such claim or claims,
subject to the rights of the Senior Lienholder.
(b) Subject to the rights of the holder of the Senior Lien, the
Trustee shall apply all Condemnation Proceeds first to reimburse the Lender for
all costs and expenses, including reasonable attorneys' fees, incurred in
connection with the collection of such Condemnation Proceeds. The balance of
such Condemnation Proceeds shall be applied in accordance with Section 1.05 of
this Deed of Trust.
Section 1.10. Additional Security. If the Lender at any time
holds additional security for the Obligations, and if an Event of Default shall
have occurred and be continuing, the Lender may enforce the sale thereof or
otherwise realize upon the same, at its option, either before or concurrently
herewith or after a sale is make hereunder.
Section 1.11. Renewals. This Deed of Trust is given to secure not
only existing obligations of the Borrower to the Lender, but also to secure all
other sums or amounts that may be added to the obligations secured hereby
pursuant to the terms of this Deed of Trust. This Deed of Trust and all other
instruments evidencing or securing the Note shall likewise secure any
extension, modification, renewal of, or substitution for, the Note and any note
or notes which may be executed and delivered in substitution for the Note. The
lien and priority of this Deed of Trust shall in no manner be affected by any
such extension, modification, renewal or substitution. Notwithstanding any
other provision of this Deed of Trust to the contrary, no additional sums or
amounts may be added to the obligations secured by this Deed of Trust, nor
shall the maximum amount outstanding under the Note plus the amount outstanding
under the Senior Lien exceed sixty percent (60%) of the value of the Property
and improvements thereon without the prior written consent of the Senior
Lienholder, in its sole discretion. In addition, any extension, modification,
renewal of, or substitution for, the Note and any note or notes which may be
executed and delivered in substitution for the Note shall not be effective,
except for a reduction in any obligations secured by this Deed of Trust,
without the prior consent of the Senior Lienholder, in its sole discretion.
Section 1.12. Fees and Expenses. The Borrower covenants and
agrees that it shall pay the reasonable out-of-pocket costs and expenses of the
Lender and the Trustee in connection with the negotiation, preparation and
delivery of this Deed of Trust and the other Loan Documents, including without
limitation the reasonable fees and disbursements of the Lender's counsel, and
pay all reasonable out-of-pocket costs and expenses of the Lender in connection
with the administration and enforcement of this Deed of Trust and of the other
Loan Documents, including without limitation reasonable attorneys' fees and
disbursements arising in connection herewith and therewith.
ARTICLE II
Security Agreement
Section 2.01. Creation of Security Interest in the Trust Estate. For
the purposes of securing the Obligations, this Deed of Trust shall constitute a
security agreement creating a security interest in all items of personal
property owned by the Borrower and used un connection with the development of
the
<PAGE> 17
Property, including all such items of personal property hereafter acquired, and
the proceeds thereof. The Borrower hereby agrees to execute such further
agreements, instruments, financing statements, continuation statements and
other documents as may be necessary or appropriate in the sole but reasonable
discretion of the Lender to perfect and maintain the security interest herein
granted to the Lender. Upon the occurrence and during the continuation of an
Event of Default hereunder, the Lender shall have the remedies of a secured
party under the Uniform Commercial Code for the Commonwealth of Virginia,
including without limitation the right to take immediate possession of any
collateral. Any sale of collateral may be held as part of and in conjunction
with a sale by the Trustee of any real property constituting a portion of the
Property.
Section 2.02. Representations and Warranties of the Borrower. The
Borrower hereby warrants, represents and covenants that: (a) the Personal
Property is not used or bought for personal, family or household purposes; and
(b) this Deed of Trust constitutes a Security Agreement as that term is used in
the Uniform Commercial Code in effect in the Commonwealth of Virginia.
ARTICLE III
Remedies
Section 3.01. Remedies.
(a) If an Event of Default shall have occurred and be
continuing, the Lender shall have all rights and remedies afforded by law or in
equity and by the Loan Documents, including the right to accelerate payment of
the Note as provided therein and including without limitation the following:
(i) enter and take possession of the Trust Estate or any
part thereof, exclude the Borrower and all persons claiming
under the Borrower whose claims are junior to this Deed of
Trust, wholly or partly therefrom, and use, operate, manage
and control the same either in the name of the Borrower or
otherwise as the Trustee or the Lender shall deem best, and
upon such entry, from time to time at the expense of the Trust
Estate, make all such repairs, replacements, alterations,
additions or improvements to the Trust Estate or any part
thereof as the Lender any deem proper and, whether or not the
Trustee or the Lender has so entered and taken possession of
the Trust Estate or any part thereof, collect and receive all
the rents therefrom and apply the same, to the extent
permitted by law, to the payment of all expenses which the
Trustee or the Lender may be authorized to make under this
Deed of Trust, the remainder to be applied to the payment of
the Obligations until the same shall have been repaid in full;
provided, however, that the taking of possession of the
Property shall not prevent concurrent or later proceedings for
the foreclosure sale of Property as provided herein; and
(ii) personally or by agents, with or without
entry, if the Trustee or the Lender shall deem it
advisable:
(a) exercise THE POWER OF SALE granted
by this Deed of Trust and sell all or any
portion of the Trust Estate in accordance
with the Virginia rules of procedure to the
highest bidder at public auction at a sale or
sales held at such place or places and time
or times and upon such notice (including
copies of such notice or notices to the
Senior Lienholder) and otherwise in such
manner as may be required by law, or in the
absence of any such requirement, as the
Trustee or the Lender may deem appropriate
and from time to time adjourn any such sale
by announcement at the time and place
specified for such sale or for such adjourned
sale without further notice,
<PAGE> 18
except such as may be required by law;
(b) proceed to protect and enforce its
rights under this Deed of Trust, by suit or
suits at law or in equity for specific
performance of any covenant contained herein
or in the Note, or in aid of the execution of
any power granted herein or in the note, or
for the foreclosure of this Deed of Trust and
the sale of the Trust Estate under the
judgment or decree of a court of competent
jurisdiction, or for the enforcement of any
other right as the Trustee or the Lender
shall deem most effectual for such purpose
or;
(c) exercise any or all of the remedies
available to a secured party under the
applicable Uniform Commercial Code,
including:
(1) either personally or by means
of a court appointed receiver, take
possession of all or any of the
Trust Estate that is not real
property and exclude therefrom the
Borrower and all persons claiming
under the Borrower and thereafter
hold, store, use, operate, manage,
maintain and control, make repairs,
replacements, alterations, additions
and improvements to and exercise all
rights and powers of the Borrower in
respect of all or any of the Trust
Estate that is not real property.
If the Lender demands or attempts to
take possession of all or any of the
Trust Estate that is not real
property in the exercise of any
rights hereunder, the Borrower shall
promptly turn over and deliver
complete possession thereof to the
Lender;
(2) without notice to or demand
upon the Borrower, make such
payments and do such acts as the
Lender may deem necessary to protect
its security interest in all or any
of the Trust Estate that is not real
property, including paying,
purchasing, contesting or
compromising any encumbrance which
is prior to or superior to the
security interest granted hereunder,
and in exercising any such powers or
authority to pay all expenses
incurred in connection therewith;
(3) require the Borrower to
assemble all or any of the Trust
Estate that is not real property, at
a place designated by the Lender and
convenient to both parties, and
Promptly to deliver it to the
Lender, or its designated agent or
representative. The Lender, and its
agents and representatives, shall
have the right to enter upon the
premises and property of the
Borrower to exercise the Lender's
rights hereunder;
(4) sell, lease or otherwise
dispose of all or any of the Trust
Estate that is not real property at
public sale, with or without having
all or any of the Trust Estate that
is not real property at the place of
sale, and upon such terms and in
such manner as the Lender may
determine (the Trustee or the Lender
may be a purchaser at any such
sale); and
<PAGE> 19
(5) give the Borrower at least ten
(10) days prior notice of the time
and place of any public sale of all
or any of the Trust Estate that is
not real property or other intended
disposition thereof.
(b) If an Event of Default shall have
occurred and be continuing, the Lender, to the extent permitted by law, shall
be entitled as a matter of right to the appointment of a receiver of the Trust
Estate, without notice or demand, without the requirement for a bond, and
without regard to the adequacy of the security for the Obligations or the
solvency of the Borrower. The Borrower hereby irrevocably consents to such
appointment and waives notice of any application therefor. Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of the Lender in case of entry as
provided in Section 3.01(a)(i) and shall continue as such and exercise all such
powers until the date of confirmation of sale of the Trust Estate, unless such
receivership is sooner terminated.
(c) If an Event of Default shall have
occurred and be continuing, the Borrower hereby also assents to the passage of
a decree by a court of competent jurisdiction for the sale of the Trust Estate
pursuant to the terms of this Deed of Trust and the Virginia rules of
procedure.
(d) To implement the rights of the
Lender and the Trustee under this Section 3.01, the Borrower hereby constitutes
and appoints the Lender its true and lawful attorney-in-fact with full power of
substitution in the premises to complete construction of any improvements to
the Property authorized or permitted under this Deed of Trust substantially in
accordance with the Borrower's plans and specifications or any other Loan
Document, in the name of the Borrower and to pay all bills and expenses
incurred thereby and hereby empower the Lender as its attorney as follows: to
use any funds of the Borrower for the purpose of completing the Improvements
substantially in accordance with the Borrower's plans and specifications or any
extension or installation of public or private utilities and streets, walks and
roads which may be necessary or desirable for the occupancy or operation of the
Improvements; to make such additions, changes and corrections in the plans and
specifications as may be necessary or desirable to complete the Improvements in
substantially the manner contemplated in such plans and specifications; to
employ such contractors, agents, architects and inspectors as shall be
required; to pay settle or compromise all existing bills and claims which may
be or become desirable for completion of the Improvements or for the clearance
of title; to execute all contracts and do any and every act which the Borrower
might do in its own behalf to complete the Improvements substantially according
to the plans and specifications. It is further understood and agreed that this
power of attorney shell also empower the Lender to prosecute and defend all
actions and proceedings in connection with the construction of the
Improvements, to take such action and require such performance under any surety
bond or other obligation, or to execute in the name of the Borrower such
further bonds or obligations as may be reasonably required in connection with
the work.
(e) In any sale under any provision of
this Deed of Trust or pursuant to any judgment or decree of court, the Trust
Estate, to the extent permitted by law, may be sold in one or more parcels or
as an entirety and in such order as the Trustee or the Lender may elect,
without regard to the right of the Borrower, or any person claiming under the
Borrower to the marshalling of assets. The purchaser at any such sale shall
take title to the Trust Estate or the part thereof so sold free and discharged
of the estate of the Borrower therein, the purchaser being hereby discharged
from all liability to see to the application of the purchase money. Any
person, including the Lender and the Trustee, may purchase at any such sale.
Upon the completion of any such sale made by the Trustee or the Lender or by
virtue of this section 3.01, the Trustee shall execute and deliver to the
purchaser an appropriate instrument which shall effectively transfer all of the
Borrower's and the Trustee's estate, right,
<PAGE> 20
title, interest, property, claim and demand in and to the Trust Estate or
portion thereof so sold, but without any covenant or warranty, express or
implied. The Trustee and the Lender are hereby irrevocably appointed the
attorneys-in-fact of the Borrower in its name and stead to make all appropriate
transfers and deliveries of the Trust Estate or any portions thereof so sold
and, for that purpose, the Lender and the Trustee may execute all appropriate
instruments of transfer, and may substitute one or more persons with like
power, the Borrower hereby ratifying and confirming all that said attorneys or
such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, the Borrower shall ratify and confirm without recourse, or cause
to be ratified and confirmed without recourse, any such sale or sales by
executing and delivering, or by causing to be executed and delivered, to the
Trustee, to the Lender or to such purchaser or purchasers all such instruments
as may be advisable, in the judgement of the Trustee or the Lender, for such
purpose, and as may be designated in such request. Any sale or sales made
under or by virtue of this Deed of Trust, to the extent not prohibited by law,
shall operate to divest all the estate, right, title, interest, property, claim
and demand whatsoever, whether at law or in equity, of the Borrower in and to
the Trust Estate, or any portions thereof so sold, and shall be a perpetual bar
both at law and in equity against the Borrower and against any and all persons
claiming or who may claim, the same, or any part thereof, by, through or under
the Borrower. The powers and agency herein granted are coupled with an
interest and are irrevocable. Any sale or sales made under or by virtue of
this Deed of Trust need not be held in the county where the Trust Estate is
located.
Section 3.02. Application of Proceeds. The proceeds of any
enforcement of this Deed of Trust, including any sale made either under the
power of sale hereby given or under a judgement, order or decree made in any
action to foreclose or to enforce this Deed of Trust shall, to the extent
permitted by law, be applied:
(a) first to the payment of all costs
and expenses of such sale, including a Trustee's fee
equal to 2% of the proceeds of such sale and
reasonable attorneys' fees;
(b) then to the cost of any evidence of
title procured and of correcting any irregularity
that may appear in connection with such sale and
renewal stamps on the deed;
(c) then to the payment of all charges,
expenses and advances incurred or made by the Trustee
or the Lender in the administration, protection or
execution of this Deed of Trust or the security
afforded hereby, including without limitation any
expense of obtaining possession of the Property;
(d) then to the payment of all accrued
and unpaid interest on the Obligations;
(e) then to the payment in full of the
balance of the Obligations, whether the same shall be
due or not, in such order of priority as the Lender
shall determine notwithstanding any contrary
provision of the Note, it being agreed that (i)
interest shall continue to accrue until proceeds of
the sale are actually paid and (ii) the Note shall,
upon foreclosure sale being made before the maturity
of the Note, be and become immediately payable at the
election of the Lender;
and any surplus remaining shall be paid to the Borrower or to whosoever may be
lawfully entitled to receive the same.
Section 3.03. Right to Sue. If an Event of Default has occurred
and is continuing, the Trustee and the Lender shall have the right from time to
time to sue for any sums required to be paid by the Borrower under the terms of
this
<PAGE> 21
Deed of Trust as the same become due, without regard to whether or not any
other amounts constituting the Obligations shall be, or have become, due and
without prejudice to the right of the Trustee or the Lender thereafter to bring
any action or proceeding of foreclosure or any other action upon the occurrence
of any Event of Default existing at the time such earlier action was commenced.
Section 3.04. Powers of the Trustee and the Lender.
(a) The Trustee or the Lender may at any time or from
time to time renew or extend this Deed of Trust, alter or modify the
same in any way, or waive any of the terms, covenants or conditions
hereof or thereof, in whole or in part, and may release or reconvey
any portion of the Trust Estate or any other security, and grant such
extensions and indulgences in relation to the Obligations, or release
any person liable therefor as the Trustee or the Lender may determine
without the consent of any junior lien or encumbrancer, without any
obligation to give notice of any kind thereto, without in any manner
affecting the priority of the lien and estate of this Deed of Trust on
or in any part of the Trust Estate, and without affecting the
liability of the Borrower or any other person liable for any of the
Obligations.
(b) No right or remedy herein conferred upon of reserved
to the Trustee or the Lender is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy under the Loan
Agreement, this Deed of Trust and the other Loan Documents, or now or
hereafter existing; the failure of the Trustee or the Lender to insist
at any time upon the strict observance or performance of any of the
provisions of this Deed of Trust, or to exercise any right or remedy
provided for herein, shall not impair any such right or remedy nor be
construed as a waiver or relinquishment thereof; and
(c) The Trustee and the Lender, and each of them, shall
be entitled to enforce payment and performance to any of the
Obligations and to exercise all rights and powers under this Deed of
Trust or Note or any laws now or hereafter in force, notwithstanding
that some or all of the Obligations may now or hereafter be otherwise
secured, whether by mortgage, deed or trust, pledge, lien, assignment
or otherwise; neither the acceptance of this Deed of Trust nor its
enforcement, whether by court action or pursuant to the power of sale
or other powers herein contained, shall prejudice or in any manner
affect the Trustee's or the Lender's right to realize upon or enforce
any other security now or hereafter held by the Trustee or the Lender,
it being stipulated that the Trustee and the Lender, and each of them,
shall be entitled to enforce this Deed of Trust and any other security
now or hereafter held by the Trustee or the Lender in such order and
manner as they, in their sole discretion, may determine; every power
or remedy given by the Loan Documents to the Trustee or to the Lender
or to which either of them may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as
often as may be deemed expedient by the Trustee or the Lender, and
either of them may pursue inconsistent remedies.
Section 3.05. Event of Default. Each of the following events
or conditions shall constitute an Event of Default:
(a) the failure of the Borrower to make any payment of
principal or interest payable by it under the Note or any other amount payable
by the Borrower to the Lender under this Deed of Trust (i) within 10 days after
written notice from the Lender to the Borrower of such default;
(b) the failure of the Borrower to perform any of its
other obligations under this Deed of Trust if such default shall continue
unremedied for a period of 30 days after written notice thereof from the Lender
to the Borrower and the Senior Lienholder, provided that if promptly after
receipt of
<PAGE> 22
such written notice the Borrower shall have diligently attempted to cure such
default but such default is not susceptible of being cured with reasonable
diligence within such 30 day period, such period shall be extended for such
additional period of time not to exceed 60 days as may be necessary to cure
such default using reasonable diligence;
(c) any Event of Default under the Senior Lien (as
defined therein);
(d) any representation or warranty made to the Lender by
the Borrower in this Deed of Trust or any other Loan Document shall prove to
have been false or incorrect in any material, adverse respect on the date as of
which the same was made;
(e) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property; (ii)
make a general assignment for the benefit of its creditors; (iii) commence a
voluntary case under the Bankruptcy Code (as now or hereafter in effect); (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts; or (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code;
(f) a proceeding or case shall be commenced, without the
application or consent of the Borrower in any court of competent jurisdiction,
seeking (i) liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of debts of the Borrower; (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or of all
or any substantial part of any of the Borrower's assets; or (iii) similar
relief in respect of the Borrower under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgement
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days, or an order for
relief against the Borrower shall be entered in an involuntary case under the
Bankruptcy Code.
ARTICLE IV
The Trustee
Section 4.01. Acceptance by Trustee. The Trustee accepts this
trust when this Deed of Trust, duly executed and acknowledged, is made a public
record as provided by law.
Section 4.02. Action in Accordance With Instructions. Upon
receipt by the Trustee of instructions from the Lender at any time or from time
to time, the Trustee shall (a) give any notice or direction or exercise any
right, remedy or power hereunder or in respect of any part or all of the Trust
Estate as shall be specified in such instructions and (b) approve as
satisfactory all matters required by the terms hereof to be satisfactory to the
Trustee or to the Lender. The Trustee may, but need not, take any of such
actions in the absence of such instructions. At any time or from time to time,
upon request or the Lender, and without affecting the liability of any person
for payment of the Obligations, the Trustee shall reconvey all or any part of
the Trust Estate, consent to the making of any map or part thereof, join in
granting any easement thereon, or join in any extension agreement or any
agreement subordinating the lien and estate hereof.
Section 4.03. Resignation. The Trustee may resign at any time
upon giving not less than 60 days prior notice to the Lender, but shall
continue to act as trustee until its successor shall have been chosen and
qualified.
Section 4.04. Successor Trustee. In the event of the death,
removal, resignation or refusal or inability of the Trustee to act, or for any
<PAGE> 23
reason, at any time, the Lender shall have the irrevocable power, with or
without cause, without prior notice of any kind, and without applying to any
court, to select and appoint a successor trustee. Each such appointment and
substitution shall be made by notice to the Borrower, the Trustee and successor
trustee and by recording notice of such in each office in which this Deed of
Trust is recorded. Such notice shall be executed and acknowledged by the
Lender and shall contain reference to this Deed of Trust and when so recorded
shall be conclusive proof of proper appointment of the successor trustee. Such
successor shall not be required to give bond for the faithful performance of
its duties unless required by the Lender.
ARTICLE V
Miscellaneous
Section 5.01. Reconveyance by Trustee. The Lender shall notify the
Trustee of the payment in full of the Obligations. Upon receipt of such
notification and upon payment by the Borrower of the Trustee's expenses, the
Trustee (and, if required by law, the Lender) shall reconvey, without warranty
or covenant, any portion of the Trust Estate then held hereunder to the
Borrower or to the person or persons legally entitled thereto, by an instrument
duly acknowledged in for recording. The recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof.
Section 5.02. Notices. All notices, requests, demands,
consents, approvals or other communications to, upon or by any party hereto
shall be in writing and shall be delivered to the intended recipient at the
"address for Notices" specified below or at such other address as shall be
designated by a party in a notice to each other party. All notices shall be
deemed to have been duly given, in the case of hand delivery, when received, or
in the case of certified mail, return receipt requested, on the date the
receipt is signed or the date delivery is refused. Notices to the Senior
Lienholder shall be given, and shall be effective, as provided in the Senior
Lien, subject also to changes in such address as are made in accordance with
said Senior Lien.
Address for Notices:
If to the Borrower:
CM/CP BULL RUN JOINT VENTURE
c/o Combined Properties, Inc.
1899 L Street, N.W.
Washington, D.C. 20036
Attention: David Roodberg
and
c/o Combined Properties, Inc.
1899 L Street, N.W.
Washington, D.C. 20036
Attention: Alexis Iszard, Esq.
If to the Lender:
CABOT-MORGAN REAL ESTATE COMPANY
c/o Dart Group Corp.
3300 75th Avenue
Landover, MD 20785
Attention: Ron Marshall
with a copy to:
<PAGE> 24
Lewis H. Ferguson, III, Esq.
Williams & Connolly
725 12th Street, N.W.
Washington, D.C. 20005
If to the Trustees:
Philip J. Ward
Laurie S. Fulton
725 12th Street, N.W.
Washington, D.C. 20005
Section 5.03. Amendments, Waivers, etc. This Deed of Trust
cannot be modified, changed or discharged except by an agreement in writing,
duly acknowledged in form for recording, signed by the party against whom
enforcement of such modification, change or discharge is sought.
Section 5.04. Successors and Assigns. This Deed of Trust
shall bind and inure to the benefit of the paries hereto and their respective
successors and assigns and shall run with the Property. This Deed of Trust
shall not be assignable by the Lender, except with the prior written consent of
the Senior Lienholder, in its sole discretion; provided, however, that such
consent shall not be required for the transfer to a party permitted under
Article 4.1(f) of the Senior Trust.
Section 5.05. Severability. If any term or provision of this
Deed of Trust or the application thereof to any person or circumstance shall to
any extent be invalid or unenforceable, the remainder of this Deed of Trust, or
the application of such term or provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Deed of Trust shall be valid and
enforceable to the fullest extent permitted by law. Should this Deed of Trust
be or become ineffective as a deed of trust, then it shall be construed and
enforce as a realty mortgage with the Borrower being the mortgagor and the
Lender being the mortgagee.
Section 5.06. Limitation of Interest. It is the intention
of the Borrower and the Lender in the execution of this Deed of Trust and the
Note to contract in strict compliance with all applicable usury laws. In
furtherance thereof, the Lender and the Borrower stipulate that none of the
terms and provisions contained in this Deed of Trust shall ever be construed to
create a contract for the use, forbearance or detention of money requiring
payment of interest at a rate in excess of the maximum interest rate permitted
to be charged by applicable law. The Borrower shall never be liable for
unearned interest on the Obligations and shall never be required to pay
interest thereon at a rate in excess of the maximum interest which may be
lawfully charged under applicable usury laws and this section 5.06 shall
control over all other provisions of this Deed of Trust and the Note which may
be in apparent conflict herewith. If the Lender shall collect monies which are
deemed to constitute interest which would otherwise increase the effective
interest rate on the Obligations to a rate in excess of that permitted to be
charged by applicable usury laws, all such sums deemed to constitute interest
in excess of the legal rate shall be immediately returned to the Borrower upon
such determination.
Section 5.07. Trust is Irrevocable. The trust created hereby is
irrevocable by the Borrower subject to defeasance in accordance with this Deed
of Trust.
Section 5.08. Governing Law. This Deed of Trust shall be governed
by and interpreted in accordance with the law of the Commonwealth of Virginia,
excluding the choice of law rules thereof.
Section 5.09. Statutory Provisions. This Deed of Trust is made
under and pursuant to the provisions of the Code of Virginia, Sections 55-59,
55-60,
<PAGE> 25
26-49 and 55-58.2, as amended, and shall be construed to impose and confer upon
the parties hereto and Noteholder all the rights, duties and obligations
prescribed by said Sections 55-59, 55-60, 26-49 and 55-58.2, as amended, except
as herein otherwise restricted, expanded or changed, including, without
limitation, the following rights, duties and obligations described in short
form:
(a) All exemptions are hereby waived.
(b) Subject to call on default.
(c) Renewal, extension, or reinstatement permitted.
(d) Substitution of trustees collectively or of any of them
individually by the beneficiary is permitted for any reason whatsoever, and any
number of times without exhaustion of the right to do so.
(e) Trustee's commission in the event of advertisement but payment
before sale, reasonable fees not in excess of 2% of the outstanding
indebtedness.
(f) Advertisement required, once a week for four successive weeks.
(g) Any trustee may act.
(h) The trustee may require a deposit in the amount of Two Percent
(2%) of the unpaid principal indebtedness then secured hereby or Fifty Thousand
Dollars ($50,000), whichever is greater, to accompany each bid at foreclosure
or sale in lieu thereof.
Section 5.10. Additional Rights of Senior Lienholder. The
Borrower further covenants, and the Lender by making the Loan agrees, as
follows:
(a) This Deed of Trust is unconditionally subordinate to the
Senior Lien and to all Leases, as defined in the Senior Lien.
(b) If any action (whether judicial or pursuant to a power of
sale) shall be instituted to foreclose or otherwise enforce this Deed of Trust,
no tenant of any of the Leases shall be named as a party defendant, and no
action shall be taken that would terminated any occupancy or tenancy without
the prior written consent of the Senior Lienholder, in its sole discretion.
(c) Rents, as defined in the Senior Lien, if collected by of for
the beneficiary of this Deed of Trust, shall be applied first to the payment of
the secured indebtedness then due pursuant to the Senior Lien and expenses
incurred in the ownership, operation and maintenance of the Property in such
order as the Senior Lienholder may determine, in its sole discretion, prior to
being applied to any indebtedness secured by this Deed of Trust.
(d) Written notice of any default or Event of Default, as
applicable, under this Deed of Trust and written notice of the commencement of
any action (whether judicial or pursuant to the power of sale) to foreclose or
otherwise enforce this Deed of Trust or to seed the appointment of a receiver
for all or any part of the Property shall be given to the Senior Lienholder
with or immediately after the occurrence of any such default, Event of Default
or Commencement.
(e) Neither the beneficiary of this Deed of Trust, nor any
purchaser at foreclosure thereunder, nor anyone claiming by, through or under
any of them shall succeed to any of Borrower's rights under the Senior Lien
without the prior written consent of the Senior Lienholder, in its sole
discretion.
Section 5.11. Waiver. To the full extent permitted by law, the
Borrower waives the benefit of homestead and all other exemptions to which it
may be entitled with respect to the Obligations. The Borrower also waives, to
the full extent permitted by law, the benefit of all appraisement, valuation,
stay,
<PAGE> 26
moratorium and redemption laws now or hereafter in force with respect to the
Obligations.
IN WITNESS WHEREOF, this Deed of Trust has been duly executed,
acknowledged and delivered by the Borrower as of the day and year first above
written.
<TABLE>
<S> <C>
GRANTOR:
--------
CM/CP BULL RUN JOINT VENTURE,
a Delaware general partnership
By: CP/BULL RUN LIMITED PARTNERSHIP,
a Maryland limited partnership,
general partner
By: BULL RUN, INC.,
a Maryland corporation,
Witness: general partner
Elaine M. Campbell By: Ronald S. Haft
- ------------------------ ----------------------------
Title:Ronald S. Haft, President
-------------------------
Witness: By: CABOT-MORGAN REAL ESTATE COMPANY,
a Delaware corporation,
general partner
Elaine M. Campbell By: Herbert H. Haft
- ------------------------ ----------------------------------
Title: Herbert H. Haft, Chairman
-------------------------------
</TABLE>
<PAGE> 27
ACKNOWLEDGEMENT
DISTRICT OF COLUMBIA TO WIT:
I, Valeria M. Witt , a notary public in and for the jurisdiction
aforesaid, do certify that Ronald S. Haft, whose name, as President of BULL
RUN, INC., the general partners of CP/Bull Run Limited Partnership, a Maryland
limited partnership, a general partner of CM/CP BULL RUN JOINT VENTURE, a
Delaware general partnership, is signed to the foregoing instrument, bearing
the date of May 21, 1993, has acknowledged the same before me in the
jurisdiction aforesaid.
Given under my hand and official seal this 21st day of May 1993.
(Notarial Seal) Valeria M. Witt
------------------------------
Notary Public
DISTRICT OF COLUMBIA TO WIT:
I, Valeria M. Witt , a notary public in and for the jurisdiction
aforesaid, do certify that Herbert H. Haft, whose name, as Chairman of
CABOT-MORGAN REAL ESTATE COMPANY, a Delaware corporation, a general partner of
CM/CP BULL RUN JOINT VENTURE, a Delaware general partnership, is signed to the
foregoing instrument, bearing the date of May 21, 1993, has acknowledged the
same before me in the jurisdiction aforesaid.
Given under my hand and official seal this 21st day of May 1993.
(Notarial Seal) Valeria M. Witt
------------------------------
Notary Public
<PAGE> 28
LIST OF EXHIBITS
EXHIBIT A - Description of Property
<PAGE> 29
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
Dated as of May 21, 1993
between
CABOT-MORGAN REAL ESTATE COMPANY and CM/CP BULL RUN JOINT VENTURE
have entered and/or anticipate entering into one or more transactions (each a
"Swap Transaction"). The parties agree that each Swap Transaction will be
governed by the terms and conditions set forth in this document (which
includes the schedule (the "Schedule")) and in the documents (each a
"Confirmation") exchanged between the parties confirming such Swap
Transactions. Each Confirmation constitutes a supplement to and forms part of
this document and will be read and construed as one with this document, so that
this document and all the Confirmations constitute a single agreement between
the parties (collectively referred to as this "Agreement"). The parties
acknowledge that all Swap Transactions are entered into in reliance on the fact
that this document and all Confirmations will form a single agreement between
the parties, it being understood that the parties would not otherwise enter
into any Swap Transactions. Accordingly, the parties agree as follows:
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Agreement.
(b) Inconsistency. In the event of any inconsistency between the
provisions of any Confirmation and this document, such Confirmation will
prevail for the purpose of the relevant Swap Transaction.
2. Payments
(a) Obligations and Conditions.
(i) Each party will make each payment specified in each Confirmation
as being payable by it.
(ii) Payments under this Agreement will be made not later than the
due date for value on that date in the place of the account specified
in the relevant Confirmation or Otherwise pursuant to this Agreement,
in freely transferable funds and in the manner customary for payments
in the required currency.
(iii) Each obligation of each party to pay any amount due under
Section 2(a)(i) is subject to (1) the condition precedent that no
Event of Default or Potential Event of Default with respect to the
other party has occurred and is continuing and (2) each other
applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account by giving
notice to the other party at least five days prior to the due date for payment
for which such change applies.
(c) Netting. If on any date amounts would otherwise be payable:
(i) in the same currency; and
(ii) in respect of the same Swap Transaction.
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other
<PAGE> 30
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
If the parties specify "Net Payments-Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will
cease to apply to all Swap Transactions with effect from the date so specified
(so that a net amount will be determined in respect of all amounts due on the
same date in the same currency, regardless of whether such amounts are payable
in respect of the same Swap Transaction); provided that, in such case, this
Section 2(c) will apply separately to each Office through which a party makes
and receives payments as set forth in Section 10.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any applicable
law, as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full amount
required to be deducted or withheld from any additional amount
paid by X to Y under this Section 2(d)) promptly upon the
earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been
assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably acceptable
to Y, evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled under
this Agreement, such additional amount as is necessary to
ensure that the net amount actually received by Y (free and
clear of Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not
by required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i) or 4(d) or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for a
Change in Tax Law.
(ii) Liability. If:
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority,
to make any deduction withholding in respect of which X would
not be required to pay as additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X.
then, except to the extent Y has satisfied or then satisfies the
liability
<PAGE> 31
resulting from such Tax. Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including
any related liability for penalties only if Y has failed to comply
with or perform any agreement contained in Section 4(a)(i) or (d)).
(e) Default Interest. A party that defaults in the payment of any amount
due will, to the extent permitted by law, be required to pay interest (before
as well as after judgement) on such amount to the other party on demand in the
same currency as the overdue amount, for the period from (and including) the
original due date for payment to (but excluding) the date of actual payment, at
the Default Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
3. Representations
Each party represents to the other party which representations will be deemed
to be repeated by each party on each date on which a Swap Transaction is
entered into and in the case of the representations in Section 3(f), at all
times until the termination of this Agreement that;
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the
laws of the jurisdiction of its organization or incorporation and if
relevant under such laws in good standing.
(ii) Powers. It has the power to execute and deliver this
Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorize such execution, delivery, and
performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgement
of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it
or any of its assets;
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party have been obtained
and are in full force and effect and all conditions of any such
consents have been complied with; and
(v) Obligations Binding. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute its
legal, valid and binding obligations, enforceable in accordance with
their respective terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
creditors rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether
enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that purports to draw into question, or is likely to
<PAGE> 32
affect, the legality, validity or enforceability against it of this Agreement
or any Credit Support Document to which it is a party or its ability to perform
its obligations under this Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in paragraph 2 of Part 3 of the Schedule
is, as of the date of the information, true, accurate and complete in every
material respect.
(e) Payer Tax Representation. Each representation specified in Part 2 of
the Schedule as being made by it for the purpose of this Section 3(e) is
accurate and true.
(f) Payee Tax Representations. Each representation specified in Part 2 of
the Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. Agreements
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to which
it is a party:
(a) Furnish Specified Information. It will deliver to the other party:
(i) any forms, documents or certificates relating to taxation
specified in Part 3 of the Schedule or any Confirmation; and
(ii) any other documents specified in Part 3 of the Schedule or any
Confirmation,
by the date specified in Part 3 of the Schedule or such Confirmation or, if
none is specified, as soon as practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to
maintain in full force and effect all consent of any governmental or other
authority that are required to be obtained by it with respect to this Agreement
or any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. It will pay any Stamp Tax levied or imposed
upon it or in respect of its execution or performance of this Agreement by a
jurisdiction in which it is incorporated, organized, managed and controlled, or
considered to have its seat, or in which a branch or office through which it is
acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction")
and will indemnify the other party against any Stamp Tax levied or imposed upon
the other party or in respect of the other party's execution or performance of
this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Specified Entity of such party, of any of the following
events
<PAGE> 33
constitutes an event of default (an "Event of Default") with respect to such
party:
(i) Failure to Pay. Failure by the party to pay, when due, any
amount required to be paid by it under this Agreement if such failure
is not remedied on or before the third Business Day after notice of
such failure to pay is given to the party:
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to pay
any amount required to be paid by it under this Agreement or to give
notice of a Termination Event or any agreement or obligation under
Section 4(a)(i) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on
or before the thirtieth day after notice of such failure is given to
the party;
(iii) Credit Support Default.
(1) Failure by the party or any applicable Specified
Entity to comply with or perform any agreement or obligation
to be complied with or performed by the party or such
Specified Entity in accordance with any Credit Support
Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document, or the ceasing of such Credit Support Document to be
in full force and effect, prior to the final Scheduled Payment
Date of each Swap Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Specified Entity repudiates, or
challenges the validity of , such Credit Support Document;
(iv) Misrepresentation. A representation(other than a
representation under Section 3(e) or (f) made or repeated or deemed to
have been made or repeated by the party or any applicable Specified
Entity in this Agreement or any Credit Support Document relating to
this Agreement proves to have been incorrect or misleading in any
material respect when made or repeated or deemed to have been made or
repeated;
(v) Default under Specified Swaps. The occurrence of an event of
default in respect of the party or any applicable Specified Entity
under a Specified Swap which, following the giving of any applicable
notice or the lapse of any applicable grace period, has resulted in
the designation or occurrence of an early termination date in respect
of such Specified Swap:
(vi) Cross default. If "Cross Default" as specified in Part 1 of
the Schedule as applying to the party (1) the occurrence or existence
of an event or condition in respect of such party or any applicable
Specified Entity under one or more agreements or instrument relating
to specified Indebtedness of such party or any such Specified Entity
in an aggregate amount of not less than the Threshold Amount (as
specified in Part 1 of the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of
being desired due and payable under such agreement or instrument,
before it would otherwise have been due and payable or (2) the failure
by such party or any such Specified Entity to make one or more payment
at maturity in an aggregate amount of not less than the Threshold
Amount under such agreements or instruments (after giving effect to
any applicable grace period).
(vii) Bankruptcy. The party or any applicable Specified
Entity:
(1) is dissolved; (2) becomes insolvent or fails
or is
<PAGE> 34
unable or admits in writing its inability generally
to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with
or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a
judgement of insolvency of bankruptcy or any other
relief under any bankruptcy or insolvency law or
other similar law affecting creditor' rights, or a
petition is presented for the winging-up of
liquidation of the party or any such Specified
Entity, and, in the case of any such proceeding or
petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an for
relief or the making of an order for the winding-up
or liquidation of the party or such Specified Entity
or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the
institution or presentation thereof, (5) has a
resolution passed for its winding-up of liquidation;
(6) seeks or becomes subject to the appointment of an
administrator, receiver, trustee, custodian or other
similar official for it or for all or substantially
all its assets (regardless of how brief such
appointment may be, or whether any obligations are
promptly assumed by another entity or whether any
other event described in this clause (6) has occurred
and is continuing); (7) any event occurs with respect
to the party or any such Specified Entity which,
under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in
clause (1) to (6)(inclusive); or (8) takes any action
in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of foregoing
acts;
other than in the case of clause (1) or (5) or, to the extent it
relates to those clauses, clause (8) for the purpose of consolidation,
amalgamation or merger which would not constitute an event described
in (viii) below; or
(viii) Merger Without Assumption. The party consolidates or
amalgamates with , or merges into, or transfers all or substantially
all its assets to , another entity and, at the time of such
consolidation, amalgamation, merger or transfer:
(1) The resulting, surviving or transferee entity fails to
assume all the obligations of such party under this Agreement
by operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document relating to
this Agreement fail to extend (without the consent of the
other party) to the performance by such resulting, surviving
or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party of any event
specified below constitutes an Illegality if the event is specified in (i)
below, a Tax Event if the event is specified in (ii) below, a Tax Event Upon
Merger if the event is specified in (iii) below or a Credit Event Upon Merger
if the event is specified in (iv) below:
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which such Swap Transaction is
entered into, or due to promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with
competent jurisdiction of any applicable law after such date, it
becomes unlawful (other than as a result of a breach by the party of
Section 4(b)) for such party (which will be the Affected Party):
<PAGE> 35
(1) to perform any absolute or contingent obligation to make
a payment or to receive a payment in respect of such Swap
Transaction or to Comply with any other material provision of
this Agreement relating to such Swap Transaction; or
(2) to perform, or for any applicable Specified Entity to
perform, any contingent or other obligation which the party
(or such Specified Entity has under any Credit Support
Document relating to such Swap Transaction:
(ii) Tax Event
(1) The party (which will be the Affected Party) will be
required on the next succeeding Scheduled Payment Dated to pay
to the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect
of interest under Section 2(e)) as a result of a Change in Tax
Law; or
(2) there is a substantial likelihood that the party (which
will be the Affected Party) will be required on the next
succeeding Scheduled Payment Date to pay to the other party an
additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under
Section 2(E)) and such substantial likelihood results from an
action taken by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which such
Swap Transaction was entered into (regardless of whether such
action was taken or brought with respect to a party to the
Agreement);
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on
the next succeeding Scheduled Payment Date will either (1) be required
to pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e))
or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of
which the other party is not required to pay an additional amount, in
either case as a result of a party consolidating or amalgamating with,
or merging into, or transferring all or substantially all its assets
to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
or
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in Part 1 of the Schedule as applying to the party, such
party ("X") consolidates or amalgamates with, or merges into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity (which will be the Affected Party) is materially
weaker than that of X immediately prior to such action.
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time
an Event of Default with respect to a party (the "Defaulting Party")
has occurred and is then continuing, the other party may, by not more
than 20 days notice to the Defaulting Party specifying the relevant
Event of Default, designate a day not earlier than the day such notice
is effective as an Early Termination Date in respect of all
outstanding Swap Transactions. However, an Early Termination Date
will be deemed to have
<PAGE> 36
occurred in respect of all Swap Transactions immediately upon the
occurrence of any Event of Default specified in Section 5(a)(vii)(1),
(2), (3), (5), (6), (7) or (8) and as of the time immediately
preceding the institution of the relevant proceeding or the
presentation of the relevant petition upon the occurrence of any Event
of Default specified in Section 5(a)(vii)(4).
(b) Right to Terminate Following Termination Event
(i) Notice. Upon the occurrence of a Termination Event, an
Affected Party will, promptly upon becoming aware of the same, notify
the other party thereof, specifying the nature of such Termination
Event and the Affected Transactions relating thereto. The Affected
Party will also give such other information to the other party with
regard to such Termination Event as the other party may reasonably
require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will as a condition to
its right to designate an Early Termination Date under Section
6(b)(iv) use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses to transfer
with 20 days after it gives notice under Section 6(b)(1) all its
rights and obligations under this Agreement in respect of the Affected
Transactions to another of its offices, branches or Affiliates so that
such Termination Event ceases to exist.
If the Affected Party is no able to make such a transfer it will give
notice to the other party so that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(1).
Any such transfer by a party under this Section 6(b)(1) will be
subject to and conditional upon the prior written consent of the
other party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into swap
transactions with the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there are two Affected Paries,
each party will use all reasonable efforts to reach agreement with 30
days after notice thereof is given under Section 6(b)(1) on action
that would cause such Termination Event to cease to exist.
(iv) Right to Terminate. If:
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30
days after an Affected Party gives notice under Section
6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2) or a Credit
Event Upon Merger occurs, or a Tax Event Upon Merger occurs
and the Burdened Party is not the Affected Party.
either party in the case of an illegality, the Burdened Party in the case of a
Tax Event Upon Merger, any Affected Party in the case of a Tax Event, or the
party which is not the Affected Party in the case of a Credit Event Upon
Merger, may, by not more than 20 days notice to the other party and provided
that the relevant Termination Event is then continuing, designate a day not
earlier than the day such notice is effective as Early Termination Date in
respect of all Affected Transactions.
(c) Effect of Designation.
<PAGE> 37
(i) if notice designation an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is continuing on the relevant Early Termination
Date.
(ii) Upon the effectiveness of notice designation an Early
Termination Date (or the deemed occurrence of an Early Termination
Date), the obligations of the paries to make any further payments
under Section 2(a)(i) in respect of the Terminated Transaction will
terminate, but without prejudice to the other provisions of this
Agreement.
(d) Calculations.
(i) Statement. Following the occurrence of an Early Termination
Date, each party will make the calculations (including calculation of
applicable interest rates) on its part contemplated by Section 6(e)
and will provide to the other party a statement (1) showing, in
reasonable detail, such calculations (including all relevant
quotations) and (2) giving details of the relevant account to which
any payment due to it under Section 6(e) is to be made. In the
absence of written confirmation of a quotation obtained in determining
a Market Quotation from the source providing such quotation, the
records of the party obtaining such quotation will be conclusive
evidence of the existence and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable under Section
6(e) will be due on the day that notice of the amount payable is
effective (in the case of as Early Termination Date which is
designated or deemed to occur as a result of an Event of Default) and
not later than the day which is two Business Days after the day on
which notice of the amount payable is effective (in the case of an
Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon in the
Termination Currency from (and Including) the relevant Early
Termination Date to (but excluding) the relevant due date, calculated
as follows:
(1) if notice is given designation an Early Termination Date
or if an Early Termination Date is deemed to occur, in either
case as a result of an Event of Default, at the Default Rate;
or
(2) if notice is given designating an Early Termination Date
as a result of a Termination Event, at the Default Rate minus
1% per annum.
Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination.
(i) Defaulting Party of One Affected Party. If notice is given
designating an Early Termination Date or if and Early Termination Date
is deemed to occur and there is a Defaulting Party or one Affected
Party, the other party will determine the Settlement Amount in respect
of the Terminated Transactions and:
(1) if there is a Defaulting Party, the Defaulting Party will
pay to the other party the excess, if a positive number of (A)
the sum of such Settlement Amount and its Termination Currency
Equivalent of the Unpaid Amounts owing to the party and (B)
the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party: and
(2) if there is an Affected Party, the payment to be made
will be equal to (A) the sum of such Settlement Amount and
Termination Currency Equivalent of the Unpaid Amounts owing to
the party
<PAGE> 38
determining the Settlement Amount ("X") less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the party and determining the Settlement Amount ("Y").
(ii) Two Affected Parties. If notice is given of an Early
Termination Date and there are Two Affected Parties, each party will
determine a Settlement Amount in respect of the Terminated
Transactions and the payment to be made will be equal to (1) the sum
of (A) one half of the difference between the Settlement Amount of the
party with the higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount ("Y") and (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to X less
(2) the Termination Currency Equivalent of the Unpaid Amounts owing to
Y.
(iii) Party Owing. If the amount calculated under Section
6(e)(i)(2) or (ii) is a positive number Y will pay such amount to X;
if such amount is a negative number, X will pay the absolute value of
such amount to Y.
(iv) Adjustment for Bankruptcy. In Circumstances where an Early
Termination Date is deemed to occur, the amount determined under
Section 6(e)(i) will be subject to such adjustments as are appropriate
and permitted by law to reflect any payments made by one party to the
other under this Agreement (and retained by such other party)during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(v) Pre-Estimate of Loss. The parties agree that the amounts
recoverable under this Section 6(e) are a reasonable pre- estimate of
loss and not a penalty. Such amounts are payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
7. Transfer
Subject to Section 6(b) and to any exception provided in the Schedule,
neither this Agreement nor any interest or obligation in or under this
Agreement may be transferred by either party without the prior written
consent of the other party (other than pursuant to a consolidation or
amalgamation with, or merger into, or transfer of all or substantially
all its assets to, another entity) and any purported transfer without
such consent will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this
Agreement will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not by discharged or satisfied by any tender in any
currency other that the Contractual Currency, except to the extent such tender
results in the actual receipt by the party to which payment is owed, acting in
a reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts due in respect of this Agreement. If for any reason the amount
in the Contractual Currency so received falls short of the amount in the
Contractual Currency due in respect of this Agreement, the party required to
make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to
compensate for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency due in
respect of this Agreement, the party receiving the payment will refund promptly
the amount of such excess.
(b) Judgements. To the extent permitted by applicable law, if any
judgement or order expressed in a currency other than the Contractual Currency
is rendered
<PAGE> 39
(i) for the payment of any amount owing in respect of the Agreement, (ii) for
the payment of any amount relation to an early termination in respect of this
Agreement or (iii) in respect of a judgement or order of another court for the
payment of any amount described in (i) or (ii) above, the parties seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such parties as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgement or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgement or order actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of conversion
into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence granted
by the party to which any payment is owed and will not be affected by judgment
being obtained or claim or proof being made for any other sums due in respect
of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing and executed by each of the
parties or confirmed by an exchange of telexes.
(c) Survival of Obligations. Except as provided in Section 6(c)(ii), the
obligations of the parties under this Agreement will survive the termination of
Swap Transactions.
(d) Remedies Cumulative. Except as provided in this Agreement, the
rights, power, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges
provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement may be executed in counterparts, each
of which will be deemed an original.
(ii) A confirmation may be executed in counterparts or be
created by an exchange of telexes, which in either case will
be sufficient for all purposes to evidence a binding
supplement to this Agreement. Any such counterpart or telex
will specify that it constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right,
power or privilege in respect of this Agreement will not be presumed to operate
as a waiver, and a single or partial exercise of any right, power or privilege
will
<PAGE> 40
not be presumed to preclude any subsequent or further exercise of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Multibranch Parties
If a party is specified as a Multibranch Party in Part 4 of the Schedule, such
Multibranch Party may make and receive payments under any Swap Transaction
through any of its branches or offices listed in the Schedule (each an
"Office"). The Office through which it so makes and receives payments for the
purpose of any Swap Transaction will be specified in the relevant Confirmation
and any change of Office for such purpose requires the prior written consent of
the other party. Each Multibranch Party represents to the other party that,
notwithstanding the place of payment, the obligations of each Office are for
all purposes under this Agreement the obligations of such Multibranch Party.
This representation will be deemed to be repeated by such Multibranch Party on
each date on which a Swap Transaction is entered into.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or by reason of the early
termination of any Swap Transaction, including, but not limited to, costs of
collection.
12. Notices
(a) Effectiveness. Any notice or communication in respect of this
Agreement will be sufficiently given to a party if in writing and delivered in
person, sent by certified or registered mail (airmail, if overseas) or the
equivalent (with return receipt requested) or by overnight courier or given by
telex (with answerback received) at the address or telex number specified in
Part 4 of the Schedule. A notice or communication will be effective:
(i) if delivered by hand or sent by overnight courier, on the day
it is delivered (or if that day is not a day on which commercial banks
are open for business in the city specified in the address for notice
provided by the recipient (a "Local Banking Day"), or if delivered
after the close of business on a Local Banking Day, on the first
following day that is a Local Banking Day);
(ii) If sent by telex, on the day the recipient's answerback is
received (or if that day is not a Local Banking Day, or if after the
close of business on a Local Banking Day, on the first following day
that is a Local Banking Day); or
(iii) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), three Local Banking Days
after despatch if the recipient's address for notice is in the same
country as the place of despatch and otherwise seven Local Banking
Days after despatch.
(b) Change of Addresses. Either party may by notice to the other change
the address or telex number at which notices or communications are to be given
to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in Part 4 of the Schedule.
<PAGE> 41
(b) Jurisdiction. With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan
in New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives
any claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgements Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in Part 4 of the Schedule to receive, for
it and on its behalf, service of process in any Proceedings. If for any reason
any party's Process Agent is unable to act as such, such party will promptly
notify the other party and within 30 days appoint a substitute process agent
acceptable to the other party. The parties irrevocably consent to service of
process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets irrespective of their use or intended uses, all immunity on the grounds
of sovereignty or other similar grounds from lawsuit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:
"Affected Party:" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Swap Transactions.
"Affiliate" means, subject to Part 4 of the Schedule, in relation to any
person, any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity under
common control with the person. For this purpose, "control" of any entity or
person means ownership of a majority of the voting power of the entity or
person.
"Burdened Party" has the meaning specified in Section 5(b).
"Business Day" means (a) in relation to any payment due under Section 2(a)(i),
<PAGE> 42
a day on which commercial banks and foreign exchange markets are open for
business in the place(s) specified in the relevant Confirmation and (b) in
relation to any other payment, a day on which commercial banks and foreign
exchange markets are open for business in the place where the relevant account
is located and, if different, in the principal financial center of the currency
of such payment.
"Change in Tax Law" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Swap Transaction is entered into.
"consent" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has he meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument which is specified
as such in this Agreement.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the dated specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a).
"illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organized, present or engaged in a trade
or business is such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or A Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified in the case of
tax matters by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"loss" means, with respect to a Terminated Transaction and a party, an amount
equal to the total amount (expressed as a positive amount) required, as
determined as of the relevant Early Termination Date or if an Early Termination
Date is deemed to occur, as of a time as soon thereafter as practicable by the
party in good faith, to compensate it for any losses and costs (including loss
of bargain and costs of funding but excluding legal fees and other
out-of-pocket expenses) that it may incur as a result of the early termination
of the obligations of the parties in respect of such Terminated Transaction. If
a party determines that it would gain or benefit from such early termination,
such party's Loss will be an amount (expressed as a negative amount) equal to
the amount of the gain or benefit as determined by such party.
"Market Quotation" means, with respect to a Terminated Transaction and a party
to such Terminated Transaction making the determination, an amount (which may
be
<PAGE> 43
negative) determined on the basis of quotations from Reference Market-makers
for the amount that would be or would have been payable on the relevant Early
Termination Date, either by the party to the Terminated Transaction Making the
determination (to be expressed as a positive amount) or to such party (to be
expressed as a negative amount), in consideration of an agreement between such
party and the quoting Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early Termination Date as
the date of commencement of such agreement (or, if later, the day specified as
the effective date of such Terminated Transaction in the relevant
Confirmation), that would have the effect of preserving for such party the
economic equivalent of the payment obligations of the parties under Section
2(a)(i) in respect of such Terminated Transaction that would, but for the
occurrence of the relevant Early Termination Date, fall due after such Early
Termination Date (excluding any Unpaid Amounts in respect of such Terminated
Transaction but including, without limitation, any amounts that would, but for
the occurrence of the relevant Early Termination Date, have been payable
(assuming each applicable condition precedent had been satisfied) after such
Early Termination Date by reference to any period in which such Early
Termination Date occurs). The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
practicable as of the same time (without regard to differed time zones) on the
relevant Early Termination Date (or, if an Early Termination Date is deemed to
occur, as of a time as soon thereafter as practicable). The time as of which
such quotations are to be obtained will, if only one party is obliged to make a
determination under Section 6(e), be selected in good faith by that parties and
otherwise will be agreed by the parties. If more than three such quotations
are provided, the Market Quotation will be the arithmetic mean of the
Termination Currency Equivalent of the quotations, without regard to the
quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the quotations having the highest and lowest values. If
fewer than three quotations are provided, it will be deemed that the Market
Quotation in respect of such Terminated Transaction cannot be determined.
"Office" has the meaning specified in Section 10.
"Potential Event of Default" means any event which, with the giving of notice
or the lapse of time or both, would constitute and Event of Default.
"Reference Market-makers" means four leading dealers in the relevant swap
market selected by the party determining a Market Quotation in good faith (a)
from among dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding whether to
offer or to make an extension of credit and (b) to the extent practicable, from
among such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organized, managed and controlled or
considered to have its seat, (b) where a branch or office through which the
party is acting for purposes of this Agreement is located, (c) in which the
party executes this Agreement and (d) in relation to any payment, from or
through which such payment is made.
"Scheduled Payment Date: means a date on which a payment is due under Section
2(a)(i) with respect to a Swap Transaction.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction for which a Market
Quotation is determined; and
(b) for each Terminated Transaction for which a Market Quotation is not,
or cannot be, determined the Termination Currency Equivalent of such party's
Loss
<PAGE> 44
(whether positive or negative),
provided that if the parties agree that an amount may be payable under Section
6(e) to a Defaulting Party by the other party, no account shall be taken of a
Settlement Amount expressed as a negative number.
"Specified Entity" has the meaning specified in Part 1 of the Schedule.
"Specified Indebtedness" means, subject to Part 1 of the Schedule, any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"Specified Swap" means, subject to Part 1 of the Schedule, any rate swap or
currency exchange transaction now existing or hereafter entered into between
one party to this Agreement (or any applicable Specified Entity) and the other
party to this Agreement (or any applicable Specified Entity).
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment
or fee of any nature (including interest, penalties and additions thereto)
that is imposed by any government or other taxing authority in respect of any
payment under this Agreement other than a stamp, registration, documentation or
similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means (a) with respect to any Early Termination Date
occurring as a result of a Termination Event, all Affected Transactions and (b)
with respect to any Early Termination Date occurring as a result of an Event of
Default, all Swap Transactions, which in either case are in effect as of the
time immediately preceding the effectiveness of the notice designating such
Early Termination Date (or, in the case of an Event of Default specified in
Section 5(a)(vii), in effect as of the time immediately preceding such Early
Termination Date).
"Termination Currency" has the meaning specified in Part 1 of the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in respect
of any amount denominated in a currency other than the Termination Currency
(the "Other Currency"), the amount in the Termination Currency determined by
the party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant determination as being
required to purchase such amount of such Other Currency as at the relevant
Early Termination Date with the Termination Currency at the rate equal to the
spot exchange rate of the foreign exchange agent (selected as provided below)
for the purchase of such Other Currency with the Termination Currency at or
about 11:00 a.m. (in the city in which such foreign exchange agent is located)
on such date as would be customary for the determination of such a rate for the
purchase of such Other Currency for value the relevant Early Termination Date.
The foreign exchange agent will, if only one party is obliged to make a
determination under Section 6 (e), be selected in good faith by that party and
otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event Upon Merger or a Credit
Event Upon Merger.
"Unpaid Amounts" owing to any party means, with respect to any Early
Termination Date, the aggregate of the amounts that became due and payable (or
that would have become due and payable but for Section 2(a)(iii) or the
designation or occurrence of such Early Termination Date) to such party under
Section 2(a)(i)
<PAGE> 45
in respect of all Terminated Transactions by reference to all periods ended on
or prior to such Early Termination Date and Which remain unpaid as at such
Early Termination Date, together with (to the extent permitted under applicable
law and in lieu of any interest calculated under Section 2(e)) interest
thereon, in the currency of such amounts, from (and including) the date such
amounts became due and payable or would have become due and payable to (but
excluding) such Early Termination Date, calculated as follows:
(a) in the case of notice of an Early Termination Date given as a result
of an Event of Default:
(i) interest on such amounts due and payable by a Defaulting Party
will be calculated at the Default Rate, and
(ii) interest on such amounts due and payable by the other party will
be calculated at a rate per annum equal to the cost to such other
party (as certified by 10 if it were to fund such amounts (without
proof or evidence of any actual cost); and
(b) in the case of notice of an Early Termination Date give as a result of
a Termination Event, interest on such amounts due and payable by either party
will be calculated at a rate per annum equal to the arithmetic mean of the cost
(without proof or evidence of any actual cost) to each party as certified by
such party and regardless of whether due and payable by such party) if it were
to fund or funding such amounts.
Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
<TABLE>
<S> <C>
CM/CP Bull Run Joint Venture Cabot-Morgan Real Estate Company
By: CP Bull Run Limited Partnership
By: Bull Run Inc.
By: Ronald S. Haft By: Herbert H. Haft
-------------------------------- --------------------------------
Name: Ronald S. Haft Name: Herbert H. Haft
Title: President Title: Chairman of the Board
</TABLE>
<PAGE> 46
SCHEDULE
to the
Interest Rate and Currency Exchange Agreement,
dated as of May 21, 1993,
between CM/CP BULL RUN JOINT VENTURE, a Delaware general partnership ("Party
A"), and CABOT-MORGAN REAL ESTATE COMPANY, a Delaware corporation ("Party B").
Part 1
Definitions and Termination Provisions
In the Agreement:
(1) Unless otherwise designated by a Confirmation for a particular Swap
Transaction, the "Calculation Agent" shall be Party A.
(2) "Specified Entity" means:
(i) with respect to Party A for purposes of this Agreement; None;
and
(ii) with respect to Party B for purposes of this Agreement; None.
(3) "Specified Swap" means any rate swap, rate cap, rate floor, rate
collar, currency exchange transaction, forward rate agreement, or
other exchange or rate protection transaction, or any combination of
such transactions or agreements or any option with respect to any such
transaction now existing or hereafter entered into between one party
to this Agreement and the other party to this Agreement.
(4) The "Default Rate" shall be, notwithstanding the provisions of Section
14, the NationsBank Prime Rate (as defined below) plus 4% unless
otherwise set forth in a confirmation for a particular Swap
Transaction. The "NationsBank Prime Rate" means, on any day, the rate
of interest per annum established by NationsBank of D.C., N.A., a
national banking association, as its "prime rate."
(5) Unless otherwise designated in a Confirmation for a particular Swap
Transaction, "Termination Currency" means United States Dollars.
(6) For purposes of Section 5(a):
(a) Section 5 (a)(i) is modified by changing "third" to "seven" in
the second line.
(b) For the purposes of Section 5 (a)(vi):
The "Cross Default" provisions will not apply to either party
or to any Specified Entity.
(7) For purposes of Section 5(b):
(a) The following shall be inserted in both Sections 5(b)(ii)(1)
and 5(b)(ii)(2) after the word "amount" and before the word
"in":
(other than an additional amount paid by reason of an increase
in the rate of tax from other than a zero rate)
(b) The following shall be inserted in Section 5(b)(ii)(2) before
the words "there is a substantial likelihood that":
<PAGE> 47
in the written opinion of independent legal counsel of
recognized standing
(c) The provisions of Section 5(b)(iii) relating to Tax Event Upon
Merger will not apply to the parties.
(d) The provisions of Section 5(b)(iv) relating to Credit Event
Upon Merger will not apply to the parties.
(8) Section 6(b)(iv) is amended by deleting the language beginning with
clause (2) and ending with the period and substituting therefor the
following:
(2) an Illegality under Section 5(b)(i)(2) occurs,
either party in the case of an Illegality or any Affected Party in the
case of a Tax Event, may, by not more than 20 days' notice to the
other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as early Termination Date in respect of all Affected
Transactions.
(9) Section 6(e)(i) is modified by deleting the period at the end of
clause (2) and substituting therefor "; and". This section is further
modified by adding the following as a new clause:
(3) for purposes of calculating payments due in respect of an
Early Termination Date (including any payments under Section 6(d) and
any Unpaid Amounts), an Event of Default specified in Section
5(a)(vii) (Bankruptcy) of this Agreement shall be treated as if it
were a Termination Event with the Defaulting Party as the Affected
Party (and for such purposes the proviso to the definition of
"Settlement Amount" shall be deemed to be of no force and effect).
Such Event of Default shall take precedence over any other Event of
Default which is existing at the time of the designation or deemed
occurrence of such Early Termination Date.
Part 2
Representations
(1) Tax Representations. The following tax representation is made by
both Party A and Party B for purposes of Section 3(e):
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of
any Relevant Jurisdiction to make any deduction or withholding
for or on account of any Tax from any payment (other than
interest under Section 2(e) or 6(d)) to be made by it to the
other party under this Agreement.
In making this representation, each party may rely on:
(i) the accuracy of any representation made by the other
party pursuant to Section 3(f);
(ii) the satisfaction of the agreement of the other party
contained in Section 4(a)(i) and the accuracy and
effectiveness of any document provided by the other
party pursuant to Section 4(a)(i); and
(iii) the satisfaction of the agreement of the other party
contained in Section 4(d).
(2) Other Representations. The following shall be an additional
representation f each party under Section 3 of this Agreement:
(g) Financial Information. As of the date hereof, there has
been no
<PAGE> 48
material adverse change as to its financial condition or the results
of its operations set forth in the most recent financial information
provided by it to the other party.
Part 3
Document to be delivered
For purposes of Section 4(a):
(1) Covenants regarding tax forms, documents or certificates to be
delivered under 4(a)(i) are as follows:
Each party agrees to complete, accurately and in a manner
reasonably satisfactory to the other party, and to execute,
arrange for any required certification of, and deliver to the
other party (or to such government or taxing authority as the
other party reasonably directs), any form or document that may
be required or reasonably requested in order to allow such
other party to make a payment under this Agreement without any
deduction or withholding for or on account of any Tax, or with
such deduction or withholding at a reduced rate, promptly upon
the earlier of (i) reasonable demand by the other party and
(ii) learning that the form or document is required.
Part 4
Miscellaneous
(1) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
the choice of law doctrine.
(2) Process Agent.
Neither party appoints any Process Agent.
(3) Multibranch Party.
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(4) Addresses for Notices.
Address for notices or communications to Party A (for all purposes):
Address: C/O COMBINED PROPERTIES, INC.
1899 L STREET, N.W.
WASHINGTON, D.C. 20036
Attention: David Roodberg and Alexis Iszard
Address for notices or communications to Party B (for all purposes):
Address: 3300 75TH AVENUE
LANDOVER, MARYLAND 20785
Attention: Ron Marshall
(5) Netting of Payments.
"Net Payments-Corresponding Payment Dates" will apply for the purpose
of Section 2(c) with the effect from the date of this Agreement.
Part 5
Other Provisions
<PAGE> 49
(1) ISDA Definitions. Except as otherwise defined in this Schedule
or a Confirmation, this Agreement and each Swap Transaction are
subject to the 1991 Definitions, and will be governed in all relevant
respects by the provisions set forth in the 1991 Definitions, without
regard to any amendments to the 1991 Definitions subsequent to the
date hereof. The provisions of the 1991 Definitions are incorporated
by reference in, and shall be deemed a part of, this Schedule and each
Confirmation, as if set forth in full in this Schedule and that
Confirmation. In the event of any inconsistency between the
provisions of this Schedule and the 1991 Definitions, this Schedule
will prevail. In the event of any inconsistency between the
provisions of a Confirmation for a particular Swap Transaction and
this Schedule, such Confirmation will prevail for purposes of the
relevant Swap Transaction.
(2) Confirmations. A Confirmation of a Swap Transaction may be
substantially in the form attached hereto as Exhibit I (or in such
other form as the paries hereto may agree). Each party agrees to
promptly request the correction of any errors in any Confirmation
received from the other party. Each party further agrees that it will
use its best efforts to promptly execute and provide to the other
party any such Confirmation that accurately reflects the terms of the
Swap Transaction to which it relates. Each party understands and
agrees that any fully executed Confirmation shall remain in full force
and effect until such time as the final Confirmation, if any, that
supersedes and replaces such Confirmation is executed by the parties.
(3) Payment Accounts. All payments under this Agreement shall be
made to the following accounts:
If to Party A: Acct. No.---------------------------------------
Address ----------------------------------------
If to Party B: Acct. No.---------------------------------------
Address ----------------------------------------
(4) No Set-Off. All amounts payable under this Agreement by a party
shall be paid without any set-off or counterclaim.
(5) Deduction or Withholding for Tax. Section 2(d)(i)(4) shall be
amended to read as follows:
if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that:
(A) it would not be required to be paid but for the failure by Y
to comply with or perform any agreement contained in Section
4(a)(i) or 4(d);
(B) it would not be required to be paid but for Y's consolidation
or amalgamation with or into, or merger into, or transfer of
all or substantially all of its assets to, another party; or
(C) Y determines it will receive credit for the Indemnifiable Tax
in computing its tax liability with respect to the amounts
payable under this Agreement.
(D) it would not be required to be paid but for the failure of a
representation made by Y pursuant to Section 3(f) to be
accurate and true unless such failure would not have occurred
but for a Change in
<PAGE> 50
Tax Law.
IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed as of the date first above written.
<TABLE>
<S> <C>
PARTY A:
--------
CM/CP BULL RUN JOINT VENTURE, a Delaware
General Partnership
By: CABOT-MORGAN REAL ESTATE COMPANY, a
Delaware Corporation, General Partner
By: Herbert H. Haft
---------------------------------
Herbert H. Haft, Chairman
Date: May 21, 1993
-------------------------------
By: CP/BULL RUN LIMITED PARTNERSHIP
COMPANY, a Maryland Limited
Partnership, General Partner
By: Ronald S. Haft
---------------------------------
Ronald S. Haft, President
Date: May 21, 1993
-------------------------------
PARTY B:
--------
CABOT-MORGAN REAL ESTATE COMPANY, a
Delaware Corporation
By: Herbert H. Haft
---------------------------------------
Herbert H. Haft, Chairman
Date: May 21, 1993
-------------------------------------
</TABLE>
<PAGE> 51
EXHIBIT I
CONFIRMATION
Dated as of May 21, 1993
CABOT-MORGAN REAL ESTATE COMPANY
C/O COMBINED PROPERTIES, INC.
1899 L STREET, N.W.
WASHINGTON, D.C. 20036
SUBJECT: Swap Transaction between CM/CP BULL RUN JOINT VENTURE
and CABOT-MORGAN REAL ESTATE COMPANY
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between us on the Trade Date listed below
(the "Swap Transaction"). This letter agreement constitutes a "Confirmation"
as referred to in the Interest Rate and Currency Exchange Agreement specified
below, and supersedes and replaces any previously executed Confirmation of this
Swap Transaction.
1. The definitions and provisions contained in the 1991 ISDA Definitions
(the "1991 Definitions"), as published by the International Swap
Dealers Association, Inc. ("ISDA"), are incorporated into this
Confirmation. The parties agree that this transaction is a Swap
Transaction under the master Interest Rate and Currency Exchange
Agreement of the parties dated as of May 21, 1993. The master
agreement is comprised of the printed form of such agreement as
published by ISDA, as supplemented and modified by a Schedule (the
"ISDA Agreement"). In the event of any inconsistency between the 1991
Definitions, the ISDA Agreement, and this Confirmation, this
confirmation will govern.
This Confirmation constitutes a binding agreement between you and us
and will supplement, form a part of, and be subject to the ISDA
Agreement described above.
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
Party A: CM/CP Bull Run Joint Venture
Party B: Cabot-Morgan Real Estate Company
Related Note: The note in the aggregate amount of $9,750,000,
issued by NationsBank of D.C., N.A. ("NationsBank"), pursuant to the
Deed of Trust Note, dated May 21, 1993, between NationsBank and Party
A and due May 21, 1996 (the "Loan Agreement").
Notional Amount: US $9,750,000. Amortizing according to the
attached Schedule A.
Revised Schedule A: In the event that Party A makes a partial
prepayment of the Related Note pursuant to Section 4 of the Loan
Agreement, then at the time of any such partial prepayment, Party A
shall provide a revised Schedule A to Party B in form and substance
satisfactory to Party B to reflect a pro rata reduction to the
scheduled amortization of the Notional Amount to the same extent as
such partial prepayment reduces the scheduled amortization of the
Related Note, and such revised Schedule A shall supersede and replace
the most recent Schedule A to this
<PAGE> 52
Confirmation.
Trade Date: May 21, 1993
Effective Date: May 21,1993
Termination Date: May 21, 1996
Fixed Amounts:
Fixed Rate Payer: Party A
Fixed Rate Payer Payment Dates: The first day of each
calendar month, for the period from and including May 21, 1993
and to but excluding May 21, 1996, subject to adjustment in
accordance with the Following Business Day convention.
Fixed Rate: 8% per annum for the period from and
including May 21, 1993 and to but excluding May 1, 1994; 8.5%
per annum for the period from and including May 1, 1994 and to
but excluding May 1,1995, and 9% per annum for the period from
and including May 1, 1995 and to but excluding May 21, 1996.
Fixed Rate Day Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: Party B
[Floating Rate Payer Currency Amount:]
Floating Rate Payer Payment Dates: The first day of each
calendar month for the period from and including May 21, 1993
and to but excluding May 21, 1996, subject to adjustment in
accordance with the Following Business Day convention.
Floating Rate Option: NationsBank Prime, determined as set
forth in "Other Provisions," below.
Spread: Plus 0.75% (75 basis points)
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each Business Day
Business Days: Washington, D.C.
Other Provisions:
(a) "NationsBank Prime" means that a rate for a Reset Date will be
the rate of interest per annum then most recently established by
NationsBank as its "prime rate";provided, however, that if the
NationsBank Prime rate is not established for a Reset Date, the rate
for that Reset Date will be the rate in effect for the immediately
preceding Reset Date. Any such established rate is a general rate of
interest, may not be related to any other rate, and may not be the
lowest or best rate actually charged by NationsBank to any customer or
a favored rate and may not correspond with future increases or
decreases in interest rates charged by other lenders or market rates
in general.
(b) At any time after the Effective Date of this Swap Transaction,
and provided that Party A has prepaid in full the Related Note
pursuant to Section 4 of the Loan Agreement, Party A may, on the terms
and conditions set forth in this paragraph (b) and paragraphs (c), (d)
and (e),
<PAGE> 53
terminating any other Swap Transactions under the ISDA Agreement,
unless Party A shall otherwise be entitled to terminate such other
Swap Transactions pursuant to Section 6 of the ISDA
Agreement);provided, however, that no Event of Default with respect to
Party A or event that with the giving of notice or the lapse of time,
or both, would constitute such an Event of Default shall have occurred
and be continuing, and provided that no Early Termination Date has
been designated.
(c) Party A shall notify Party B telephonically of its election to
terminate this Swap Transaction on not more than 30 days and not less
than 7 days prior notice ("Optional Termination Election"), such
termination shall be effective on the date of the prepayment in full
under the Loan Agreement (the "Repurchase Date"), and such notice
shall be irrevocable. The Optional Termination Election shall be
confirmed by notice in writing by Party A to Party B one Business Day
after making election.
(d) The amount payable on the Repurchase Date will be the amount
that would, had this Swap Transaction not been terminated, have
accrued as of the Repurchase Date on the Notional Amount under this
Swap Transaction but had not yet been paid by Party A or Party B, as
the case may be. Notwithstanding the foregoing, if Party A or Party B
shall, at the time of termination of this Swap Transaction, be
entitled to terminate any other Swap Transactions pursuant to Section
6 of the ISDA Agreement, the amount payable in respect to the
termination of all such Swap Transactions (including this Swap
Transaction) shall be determined in accordance with Section 6 of the
ISDA Agreement.
(e) The designation of the Repurchase Date by Party A shall not
affect or suspend any obligations of the paries hereto arising under this Swap
Transaction on or prior to the Repurchase Date. Upon the payment of the amount
required by the preceding paragraph (b), the obligation of each party to make
any further payments contemplated by Section 2 of the ISDA Agreement with
respect to this Swap Transaction will terminate.
3. Account Details:
Payments to Fixed Rate Payer:
Account for payments: Please Provide
Payments to Floating Rate Payer:
Account for payments: Please Provide
4. Time for Payments: 5:00 p.m. (Eastern Time), subject to the
provisions of Part 1 Item (7)(a) of the Schedule
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
<TABLE>
<S> <C>
PARTY A:
--------
CM/CP BULL RUN JOINT VENTURE, a Delaware
General Partnership
By: CABOT MORGAN REAL ESTATE COMPANY, a
Delaware Corporation, General Partner
By: Herbert H. Haft
---------------------------------
Herbert H. Haft, Chairman
Date: May 21, 1993
-------------------------------
</TABLE>
<PAGE> 54
<TABLE>
<S> <C>
By: CP/BULL RUN LIMITED PARTNERSHIP
COMPANY, a Maryland Limited
Partnership, General Partner
By: Ronald S. Haft
---------------------------------
Ronald S. Haft, President
Date: May 21, 1993
-------------------------------
Accepted and confirmed as
of the date first written:
PARTY B:
- --------
CABOT-MORGAN REAL ESTATE COMPANY,
a Delaware Corporation
By: Herbert H. Haft
-----------------------------------
Herbert H. Haft, Chairman
Date: May 21, 1993
---------------------------------
</TABLE>
<PAGE> 1
* * * * * * * * * * * *
GREENBRIAR OFFICE BUILDING
Fairfax, Virginia
OFFICE LEASE AGREEMENT
Between
COMBINED PROPERTIES\GREENBRIAR OFFICE LIMITED PARTNERSHIP
("Landlord")
AND
TOTAL BEVERAGE VA CORP.
("Tenant")
* * * * * * * * * * * *
<PAGE> 2
TABLE OF CONTENTS
OFFICE LEASE AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 PREMISES. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 TERM. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 DELIVERY OF THE PREMISES TO TENANT. . . . . . . . 5
ARTICLE 4 ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT 5
ARTICLE 5 RENTAL. . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 6 OPERATING EXPENSES. . . . . . . . . . . . . . . . 6
ARTICLE 7 SERVICES BY LANDLORD. . . . . . . . . . . . . . . 6
ARTICLE 8 UTILITIES . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 9 USE . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 10 LAWS, ORDINANCES, AND REQUIREMENTS OF . . . . . .
PUBLIC AUTHORITIES. . . . . . . . . . . . . . . . 9
ARTICLE 11 PAYMENT TO LANDLORD AND LATE CHARGE FEE . . . . . 9
ARTICLE 12 ALTERATIONS . . . . . . . . . . . . . . . . . . . 10
ARTICLE 13 LIENS . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 14 REPAIRS . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 15 INSURANCE . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 16 DAMAGE BY FIRE OR OTHER CASUALTY. . . . . . . . . 15
ARTICLE 17 CONDEMNATION. . . . . . . . . . . . . . . . . . . 17
ARTICLE 18 ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . 18
ARTICLE 19 INDEMNIFICATION . . . . . . . . . . . . . . . . . 19
ARTICLE 20 SURRENDER OF THE PREMISES . . . . . . . . . . . . 20
ARTICLE 21 ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . 21
ARTICLE 22 SUBORDINATION . . . . . . . . . . . . . . . . . . 22
ARTICLE 23 DEFAULT AND REMEDIES. . . . . . . . . . . . . . . 23
ARTICLE 24 WAIVER BY TENANT. . . . . . . . . . . . . . . . . 26
ARTICLE 25 SECURITY DEPOSIT. . . . . . . . . . . . . . . . . 26
ARTICLE 26 LANDLORD'S LIEN AND SECURITY INTEREST . . . . . . 26
ARTICLE 27 ATTORNEYS' FEES AND LEGAL EXPENSES. . . . . . . . 26
ARTICLE 28 NOTICES . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 29 CONSTRUCTION AND USE OF COMMON AREAS. . . . . . . 28
ARTICLE 30 TENANT'S WORK . . . . . . . . . . . . . . . . . . 28
ARTICLE 31 SIGNS . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 32 MISCELLANEOUS . . . . . . . . . . . . . . . . . . 31
</TABLE>
Exhibits:
Exhibit A Floor Plans
Exhibit B The Land
Exhibit C Intentionally Deleted
Exhibit D Rules and Regulations
Exhibit E Intentionally Deleted
Exhibit F Sign Plans
<PAGE> 3
OFFICE LEASE
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
Date: June 8, 1993
Landlord: Combined Properties\Greenbriar Office
Limited Partnership, a District of
Columbia limited partnership
Tenant: Total Beverage VA Corp.
a Virginia corporation
Building: The building constructed on the land commonly known as
Greenbriar Office Building shown on Exhibit "B" attached
hereto, located at 13135 Lee Jackson Highway, Fairfax, Virginia
22030, as the same may be modified from time to time during
the Term of the lease.
Premises: The premises located on the first floor of the Building, as
more fully described in Section 1.01 of the lease and shown
and Tenant Space 106 on the floor plans attached as Exhibit A
to the lease.
Commencement Date: May 15, 1993
Rent Commencement
Date: May 15, 1993
Expiration Date: May 31, 2003
Renewal Option: None
Rentable Area of 448 square feet
the Premises:
</TABLE>
<TABLE>
<CAPTION>
Monthly Base Rent: Lease Years Monthly Base Rent
----------- -----------------
<S> <C> <C>
1-10 $560.00
Base Year: N/A
Consumer Price Index: N/A
Base CPI: N/A
Fiscal Year: N/A
Security Deposit: None
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Lease Year: The 12-month period beginning on the first day of the
month in which the Commencement Date falls and each
anniversary thereof
Landlord's Address Combined Properties/Greenbriar Office Limited
for Notices: Partnership
1899 L Street, N.W.
9th Floor
Washington, D.C. 20036
Landlord's Address for Combined Properties/Greenbriar Office Rent Limited
Payments: Partnership
P.O. Box 2074
Merrifield, Virginia 22116
Tenant's Address Total Beverage VA Corp.
for Notices: 3300 75th Avenue
Landover, Maryland 20785
Brokers: None
</TABLE>
Exhibits
Exhibit A Floor Plans
Exhibit B The Land
Exhibit C Intentionally Deleted
Exhibit D Rules and Regulations
Exhibit E Intentionally Deleted
Exhibit F Sign Plans
The foregoing Basic Lease Information is hereby incorporated into and made a
part of the lease. Each reference in the lease to any information and
definitions contained in the Basic Lease Information shall mean and refer to the
information and definitions hereinabove set forth. If there is any conflict
between the terms of the lease and the foregoing Basic Lease Information, the
terms of the lease shall prevail.
- 2 -
<PAGE> 5
OFFICE LEASE AGREEMENT
THIS LEASE, dated as of the date specified in the Basic Lease
Information, is made between Landlord and Tenant.
ARTICLE 1
PREMISES
Section 1.01. Landlord leases to Tenant, and Tenant leases from
Landlord, for the Term (as defined below) and subject to the provisions hereof,
to each of which Landlord and Tenant mutually agree, the Premises, together
with the right to use, in common with others, the lobbies, entrances, stairs,
elevators, off-street loading areas (for loading and unloading of materials and
supplies) and other public portions of the Building, which Building has been
constructed on a parcel of real property (the "Office Parcel") as shown on
Exhibit B hereto (the "Land"). The Building has a post office address of P.O.
Box 2074, Merrifield, Virginia 22116.
Section 1.02. Together with the Premises demised hereby, Landlord
grants to Tenant the use, in common with others, of the parking areas,
roadways, means of ingress and egress and service areas of the Shopping Center.
Tenant acknowledges that Landlord has the right and power to erect free
standing buildings or other structures or facilities in the common areas or
elsewhere in the Shopping Center, to manage and operate the common areas,
including all means of exit and entrance and approaches thereto within the
Shopping Center, and Landlord shall at all times have the right, at Landlord's
sole discretion, from time to time, to erect free standing buildings or other
structures or facilities, to determine and change the common areas and parking
plan for the Shopping Center, and the arrangement of entrances, exits and
approaches thereto, providing same meets governmental codes. Landlord further
reserves the right, and shall from time to time at its sole discretion have the
rights, to modify, remove, delete, add to, expand or otherwise reconfigure
existing buildings, structures and facilities of the Shopping Center, provided
same meets governmental codes; provided, however, that no such activity of the
Landlord with respect to the Shopping Center shall have a material adverse
effect on Tenant's access to the Premises (including, specifically, the use of
the Building elevators) or on Tenant's use of the Premises as described in
Article 9 hereof.
- 3 -
<PAGE> 6
Section 1.03. As a material inducement to Landlord for entering
into this Lease with Tenant and in consideration thereof, Tenant agrees that
Landlord shall have the absolute right, throughout the term of this Lease and
any renewal hereof, if any, to require Tenant to relocate Tenant's office from
the Premises to another available location ("Relocation Premises") in the
Building. The size and location of the Relocation Premises shall be determined
by Landlord in its sole discretion. Provided, however, the Relocation Premises
shall consist of not less than 400 square feet of leasable area (i.e., gross
floor area of premises), and if the Relocation Premises is greater than 448
square feet of leasable area in size, then Base Rent and all other charges
hereunder shall not be affected as a result thereof. Landlord shall, at
Landlord's cost, deliver the Relocation Premises to Tenant with floor, wall and
ceiling finishes which are similar to those in the original Premises, and with
an interior configuration similar to that of the original Premise s(subject to
variations due to differences in the size and dimensions of the Relocation
Premises). Landlord shall give Tenant at least sixty (60) days prior written
notice to relocate Tenant's office and, upon expiration of said sixty (60) day
period, Tenant shall have no further right to occupy the Premises. Tenant's
failure to vacate the Premises upon the expiration of said sixty (60) day
period shall constitute a default under this Lease entitling Landlord, in
addition to any and all remedies available under this Lease or at law or in
equity,to reenter the Premises to remove all persons or chattels therefrom.
Provided, however, that within thirty (30) days after Landlord notifies Tenant
of Landlord's intention to exercise its right to relocate Tenant granted
herein, Tenant may elect by written notice to Landlord not to relocate to the
Relocation Premises and, in lieu thereof, terminate this Lease effective within
thirty (30) days of the date Tenant provides written notice to Landlord of its
intention to terminate this Lease. Within thirty (30) days after (i) Tenant
opens for business in the Relocation Premises or (ii) Tenant vacates the
Demised Premises pursuant to a termination of this Lease under this provision,
Landlord shall pay Tenant the sum of Five dollars ($5.00) per square foot of
leasable area in the original Premises. Tenant acknowledges that if not for
the provisions of this Section 1.02, Landlord would not have entered into this
Lease.
ARTICLE 2
TERM
Section 2.01. The Term of this lease (the "Term") shall begin on
the Commencement Date. Unless sooner terminated, the Term shall end at
midnight on the Expiration Date.
- 4 -
<PAGE> 7
Section 2.02. Provided Tenant performs all of Tenant's obligations
under this lease, including the payment of Rental (as defined below), Tenant
shall, during the Term, enjoy the Premises without disturbance from Landlord or
any other persons claiming or acting by, through, or under Landlord; subject,
however, to the terms of this lease. This covenant and all other covenants of
Landlord now or hereafter in this lease shall be binding upon Landlord and its
successors only with respect to breaches based on Landlord's acts or omissions
occurring during its and their respective ownership of Landlord's interest
hereunder.
ARTICLE 3
DELIVERY OF THE PREMISES TO TENANT
Landlord shall deliver actual possession of the Premises to Tenant on
or before the Commencement Date. Tenant may not, without Landlord's consent,
enter or occupy the Premises until the Premises are tendered by Landlord. Any
entry of the Premises before the Commencement Date shall be with Landlord's
express written consent and subject to all of the terms of this lease; provided
that no such early entry shall change the Commencement Date or the Expiration
Date.
ARTICLE 4
ACCEPTANCE OF THE PREMISES
AND BUILDING BY TENANT
Taking possession of the Premises by Tenant shall be conclusive
evidence that Tenant: (a) accepts the Premises as suitable for the purposes
for which they are leased; (b) accepts the Building, Shopping Center and every
part and appurtenance thereof in their respective "as is" condition; and (c)
waives any defects in the Premises, subject to Landlord's obligation to repair
pursuant to Section 14.02 hereof, and excepting any structural defects therein.
Landlord shall not be liable, except for gross negligence or willful
misconduct, to Tenant or any of its agents, employees, licensees, servants, or
invitees for any injury or damage to person or property due to the condition or
design of or any defect in the Building or Shopping Center or their mechanical
systems and equipment which may exist or occur.
- 5 -
<PAGE> 8
ARTICLE 5
RENTAL
Section 5.01. Commencing on the Rent Commencement Date, Tenant shall
pay to Landlord monthly, in advance, without demand, on the first day of each
calendar month during each Lease Year of the Term, the Monthly Base Rent
specified in the Basic Lease Information. The first installment of Monthly
Base Rent shall be payable in advance by Tenant on the date of execution of
this lease. If the Commencement Date is a date other than the first day of a
calendar month, then the first installment of Monthly Base Rent for the first
month for which rent is owing, being a fractional month, shall be appropriately
prorated. If the Expiration Date is a date other than the last day of a
calendar month, then the first installment of Monthly Base Rent for the last
month for which rent is owing, being a fractional month, shall be appropriately
prorated.
Section 5.02. All Rental shall be paid to Landlord by Tenant when due,
without deduction, offset or counterclaims, in lawful money of the United
States, at Landlord's Address for Notices as specified in the Basic Lease
Information, or such other place as Landlord may from time to time designate.
The Term "Rental" as used herein means the then applicable Monthly Base Rent
and all other sums payable by Tenant under this lease. All past due
installments of Rental shall be subject to the late charges as set forth in
Article 11.
ARTICLE 6
INTENTIONALLY DELETED
ARTICLE 7
SERVICES BY LANDLORD
While Tenant is occupying the Premises and is not in default under
this lease (after reasonable notice and an opportunity to cure), Landlord shall
furnish the Premises with: (a) passenger elevator service in common with other
tenants for access to and from the Premises; provided, however, that Landlord
may reasonably limit the number of elevators to be operated at night after
normal business hours and on Saturdays, Sundays, and holidays or during periods
of construction or for safety or maintenance purposes; (b) a keyed access
security system for entry into the Building common areas after normal business
hours; and (c) the services provided for in Section 8.02. If Tenant requires
services which are not specified herein and Landlord specifically agrees to
provide such services to Tenant, Tenant will pay to Landlord, upon demand, as
- 6 -
<PAGE> 9
additional Rental, Landlord's charges for providing such services. Such
charges will be based upon Landlord's incremental costs for such services, plus
an administrative fee not to exceed 10% of such costs.
ARTICLE 8
UTILITIES
Section 8.01. If Tenant's requirements for electric service regularly
exceed an average load of five (5) watts per square foot of Rentable Area of
the Premises during normal business hours, Landlord, at Tenant's expense, will
make reasonable efforts to supply such service through the then-existing
feeders servicing the Building and Tenant shall pay Landlord, on demand, as
Rental, the costs of the additional electric consumption. Such additional
consumption shall be determined, at Landlord's election, either (1) by a survey
performed by a reputable consultant selected by Landlord and paid for by
Tenant, or (2) by a separate meter in the Premises to be installed, maintained,
and read by Landlord at Tenant's sole expense.
Section 8.02. While Tenant is occupying the Premises and is not in
default under this lease (after reasonable notice and an opportunity to cure),
Landlord shall furnish Tenant with the following services: (a) potable water
at those points of supply provided for normal lavatory use by tenants in the
Building; (b) heating, ventilating, and/or air conditioning in the Premises on
business days from 8:00 a.m. to 6:00 p.m. (except holidays) and on Saturdays
from 9:00 a.m. to 4:00 p.m. (except holidays), at such temperatures and in such
amounts as may customarily be provided to tenants occupying comparable space in
first-class office buildings in Alexandria, Virginia; and (c) electric lighting
for common and public areas and special service areas of the Building in the
manner and to the extent customarily provided in first-class office buildings
in Alexandria, Virginia, all of which services shall be provided to Tenant by
Landlord and paid for by Tenant as part of Operating Expenses. With respect to
heating and/or air conditioning, if Tenant requires air conditioning or heating
in the Premises outside the hours and days specified above, Landlord shall be
obligated to furnish such additional services only upon prior written notice
from Tenant given prior to noon of the previous business day. Tenant shall
notify Landlord when and if Tenant desires such additional service until 8:00
p.m. Mondays through Fridays (excluding holidays) and Tenant agrees to pay for
such additional service as required under this Section 8.02 at a rate based on
Landlord's incremental cost plus an administrative fee not to exceed 10% of
such cost. Tenant shall pay for any such services requested by Tenant and
furnished by Landlord at the rate Landlord is then charging therefor. If more
than one tenant requests such services during the same time such services are
to be provided to
- 7 -
<PAGE> 10
Tenant, Tenant shall pay that portion of Landlord's rate for such
services that equals Landlord's rate multiplied by the quotient of (i) the
Rentable Area of the Premises to which such services are supplied divided by
(ii) the Rentable Area to which such services are supplied (including the
Premises) of all tenants requesting such services during the time Tenant
requested such services. Whenever machines or equipment that generate abnormal
heat or otherwise affect the air conditioning system are used in the Premises
by Tenant which affect the temperature or humidity otherwise maintained by the
air conditioning system, Landlord will have the right to install supplemental
air conditioning units in the Premises, and the full cost thereof, including
the cost of installation, operation, use, and maintenance, will be paid by
Tenant to Landlord on demand.
Section 8.03. At all times Tenant agrees that its use of electric
current will never exceed the level which Landlord reasonably determines to be
the capacity of existing feeders to the Building or the risers or wiring
installations. Any riser or risers or wiring to meet Tenant's excess
electrical requirements will, upon Tenant's written request, be installed by
Landlord at Tenant's sole cost (if the same are necessary and will not cause
permanent damage or injury to the Building or to the Premises or cause or
create a dangerous or hazardous condition, or entail excessive or unreasonable
alterations, repairs, or expense or interfere with or disturb other tenants or
occupants).
Section 8.04. Failure to furnish, or any stoppage of, the services
provided for in Article 7 above and this Article 8 resulting from any cause
will not make Landlord liable in any respect for damages to either person,
property, or business, nor be construed as an eviction of Tenant, nor entitle
Tenant to any abatement of rent, nor relieve Tenant from its obligations under
this lease; provided, however, that if the failure to furnish, or the stoppage
of such services as provided above, is due to Landlord's conduct and is within
Landlord's immediate control to remedy, then if Landlord shall fail to restore
such services within twenty- four hours, Monthly Base Rent shall be abated
until the services are restored. Should any malfunction of the Building
improvements or facilities occur, Landlord will repair such malfunction
promptly with reasonable diligence, but Tenant will have no claim for rebate,
abatement of rent or damages because of malfunctions or any interruptions in
service. Landlord shall use reasonable commercial efforts to restore the
services provided above.
- 8 -
<PAGE> 11
ARTICLE 9
USE
The Premises shall be used only for first class general business
offices.
ARTICLE 10
LAWS, ORDINANCES, AND REQUIREMENTS OF PUBLIC AUTHORITIES
Tenant shall, at its sole expense, (i) comply with all laws, orders,
ordinances, and regulations of Federal, state, county, municipal and other
authorities having jurisdiction over the Premises and which are applicable to
Tenant's occupancy or use of the Premises or due to conditions which have been
created by or at the insistence of Tenant ("Legal Requirements"); (ii) comply
with any direction made pursuant to law by any public officers requiring
abatement of any nuisance; or which imposes upon Landlord or Tenant any duty or
obligation arising from Tenant's occupancy or use of the Premises as a medical
office as contemplated in Article 9 hereof; or from conditions which have been
created by or at the insistence of Tenant; and (iii) indemnify Landlord and
hold Landlord harmless from any loss, cost, claim, or expense which Landlord
may incur or suffer by reason of Tenant's failure to comply with its
obligations under clauses (i) or (ii) above. If Tenant receives notice of any
such direction or of violation of any such law, order, ordinance, or
regulation, it shall promptly notify Landlord thereof.
ARTICLE 11
PAYMENT TO LANDLORD AND LATE CHARGE FEE
Section 11.01. Tenant will promptly pay all Rental and other payments
called for herein when and as the same shall become due and payable. If
Landlord shall pay any monies or incur any expenses in connection with any
violation of the covenants herein set forth, the amounts so paid or incurred
shall, at Landlord's option, be considered additional rent as shall all costs,
fees, payments and charges specifically set forth under this Lease which are
payable by Tenant to Landlord, and all such additional rent shall be deemed
rent (or Rental) and shall be payable by Tenant with the first installment of
Monthly Base Rent thereafter to become due and payable, and may be collected
and enforced by Landlord as Rental. All sums of money or charges payable by
Tenant to Landlord under this lease shall be paid when due, without any
deductions or offsets whatsoever, and the failure to pay such charges carries
the same consequences as Tenant's failure to pay Rental. Any payments of
Rental or other charges by Tenant or
- 9 -
<PAGE> 12
acceptance by Landlord of a lesser amount than shall be due from Tenant to
Landlord shall be treated as a payment on account. The acceptance by Landlord
of a check for a lesser amount with any endorsement or statement thereon, or
upon any letter accompanying such check, that such lesser amount is payment in
full, shall be given no effect, and Landlord may accept such check without
prejudice to any other rights or remedies which Landlord may have against
Tenant.
Section 11.02. In the event said payments are not received by the
Landlord by the 10th day of the month in which said payments are due, then
Tenant agrees to pay to Landlord, upon demand, a late charge fee of One Hundred
Dollars ($100.00) for each such late payment to cover extra expenses incurred
by Landlord in handling delinquent payments. In addition to the late charge
fee referred to above, any and all payments in arrears shall bear interest,
payable as rent to Landlord at the rate of fifteen percent (15%) per annum, or
at Landlord's option, at the rate of two percent (2%) above the prevailing
prime interest rate as posted by Riggs National Bank of Washington, D.C. The
provisions of this Section 11.02 are cumulative and shall in no way restrict
the other remedies available to Landlord in the event of Tenant's default as
provided for under this lease.
ARTICLE 12
ALTERATIONS
Section 12.01. Tenant shall not, at any time during the Term, make
any alterations to the Premises without Landlord's prior written consent, which
consent shall not be unreasonably withheld with respect to non-structural
changes. If Tenant desires to make any alterations in or to the Premises,
Tenant shall, prior to beginning any such work, deliver to Landlord all plans
or drawings and specifications therefor. Upon Tenant's receipt of Landlord's
written approval and upon Tenant's paying to Landlord the actual charge
incurred by Landlord, if any, for the review of such plans and specifications
by third party consultants, Tenant may proceed to the construction of the
alterations provided that the alterations are in strict compliance with the
plans and specifications submitted to Landlord and with the provisions of this
Article 12. Tenant agrees to indemnify and hold Landlord harmless against and
from any and all claims, damages, costs and fines arising out of or connected
with such alterations, and Tenant shall pro cure at its own expense such
governmental approvals and permits as may be required for such alterations.
All alterations shall be made at Tenant's expense, by contractors which have
been approved by Landlord. All such construction, alterations, and maintenance
work done by, or for, Tenant shall (A) be performed in such a manner as to
maintain harmonious labor relations, (B) not alter the exterior appearance of
the Building or the common and
- 10 -
<PAGE> 13
public areas thereof, (C) not affect the structure or the safety of the
Building, (D) comply with all building, safety, fire, plumbing, electrical, and
other codes and governmental and insurance requirements, (E) be completed
promptly and in a good and workmanlike manner, and (F) be performed in
compliance with Article 13 hereof. Landlord may as a condition to approving
any alteration, require Tenant to remove same at the expiration of the Term.
Section 12.02. After the completion of any alterations to the
Premises, Tenant shall deliver to Landlord either (i) a certificate signed by
Tenant stating that such alterations have been completed in accordance with the
plans and specifications previously delivered to Landlord or (ii) a copy of
"as-built" plans and specifications with respect to such alterations.
Section 12.03. All alterations, leasehold improvements, and other
physical additions made or installed by or for Tenant in or to the Premises
shall be and remain Landlord's property, except Tenant's furniture,
furnishings, personal property, and movable trade fixtures, and shall not be
removed without Landlord's written consent.
ARTICLE 13
LIENS
Tenant shall keep the Premises and the Building free from any liens
arising from any work performed, materials furnished, or obligations incurred
by or at the request of Tenant, excluding liens arising from any work performed
by or which otherwise is the responsibility of Landlord. All persons either
contracting with Tenant or furnishing or rendering labor and materials to
Tenant shall be notified in writing by Tenant that they must look only to
Tenant for payment. Nothing contained in this lease shall be construed as
Landlord's consent to any contractor, subcontractor, laborer, or materialman
for the performance of any labor or the furnishing of any materials for any
specific improvement, alteration, or repair of, or to, the Premises or the
Building, nor as giving Tenant any right to contract for, or permit the
performance of, any services or the furnishing of any materials that would
result in any liens against the Premises or the Building. If any lien is filed
against the Premises or Tenant's leasehold interest therein, or if any lien is
filed against the Building which arises out of any purported act or agreement
of Tenant, Tenant shall discharge the same within ten (10) days after its
filing. If Tenant fails to discharge such lien within such period, then, in
addition to any other right or remedy of Landlord, Landlord may, at its
election, discharge the lien by paying the amount claimed to be due, by
obtaining the discharge by deposit with a court or a title company, or by
bonding. Tenant shall pay
- 11 -
<PAGE> 14
on demand any amount paid by Landlord for the discharge or satisfaction of any
such lien, and all reasonable attorneys' fees and other costs and expenses of
Landlord incurred in defending any such action or in obtaining the discharge of
such lien, together with all necessary disbursements in connection therewith.
ARTICLE 14
REPAIRS
Section 14.01. Tenant shall keep the Premises and every part thereof
in good condition and repair at all times during the Term and at Tenant's sole
cost and expense; provided, however, that Tenant shall have no obligation to
repair those items required to be repaired and/or maintained by Landlord
pursuant to Section 14.02. If Tenant fails to make such repairs promptly,
Landlord, at its option, may make such repairs, and Tenant shall pay Landlord
on demand Landlord's actual costs in making such repairs plus fifteen percent
(15%) for Landlord's overhead. Notwithstanding the foregoing, Tenant shall
have no obligation to maintain or repair any portion of the Building or the
Shopping Center which is not part of the Premises; provided, however, that
Tenant shall reimburse Landlord for any actual costs incurred for maintenance
or repair of any such portion of the Building or the Shopping Center,
necessitated by the negligent acts or omissions of Tenant to the extent such
maintenance or repair is not actually covered by the insurance required under
Section 15.02 hereof. At the end of the Term, Tenant shall surrender to
Landlord the Premises and all alterations, additions and improvements thereto
subject to the provisions of Article 20 hereof. Landlord has no obligation and
has made no promise to alter, remodel, improve, repair, redecorate, or paint
the Premises or any part thereof, except as specifically set forth in this
lease. No representations respecting the condition of the Premises, the
Building or the Shopping Center have been made by Landlord to Tenant except as
specifically set forth in this lease.
Section 14.02.
Subject to the other provisions of this lease imposing
obligations in this respect upon Tenant, and subject to the provisions of
Articles 16 and 17 hereof, Landlord shall repair, replace, and maintain (i) the
external and structural parts of the Building and Shopping Center, (ii) all
common and public areas of the Building and Shopping Center, and (iii) the
HVAC, mechanical, electrical and plumbing systems of the Building and Shopping
Center exclusive of systems, if any, specially installed by or on behalf of any
tenant.
- 12 -
<PAGE> 15
ARTICLE 15
INSURANCE
Section 15.01. During the Term, Tenant, at its sole expense, shall
obtain and keep in force the following insurance:
(a) All-Risk insurance upon property of every description
and kind owned by Tenant and located in the Building or for which Tenant is
legally liable or installed by or on behalf of Tenant, including without
limitation, furniture, fittings, installations, furnishings, movable trade
fixtures and personal property, and alterations, in an amount not less than
eighty percent (80%) of the full replacement cost thereof. All such insurance
policies shall name Tenant and Landlord as named insureds thereunder and
contain a waiver of subrogation in favor of Landlord. Landlord will not be
required to carry insurance on any of Tenant's fixtures, equipment or
improvements under this lease, and Landlord shall not be obligated to repair
any damage thereto or replace the same.
(b) Comprehensive general liability insurance coverage,
including personal injury, bodily injury, broad form property damage,
operations hazard, owner's protective coverage, contractual liability, and
products and completed operations liability, in limits not less than $3,000,000
inclusive. All such insurance policies shall name Tenant as named insured
thereunder and shall name Landlord (and, if requested by Landlord, Landlord's
mortgagees, ground or primary lessors) as additional insureds thereunder, all
as their respective interests may appear.
(c) Worker's Compensation and Employer's Liability
insurance as required by law, and business interruption insurance, with waiver
of subrogation endorsement, all in form and amount satisfactory to Landlord.
(d) Any other form or forms of insurance as Tenant,
Landlord or Landlord's mortgagee may reasonably require from time to time in
form, in amounts and for insurance risks against which a prudent tenant of
comparable size and in a comparable business would protect itself.
All policies shall be issued by insurers that are qualified to issue
such insurance in the State of Virginia with a Best's rating of A+ or better.
Tenant will deliver certificates of insurance to Landlord as soon as
practicable after the placing of the required insurance, but not later than ten
(10) days prior to the Commencement Date. All policies shall contain an
undertaking by the insurers to notify Landlord and Landlord's mortgagees (and,
if applicable, ground lessors) in writing, by certified or registered
- 13 -
<PAGE> 16
United States mail, return receipt requested, not less than fifteen (15) days
before any material adverse change, reduction in coverage, cancellation, or
other termination thereof.
Section 15.02. During the Term, Landlord shall insure the Building
and the Shopping Center (excluding any property Tenant is obligated to insure
under Section 15.01 hereof) against damage with All-Risk insurance and
comprehensive general liability insurance, all in such amounts and with such
deductions as Landlord considers appropriate, not less than 80% of full
replacement value with a deductible not to exceed $10,000.00. Such policies
shall include a clause or endorsement denying the insurer any rights of
subrogration consistent with the provisions of Section 15.05 hereof. Landlord
may, but shall not be obligated to, obtain and carry any other form or forms of
insurance as it or Landlord's mortgagees may reasonably determine advisable.
Notwithstanding any contribution by Tenant to the cost of insurance premiums,
as provided herein, Tenant acknowledges that it has no right to receive any
proceeds from any insurance policies carried by Landlord.
Section 15.03. Tenant will not keep, use, sell, or offer for sale in
or upon the Premises any article which may be prohibited by any insurance
policy in force covering the Building, the Shopping Center and the
improvements therein. If Tenant's occupancy or business in or on the Premises,
whether or not Landlord has consented to the same, results in any increase in
premiums for the insurance carried by Landlord with respect to the Building and
the Shopping Center, Tenant shall pay any such increase in premiums as
additional Rental within ten (10) days after being billed therefor by Landlord.
In determining whether increased premiums are a result of Tenant's use of the
Premises, a schedule issued by the organization computing the insurance rate on
the Building showing the various components of such rate shall be conclusive
evidence of the several items and charges which make up such rate. Tenant
shall promptly comply with all reasonable requirements of the insurance
authority or any present or future insurer relating to the Premises.
Section 15.04. If any of Landlord's insurance policies shall be
cancelled or cancellation shall be threatened or the coverage thereunder
reduced or threatened to be reduced in any way because of the use of the
Premises or any part thereof by Tenant or any assignee or subtenant of Tenant
or by anyone Tenant permits on the Premises and if Tenant fails to remedy the
condition giving rise to such cancellation, threatened cancellation, reduction
of coverage, or threatened reduction of coverage within 48 hours after notice
thereof, Landlord may, at its option, either terminate this lease or enter upon
the Premises and attempt to remedy such condition, and Tenant shall promptly
pay the cost thereof to Landlord as additional Rental. Landlord shall not be
liable for any damage or injury caused to any property of Tenant or of others
located on the Premises resulting from such entry. If Landlord is unable, or
- 14 -
<PAGE> 17
elects not, to remedy such condition, then Landlord shall have all of the
remedies provided for in this lease in the event of a default by Tenant.
Section 15.05. All policies covering real or personal property which
either party obtains affecting the Premises, the Building or the Shopping
Center shall include a clause or endorsement denying the insurer any rights of
subrogation against the other party to the extent rights have been waived by
the insured before the occurrence of injury or loss. Landlord and Tenant shall
not be liable or responsible for, and each hereby releases the other, the
partners, employees, officers, directors and agents of the other from any and
all liability and responsibility to the other, or any person claiming by,
through or under the Landlord or Tenant, by way of subrogation or otherwise for
any damage or loss to their respective property due to hazards covered or which
should be covered by policies of insurance obtained or which should be or have
been obtained pursuant to this lease, to the extent of the injury or loss
covered or which should have been covered thereby, assuming that any deductible
shall be deemed to be insurance coverage.
ARTICLE 16
DAMAGE BY FIRE OR OTHER CASUALTY
Section 16.01. Tenant shall immediately notify Landlord of any
damage to the Building or the Shopping Center which affects the Premises. In
the event that the Building, the Shopping Center, the Premises, or any portion
thereof, are damaged by any casualty not required to be insured against by
Landlord under Section 15.02, Landlord shall have the right to terminate this
lease by written notice to Tenant given within ninety (90) days after the date
of such damage, provided, however, that those provisions of this lease which
are designated to cover matters of termination and the period thereafter shall
survive the termination hereof. In any such event, if the lease has not been
terminated by Landlord in accordance with the preceding sentence, Landlord
shall, within 180 days after the date of such damage, use its best efforts to
provide such access to the Premises as is reasonably necessary for the conduct
of Tenant's business, notwithstanding any other damage to the Building or
Shopping Center. Subject to Sections 16.02, 16.03, and 16.04 hereof, if the
Building or the Shopping Center is damaged so as to affect the Premises by fire
or other casualty against which Landlord is required to be insured under
Section 15.02, Tenant shall immediately notify Landlord, who shall, to the
extent of the condition of the Building immediately before such damage occurred
(and excluding those items insured by Tenant), and only if the proceeds from
Landlord's insurance available to Landlord and free from collection by
Landlord's mortgagee or any ground or primary lessor are sufficient, have the
damage repaired with
- 15 -
<PAGE> 18
reasonable speed at the expense of Landlord, subject to delays which may arise
by reason of adjustment of loss under insurance policies and to other delays
beyond Landlord's reasonable control. An abatement in the Rental hereunder
shall be allowed as to that portion of the Premises rendered untenantable by
such damage until such time as Landlord reasonably determines that such damaged
portion of the Premises has been made tenantable.
Section 16.02. If all or any portion of the Premises is damaged or
destroyed by any casualty against which Landlord is required to be insured
under Section 15.02, and if, in Landlord's reasonable opinion, the Premises
cannot be rebuilt or made fit for Tenant's purposes within one hundred eighty
(180) days of the damage or destruction, or if the proceeds from insurance
remaining after payment of any such proceeds to Landlord's mortgagee or any
ground or primary lessor are insufficient to repair or restore the damage or
destruction, Landlord may, at its option, terminate this lease by giving
Tenant, within ninety (90) days after such damage or destruction, notice of
termination, and thereupon Rental and any other payments for which Tenant is
liable under this lease shall be apportioned and paid to the date of such
damage, and Tenant shall immediately vacate the Premises, provided, however,
that those provisions of this lease which are designated to cover matters of
termination and the period thereafter shall survive the termination hereof. If
all or any portion of the Premises is damaged or destroyed by any casualty
against which Landlord is required to be insured under Section 15.02, and if
Landlord has not given notice to terminate this lease as provided above, Tenant
shall have the right to terminate this Lease if Landlord shall: (i) fail to
commence construction to restore such damage within ninety (90) days after the
date of such damage or (ii) if Landlord shall have commenced construction
within such ninety (90) day period, but Landlord shall fail to diligently
pursue and complete the restoration of such damage within 180 days after the
date of such damage.
Section 16.03. If the Building, the Shopping Center or any portion
thereof is damaged or destroyed by any cause whatsoever, to the extent that (a)
in Landlord's reasonable judgment, it would not be economically feasible to
repair or restore such damage or destruction, or (b) in Landlord's reasonable
judgment, the damage or destruction to the Building or the Shopping Center
cannot be repaired or restored within three hundred sixty (360) days after such
damage or destruction, Landlord may, at its option, terminate this lease by
giving Tenant, within sixty (60) days after such damage or destruction, notice
of such termination requiring Tenant to vacate the Premises sixty (60) days
after delivery of the notice of termination, and thereupon Rental and any other
payments shall be apportioned and paid to the date on which possession is
relinquished and Tenant shall immediately vacate the Premises according to such
notice of termination, provided, however, that those provisions of this lease
which are designated to cover
- 16 -
<PAGE> 19
matters of termination and the period thereafter shall survive the termination
hereof. In the event that any portion of the Building as the Shopping Center
shall be taken or condemned for any public purpose (whether or not such taking
includes any portion of the Premises), which taking shall materially and
adversely attest the access to the Premises which is reasonably necessary for
the conduct of Tenant's business.
Section 16.04. No damages, compensation, or claim shall be payable by
Landlord for inconvenience, loss of business, or annoyance arising from any
repair or restoration of any portion of the Premises, the Shopping Center or
the Building. Landlord shall use its best efforts to have such repairs made
promptly so as not to unnecessarily interfere with Tenant's occupancy.
ARTICLE 17
CONDEMNATION
Section 17.01. In the event the whole or substantially the whole of
the Building, the Shopping Center and/or the Premises are taken or condemned
for any public purpose, this lease shall terminate as of the date of such
taking; provided, however, that those provisions of this lease which are
designated to cover matters of termination and the period thereafter shall
survive the termination hereof.
Section 17.02. In the event that any portion of the Building or the
Shopping Center shall be taken or condemned for any public purpose (whether or
not such taking includes any portion of the Premises), which taking, in
Landlord's sole judgment, shall interfere materially with Landlord's use and
operation of the Building or the Shopping Center or is such that Landlord
determines that the Building or the Shopping Center cannot be restored to
usefulness in an economically feasible manner, then Landlord shall have the
option to terminate this lease, effective as of the date specified by Landlord
in its notice of termination, provided, however, that those provisions of this
lease which are designated to cover matters of termination and the period
thereafter shall survive the termination hereof. In the event that any portion
of the Building or the Shopping Center shall be taken or condemned for any
public purpose (whether or not such taking includes any portion of the
Premises), which taking shall materially and adversely affect the access to the
Premises which is reasonably necessary for the conduct of Tenant's business.
Section 17.03. In the event that a portion, but less than
substantially the whole, of the Premises should be taken or condemned for any
public purpose, then this lease shall terminate as of the date of such taking
as to the portion of the Premises so taken, and, unless Landlord exercises its
option to terminate this
- 17 -
<PAGE> 20
lease pursuant to Section 17.02, this lease shall remain in full force and
effect as to the remainder of the Premises. In such event, the Monthly Base
Rent will be diminished by an amount representing the part of such amount
properly applicable to the portion of the Premises so taken.
Section 17.04. In the event of the termination of this lease pursuant
to the provisions of Sections 17.01, 17.02 or 17.03, this lease and the Term
and the estate hereby granted shall expire as of the date of such termination
in the same manner and with the same effect as if that were the date set for
the normal expiration of the Term, and Rental shall be apportioned as of the
date of termination. The provisions of this Section 17.04 shall apply in the
same manner to any partial termination of this lease pursuant to the provisions
of this Article 17.
Section 17.05. Landlord shall be entitled to receive the entire award
in any condemnation proceeding or action for taking, without deduction
therefrom for any estate vested in Tenant by this lease; provided that nothing
herein contained shall prohibit Tenant from seeking severance damages or moving
expenses so long as such awards do not in any manner reduce the award payable
to Landlord.
ARTICLE 18
ASSIGNMENT AND SUBLETTING
Section 18.01. Tenant may not sell, assign, transfer, or hypothecate
this lease or any interest herein (either voluntarily or by operation of law,
including, if Tenant is a corporation, the sale or transfer of a controlling
interest in Tenant) or sublet the Premises or any part thereof without the
prior written consent of Landlord, except as hereinafter provided. If Tenant
should desire to assign this lease or sublet the Premises (or any part thereof)
and provided that Tenant is not then in default hereunder, Tenant shall give
Landlord written notice at least ninety (90) but no more than one hundred
eighty (180) days in advance of the date on which Tenant desires to make such
assignment or sublease. Landlord shall then have a period of thirty (30) days
following receipt of such notice within which to notify Tenant in writing that
Landlord elects either (a) in the case of a sublease for less than
substantially all of the unexpired Term (exclusive of any unexercised renewal
options), to sublet from Tenant the space so affected, for the same period
proposed by Tenant, at the per square foot Rental payable hereunder; (b) to
permit Tenant to assign or sublet such space, subject, however, to the
subsequent written approval of the proposed assignee or subtenant by Landlord,
provided, however, that if (i) the rental rate agreed upon between Tenant and
its proposed subtenant under any proposed sublease of the Premises (or any part
thereof) minus (ii) the actual out-of-pocket expenses incurred by Tenant in
connection with Tenant's
- 18 -
<PAGE> 21
subleasing of such space (including advertising, brokerage commissions, and the
cost of preparing such space for occupancy by the subtenant) is greater than
the rental rate that Tenant must pay Landlord hereunder for that portion of the
Premises that is subject to such proposed sublease, or if any consideration
shall be received by Tenant in connection with such proposed assignment or
sublease (in addition to rental as provided in such proposed sublease), then
such excess rental or such consideration, as the case may be (or both), shall
be considered additional Rental owed by Tenant to Landlord, and shall be paid
by Tenant to Landlord, in the case of excess rentals, in the same manner that
Tenant pays Monthly Base Rent and, in the case of any other consideration,
immediately upon receipt thereof by Tenant; or (c) to refuse, in Landlord's
sole and absolute discretion, to consent to Tenant's assignment or subletting
of such space and to continue this lease in full force and effect as to the
entire Premises. For purposes of this Section 18.01, the Term of a sublease
shall be considered "substantially all of the unexpired Term" if the Term of
such sublease expires less then twelve (12) months prior to the expiration of
the Term of this lease. No assignment or subletting by Tenant shall relieve
Tenant of Tenant's obligations under this lease. Any attempted assignment or
subletting by Tenant in violation of the terms and provisions of this Section
18.01 shall be void.
Section 18.02. Landlord may sell, transfer, assign, and convey, all
or any part of the Building and any and all of its rights under this lease, and
in the event Landlord assigns its rights under this lease, Landlord shall be
released from any further obligations accruing thereafter and Tenant agrees to
look solely to Landlord's successor in interest for performance of such
obligations.
ARTICLE 19
INDEMNIFICATION
Section 19.01. Tenant waives all claims against Landlord for damage
to any property or injury to, or death of, any person in, upon or about the
Building, the Shopping Center or the Premises, arising at any time and from any
cause other than by reason of the willful misconduct of Landlord, its agents or
employees, and Tenant shall indemnify Landlord and shall hold Landlord harmless
from any damage to any property or injury to, or death of, any person arising
from the use of the Building, the Shopping Center or the Premises, by Tenant or
its agents, employees, representatives, contractors or invitees, except such as
is caused solely by the willful misconduct of Landlord, its agents or
employees. Without limiting the generality of the foregoing, Landlord shall
not be liable for any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity,
- 19 -
<PAGE> 22
water, rain, flood, snow, or leaks from any part of the Premises or from the
pipes, appliances, equipment, plumbing works, roof, or subsurface of any floor
or ceiling, or from the street or any other place, or by dampness or by any
other cause whatsoever. Landlord shall not be liable for any such damage
caused by other tenants or persons in the Building or the Shopping Center or by
occupants of adjacent property thereto, or by the public, or caused by any
private, public, or quasi-public construction or other work, including, but not
limited to, any construction, modifi-cation, or operation of underground,
ground-level, or above-ground pedestrian tunnels, bridges, walkways, or similar
items. Tenant's foregoing indemnity obligation shall include reasonable
attorneys' fees, investigation costs, and all other reasonable costs and
expenses incurred by Landlord from the first notice that any claim or demand
has been made or may be made. The provisions of this Article 19 shall survive
the termination of this lease with respect to any damage, injury, or death
occurring before such termination.
Section 19.02. In the event Tenant suffers any loss or injury caused
solely by the negligence or willful misconduct of Landlord in or about the
common areas of the Shopping Center, then to the extent Tenant is not
reimbursed by its own insurance carrier, Landlord shall indemnify and hold
harmless Tenant from and against such loss or injury. Notwithstanding anything
contained in this Section 19.02 to the contrary, except in the case of
Landlord's willful misconduct, Landlord's indemnity obligation set forth in
this Section 19.02 shall be limited to available insurance proceeds.
ARTICLE 20
SURRENDER OF THE PREMISES
Section 20.01. Upon the expiration of this lease, or any extension
thereof, the Tenant will quit and surrender the Premises, without the necessity
of any notice from either Landlord or Tenant to terminate the same, and Tenant
hereby waives notice to vacate said Premises, and agrees that Landlord shall be
entitled to the benefit of all provisions of law respecting the summary
recovery of possession of said Premises from a tenant holding over to the
extent as if statutory notice had been given. Tenant will quit and surrender
said Premises in as good a state and condition as they were when entered into,
reasonable use and wear thereof, unavoidable accident, condemnation, casualty
loss and/or Act of God, shall be excepted. All alterations, additions,
erections or improvements in or upon said Premises at the expiration or early
termination of this lease, which are not wanted by Landlord (except such
furniture, fixtures, and equipment which are Tenant's trade fixtures and
equipment) shall be removed by Tenant at Tenant's sole cost and expense. Any
alterations, additions, erections or improvements which are wanted by Landlord,
except as exempted
- 20 -
<PAGE> 23
above, shall remain a part of the Premises and shall be surrendered with said
Premises at the expiration or early termination of this Lease.
Section 20.02. In the event the Tenant remains in possession of the
herein Premises after the expiration of this lease without the written
permission of Landlord, and without the execution of a new lease, Tenant shall
be deemed occupying the Premises as a tenant from month-to-month subject to all
the conditions, provisions and obligations of this Lease insofar as the same
are applicable to a month-to-month tenancy. Rental shall be, during any such
hold over period, Two Hundred percent (200%) of the Monthly Base Rent last in
effect and other payments called for herein, which are in effect for the last
month of the Term hereof.
ARTICLE 21
ESTOPPEL CERTIFICATES
Tenant agrees to furnish no later than fifteen (15) days after a
request therefor by Landlord, any ground lessor, or the holder of any deed of
trust or mortgage covering the Building, the Land, or any interest of Landlord
therein or any purchaser of Landlord's interest, a certificate signed by Tenant
certifying (to the extent same is true) that this lease is in full force and
effect and unmodified; that the Term has commenced and the full Rental is then
accruing hereunder; that Tenant has accepted possession of the Premises and
that any improvements required by the terms of this lease to be made by
Landlord have been completed to the satisfaction of Tenant; that no Rental
under this lease has been paid more than thirty (30) days in advance of its due
date; that the address for notices to be sent to Tenant is as set forth in this
lease (or has been changed by notice duly given and is as set forth in the
certificate); that Tenant, as of the date of such certificate, has no knowledge
of any charge, lien, or claim of offset under this lease or otherwise against
Rentals or other charges due or to become due hereunder; that Landlord is not
then in default under this lease; and such other matters as may be reasonably
requested by Landlord or any such ground lessor, holder of such deed of trust
or mortgage or purchaser. If Tenant is unable to so certify as to one or more
of the foregoing items, Tenant shall specify its reason therefor in writing.
Any such certificate may be relied upon by any prospective purchaser, ground
lessor, mortgagee, or any beneficiary under any deed of trust on the Building
or the Land or any part thereof.
- 21 -
<PAGE> 24
ARTICLE 22
SUBORDINATION
Section 22.01. This lease is subject and subordinate to any first
deeds of trust, first mortgages or other first security instruments
(collectively, "Superior Instruments") which may from time to time during the
Term cover the Building and/or the Land, or any interest of Landlord therein,
and to any advances made on the security thereof, and to any refinancings,
increases, renewals, modifications, consolidations, replacements, and
extensions of any such future Superior Instruments. This provision is declared
by Landlord and Tenant to be self-operative and no further instrument shall be
required to effect such subordination of this lease. Upon Landlord's request,
Tenant shall execute, acknowledge, and deliver to Landlord any further
instruments and certificates evidencing such subordination as Landlord or the
holder of any Superior Instrument may reasonably request and the failure to
comply with Landlord's request within five (5) business days thereof shall be
an Event of Default.
Section 22.02. Notwithstanding the generality of the foregoing
provisions of Section 22.01 hereof, any holder of a Superior Instrument shall
have the right, unilaterally, at any time, to subordinate fully or partially
any such Superior Instrument to this lease on such terms and subject to such
conditions as such holder of a Superior Instrument may consider appropriate.
Upon request, Tenant shall execute an instrument confirming any such full or
partial subordination by any holder of a Superior Instrument. At any time,
before or after the institution of any proceedings for the foreclosure of any
Superior Instrument, or sale of the Building and/or under any Superior
Instrument, or upon the termination of any ground lease, or upon notice from
any holder of a Superior Instrument (upon which Tenant may rely), Tenant shall
attorn to such purchaser upon any such sale or the grantee under any deed in
lieu of such foreclosure or to any ground lessor in the event of a termination
of a ground lease, as the case may be, and shall recognize such ground
purchaser, grantee or ground lessor, as the case may be, as Landlord under this
lease; provided however that upon such request for attornment, the ground
purchaser, grantee, or ground lessee, as the case may be shall agree that so
long as an Event of Default does not exist, not to disturb the Tenant under
this lease. Tenant hereby waives the right, if any, to elect to terminate this
lease or to surrender possession of the Premises in the event of the judicial
or nonjudicial foreclosure of any deed of trust, mortgage, or security
agreement (or any transfer in lieu thereof) or termination of a
- 22 -
<PAGE> 25
ground lease. The foregoing agreement of Tenant to attorn shall survive any
such foreclosure sale, trustee's sale, or conveyance in lieu thereof, or
termination of a ground lease. Tenant shall, upon demand at any time, before
or after any such foreclosure sale, trustee's sale, or conveyance in lieu
thereof, or termination of a ground lease, execute, acknowledge, and deliver to
Landlord's mortgagee or any successor thereof or any then owner of the Building
or to the ground lessor (as the case may be), any written instruments and
certificates evidencing such attornment as such mortgagee, successor, owner or
ground lessor may reasonably require. If Tenant shall fail to deliver such
written instruments and certificates as provided above, within five (5)
business days after receipt of the demand therefore, such failure shall be an
Event of Default.
Section 22.03. Should any ground lease be terminated, or any deed of
trust, mortgage, or security instrument be foreclosed, the liability of the
ground lessor, mortgagee, trustee, or purchaser, as the case may be, as
"Landlord" hereunder, shall exist only with respect to the acts or omissions of
such person or entity occurring while it was the owner of the Land and/or
Building. Further, Tenant agrees that any such ground lessor, mortgagee,
trustee, or purchaser shall not be liable for (i) any Rental paid more than
thirty (30) days in advance of its due date; (ii) any amendment or modification
of this lease without the prior written approval of such ground lessor,
mortgagee, trustee, or purchaser; or (iii) any default by or any claim against
any prior Landlord.
ARTICLE 23
DEFAULT AND REMEDIES
Section 23.01. The occurrence of any one or more of the following
events, shall constitute an event of default ("Event of Default") under this
lease: (a) if Tenant shall fail to pay any Rental or other sums payable by
Tenant hereunder as and when such Rental or other sums become due and payable
and such failure shall continue for more than five (5) days after written
notice (not to be provided more frequently than once in any year with respect
to a failure by Tenant to pay any Rental or other sum payable hereunder); (b)
if Tenant shall fail to perform or observe any covenant or obligation hereunder
or any of the Rules and Regulations attached as Exhibit D hereto and such
failure shall continue for more than ten (10) days after notice; or, if such
failure cannot be corrected within such ten-(10) day period, if Tenant does not
commence to correct same within said ten-(10) day period and thereafter
diligently prosecute the correction of same to completion; (c) if Tenant
vacates all or substantially all of the Premises; (d) if any petition is filed
by or against Tenant or any guarantor of Tenant's obligations under this lease
under any section or chapter of the present or any future Federal Bankruptcy
Code or under any similar law or statute of the United States or any state
thereof (which, in the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within ninety
(90) days of its commencement), or if any order for relief shall be entered
against Tenant or any
- 23 -
<PAGE> 26
guarantor of Tenant's obligations under this lease in proceedings filed under
any section or chapter of the present or any future Federal Bankruptcy Code or
under any similar law or statute of the United States or any state thereof; (e)
if Tenant or any guarantor of Tenant's obligations under this lease becomes
insolvent or makes a transfer in fraud of creditors; (f) if Tenant or any
guarantor of Tenant's obligations under this lease makes an assignment for the
benefit of creditors; (g) if a receiver, custodian, or trustee is appointed for
Tenant or any guarantor of Tenant's obligations under this lease or for any of
the assets of Tenant or any guarantor of Tenant's obligations under this lease,
which appointment is not vacated within sixty (60) days of the date of such
appointment or (h) if Tenant shall fail to pay to Landlord when due any Rental
payable hereunder (without regard to any grace period otherwise allowed by this
Section 23.01) more than twice within any twelve-month period during the Term.
Section 23.02. If an Event of Default occurs, then at any time
thereafter while Tenant remains in default, Landlord may do any one or more of
the following:
(a) Terminate this lease, in which event Tenant shall
immediately surrender the Premises to Landlord. If Tenant fails to do so,
Landlord may, without notice and without prejudice to any other remedy Landlord
may have, enter upon and take possession of the Premises and expel or remove
Tenant and its effects without being liable to prosecution or any claim for
damages therefor; and Tenant shall indemnify Landlord for all loss and damage
which Landlord may suffer by reason of such termination, whether through
inability to relet the Premises or otherwise, including any loss of Rental for
the remainder of the Term.
(b) Terminate this lease, in which event Tenant's Event of
Default should be considered a total breach of Tenant's obligations under this
lease and Tenant immediately shall become liable for such damages for such
breach in an amount, equal to the total of (1) the costs of recovering the
Premises; (2) the unpaid Rental earned as of the date of termination, plus
interest thereon at a rate per annum from the due date equal to five percent
(5%) over the prime rate (the "Prime Rate") publicly announced by the Riggs
National Bank of Washington, D.C. (or its successor) from time to time;
provided, however, that such interest shall never exceed the Highest Lawful
Rate (the term "Highest Lawful Rate" as used herein shall mean the maximum rate
of interest from time to time permitted to be charged under applicable law to
Tenant with respect to the indebtedness for which such interest is charged
under this lease); (3) the total Rental which Landlord would have received
under the lease for the remainder of the Term reduced by Rentals received from
any reletting less any expenses incurred by Landlord to effectuate such
reletting (including advertising, brokerage commissions, reasonable attorneys'
fees and the costs of preparing such space for reletting), provided however
that such
- 24 -
<PAGE> 27
amounts shall be payable as they otherwise would have come due under this
lease; and (4) all other sums of money and damages owing by Tenant to Landlord.
(c) Enter upon and take possession of the Premises as
Tenant's agent, without terminating this lease and without being liable to
prosecution or any claim for damages therefor, and Landlord may relet the
Premises as Tenant's agent and receive the Rental therefor, in which event
Tenant shall pay to Landlord on demand any and all costs of restoring the
Premises to the condition required under this lease pursuant to Section 20.01
for a new tenant or tenants and any deficiency that may arise by reason of such
reletting, provided, however, that Landlord shall use commercially reasonable
efforts to relet the Premises and Landlord's failure to relet the Premises
shall not release or affect Tenant's liability for Rental or for damages.
(d) Do whatever Tenant is obligated to do under this lease
and enter the Premises without being liable to prosecution or any claim for
damages therefor to accomplish this purpose. Tenant shall reimburse Landlord
immediately upon demand for any expenses which Landlord incurs in thus
effecting compliance with this lease on Tenant's behalf, and Landlord shall not
be liable for any damages suffered by Tenant from such action, whether caused
by the negligence of Landlord or otherwise.
Section 23.03. No act or thing done by Landlord or its agents during
the Term shall constitute an acceptance of an attempted surrender of the
Premises, and no agreement to accept a surrender of the Premises shall be valid
unless made in writing and signed by Landlord. No re-entry or taking
possession of the Premises by Landlord shall constitute an election by Landlord
to terminate this lease, unless a written notice of such intention is given to
Tenant. Notwithstanding any such reletting or re-entry or taking possession,
Landlord may at any time thereafter terminate this lease for a previous
default. Landlord's acceptance of Rental following an Event of Default
hereunder shall not be construed as a waiver of such Event of Default. No
waiver by Landlord of any breach of this lease shall constitute a waiver of any
other violation or breach of any of the terms hereof. Forbearance by Landlord
to enforce one or more of the remedies herein provided upon a breach hereof
shall not constitute a waiver of any other breach of the lease.
Section 23.04. No provision of this lease shall be deemed to have
been waived by Landlord unless such waiver is in writing and signed by
Landlord. Nor shall any custom or practice which may evolve between the
parties in the administration of the terms of this lease be construed to waive
or lessen Landlord's right to insist upon strict performance of the terms of
this lease. The rights granted to Landlord in this lease shall be cumulative
of every other right or remedy which Landlord may otherwise have at
- 25 -
<PAGE> 28
law or in equity or by statute, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
ARTICLE 24
WAIVER BY TENANT
To the extent permitted by applicable law, Tenant waives for itself
and all claiming by, through, and under it, including creditors of all kinds:
(a) any right and privilege which it or any of them may have under any present
or future constitution, statute, or rule of law to redeem the Premises or to
have a continuance of this lease for the Term after termination of Tenant's
right of occupancy by order or judgment of any court or by any legal process or
writ, under the terms of this lease, or after the termination of the Term as
herein provided; and (b) the benefits of any present or future constitution,
statute, or rule of law which exempts property from liability for debt or for
distress for rent.
ARTICLE 25
INTENTIONALLY DELETED
ARTICLE 26
LANDLORD'S LIEN AND SECURITY INTEREST
Landlord shall have a landlord's statutory lien, and also Landlord
shall have, and Tenant hereby grants to Landlord, a security interest in all of
the goods, wares, furniture, fixtures, office equipment, supplies, and other
property of Tenant now or hereafter placed in, upon, or about the Premises, and
all proceeds thereof, as security for all of Tenant's obligations under this
lease; provided, however, that Landlord shall not be entitled to any such lien
in Tenant's medical equipment. Tenant shall not remove any of its furniture,
furnishings, personal property, or movable trade fixtures from the Premises
except for the purpose of replacing or disposing of them in the ordinary course
of Tenant's business until all of Tenant's obligations under this lease have
been fully satisfied. Without excluding any other manner of giving Tenant any
required notice, any requirement of reasonable notice to Tenant of Landlord's
intention to dispose of any collateral pursuant to the enforcement of such
security interest shall be met if such notice is given in the manner prescribed
in Article 28 of this lease at least five (5) days before the time of any such
disposition. Any sale made pursuant to the enforcement of such security
interest shall be considered a public sale conducted in a
- 26 -
<PAGE> 29
commercially reasonable manner if held in the Premises after the time, place,
and method of sale and a general description of the types of property to be
sold have been advertised in a daily newspaper published in the jurisdiction in
which the Building is situated, for five (5) consecutive days before the date
of sale. Landlord shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code of the State of Virginia and, upon request by
Landlord, Tenant shall execute and deliver to Landlord a financing statement in
form sufficient to perfect the security interest of Landlord in the
aforementioned property and proceeds thereof. A carbon, photographic, or other
reproduction of this lease shall be sufficient as a financing statement, but
shall be filed as such only in the event Tenant fails to execute or deliver a
financing statement requested by Landlord hereunder.
ARTICLE 27
ATTORNEYS' FEES AND LEGAL EXPENSES
In any action or proceeding brought by Landlord against Tenant under
this lease by reason of an Event of Default by Tenant, Landlord shall be
entitled to recover from Tenant reasonable attorneys' fees, investigation
costs, and other reasonable legal expenses and court costs incurred by Landlord
in such action or proceeding.
ARTICLE 28
NOTICES
Section 28.01. Any notice or demand, consent, approval or
disapproval, or statement (collectively called "Notices") required or permitted
to be given by the terms and provisions of this lease, or by any law or
governmental regulation, shall be in writing (unless otherwise specified
herein) and unless otherwise required by such law or regulation, shall be
personally delivered or sent by United States mail postage prepaid as
registered or certified mail, return receipt requested. Any Notice shall be
addressed to Landlord or Tenant, as applicable, at its address specified in the
Basic Lease Information as said address may be changed from time to time as
hereinafter provided. By giving the other party at least ten (10) days' prior
written notice, either party may, by Notice given as above provided, designate
a different address or addresses for Notices.
Section 28.02. Any Notice shall be deemed given as of the date of
delivery as indicated by affidavit in case of personal delivery or by the
return receipt in the case of mailing; and in the event of failure to deliver
by reason of changed address of which no Notice was given or refusal to accept
delivery, as of the
- 27 -
<PAGE> 30
date of such failure as indicated by affidavit or on the return receipt or by
notice of the postal service, as the case may be.
ARTICLE 29
CONSTRUCTION AND USE OF COMMON AREAS
Section 29.01. Landlord did hard-surface, drain, light and landscape
a parking area, or areas, together with the access roads, in the Shopping
Center and provide parking as required by governmental codes. Landlord hereby
grants to Tenant and Tenant's invitees a right, during the Term hereof, to use
in common with others entitled to the use thereof, said parking area, or areas.
The manner in which such areas and facilities shall be maintained, and the
expenditures therefor, shall be at the discretion of Landlord and the use of
such areas and facilities shall be subject to such reasonable regulations as
Landlord shall make from time to time.
Section 29.02. The Tenant shall direct and instruct its employees to
use only such parking areas provided by Landlord from time to time for employee
parking, and not to use the areas provided for customer parking. Tenant shall
not at any time allow any trucks or any other vehicles servicing its offices to
stand or park in the access roads or areas provided for customer parking. The
Shopping Center may be constructed in stages or it may be determined that
alterations are to be made and construction of later stages or future
alterations may necessitate the rearrangement and alteration so some or all of
the common areas. Landlord, therefore, reserves the right in its sole
discretion to change, rearrange, alter, modify or supplement any or all of the
areas designed for the common use and convenience of all tenants so long as
adequate common area facilities are made available to the Tenant herein.
ARTICLE 30
TENANT'S WORK
Section 30.01. (a) Within three (3) weeks from the date of this
lease, the Tenant shall submit to Landlord, for Landlord's approval, its office
plans and specifications for first class physicians offices and medical
facilities, showing in reasonable detail and in such manner as would be
employed by an architect, professional office designer or draftsman any and all
interior and/or exterior alterations, changes, or improvements that Tenant may
want to make to the Premises including, but not limited to, mechanical,
plumbing and electrical work, Tenant's interior decor, floor and wall
treatment, placement of trade fixtures and partitions, etc., (hereinafter
sometimes referred to as "Tenant's
- 28 -
<PAGE> 31
Plans"). After approval by Landlord, said Tenant's plans shall be marked
"Approved", dated, signed by Landlord, and attached to an made a part of this
Lease. Landlord will require a minimum of four (4) such copies for approval.
Tenant shall not commence any work in the Premises prior to obtaining
Landlord's approval of its Tenant's plans. Landlord shall review and respond
to Tenants' Plans within seven (7) days of its receipt thereof. As part of
Tenant's plans and specifications, Tenant shall submit a floor plan, elevation
of interior walls and a sample board showing color and interior finishes, or a
reference in the plans or specifications showing color and interior finishes,
including flooring and wall treatment.
(b) It is understood and agreed that any work performed by Tenant
shall be performed and paid for wholly by Tenant, except as otherwise expressly
provided in this Article 30. The Landlord undertakes no responsibility for the
performance and/or payment of Tenant's work. Furthermore, Tenant shall not
open its offices nor conduct any business in the Premises without having first
submitted and obtained Landlord's approval of its Tenant's Plans and without
having first substantially completed its work pursuant to said approved
Tenant's Plans.
ARTICLE 31
SIGNS
Section 31.01. Tenant may install on the Premises after the
Commencement Date of this lease, and at all times thereafter maintain in good
condition and repair, including keeping same lighted, as hereinafter set forth,
two exterior sign in the size, design and location described and shown on
Exhibit F attached hereto. Tenant shall comply with all applicable
requirements of governmental authorities having jurisdiction and Tenant shall
be responsible for obtaining all necessary permits. Tenant shall make all
repairs required by reason of the installation, maintenance and removal of its
sign. Tenant shall not maintain or display any sign, lettering or lights on
the interior or exterior surfaces of windows of the Premises and shall not
attach any non-permanent sign to the inside of any window of the Premises which
may be visible through such window from the outside.
Section 31.02. Prior to fabrication or installation of Tenant's sign,
Tenant shall submit Tenant's sign plan, prepared in accordance with Exhibit F,
to Landlord for approval, which shall not be unreasonably withheld. Landlord
shall respond to Tenant's proposed sign plan within two weeks. Landlord will
need a minimum of four (4) copies of said plan for approval. Tenant shall be
in default hereunder if Tenant installs a sign which has not been
- 29 -
<PAGE> 32
first approved by Landlord, and any sign installed without such written
approval may be removed by Landlord at Tenant's cost and expense.
Section 31.03. Notwithstanding the foregoing, Tenant agrees that
Landlord has the right, at Landlord's discretion, at any time during the lease
Term, to remodel or change exterior surfaces of the Shopping Center or
Building. Tenant understands that during such remodeling, it might be
necessary to remove Tenant's existing sign and that said sign may not be
suitable for reinstallation after the remodeling is completed. Said sign or
part thereof, which Tenant had installed, shall remain the property of Tenant,
but Landlord is released from any and all liability for damage to said sign
during its removal, providing said removal was conducted with reasonable care.
During the remodeling, Tenant agrees to cooperate with Landlord and execute any
necessary documentation required to facilitate the remodeling process.
Section 31.04. In the event the aforesaid remodeling requires
Landlord to install a sign box or a raceway, with or without lettering (both
hereinafter referred to as "sign box"), then Tenant shall, at its sole cost and
expense, including all permits and governmental approval, supply to Landlord
its sign face which has been approved by Landlord in accordance herewith and
either Landlord or Tenant shall install Tenant's sign face in the sign box. It
is understood that the sign box shall remain the property of the Landlord and
the sign face shall remain the property of the Tenant. In the event the Tenant
does not remove its sign face or individual lettered sign, whichever the case
may be, upon the expiration of its occupancy of the Premises, then Landlord may
cause the removal of said sign in accordance with the foregoing, at the sole
cost and expense of Tenant. In such event, the sign shall be deemed abandoned
and Landlord may dispose of same as it sees fit. In the event Landlord
installs a sign box, Tenant shall pay, after being notified by Landlord, a
one-time rental charge to be reasonably determined by Landlord.
Notwithstanding any other provision of this Article 31 to the contrary,
Landlord shall bear the cost and expense of the construction and installation
of any new sign which may be required due to any change or remodeling which may
occur during the initial Term of this lease.
Section 31.05. Tenant shall be responsible for the day-to-day
maintenance of its sign, including but not limited to the replacement of light
bulbs, and for the utility charges necessary to illuminate the sign. Damage to
the sign by fire, or other casualty, insurable under full standard risk
insurance, shall be Landlord's responsibility to repair or replace unless same
is caused by Tenant, its agents, employees or contractors, in which event
Tenant shall be responsible and reimburse Landlord for the repair or
replacement. Damage to the sign face by any cause shall
- 30 -
<PAGE> 33
be the responsibility of Tenant unless caused by landlord, its agents,
employees or contractors, in which event Landlord shall repair or replace the
sign face.
ARTICLE 32
MISCELLANEOUS
Section 32.01. Upon reasonable notice to Tenant, except in the case
of an emergency, Landlord, its agents or employees shall have the right to
enter the Premises at all reasonable times (a) to make inspections or to make
repairs to the Premises or repairs to other premises as Landlord may deem
necessary and (b) for any purpose whatsoever relating to the safety, protection
or preservation of the Building.
Section 32.02. Landlord recognizes Brokers (as set forth in the Basic
Lease Information) as the sole brokers procuring this lease and shall pay the
Brokers a commission therefor pursuant to a separate agreement between said
brokers and Landlord. Except for the Brokers, Landlord and Tenant each
represent and warrant that it has not entered into any agreement with, nor
otherwise had any dealings with, any other broker or agent in connection with
the negotiation or execution of this lease which could form the basis of any
claim by any such broker or agent for a brokerage fee or commission, finder's
fee, or any other compensation of any kind or nature in connection herewith,
and Landlord and Tenant each agree to indemnify and hold the other harmless
from any costs (including, but not limited to, court costs, investigation
costs, and attorneys' fees), expenses, or liability for commissions or other
compensation claimed by any broker or agent with respect to this lease which
arise out of any agreement or dealings, or alleged agreement or dealings,
between such party and any such agent or broker.
Section 32.03. Every agreement contained in this lease is, and shall
be construed as, a separate and independent agreement. If any Term of this
lease or the application thereof to any person or circumstances shall be
invalid and unenforceable, the remainder of this lease, or the application of
such Term to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected.
Section 32.04. There shall be no merger of this lease or of the
leasehold estate hereby created with the fee estate in the Premises or any part
thereof by reason of the fact that the same person may acquire or hold,
directly or indirectly, this lease or the leasehold estate hereby created or
any interest in this lease or in such leasehold estate as well as the fee
estate in the Premises or any interest in such fee estate. In the event of a
voluntary or other surrender of this lease, or a mutual
- 31 -
<PAGE> 34
cancellation hereof, Landlord may, at its option, terminate all subleases, or
treat such surrender or cancellation as an assignment of such subleases.
Section 32.05. Any and all covenants, undertakings and agreements
herein made on the part of Landlord are made and intended not as personal
covenants, undertakings and agreements or for the purpose of binding Landlord
personally or the assets of Landlord except Landlord's interest in the Land,
Building, and Premises, but are made and intended for the purpose of binding
only the Landlord's interest from time to time in the Land, Building, Premises
and any proceeds of a sale or rental thereof. No personal liability or
personal responsibility is assumed by, nor shall at any time be enforceable
against,the constituent partners of Landlord or Landlord's agent or agents,
beneficiaries, partners, or their respective heirs, legal representatives,
successors, and assigns on account of this lease or on account of any covenant,
undertaking, or agreement of Landlord in this lease contained, all such
liability being specifically waived by Tenant.
Section 32.06. Whenever a period of time is herein prescribed for
action to be taken by Landlord, Landlord shall not be liable or responsible
for, and there shall be excluded from the computation for any such period of
time, any delays due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations, or restrictions, or any other
cause of any kind whatsoever which is beyond the reasonable control of
Landlord.
Section 32.07. The article headings contained in this lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
various and several articles hereof. Words of any gender used in this lease
shall include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
Section 32.08. If there be more than one Tenant, the obligations
hereunder imposed upon Tenant shall be joint and several, and all agreements
and covenants herein contained shall be binding upon the respective heirs,
personal representatives, successors, and, to the extent permitted under this
lease, assigns of the parties hereto.
Section 32.09. Neither Landlord nor Landlord's agents or brokers have
made any representations or promises with respect to the Premises or the
Building except as herein expressly set forth and all reliance with respect to
any representations or promises is based solely on those contained herein. No
rights, easements, or licenses are acquired by Tenant under this lease by
implication or otherwise except as expressly set forth in this lease.
Section 32.10. This lease sets forth the entire agreement between the
parties and cancels all prior negotiations,
- 32 -
<PAGE> 35
arrangements, brochures, agreements, and understandings, if any, between
Landlord and Tenant regarding the subject matter of this lease. No amendment
or modification of this lease shall be binding or valid unless expressed in a
writing executed by both parties hereto.
Section 32.11. The submission of this lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights with respect thereto
unless Landlord executes a copy of this lease and delivers the same to Tenant.
Section 32.12. Each of the persons executing this lease on behalf of
Tenant represents and warrants that Tenant has complied with all applicable
laws, rules, and governmental regulations relative to its right to do business
and conduct a medical practice in Alexandria, Virginia, that such entity has
the full right and authority to enter into this lease, and that all persons
signing on behalf of the Tenant were authorized to do so by any and all
necessary or appropriate corporate actions.
Section 32.13. If, in connection with obtaining debt or equity
financing for the Building (including a sale/ leaseback) any lender, investor
or ground lessor shall request reasonable modifications to this lease as a
condition to such financing, Tenant will not unreasonably withhold, delay, or
defer its consent thereto, provided that such modifications do not increase the
obligations of Tenant hereunder or materially adversely affect either the
leasehold interest hereby created or Tenant's use and enjoyment of the
Premises.
Section 32.14. This lease shall be governed by and construed under
the laws of the State of Virginia. Any action brought to enforce or interpret
this lease shall be brought in the court of appropriate jurisdiction in the
State of Virginia. Landlord and Tenant each hereby waives all right to trial
by jury in any claim, action, proceeding or counterclaim by either Landlord or
Tenant against the other on matters arising out of or in any way connected with
this lease, the relationship of Landlord and Tenant and/or Tenant's use or
occupancy of the Premises.
Section 32.15. Tenant shall not, without the prior written consent of
Landlord, use the name of the Building for any purpose other than as the
address of the business to be conducted by Tenant in the Premises, nor shall
Tenant use the name of the Building as Tenant's business address after Tenant
vacates the Premises.
Section 32.16. Any elimination or shutting off of light, air, or view
by any structure which may be erected on lands adjacent to the Building shall
in no way effect this lease or impose any liability on Landlord.
- 33 -
<PAGE> 36
Section 32.17. The exhibits referred to in the Basic Lease
Information are by this reference incorporated fully herein. The Term "this
lease" shall be considered to include all such exhibits.
Section 32.18. Tenant shall, and shall cause Tenant's subtenants,
agents, employees, invitees, licensees, clients and guests to, comply with and
observe all reasonable Rules and Regulations concerning the use, management,
operation, safety and good order of the Premises and the Building which may
from time to time be promulgated by Landlord, provided that such Rules and
Regulations are of general applicability to all tenants in the Building, and
are not inconsistent with the provisions of this lease. Initial Rules and
Regulations, which shall be effective until amended by Landlord, are attached
as Exhibit D to this lease.
EXECUTED under seal as of the date first written above.
<TABLE>
<S> <C>
WITNESS: LANDLORD:
COMBINED PROPERTIES/GREENBRIAR
OFFICE LIMITED PARTNERSHIP
By: CM/CP GREENBRIAR OFFICE
JOINT VENTURE
By: CP/GREENBRIAR OFFICE
INVESTMENTS
LIMITED PARTNERSHIP
By: CP/GREENBRIAR OFFICE, INC.
THOMAS B. MCKEE BY: RONALD S. HAFT
- ------------------------------------ -----------------------------------------
Ronald S. Haft
President
ATTEST: TENANT:
TOTAL BEVERAGE VA CORP.
BY: HERBERT H. HAFT
- ------------------------------------ -----------------------------------------
(corporate seal) ITS: CHAIRMAN
-----------------------------------------
</TABLE>
- 34 -
<PAGE> 37
EXHIBIT A
[FLOOR PLAN DATED JUNE 8, 1993 -- SEE EDGAR APPENDIX]
<PAGE> 38
EXHIBIT B
[GREENBRIAR TOWN CENTER, FAIRFAX, VIRGINIA MAP -- SEE EDGAR APPENDIX]
<PAGE> 39
EXHIBIT C
INTENTIONALLY DELETED
<PAGE> 40
EXHIBIT D
RULES AND REGULATIONS
1. Sidewalks, doorways, entrances, vestibules, halls, stairways,
courts, elevators and similar areas shall not be obstructed or encumbered by
tenants or their officers, agents, servants or employees, or used for any
purpose other than ingress and egress to and from the Premises and for going
from one part of the Building to another part of the Building. Landlord shall
have reasonable control over the use and operation of the public portions of
the Building and the facilities furnished for the common use of the tenants, in
such manner as Landlord deems best for the benefit of the tenants generally.
2. Plumbing fixtures and appliances shall be used only for the
purposes for which constructed, and no sweepings, rubbish, rags or other
unsuitable material shall be thrown or placed therein. The cost of repairing
any stoppage or damage resulting to any such fixtures or appliances from misuse
on the part of a tenant or such tenant's officers, agents, servants, employees,
visitors or licensees shall be paid by such tenant.
3. No signs, posters, advertisements or notices shall be inscribed,
painted, affixed or displayed on any window, door, or other part of the
Building, except of such color, size and style, and in such places, as shall be
first approved in writing by the Building manager. If any such sign, poster,
advertisement or notice is exhibited without the required approval, Landlord
or the Building manager shall have the right to remove the same and the tenant
exhibiting the same shall be liable for any and all expenses incurred by
Landlord or the Building manager by said removal. No nails, hooks or screws
shall be driven into or inserted in any part of the Building, except by
Building maintenance personnel.
4. The Premises shall not be used for conducting any barter, trade, or
exchange of goods or sale through promotional give-away gimmicks or any
business involving the sale of second-hand goods, insurance salvage stock or
fire sale stock, and shall not be used for any auction or pawnshop business,
any fire sale, bankruptcy sale, going-out-of-business sale, moving sale, bulk
sale or any other business which, because of merchandising methods or
otherwise, would tend to lower the first-class character of the Building.
5. Tenants shall not place a load upon any floor of the Premises which
exceeds the floor load per square foot which such floor was designed to carry
or which is allowed by applicable building codes. Landlord may prescribe the
weight and position of all safes and heavy installations which any tenant
desires to place in the Building so as to properly distribute the weight
thereof. All damage done to the Building by the improper placing of heavy
items which over stress the floor will be repaired at the sole expense of the
tenant responsible.
6. A tenant shall notify the Building manager when safes, freight,
furniture or other bulky matter of any description is to be taken into or out
of the Building. Moving of such items shall be done under the supervision of
the Building manager after receiving written permission from him. All
deliveries of such bulky items must be made via the service entrance and
service elevators during such hours as directed or scheduled by Landlord or the
Building manager. Landlord reserves the right to inspect all freight to be
brought into the Building, except for government classified and confidential
client materials, and to exclude from the Building all freight which violates
any of these Rules and Regulations or the lease to which these Rules and
Regulations are attached.
Page One of Four
<PAGE> 41
7. Corridor doors, when not in use, shall be kept closed.
8. Prior approval must be obtained for Landlord or the Building manager
for any deliveries that must be received after normal business hours.
9. Each tenant shall cooperate with Building employees in keeping its
premises neat and clean.
10. Nothing, including mats and trash, shall be placed, swept or thrown
into the corridors, halls, elevator shafts, stairways or other common or public
areas.
11. No birds, animals, reptiles or other creatures, except small fish,
shall be brought into or kept in or about the Building.
12. No tenant shall make, or permit to be made, any disturbing noises,
nor disturb or interfere with occupants of this or neighboring buildings or
premises, whether by the use of any musical instrument, radio, talking machine
or in any other way.
13. Tenants, employees or agents, or anyone else who desires to enter
or leave the Building after normal business hours, may be required to provide
appropriate identification and to sign in upon entry and departure, giving such
person's destination within the Building and such person's time of arrival and
departure. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself or
herself to the Building management or watchman on duty.
14. No inflammable, combustible or explosive fluid, chemical or
substance shall be brought or kept in the Building, except those that are
routinely used for standard office and medical equipment.
15. Each tenant shall be responsible for all persons for whom such
tenant authorizes entry into the Building and shall be liable to Landlord for
all acts of such persons.
16. Landlord has the right to evacuate the Building in the event of
emergency or catastrophe or for the purpose of holding a reasonable number of
fire drills.
17. Landlord may, upon request by any tenant, waive compliance by such
tenant with any of the foregoing Rules and Regulations, provided that (i) no
waiver shall be effective unless signed by Landlord or Landlord's authorized
agent; (ii) any such waiver shall not relieve such tenant from the obligation
to comply with such rule or regulation in the future unless expressly consented
to by Landlord; and (iii) no waiver granted to any tenant shall relieve any
other tenant from the obligation of complying with the foregoing Rules and
Regulations, unless such other tenant has received a similar waiver in writing
from Landlord.
18. No drapes, blinds, shades or screens shall be attached to or hung
in, or used in connection with, any exterior window or door of the Premises so
as to be seen from the outside of the Premises without the prior written consent
of Landlord.
Page Two of Four
<PAGE> 42
19. No bicycles or vehicles of any kind shall be brought into or
kept in or about the Premises.
20. No additional locks or bolts of any kind shall be placed upon
any of the entrances to the Premises, nor shall any changes be made in existing
locks or the mechanisms thereof; provided, however that Tenant may install
additional locks or bolts on the entrances to the Premises as an additional
security measure if it furnishes keys thereto to Landlord. Each tenant shall,
upon the termination of its tenancy, return to Landlord all keys either
furnished to, or otherwise procured by, such tenant and in the event of the
loss of any such keys, such tenant shall pay to Landlord the cost of replacing
the locks.
21. Tenant shall notify Landlord or the Building manager of any
person employed by it to do janitorial work within the Premises, except for
full-time employees of Tenant, prior to such person's commencing work, and such
person shall, while in the Building and outside of the Premises, comply with
all instructions issued by Landlord or its representatives. No tenant shall
pay any employees of Landlord or Landlord's agent to perform any work or
services in the Premises or the Building.
22. Canvassing, soliciting and peddling in the Building is
prohibited and each tenant shall cooperate to prevent the same.
23. There should not be used in the public or common areas of the
Building, either by any tenant or by others, in the delivery or receipt of
merchandise, any hand trucks except those equipped with rubber tires and side
guards.
24. Except while loading and unloading vehicles, there shall be no
parking of vehicles or other obstructions placed in the loading dock area.
25. Directories will be placed by Landlord, at Landlord's own
expense, in conspicuous places in the Building. No other directories shall be
permitted.
26. Tenants shall not do anything, or permit anything to be done, in
or about the Building, or bring or keep anything therein, that will in any way
increase the possibility of fire or other casualty or obstruct or interfere
with the rights of, or otherwise injure or annoy, other tenants, or do anything
in conflict with the valid pertinent laws, rules, or regulations of any
governmental authority.
27. Should a tenant require telegraphic, telephonic, annunciator, or
any other communication service, Landlord will direct the electricians and
installers where and how the wires are to be introduced and placed, and none
shall be introduced or placed except as Landlord shall direct.
28. Business machines and mechanical equipment belonging to Tenant
which cause noise and/or vibration that may be transmitted to the structure of
the Building or to any leased space so as to be objectionable to Landlord or
any tenants in the Building shall be placed and maintained by such Tenant, at
such Tenant's expense, in settings of cork, rubber, or spring-type noise and/or
vibration eliminators sufficient to eliminate vibration and/or noise.
Page Three of Four
<PAGE> 43
29. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant, before occupying the
Premises, shall procure and maintain such license or permit and submit it for
Landlord's inspection. Tenant shall at all times comply with the terms of any
such license or permit.
30. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
Building.
31. Only warm white lamps may be used in any fixture that may be
visible from outside the Building, or from the Building's central atrium.
32. Nothing may be placed on or about the balcony areas of the
Building, if any, without Landlord's or the Building manager's prior written
approval.
33. Tenant shall keep all portions of the Premises which are visible
from the Building's central atrium in a tasteful, neat and orderly condition
characteristic of first-class professional offices, so as not to be offensive
to other tenants of the Building. No desks, bookcases, file cabinets or other
furniture shall be placed against the glass surrounding the Building's central
atrium.
34. Tenant shall not install or maintain any blinds, curtains or any
other window covering on those windows of the Premises which are visible from
the Building's central atrium.
35. Landlord reserves the right to rescind any of these Rules and
Regulations and make such other and further rules and regulations as in the
judgment of Landlord shall from time to time be needed for the safety,
protection, care, and cleanliness of the Building, the operation thereof, the
preservation of good order therein, and the protection and comfort of its
tenants, their agents, employees, and invitees, which Rules and Regulations
when made and notice thereof given to a tenant shall be binding upon him in
like manner as if orginally herein prescribed. In the event of any conflict,
inconsistency, or other difference between the terms and provisions of these
Rules and Regulations, as now or hereafter in effect and the terms and
provision of any lease now or hereafter in effect between Landlord and any
tenant in the Building, Landlord shall have the right to rely on the term or
provisions in either such lease or such Rules and Regulations which is most
restrictive on such tenant and most favorable to Landlord.
36. In the event of any conflict or inconsistency between the terms
and provisions of these Rules and Regulations, as now or hereafter in effect,
and the terms and provisions of the lease to which these Rules and Regulations
are attached, the terms and provisions of such lease shall prevail.
Page Four of Four
<PAGE> 44
EXHIBIT E
INTENTIONALLY DELETED
<PAGE> 45
EXHIBIT F
TO BE PROVIDED BY LANDLORD
