SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number
1-8232
Name of Registrant
NBI, INC.
State of Incorporation IRS Employer I. D. Number
Delaware 84-0645110
Address
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
(303) 684-2700
Check whether the issuer (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.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 14, 1999
----- -------------------------------
Common Stock, par value $.01 per share 8,088,320
Preferred Stock, par value $.01 per share 500,000
<PAGE>
NBI, INC.
INDEX TO FORM 10-QSB
For Quarter Ended March 31, 1999
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
Consolidated Financial Statements (Unaudited) 3 - 6
Supplementary Notes to Consolidated Financial
Statements (Unaudited) 7 - 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations 13 - 16
PART II - OTHER INFORMATION 17
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
---------- ----------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,884 $ 209
Accounts receivable, less allowance for doubtful
accounts of $239 and $69, respectively 1,539 1,375
Inventories 2,874 2,750
Other current assets 249 156
Net current assets of discontinued operations 28 --
-------- --------
Total current assets 6,574 4,490
Property, plant and equipment, net 7,828 7,436
Other assets 174 279
Net long-term assets of discontinued operations 8 --
-------- --------
$14,584 $12,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------
Current liabilities:
Short-term borrowings and current portion
of notes payable $ 1,950 $ 1,846
Current portion of IRS debt and other income taxes payable 1,818 3,527
Accounts payable 1,787 1,200
Accrued liabilities 984 796
-------- --------
Total current liabilities 6,539 7,369
Long-term liabilities:
Income taxes payable -- 1,778
Notes payable 1,241 1,351
Deferred income taxes 223 223
Postemployment disability benefits 174 184
-------- --------
Total liabilities 8,177 10,905
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares
authorized; 500,000 shares of Series A Cumulative Preferred
Stock issued and outstanding at March 31, 1999 5 --
Capital in excess of par value - preferred stock 4,843 --
Common stock - $.01 par value; 20,000,000 shares
authorized; 10,115,520 shares issued 101 101
Capital in excess of par value - common stock 6,280 6,280
Accumulated deficit (3,954) (4,213)
-------- --------
7,275 2,168
Less treasury stock at cost (2,027,200 shares) (868) (868)
-------- --------
Total stockholders' equity 6,407 1,300
-------- --------
$14,584 $12,205
======== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales $3,602 $ 3,086 $11,831 $ 9,170
Service and rental 463 429 1,715 1,584
------- -------- -------- -------
4,065 3,515 13,546 10,754
Costs and expenses:
Cost of sales 2,587 2,130 8,211 6,574
Cost of service and rental 378 389 1,257 1,205
Marketing, general and administrative 957 770 2,664 2,343
------- ------- -------- -------
3,922 3,289 12,132 10,122
------- ------- -------- -------
Income from operations 143 226 1,414 632
Other income (expense):
Net loss on investments (507) -- (507) (39)
Other income and expenses, net 20 3 73 27
Interest expense (62) (159) (202) (524)
------- ------- -------- -------
(549) (156) (636) (536)
------- ------- -------- -------
Income (loss) from continuing operations before
income tax benefit (provision) (406) 70 778 96
Income tax benefit (provision) (19) 5 (281) (44)
------- -------- -------- -------
Income (loss) from continuing operations (425) 75 497 52
Loss from discontinued operations,
net of income tax benefits of $0, $127, $123 and
$153, respectively -- (163) (238) (298)
------- -------- -------- -------
Net income (loss) $ (425) $ (88) $ 259 $ (246)
======= ======== ======== =======
Income (loss) per common share - basic:
Income (loss) before discontinued operations $ (.07) $ .01 $ .05 $ .01
Loss from discontinued operations -- (.02) (.03) (.04)
------- -------- -------- -------
Net income (loss) $ (.07) $ (.01) $ .02 $ (.03)
======= ======== ======== =======
Income (loss) per common share - diluted:
Income (loss) before discontinued operations $ (.07) $ .01 $ .04 $ .01
Loss from discontinued operations -- (.02) (.03) (.04)
------- -------- -------- -------
Net income (loss) $ (.07) $ (.01) $ .01 $ (.03)
======= ======== ======== =======
Weighted average number of common
shares outstanding 8,088 8,088 8,088 8,073
======= ======== ======== =======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 259 $(246)
Adjustments to reconcile net income (loss) to net cash
flow provided by (used in) operating activities:
Depreciation and amortization 620 546
Provision for bad debts and returns 190 71
Provision for writedown of inventory 154 34
Provision for writedown of note receivable -- 10
Provision for impairment of property and equipment and other
long-term assets 53 167
Loss (gain) on sales of property and equipment (8) 51
Net unrealized gain on trading securities -- (53)
Compensation expense related to stock option extensions -- 48
Other 12 (2)
Changes in assets -- decrease (increase):
Accounts receivable (355) (351)
Inventory (308) (125)
Other current assets (126) (6)
Other assets 64 (74)
Changes in liabilities -- (decrease) increase:
Obligations for short-sale transactions -- (58)
Accounts payable and accrued liabilities 936 286
Income tax related accounts (3,487) (169)
-------- ------
Net cash flow provided by (used in) by operating activities (1,996) 129
-------- ------
Cash flows from investing activities:
Proceeds from sales of property and equipment 16 2
Purchases of property and equipment (1,164) (875)
-------- ------
Net cash flow used in investing activities (1,148) (873)
-------- ------
Cash flows from financing activities:
Collections on note receivable 5 4
Proceeds from issuance of preferred stock, net of offering costs 4,848 --
Proceeds from borrowings -- 100
Proceeds from stock option exercises -- 29
Payments on notes payable (196) (207)
Net borrowings (payments) on line of credit 181 645
-------- ------
Net cash flow provided by (used in) financing activities 4,838 571
-------- ------
Net increase (decrease) in cash and cash equivalents 1,694 (173)
Increase in cash and cash equivalents included in net current assets of
discontinued operations at March 31, 1999 (19) --
Cash and cash equivalents at beginning of period 209 333
-------- ------
Cash and cash equivalents at end of period $ 1,884 $ 160
======== ======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid $ 196 $ 284
====== ======
Income taxes paid $3,612 $ 85
====== ======
Noncash purchases of property, plant and equipment included in
accounts payable at end of period $ 123 $ 58
====== ======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Preparation
- - ----------------------------------
The accompanying financial statements have been prepared in accordance with
the requirements of Form 10-QSB and include all adjustments (consisting of all
normal recurring adjustments) which in the opinion of management are necessary
in order to make the financial statements not misleading. The consolidated
financial statements include the accounts of the Company and its wholly-owned
and majority-owned subsidiaries. All significant intercompany accounts and
profits have been eliminated.
Note 2 - Discontinued Operations
- - ------------------------------------
On February 1, 1999, the Company established a plan to dispose of its Krazy
Colors, Inc. operation. Therefore, it has separately reported the losses from
this segment as discontinued operations for the three and nine months ended
March 31, 1999 and 1998. The Company has estimated the net realizable value
of the disposal of the discontinued operation, including estimated costs and
expenses directly associated with the disposal and estimated losses from
operations through the disposal date, and has recorded losses from
discontinued operations as follows:
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C>
Revenues $11 $ 74 $ 106 $ 256
=== ====== ====== ======
Loss from operations before income taxes $-- (290) (163) (451)
Income tax benefit -- 127 56 153
--- ------ ------ ------
Loss from operations -- (163) (107) (298)
Estimated loss on disposal (including
provision for operating losses
through disposition date) -- -- (198) --
Income tax benefit -- -- 67 --
--- ------ ------ ------
Loss from discontinued operations $-- $(163) $(238) $(298)
=== ====== ====== ======
</TABLE>
Note 3 - Cash and Cash Equivalents
- - ----------------------------------------
Cash and cash equivalents include investments that are readily convertible to
known amounts of cash and have original maturities of six months or less. The
Company places its cash and temporary cash investments with financial
institutions. At times, such investments may be in excess of federally
insured limits.
Note 4 - Investments in Securities and Obligations from Short-Sale
- - ---------------------------------------------------------------------------
Transactions
- - ------------
During the nine months ended March 31, 1999 and 1998, all of the Company's
securities were classified as trading securities; no securities were
classified as held-to-maturity or available for sale. The Company recorded a
net realized loss of $507,000 and no unrealized gain or loss during the three
and nine months ended March 31, 1999. The Company held no investments and had
no realized or unrealized gains or losses for the quarter ended March 31,
1998. An unrealized gain of $53,000 and a realized loss of $92,000 were
recorded for the nine months ended March 31, 1998.
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As part of its investment policy, the Company's investment portfolio may
include option instruments and may include a concentrated position in one or
more securities. As a result of this, the financial results may fluctuate
significantly and have larger fluctuations than with a more diversified
portfolio. In addition, the Company may invest in short-sale transactions of
trading securities. Short-sales can result in off-balance sheet risk, as
losses can be incurred in excess of the reported obligation if market prices
of the securities subsequently increase. At March 31, 1999, the Company had
no investment positions.
Note 5 - Inventories
- - -----------------------
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31,
1999
---------
(Amounts in thousands)
<S> <C>
Raw materials $ 803
Work in process 552
Finished goods 1,500
Food and beverage inventory 19
------
$2,874
======
</TABLE>
Note 6 - Income Taxes
- - -------------------------
IRS Debt:
- - ----------
On April 28, 1998, the Company and the Internal Revenue Service ("IRS")
entered into an amended payment agreement, revising the payment terms related
to NBI Inc.'s IRS debt of $5,278,000. This agreement, effective as of April
9, 1998, revised the terms of the agreement in principal with the IRS
effective October 1, 1995 and the original settlement agreement with the IRS
dated June 12, 1991, with respect to NBI's federal tax liabilities for the
fiscal years ended June 30, 1980 through 1988. Under the new agreement,
$3,500,000 of the IRS debt was due on or before December 31, 1998, and the
remaining balance of $1,778,000 is due on or before December 31, 1999. The
IRS debt continues to be collateralized by a security interest in all of the
capital stock of American Glass, Inc., d/b/a/ L.E. Smith Glass Company, and
NBI Properties, Inc. Provided no event of default occurs prior to payment of
the IRS debt in full, NBI will not be obligated to pay any past, current or
future interest related to the debt. On December 31, 1998, the Company paid
the IRS the $3.5 million installment due on that date from the proceeds of its
preferred stock offering (see Note 8).
Income tax provision:
- - -----------------------
For the nine months ended March 31, 1999 and 1998, the Company recorded
provisions for income taxes from continuing operations of $281,000 and
$44,000, respectively. These provisions include state and other income taxes
and are based upon book income.
In accordance with fresh start accounting, which was adopted as of April 30,
1992, and as a result of the Company's reorganization under Chapter 11 of the
U.S. Bankruptcy Code, utilization of any income tax benefit from
pre-reorganization net operating losses is not credited to the income tax
provision, but rather, reported as an addition to capital in excess of par
value. No pre-reorganization net operating losses were utilized for the nine
months ended March 31, 1999 and 1998.
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Commitments and Contingencies
- - -------------------------------------------
In March 1999, Willowbrook Properties, Inc. d/b/a NBI Development ("NBI
Development"), a wholly-owned subsidiary of the Company, entered into a lease
agreement with a national grocery store chain to lease a significant portion
of the expected total rentable square footage of the first phase of NBI
Development's land development project. The lease is contingent upon NBI
Development's completion of a suitable building pad for the tenant by July 1,
1999. The agreement provides the tenant a set construction allowance from NBI
Development which they will use to construct the building. The tenant is
required to begin paying rent on the earlier of (a) the tenant's opening of
the building for business with the public; or (b) the later of (i) ten months
after NBI Development delivers a completed building pad to the tenant; (ii)
all improvements to the common areas necessary for operation of the
supermarket to be operating in the building are completed; and (iii) all
improvements shown on the highway occupancy permit are completed.
In April 1999, NBI Development entered into a construction contract for site
work totaling $1.2 million on phase one of its land development project. This
site work is scheduled to be completed no later than August 20, 1999. NBI
Development is required to make monthly progress payments based upon the work
completed.
Note 8 - Stockholders' Equity
- - ---------------------------------
The Company has authorized 20,000,000 shares of $.01 par value common stock.
At March 31, 1999, 10,115,520 shares were issued including 2,027,200 held in
treasury. Therefore, the Company had 8,088,320 shares issued and outstanding
at March 31, 1999.
At the Company's annual meeting held on October 14, 1998, the stockholders
approved an amendment to the Company's Certificate of Incorporation
authorizing issuance of up to 5,000,000 shares of preferred stock with a par
value of $.01 per share. The Company has designated 2,000,000 preferred
shares as Series A Cumulative Preferred Stock with cumulative dividends from
the date of original issue, accruing semi-annually, commencing June 30, 1999,
and each December 31 and June 30 thereafter, at the annual rate per share of
either (a) $1.00 in cash, or (b) .11 additional shares of Series A Preferred
Stock, at the option of the holder, until December 31, 2004. Subsequent to
December 31, 2004, the annual dividend rate per share will increase to either
(a) $1.10 in cash or (b) .12 additional shares of Series A Preferred Stock,
at the option of the holder. The Series A Cumulative Preferred Stock has a
liquidation preference of $10 per share and is entitled to receive all accrued
and unpaid dividends through the date of distribution. In addition, the
Series A Cumulative Preferred Stock is redeemable at the option of the Company
beginning January 1, 1999. The redemption price would be as follows for each
calendar year: $11.00 per share if redeemed in 1999, $10.80 in 2000, $10.60 in
2001, $10.40 in 2002, $10.20 in 2003, and $10.00 in 2004 or thereafter.
The Company has registered and reserved 1,000,000 shares of the Series A
Cumulative Preferred Stock through its Registration Statement on Form SB-2,
effective November 9, 1998, in connection with its public offering of units
consisting of (a) one share of the Series A Cumulative Preferred Stock, and
(b) two warrants to purchase the Company's common stock at $1.20 per share.
In addition, 550,000 shares of the Series A Cumulative Preferred Stock and
2,000,000 shares of the Company's common stock have been registered and
reserved for payment-in-kind of the preferred stock dividends and for the
exercise of the common stock purchase warrants, respectively.
As of March 31, 1999, the Company had sold 500,000 units and thus issued
500,000 shares of Series A Cumulative Preferred Stock and 1,000,000 common
stock purchase warrants in connection with this offering. The sale of these
units resulted in net proceeds of $4.8 million. The Company filed the related
amendments to its Certificate of Incorporation and Certificate of Designation
with the Delaware Secretary of State during the quarter ended December 31,
1998.
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The stockholders also approved an amendment that allows the Company to effect
a reverse stock split of either 1 for 2.5, 1 for 3, or 1 for 4 shares, at the
discretion of the Board of Directors. Further, the Board of Directors has the
discretion not to effect a reverse stock split, and to-date, has not taken any
action regarding this matter.
Note 9 - Net Income (Loss) Per Common Share
- - ---------------------------------------------------
During the Company's second quarter of fiscal 1998, NBI, Inc. adopted
Statement of Financial Accounting Standards ("SFAS") No. 128 issued by the
Financial Accounting Standards Board. SFAS No. 128 provides for the
calculation of "Basic" and "Diluted" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income (loss) available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of the entity, similar
to fully diluted earnings per share.
The following reconciles the numerators and denominators of the basic and
diluted earnings per common share computation for net income:
<TABLE>
<CAPTION>
For the three months ended
March 31,
1999 1998
---- ----
Basic Diluted Basic Diluted
----- ------- ----- -------
(Amounts in thousands
except per share data)
<S> <C> <C> <C> <C>
Income (loss) before discontinued operations $ (425) $ (425) $ 75 $ 75
Less preferred stock dividends (126) (126) -- --
------- ------- ------ ------
Income (loss) before discontinued operations available
to common stockholders $ (551) $ (551) $ 75 $ 75
======= ======= ====== ======
Weighted average number of common
shares outstanding 8,088 8,088 8,088 8,088
======= ======
Assumed conversions of stock options -- 150
------- ------
8,088 8,238
======= ======
Income (loss) per common share
before discontinued operations $ (.07) $ (.07) $ .01 $ .01
======= ======= ====== ======
<FN>
Because the Company incurred a net loss before discontinued operations for the three
months ended March 31, 1999, none of its outstanding options or warrants were included
in the computation of diluted earnings per share as their effect would be anti-dilutive.
For the three months ended March 31, 1998, only the options with exercise prices of
$.25, $.38, $.59 and $.77 were included in the computation of diluted earnings per share
because their exercise prices were less than the average market price of the common
stock during such period.
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
March 31,
1999 1998
---- ----
Basic Diluted Basic Diluted
----- ------- ----- -------
(Amounts in thousands
except per share data)
<S> <C> <C> <C> <C>
Income (loss) before discontinued operations $ 497 $ 497 $ 52 $ 52
Less preferred stock dividends (126) (126) -- --
------- ------- ------ ------
Income (loss) before discontinued operations available
to common stockholders $ 371 $ 371 $ 52 $ 52
======= ======= ====== ======
Weighted average number of common
shares outstanding 8,088 8,088 8,073 8,073
======= ======
Assumed conversions of stock options 381 127
------- ------
8,469 8,200
======= ======
Income (loss) per common share
before discontinued operations $ .05 $ .04 $ .01 $ .01
======= ======= ====== ======
<FN>
For the nine months ended March 31, 1999, all stock options and warrants outstanding,
except for the warrants with an exercise price of $1.20, were included in the
computation of diluted earnings per share, while only the options with exercise prices
of $.25, $.38, and $.59 were included in same period of the prior fiscal year, because
their exercise prices were less than the average market price of the common stock during
such periods.
</TABLE>
The options and warrants outstanding at March 31, 1999 were as follows:
<TABLE>
<CAPTION>
Number
Exercise Outstanding at
Price March 31, 1999
----- ----------------
<S> <C>
Stock options:
.38 216,000
.59 100,500
.77 400,000
.88 244,000
Warrants:
.89 1,700,000
1.20 1,000,000
---------
3,660,500
=========
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10 - Comprehensive Income
- - ----------------------------------
Effective July 1, 1998, the Company has adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income includes all
changes in equity except those resulting from investments by owners and
distribution to owners. For the nine months ended March 31, 1999 and 1998,
the Company had no items of comprehensive income other than net income;
therefore, a separate statement of comprehensive income has not been presented
for these periods.
Note 11 - Seasonal Variations of Operations
- - -------------------------------------------------
L.E. Smith Glass Company ("L.E. Smith") and the Belle Vernon Holiday Inn
typically have their strongest revenue performance during the first fiscal
quarter due to seasonal variations in these businesses. Generally, the second
and fourth fiscal quarters' revenues from these operations are moderately
lower than in the first quarter, while the third fiscal quarter's revenue is
usually significantly lower than the other quarters. However, in fiscal 1998,
L.E. Smith received several large orders from its significant customer during
the historically slower quarters, which created a more consistent revenue
stream for the year. In addition, during the second quarter of fiscal 1999,
L.E. Smith experienced a significant increase in revenues compared to the
first quarter of fiscal 1999, primarily due to a significant increase in
revenues from its significant customer. The Company is unsure whether these
trends will continue. However, the Company does expect a significant decline
in revenues from L.E. Smith during the fourth quarter of fiscal 1999 due to a
significant decline in projected revenues from its major customer.
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER, FISCAL YEAR 1999
The statements in this discussion contain both historical and
"forward-looking" statements, as such term is defined in "The Private
Securities Litigation Reform Act of 1995". The forward-looking statements are
based upon current expectations and the actual results could differ materially
from those anticipated. Factors that may affect such forward-looking
statements include, among others, ability to obtain financing, loss of
significant customers, reliance on key personnel, competitive factors and
pricing pressures, availability of raw materials, labor disputes, investment
results, adequacy of insurance coverage, inflation and general economic
conditions.
RESULTS OF OPERATIONS
Revenues from continuing operations for the third quarter of fiscal year 1999
increased $550,000, or 15.6%, to $4.1 million, from $3.5 million in the third
quarter of the prior fiscal year. Year-to-date, revenues totaled $13.5
million for the nine months ended March 31, 1999, an increase of $2.8 million,
or 26.0%, compared to the same period of fiscal 1998.
The revenue improvement was primarily attributable to increased sales revenue
from L.E. Smith. Sales revenue from L.E. Smith increased $516,000, or 16.7%,
to $3,602,000 for the third quarter of fiscal 1999, and increased $2,661,000,
or 29.0%, to $11,831,000 for the nine months ended March 31, 1999, compared to
the same periods in the previous fiscal year. The increased volume at L.E.
Smith included a significant amount of revenue growth from both new and
existing customers. Fiscal year-to-date, L.E. Smith experienced a moderate
increase in orders from its largest customer when compared to fiscal 1998;
however, L.E. Smith had a moderate decline in orders from this customer during
the third quarter of fiscal 1999, compared to the same period in fiscal 1998.
Service and rental revenue from continuing operations increased moderately
from $429,000 and $1,584,000 for the three and nine months ended March 31,
1998, respectively, to $463,000 and $1,715,000 for the same periods in fiscal
year 1999. The revenue growth was related to a significant increase in both
occupancy rates and average daily room rates of the Belle Vernon Holiday Inn
primarily resulting from higher Holiday Inn Priority Club business due to
increased marketing efforts. During the third quarter of fiscal 1999,
however, this improvement was partially offset by a moderate decline in
restaurant and bar business resulting from increased local competition.
Total revenues from continuing operations are expected to decrease
significantly for the three months ended June 30, 1999, compared to the same
period in the prior fiscal year, due to a substantial decline in revenue
expected from L.E. Smith's major customer, partially offset by increased
revenues from L.E. Smith's other customers, as L.E. Smith expects to maintain
the revenue growth from these customers generated during fiscal 1999. This
decline is also expected to be slightly offset by a small increase in hotel
room revenues from the Belle Vernon Holiday Inn. Revenues for the fourth
quarter of fiscal 1999 are expected to decrease substantially compared to the
third quarter of fiscal 1999, due to the substantial decline in revenues
expected from L.E. Smith's major customer, with steady revenues from L.E.
Smith's other customers, partially offset by increased revenues from the Belle
Vernon Holiday Inn resulting from seasonal variations. The Company does not
expect the decline in revenue from L.E. Smith's major customer to be ongoing.
Cost of sales, service and rental was $3.0 million, or 72.9% of total revenue
from continuing operations, and $9.5 million, or 69.9% of total revenue, for
the three and nine months ended March 31, 1999, respectively. Comparable
figures for the same periods in fiscal 1998 were $2.5 million and $7.8
million, or 71.7% and 72.3% of total revenues, respectively.
Cost of sales as a percentage of sales revenue for the three and nine months
ended March 31, 1999 was 71.8% and 69.4%, respectively, compared to 69.0% and
71.7% for the same periods in fiscal 1998. L.E. Smith experienced a decline
in gross margin for the third quarter of fiscal 1999 when compared to fiscal
1998, primarily because the revenue growth was insufficient to cover the
general cost increases including increased labor costs associated with a new
labor contract. However, the improvement in gross margin year-to-date was
primarily due
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER, FISCAL YEAR 1999 - CONTINUED
to increased volume and production efficiency for the nine months ended March
31, 1999, causing favorable absorption of fixed costs, partially offset by
general cost increases including increased labor costs associated with the new
labor contract.
Cost of service and rental as a percentage of service and rental revenue was
81.6% and 73.3% for the three and nine months ended March 31, 1999,
respectively, compared to 90.7% and 76.1% for the same periods in the prior
fiscal year. The improvement in the related gross margin was primarily due to
the increased rooms revenue volume available to cover fixed costs, partially
offset by general cost increases. This was also partially offset by a
moderate decline in the gross margin from its restaurant and bar business, due
to general cost increases, without a corresponding increase in related
revenues.
Cost of sales, service and rental as a percentage of total revenue from
continuing operations for the fourth quarter of fiscal 1999 is expected to be
significantly higher, compared to the fourth quarter of fiscal 1998, due to
lower margins expected from L.E. Smith resulting primarily from lower
projected revenues, anticipated close-out sales of old inventory at low
margins and general cost increases. Cost of sales, service and rental as a
percentage of total revenue for the fourth quarter of fiscal 1999 is expected
to be moderately higher compared to the third quarter of fiscal 1999 due to
projected lower revenue volume, anticipated close-out sales of old inventory
at low margins and general cost increases at L.E. Smith, partially offset by
increased revenue volume at the Belle Vernon Holiday Inn available to cover
its fixed costs.
Marketing, general and administrative expenses from continuing operations
totaled $957,000 and $770,000 for the three months ended March 31, 1999 and
1998, respectively, reflecting an increase of $187,000. Year-to-date,
marketing, general and administrative expenses totaled $2,664,000 for the nine
months ended March 31, 1999, an increase of $321,000 compared to expenses of
$2,343,000 for the same period of fiscal 1998. The increase in expenses
included an additional bad debt provision of $127,000 recorded by L.E. Smith
during the third quarter of fiscal 1999, resulting from a customer's
declaration of Chapter 11 bankruptcy in March 1999. In addition, the Company
experienced increased expenses associated with higher revenues at both L.E.
Smith and the Belle Vernon Holiday Inn, including increased sales commissions,
product development expenses, franchise and royalty fees and other sales and
marketing expenses. Also during fiscal 1999, the Company had a decline in
credits related to a reduction of a reserve for incurred but not reported
claims, because the Company previously converted to a fully-insured health
plan for its corporate and Krazy Colors employees. These increases were
partially offset by the absence of executive severance accrued during the
second quarter of fiscal 1998 and the absence of a non-cash compensation
expense for extensions of certain executive stock options included in the
first and third quarters of fiscal 1998.
Marketing, general and administrative expenses from continuing operations are
expected to increase moderately for the three months ended June 30, 1999,
compared to the same period in the prior fiscal year, primarily due to
increased sales and marketing activities and general cost increases.
Marketing, general and administrative expenses are expected to decrease
substantially in the fourth quarter of fiscal 1999 compared to the third
quarter of fiscal 1999, primarily due to the projected decline in bad debt
provisions and lower sales and marketing expenses resulting from the expected
decline in revenues.
The Company recorded a realized loss on investments of $507,000 for the three
and nine months ended March 31, 1999. No gain or loss on investments was
recorded during the quarter ended March 31, 1998; however, the Company had a
net loss on investments of $39,000 for the nine months ended March 31, 1998.
As part of its investment policy, the Company's investment portfolio may
include investments in option instruments and may include a concentrated
position in one or more securities. As a result of this, the financial
results may fluctuate significantly and have larger fluctuations than with a
more diversified portfolio. In addition, the Company may invest in short-sale
transactions of trading securities. Short-sales can result in off-balance
sheet risk, as losses can be incurred in excess of the reported obligation if
market prices of the securities subsequently increase. At March 31, 1999, the
Company had no investment positions.
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER, FISCAL YEAR 1999 - CONTINUED
Interest expense totaled $62,000 and $202,000 for the three and nine months
ended March 31, 1999, respectively, compared to $159,000 and $524,000 for the
same periods in the prior fiscal year. The decline was primarily related to
the absence of interest on the Company's IRS debt during fiscal 1999,
resulting from the restructured agreement with the IRS in April, 1998.
The Company recorded income tax provisions from continuing operations of
$19,000 and $281,000 for the three and nine months ended March 31, 1999,
respectively, compared to an income tax benefit of $5,000 for the third
quarter of fiscal 1998 and an income tax provision of $44,000 for the nine
months ended March 31, 1998. Included in these amounts are state provisions
of $19,000 and $158,000 for the three and nine months ended March 31, 1999,
respectively, compared to $34,000 and $91,000 for the same periods in fiscal
1998. The state income tax provisions are primarily related to the Company's
Pennsylvania operations and are based upon book income, as NBI does not have
any net operating loss carryforwards available in Pennsylvania. The Company
does have significant federal net operating loss carryforwards, as well as
significant net operating loss carryforwards in several states, and,
therefore, has no federal or other state income taxes payable. In accordance
with fresh start accounting, the income tax benefit and provisions recorded do
include non-cash charges to the extent that the Company expects to use its
pre-reorganization net operating loss carryforwards. These charges are
reported as an addition to capital in excess of par value, rather than as a
credit through the income tax provision. There were no non-cash components
included in the income tax provisions for the three and nine months ended
March 31, 1999 or 1998.
DISCONTINUED OPERATIONS
On February 1, 1999, the Company established a plan to dispose of its Krazy
Colors, Inc. operation. Therefore, it has separately reported the operating
losses from this segment as discontinued operations for the three and nine
months ended March 31, 1999 and 1998. The Company also recorded an estimated
loss on disposal at December 31, 1998 based upon the estimated net realizable
value of the discontinued operation, including estimated costs and expenses
directly associated with the disposal and estimated losses from operations
through the disposal date. Losses from discontinued operations totaled $0 and
$238,000, for the three and nine months ended March 31, 1999, respectively,
net of income tax benefits of $0 and $123,000, respectively. This compares to
losses of $163,000 and $298,000 for the three and nine months ended March 31,
1998, respectively, net of income tax benefits of $127,000 and $153,000,
respectively.
At March 31, 1999, the net current assets of discontinued operations
consisted primarily of cash and receivables net of accounts payable and
accrued liabilities and the net long-term assets of discontinued operations
consisted primarily of equipment.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Total assets increased $2.4 million during the first nine months of fiscal
1999, from $12.2 million at June 30, 1998, to $14.6 million at March 31, 1999.
The Company had working capital of $35,000 at March 31, 1999, compared to
negative working capital of $2.9 million at June 30, 1998. The improvement in
working capital was primarily related to a public offering of preferred stock
with an initial closing on December 31, 1998 which raised $5.0 million, before
associated expenses, of which $3.5 million was used to pay an installment on
the IRS debt which was due on or before that date (see Notes 6 and 8). This
improvement in working capital was partially offset by the reclassification of
the remaining IRS debt of $1.8 million to current liabilities at December 31,
1998.
The Company has a final installment of $1.8 million on the IRS debt which is
due on or before December 31, 1999. The Company expects to pay this
installment from a combination of cash on hand and internally generated funds,
including cash potentially available from L.E. Smith through dividend payments
to the parent Company. In addition, the Company may raise additional funds by
selling additional preferred stock through its outstanding preferred stock
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER, FISCAL YEAR 1999 - CONTINUED
offering. However, there can be no assurance that the Company will have
sufficient funds available or be able to raise sufficient funds to pay the
final installment on the IRS debt when due. The Company's ability to continue
as a going concern is dependent upon satisfaction of the IRS debt when due.
The Company expects to pay the cash dividends on its recently issued preferred
stock through existing working capital, internally generated funds, including
cash potentially available from L.E. Smith through dividend payments to the
parent Company.
The Company is currently pursuing various financing options for its real
estate development activities of its NBI Development Corporation subsidiary.
It is currently funding the construction activity out of existing cash;
however, it will be necessary to obtain financing in late fiscal 1999 or early
fiscal 2000 to enable the Company to complete phase one of the development.
The Company expects its other working capital requirements in the next fiscal
year to be met by existing working capital at March 31, 1999, internally
generated funds and, for L.E. Smith Glass Company's requirements, short-term
borrowings under an existing line of credit.
YEAR 2000 COMPLIANCE
The Company has completed a review and risk assessment of all technology items
used in its operations. The Company believes that the year 2000 issue will
pose no significant operational problems. Substantially all of the machinery
and equipment used by L.E. Smith's glass manufacturing operation is manually
controlled and operated. In addition, the hotel operation is not
significantly reliant on computer technology, with the exception of its
reservation system, which is maintained and upgraded under a contract with
Holiday Inns Franchising, Inc. Holiday Inns Franchising, Inc. has recently
completed the upgrades necessary to make the reservation system Year 2000
compliant. The primary effect of the year 2000 issue is on the Company's
accounting systems.
Year 2000 compliance will primarily be accomplished through purchases of new
equipment and data processing hardware and software upgrades, with an
estimated aggregate cost of approximately $225,000, approximately $160,000 of
which has already been purchased and most of which was previously planned and
necessitated by other technological needs of the Company. The upgrading or
replacement of equipment which is non-compliant, as well as the related
testing of such equipment is expected to be substantially completed during
fiscal 1999.
The Company's internal operations and business are also dependent upon the
computer-controlled systems of third parties such as suppliers, customers and
service providers. Management believes that absent a systemic failure outside
the control of these parties, such as a prolonged loss of electrical or
telephone service, year 2000 problems at such third parties will not have a
material impact on the Company. The Company has no contingency plan for
systemic failures such as a loss of electrical or telephone service. The
Company's contingency plan in the event of a non-systemic failure is to
establish relationships with alternative suppliers or vendors to replace
failed suppliers vendors.
L.E. Smith currently has one customer of such significance that if such
customer were to experience year 2000 problems resulting in the cancellation
or deferral of orders, it could materially adversely affect the results of
operations of the Company. The Company has discussed the year 2000 issue with
this and other material customers and vendors and currently does not
anticipate any significant problems. In addition, the Company will continue
to review the status of the year 2000 issues with these and other customers
and vendors.
<PAGE>
NBI, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-------- -------------------------------------
(a) Exhibits
10. Shopping Center Lease with SuperValu Holdings Inc. (1)
27. Financial Data Schedule(1)
(b) No reports on Form 8-K were filed during the quarter ended March 31,
1999 or subsequently.
- - ----------------------------------
(1) Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBI, INC.
May 17, 1999 By: /s/ Marjorie A. Cogan
- - -------------- --------------------------------------
(Date) Marjorie A. Cogan
As a duly authorized officer
Chief Financial Officer, Secretary
SHOPPING CENTER LEASE
ROSTRAVER TOWNSHIP, PENNSYLVANIA
between
SUPERVALU HOLDINGS, INC. as Tenant
and
WILLOWBROOK PROPERTIES, INC., D/B/A
NBI DEVELOPMENT CORPORATION as Landlord
Dated March 16, 1999
<PAGE>
SHOPPING CENTER LEASE
ROSTRAVER TOWNSHIP, PENNSYLVANIA
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Section Page
--------------------
1. Definitions (in alphabetical order) 1
1.1 Building 1
1.2 Building Area 1
1.3 Business Day 1
1.4 Common Areas 1
1.5 Construction Allowance 1
1.6 Construction Bid 1
1.7 Construction Cost 2
1.8 Construction Estimate 2
1.9 Default Rate 2
1.10 Environmental Law 2
1.11 Hazardous Substances 2
1.12 Laws and Rules 3
1.13 Outlots 3
1.14 Permitted Encumbrances 3
1.15 Premises 3
1.16 Rent Commencement Date 3
1.17 Rentable Feet 3
1.18 Shopping Center 3
1.19 Site Information 4
1.20 Site Plan 4
1.21 Supermarket Parking Lot 4
1.22 Tenant's Architect 4
1.23 Tenant's Plans 4
1.24 Tenant's Property 4
1.25 Tenant's Pro Rata Share 5
2. LEASE OF PREMISES; QUIET ENJOYMENT 5
2.1 Lease of Premises 5
2.2 Quiet Enjoyment 5
3. LEASE TERM; OPTIONS TO EXTEND; SURRENDER 5
3.1 Initial Term 5
3.2 Options to Extend 5
3.3 Surrender of Premises 6
4. REPRESENTATIONS AND WARRANTIES 6
4.1 Landlord's Representations and Warranties 6
4.2 Tenant's Representations and Warranties 8
4.3 Indemnity 8
5. TITLE AND SURVEY 9
6. CONSTRUCTION 9
6.1 Construction by Landlord and Tenant. 9
6.2 Site Information 10
6.3 Tenant's Plans 11
6.4 Tenant's Responsibilities 12
6.5 Payment 12
6.6 Excess Costs 12
6.7 Remedies 13
6.8 Right of Entry 14
7. SIGNS 14
7.1 Tenant's Sign 14
7.2 Pylon Sign 14
8. TENANT'S PROPERTY 15
9. USE 15
9.1 The Premises 15
9.2 Use Restrictions on the Shopping Center 16
9.3 Use Restrictions on the Shopping Center (other than the Premises) 17
9.4 Controlled Area 17
9.5 Use - Remedies 18
10. RENT 18
10.1 Minimum Rent 18
10.2 Rent Refund 18
11. TAXES 18
12. CAM CHARGES 20
12.1 Definition 20
12.2 Overhead Costs 21
12.3 Reimbursements 21
12.4 Bids 22
12.5 Budget and Payment 22
12.6 Statement 22
12.7 Books and Records; Audit 23
13. INSURANCE 23
13.1 Property Insurance 23
13.2 Liability Insurance 23
13.3 General Requirements 24
13.4 Certificates 24
13.5 Deductible 24
13.6 Tenant and Landlord Self-Insurance 25
14. INDEMNITY 25
14.1 Indemnity by Landlord 25
14.2 Indemnity by Tenant 25
15. LANDLORD'S COVENANTS 25
15.1 Hazardous Substances 25
15.2 Licenses and Permits 25
15.3 Shopping Center Buildings 25
15.4 Common Areas 25
15.5 Copies of Notices 25
15.6 Indemnity 25
16. REPAIRS AND MAINTENANCE 25
16.1 Landlord's Obligations for Building and Premises 25
16.2 Tenant's Obligations for Building 25
16.3 Landlord's Common Area Obligations 25
16.4 Parking Area Lighting 25
16.5 Emergency Repairs 25
16.6 Tenant's Option to Maintain Supermarket Parking Lot 25
17. ALTERATIONS 25
17.1 Right to Alter 25
17.2 No Mechanics' Liens 25
17.3 New Expansion Area 25
18. ASSIGNMENT AND SUBLETTING 25
19. DEFAULT 25
19.1 Default by Tenant 25
19.2 Remedies of Landlord 25
19.3 Monetary Default by Landlord 25
19.4 Non-Monetary Default by Landlord 25
19.5 Duty to Mitigate 25
19.6 Cumulative Remedies 25
19.7 Limitations on Damages 25
20. DAMAGE OR DESTRUCTION; RESTORATION 25
20.1 Casualty to Shopping Center (exclusive of the Building) 25
20.2 Casualty to the Building 25
20.3 Rent Abatement 25
20.4 Party Wall 25
20.5 Waiver of Claims; Subrogation 25
21. EMINENT DOMAIN 25
21.1 Taking 25
21.2 Termination 25
21.3 Restoration 25
21.4 Suspension of Business 25
21.5 Rent Abatement 25
21.6 Award 25
21.7 Mortgage Provisions 25
22. ESTOPPEL CERTIFICATES 25
23. SUBORDINATION 25
24. RECORDING 25
25. NOTICES 25
26. MISCELLANEOUS 25
26.1 Entire Agreement; Enforceability 25
26.2 Amendments 25
26.3 Binding Effect; No Third Party Beneficiaries 25
26.4 Waivers; Consents 25
26.5 Time of the Essence 25
26.6 Severability 25
26.7 Captions 25
26.8 Interpretation of including and day 25
26.9 Counterparts 25
26.10 Governing Law 25
26.11 No Partnership 25
27. NO OFFER 25
28. WAIVER OF TRIAL BY JURY 25
29. FORCE MAJEURE 25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS:
Exhibit Description of Exhibit Section
<S> <C> <C>
Exhibit A Legal Description of Shopping Center 1
Exhibit B Site Plan 1
Exhibit C Permitted Encumbrances 1
Exhibit D Survey Requirements 5
Exhibit E Site Design Criteria 6.1
Exhibit F Construction Completion Schedule 6.7
Exhibit G Gross Sales 10.1
Exhibit H Estoppel Certificate 22
Exhibit I Subordination Agreement 23
Exhibit J Memorandum of Lease 24
DEFINED TERMS WHOSE DEFINITIONS ARE NOT CONTAINED IN SECTION 1:
Defined Term Section
- - ---------------------------------------------------------------- ------------------------------------
Beneficial Occupancy 6.8.2
CAM Charges 12.1
Change Orders 6.5
Execution Date introductory paragraph
General Contractor 6.1
Gross Sales Exhibit G
Landlord introductory paragraph
Minimum Rent 10.1
New Expansion Area 17.3
Overhead Costs 12.2
Site Design Criteria 6.1
Subordination Agreement 23
Survey 5
Statement 12.6
Taking 21.1
Taxes 11
Tenant introductory paragraph
Title Defects 5
Title Insurer 5
Title Policy 5
</TABLE>
<PAGE>
SHOPPING CENTER LEASE
ROSTRAVER TOWNSHIP, PENNSYLVANIA
This Lease is entered into by SUPERVALU HOLDINGS, INC., a Missouri corporation
( Tenant ) and WILLOWBROOK PROPERTIES, INC., a Delaware corporation, d/b/a NBI
DEVELOPMENT CORPORATION ( Landlord ) as of the ______ day of March, 1999 (the
Execution Date").
Landlord and Tenant agree as follows:
1. DEFINITIONS (IN ALPHABETICAL ORDER)
As used in this Lease, the following terms shall have the following meanings:
1.1 Building
The building to be constructed by Tenant at the Premises in accordance with
the provisions of this Lease.
1.2 Building Area
The number of Rentable Feet in the Building, which will be no less than
forty-five thousand (45,000) and which shall not include the Expansion Area.
1.3 Building Pad
A pad-ready building area of approximately 45,000 square feet prepared in
accordance with the Site Design Criteria set forth on Exhibit E.
1.4 Business Day
A day on which the majority of businesses are open in the Commonwealth of
Pennsylvania, which shall not include Saturdays, Sundays or holidays
recognized by major businesses in the Commonwealth of Pennsylvania.
1.5 Common Areas
All areas of the Shopping Center which are not contained within the blue
lines of any building envelope on the Site Plan, including all parking areas,
utilities to the point where they enter a building, landscaped areas,
sidewalks, driveways and alleys. Common Areas shall also include all
easements, accesses, improvements, and rights serving or benefiting the
Shopping Center, even if not located at the Shopping Center.
1.6 Construction Allowance
An amount equal to Fifty Dollars ($50) times the Building Area.
<PAGE>
1.7 Construction Bid
A construction bid for the Building, which shall only include the following
expenses: the building shell; truck dock, dock pad, screening walls, trash
enclosures, building mounted signage (if any), roofing; flooring; interior and
exterior finishes; electric cabling; mechanical and electrical systems;
premiums for Builder's Risk Insurance and Labor/Material Payment and
Performance Bonds; building permit; water, sewer and utility hookup,
availability or tap fees; sidewalks and floodlights on the Premises; canopies
for the Building; standby fuel facilities, if required; the Contractor's
general conditions, not to exceed four percent (4%) of the remainder of the
Construction Bid amount exclusive of the Contractor's general profit and
overhead; and the Contractor's general profit and overhead, not to exceed four
percent (4%) of the remainder of the Construction Bid amount exclusive of the
Contractor's general conditions.
1.8 Construction Cost
The sum of (a) the Construction Bid which is accepted by Tenant, (b) the cost
of Tenant's Architect's services and expenses, and (c) the cost of Change
Orders.
1.9 Construction Estimate
The sum of (a) a Construction Bid, (b) $1.50 times the Building Area (which
amount is the estimated cost of Change Orders), and (iii) $2.50 times the
Building Area (which amount is the estimated cost of Tenant's Architect's
services and expenses).
1.10 Default Rate
The lesser of (a) the maximum interest rate permitted by law or (b) two
percent (2%) greater than the prime rate of interest announced by Norwest Bank
National Association from time to time as its prime rate for unsecured loans,
regardless of what rate such bank actually charges its customers.
1.11 Environmental Law
Any of the following (as the same may be amended from time to time): the
Comprehensive Environmental Response, Compensation and Liability Act of 1980;
the Super Fund Amendments and Reauthorization Act of 1986; the Federal
Resource Conservation and Recovery Act of 1986; the Clean Water Act; the Clean
Air Act; the Toxic Substances Control Act; any regulation promulgated by a
regulatory body pursuant to any Environmental Law; and any other Law or Rule
which relates to or deals with human health or the environment.
1.12 Hazardous Substances
Any of the following: asbestos; urea formaldehyde; petroleum hydrocarbons and
other petroleum products (including gasoline, diesel fuel, fuel oil, crude oil
and motor oil and constituents of those products); tetrachloroethylene;
polychlorinated benzyls; polychlorinated biphenyls; biological hazards;
nuclear fuel or materials; chemical, biological or medical wastes; radioactive
materials; explosives; known carcinogens; underground storage tanks; and all
dangerous, toxic or hazardous substances
<PAGE>
defined as hazardous or as a pollutant or contaminant in, or the release or
disposal of which is regulated by, any Environmental Law.
1.13 Landlord's Architect
Perkall Associates or such other architect selected by Landlord, acceptable
to Tenant in its reasonable discretion.
1.14 Laws and Rules
All present and future federal, state, and local laws, zoning requirements,
ordinances, rules, and regulations of any duly constituted authority affecting
or respecting the use or occupancy of the Premises or any business conducted
on the Premises, or affecting or respecting the Premises generally, whether or
not they also affect the use or occupancy of the Premises or the business
conducted thereon.
1.15 Outlots
The areas outlined in gray on the Site Plan.
1.16 Permitted Encumbrances
The matters described in Exhibit C.
1.17 Premises
That portion of the Shopping Center outlined in red on the Site Plan,
including access to the Premises and truck loading areas, and including the
Building and any other improvements constructed on the Premises now or in the
future.
1.18 Rent Commencement Date
The earlier of (a) Tenant's opening of the Building for business with the
public; or (b) the later of (i) ten months after Landlord delivers a completed
Building Pad to Tenant; (ii) all improvements to the Common Areas necessary
for operation of the supermarket to be operated in the Building (including all
three driveways) are completed; and (iii) all improvements shown on the
highway occupancy permit, including traffic signals, are completed.
1.19 Rentable Feet
The actual number of square feet of finished building space, including any
and all floors, but excluding mezzanines not used for sale purposes, measuring
each floor to the outside of exterior walls and to the center of any common
walls.
1.20 Shopping Center
The real property located in Rostraver Township, Pennsylvania and legally
described in Exhibit A, as outlined in brown on the Site Plan, together with
any and all buildings and improvements constructed thereon now or in the
future. The Shopping Center includes, and all provisions contained in this
Lease relating to the Shopping Center shall apply to, the Common Areas, the
Premises, the Building and all other areas included within the area outlined
in brown on the Site Plan.
<PAGE>
1.21 Site Information
All of the following: (1) Evidence that application has been made for a
Highway Occupancy Permit along with copies of the application and related
documents (Execution Date); (2) a certification from Landlord that there is no
building line or occupancy restriction, condition or covenant of record or any
physical matter which would interfere with or materially adversely affect the
construction or operation of the Shopping Center; (3) certified topographical
plan; (4) certified grading and drainage plans and building floor elevations
for the Shopping Center; (5) certified engineered utility plans for electric,
natural gas, sanitary and storm sewer, and domestic and fire protection water
for the Shopping Center; (6) plans for the exterior design of the buildings in
the Shopping Center (other than the Building and theater) and the structural
design of any building which will be adjacent to the Building (within 60 days
from the date Tenant submits Tenant's Plan to Landlord); (7) certified soil
borings and investigation reports; (8) certified compaction tests and reports
(to be submitted periodically during construction as produced); (9) certified
traffic studies; (10) any environmental assessments or reports in Landlord's
possession or control; (11) (a) evidence that Landlord has obtained Labor and
Industry Approval (90 days after Execution Date), (b) a final site plan, (c) a
building permit and (d) a certificate of occupancy for the Shopping Center
(exclusive of the Building, at the completion of construction of the Shopping
Center) (Tenant shall be responsible for the certificate of occupancy for the
Building); (12) site lighting plan, including photometrics; (13) landscaping
plans; and (14) certified Common Area plans and specifications. All Site
Information shall provide complete information with respect to the Shopping
Center in general and the Premises in particular.
1.22 Site Plan
The site plan attached hereto as Exhibit B.
1.23 Supermarket Parking Lot
The portion of the Common Area outlined in green on the Site Plan, including
any access drives, delivery and service areas, curbing and parking lot
lighting within such area.
1.24 Tenant's Architect
Planmark, Inc. or such other architect selected by Tenant, acceptable to
Landlord in its reasonable discretion.
1.25 Tenant's Plans
The plans and specifications for the construction of the Building, including
any addenda and Change Orders.
1.26 Tenant's Property
All fixtures, trade fixtures, machinery, equipment, furniture, sinks, signs,
sign standards, exterior lights, light standards, and other personal property
kept or installed on the Premises by Tenant.
<PAGE>
1.27 Tenant's Pro Rata Share
A fraction, the numerator of which is the Building Area, and the denominator
of which is the number of Rentable Feet in all buildings in the Shopping
Center (including the Building); provided that under no circumstances shall
said denominator be less than sixty-five thousand (65,000) regardless of the
actual amount of Rentable Feet in buildings in the Shopping Center at any
time.
2. LEASE OF PREMISES; QUIET ENJOYMENT
2.1 Lease of Premises
Landlord hereby demises and leases to Tenant, and Tenant hereby hires and
takes from Landlord, the Premises. Landlord also grants to Tenant, its
customers, licensees, invitees, subtenants and assigns, in common with other
tenants of the Shopping Center, the non-exclusive right to use the Common
Areas for ingress, egress and parking in designated areas.
2.2 Quiet Enjoyment
Except for any mortgage on the Shopping Center or any exclusive or other
agreement not prohibited by Section 9, Landlord will enter into no contract,
lease or agreement of any kind which materially adversely affect or limit
Tenant's use of the Premises or materially adversely affect or limit Tenant's
use of the Common Areas. Tenant acknowledges that the third driveway as
marked on the Site Plan will service properties other than the Shopping
Center. Upon paying the rent and performing the covenants agreed to be
performed by Tenant, Tenant shall peaceably and quietly have, hold and enjoy
the Premises and Common Areas of the Shopping Center until the expiration or
earlier termination of this Lease.
3. LEASE TERM; OPTIONS TO EXTEND; SURRENDER
3.1 Initial Term
The initial term of this Lease shall commence on the Execution Date and shall
end twenty (20) years after the Rent Commencement Date. Following the Rent
Commencement Date either party will confirm in writing, within thirty (30)
days after written request of the other party, the Rent Commencement Date, the
number of Rentable Feet in the Building Area and the Minimum Rent.
3.2 Options to Extend
Provided Tenant is not in default under this Lease, Landlord hereby grants to
Tenant the option to extend this Lease for one (1) period of five (5) years,
and one (1) period of four (4) years and ten (10) months, both upon the same
terms and conditions and at the rental as provided in Section 10.1, the first
such period commencing upon the expiration of the initial term. If Tenant
exercises an option to extend, Tenant shall notify Landlord of such exercise
in writing at least one hundred eighty (180) days in advance of the
commencement date of the applicable extension period; however, if Tenant fails
to provide Landlord with such one hundred eighty (180) day notice, Tenant's
right to extend this Lease by notice to Landlord shall remain in full force
and effect for a period of thirty (30) days after
<PAGE>
receipt by Tenant of subsequent written notice from Landlord setting forth
the expiration date of this Lease and advising Tenant that Landlord has not
received a notice of extension. If this Lease has been assigned, the original
Tenant must also execute the extension notice for such notice to be effective.
3.3 Surrender of Premises
Subject to the provisions of Section 8, at the expiration or earlier
termination of this Lease, Tenant shall surrender the Premises to Landlord
with those portions of the Premises which Tenant is responsible to maintain
under subsection 16.2 in broom-clean condition, in substantially as good
condition as when Tenant received the Premises from Landlord, subject to: (a)
reasonable wear and tear; (b) damage by fire or other casualty which is not
Tenant's responsibility to repair; (c) Landlord's repair, maintenance and
replacement obligations; and (d) damage or deterioration caused by the
negligence of Landlord or other occupants of the Shopping Center, or any of
their agents, employees, contractors, customers or invitees. Tenant shall not
be required to remove any additions or alterations or restore the Building or
the Premises to their original condition at the expiration or earlier
termination of this Lease; provided, however, if the Lease is terminated
because of Tenant's default within ten (10) years after the Rent Commencement
Date, Tenant shall restore the Premises to substantially its original
condition, reasonable wear and tear excepted. Tenant shall promptly remove
all of its equipment in the Premises at the expiration or earlier termination
of this Lease. Unless Landlord provides to Tenant, within thirty (30) days
following the expiration or earlier termination of this Lease, a notice
stating that the Premises were not surrendered in the condition required by
this Lease and specifically listing the portions of the Premises which are not
in such condition, the Premises shall be deemed to have been surrendered in
the condition required by this Lease. At the expiration or earlier
termination of the Lease, Tenant shall assign to Landlord all warranties for
property which remains in the Premises. Any alterations, equipment or
personal property remaining in the Premises after the termination of the
Lease, described in Landlord's notice and not timely removed by Tenant, shall
be deemed abandoned and may be removed and disposed of by Landlord at Tenant's
cost and expense, which cost and expense shall be paid within thirty days
after demand. Landlord shall have no obligation to store any such items.
4. REPRESENTATIONS AND WARRANTIES
4.1 Landlord's Representations and Warranties
Landlord hereby represents and warrants to Tenant that all of the following
are true, correct and complete on the Execution Date and shall be true,
correct and complete throughout the term of this Lease, as the same may be
extended pursuant to Section 3.2 hereof:
4.1.1 Title. As of the Execution Date, Landlord is the owner of the
Shopping Center in fee simple. As of the Execution Date, no part of the
Shopping Center is subject to any liens other than the Permitted Encumbrances
and matters which are subordinate to this Lease and the rights of Tenant
hereunder. Other than this Lease and the Permitted Encumbrances, there are no
contracts, leases or agreements of any kind which materially adversely affect
or limit Tenant's use of the Premises or materially adversely affect or limit
Tenant's use of the Common Areas.
<PAGE>
4.1.2 Authority. Landlord has full right, power and authority to enter
into this Lease and to perform the obligations of Landlord hereunder. This
Lease and the performance of Landlord's obligations hereunder do not
contravene any Law or Rule, contract, agreement, covenant, judgment, order or
decree of any court or arbiter binding upon Landlord or upon the Shopping
Center. The signatories to this Lease are authorized to sign this Lease on
behalf of Landlord.
4.1.3 Public Works. As of the Execution Date and to the best of
Landlord's knowledge, there are no existing or proposed plans for the widening
of any street adjacent to the Shopping Center, or for curtailment of utilities
to any portion of the Shopping Center, or for any urban renewal or other
public projects or public works affecting the Shopping Center.
4.1.4 Special Assessment/Condemnation. As of the Execution Date and to
the best of Landlord's knowledge, there are no special assessment,
reassessment, condemnation or eminent domain proceedings of any kind pending
or contemplated against or with respect to the Shopping Center.
4.1.5 Litigation. As of the Execution Date and to the best of Landlord's
knowledge, there is no litigation pending or threatened relating to the
Shopping Center which would have a material adverse effect on the Tenant's use
of the Building. As of the Execution Date and to the best of Landlord's
knowledge, there are no suits, judgments or notices from any governmental
agency relating to any violation of health, pollution control, building, fire,
zoning or any other Laws or Rules relating to the Shopping Center which would
have a material adverse effect on the Tenant's use of the Building.
4.1.6 Physical Condition. As of the Execution Date and to the best of
Landlord's knowledge, except as disclosed in the Site Information, there is no
material adverse fact relating to any physical condition of the Shopping
Center or any adverse soil condition (including compaction or expansion
characteristics, rock, surface, underground storage tanks, subterranean or
grade level waters) which has not been specifically disclosed in this Lease or
in a separate written disclosure. Except as disclosed in this Lease, in the
Site Information or by written notice to Tenant, no part of the Shopping
Center is included in any federal, state or local wetlands area.
4.1.7 Hazardous Substances. As of the Execution Date and to the best of
Landlord's knowledge, except as disclosed in the Site Information, there are
no Hazardous Substances in, on or under the Shopping Center. To the best of
Landlord's knowledge, except as disclosed in the Site Information, the
Shopping Center is not listed in the United States Environmental Protection
Agency's National Priorities List of Hazardous Waste Sites nor any other list
of hazardous waste sites maintained by any federal, state or local agency. To
the best of Landlord's knowledge, except as disclosed in the Site Information,
no part of the Shopping Center has been used as a sanitary landfill, dump, or
industrial waste disposal area, or for the storage, generation, manufacture,
refining, emission, disposal, handling, transportation or use of any Hazardous
Substances. To the best of Landlord's knowledge, except as disclosed in the
Site Information, there are no wells or underground storage tanks at the
Shopping Center.
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4.1.8 Zoning. Except as disclosed in the Site Information, there is no
applicable Law or Rule or planned unit development requirement which would
prohibit the use of the Premises as, and there will be sufficient utility
services at the Premises to operate the Premises as, a twenty-four (24) hour,
seven (7) day a week food supermarket, including the use of the same for the
sale of groceries, meats, produce, bakery products, dairy products,
delicatessen products and general merchandise, and/or as a drug store, floral
store, video store, bank or prescription pharmacy. Landlord has obtained or
will obtain, and will keep in full force and effect, all licenses, permits and
approvals required under any applicable Laws and Rules for the construction of
the Shopping Center (excluding the Premises and the theater). Tenant will
obtain the Certificate of Occupancy for the Premises.
4.1.9 Site Plan. The Site Plan is an accurate representation of the
intended Shopping Center. The Site Plan shows the anticipated location and
size of all improvements constructed or to be constructed on the Shopping
Center.
4.1.10 Federal Tax Identification Number. Landlord's federal tax
identification number is: 84-1233950.
4.2 Tenant's Representations and Warranties
Tenant hereby represents and warrants to Landlord that all of the following
are true, correct and complete on the Execution Date and shall be true,
correct and complete throughout the term of this Lease, as the same may be
extended pursuant to subsection 3.2 hereof:
4.2.1 Authority. Tenant has full right, power and authority to enter
into this Lease and to perform the obligations of Tenant hereunder. This
Lease and the performance of Tenant's obligations hereunder do not contravene
any Law, Rule, contract, agreement, covenant, judgment, order or decree of any
court or arbiter binding upon Tenant. The signatories to this Lease are
authorized to sign this Lease on behalf of Tenant.
4.2.2 Federal Tax Identification Number. Tenant's federal tax
identification number is: 34-1585144.
4.3 Indemnity
4.3.1 Landlord shall indemnify and defend Tenant against any and all
loss, cost, damage, claim, liability and expense of any kind whatsoever
(including attorneys' fees, experts' fees, court costs, costs of
investigation, and settlement costs), incurred by Tenant, or any officer,
director or employee of Tenant, to the extent of Landlord's negligence,
arising out of, resulting from or relating to (a) any material breach by
Landlord of any representation or warranty contained in subsection 4.1, and/or
(b) any material representation or warranty contained in subsection 4.1 being
false, inaccurate or misleading in any material way.
<PAGE>
4.3.2 Tenant shall indemnify and defend Landlord against any and all
loss, cost, damage, claim, liability and expense of any kind whatsoever
(including attorneys' fees, experts' fees, court costs, costs of
investigation, and settlement costs), incurred by Landlord, or any officer,
director or employee of Landlord, arising out of, resulting from or relating
to (a) any material breach by Tenant of any representation or warranty
contained in subsection 4.2, and/or (b) any material representation or
warranty contained in subsection 4.2 being false, inaccurate or misleading in
any material way.
5. TITLE AND SURVEY
Tenant has received a commitment for an ALTA Leasehold Owner's title
insurance policy in an amount no less than $3,500,000 (the "Title Policy")
issued by Commonwealth Title Insurance Company (the Title Insurer ). The
Title Policy shall be delivered within thirty (30) days after the Execution
Date and shall show Landlord as owner of the Shopping Center subject only to
the Permitted Encumbrances and shall insure Tenant's interests in the Premises
and Shopping Center under this Lease. Landlord shall provide to Tenant within
thirty (30) days after the Execution Date three copies of a survey of the
Shopping Center (the "Survey") prepared in accordance with the survey
requirements set forth in Exhibit D.
Landlord shall deliver to Tenant within thirty (30) days after the Rent
Commencement Date an as-built Survey prepared in accordance with the survey
requirements set forth in Exhibit D, showing (i) the exact location of all
buildings in the Shopping Center, (ii) the legal description of the Premises,
and (iii) an as-built schematic drawing of the Common Areas, including all
parking and service areas.
Landlord shall pay all reasonable title insurance premiums, extended coverage
charges, surveying costs and other charges incurred in connection with this
Section 5.
6. CONSTRUCTION
6.1 Construction by Landlord and Tenant.
Landlord will, at its own cost and expense, construct and complete the
Shopping Center, except the Premises and the theater, including the Common
Areas and all buildings and off-site improvements shown on the Site Plan
and/or that may be required by government authorities. Tenant shall cause the
Premises to be constructed and completed by the general contractor chosen by
Tenant (the "General Contractor"). Landlord shall commence site work by April
15, 1999 and shall construct the Building Pad for the Premises by July 1,
1999, both subject to Force Majeure. The date of the completion of the
Building Pad and of the Common Area shall be extended by the total number of
days impacted by adverse weather conditions. All such construction shall be
completed lien-free, in a good and workmanlike manner in accordance with any
applicable Laws and Rules. Tenant and Landlord shall complete all
construction in accordance with all requirements of the Site Design Criteria
attached hereto as Exhibit E (the Site Design Criteria ), the Site
Information approved by Tenant, the Site Plan, Tenant's Plans and the
requirements of this Lease; provided that notwithstanding any different
parking ratio set forth in the Site Design Criteria, (i) Landlord shall
construct within the portion of the Common Areas shown as parking areas on the
Site Plan six (6) parking spaces for each
<PAGE>
one thousand (1,000) Rentable Feet of buildings in the Shopping Center (all
of which parking spaces shall meet the requirements of the Site Design
Criteria); and (ii) Landlord shall construct within the portion of the
Supermarket Parking Lot shown as parking areas on the Site Plan two hundred
seventy (270) parking spaces (all of which parking spaces shall meet the
requirements of the Site Design Criteria). All of the buildings in the
Shopping Center shall be fully protected with an automatic fire suppression
system approved by appropriate government authorities and the Board of Fire
Underwriters, and shall be adequately set back from property lines to permit
construction of the Building in the size permitted under this Lease. Landlord
and Tenant shall maintain a reasonable amount of Builder's Risk Insurance
throughout construction.
6.2 Site Information
6.2.1 Timing of Delivery. Except as provided in Section 1.19, Landlord
shall, at its sole expense, use its best efforts to deliver the Site
Information to Tenant on or before sixty (60) days after the Execution Date.
After delivery by Landlord to Tenant of the Site Information, Landlord shall
not change, or allow changes to, the Site Information without Tenant's
consent, which shall not be unreasonably withheld or delayed.
6.2.2 Review by Tenant. Tenant shall have twenty-one (21) days after the
date of delivery of each item of the Site Information in which to review the
particular item of Site Information and notify Landlord of any problems
therewith. If any of the Site Information is not provided within the
appropriate time periods, Tenant shall have the right to obtain appropriate
information at Landlord's expense. Without limiting any other right or remedy
of Tenant, if the Highway Occupancy Permit is not (a) provided to Tenant prior
to Tenant beginning construction of the Building, or (b) in substance
reasonably acceptable to Tenant, Tenant may terminate this Lease by written
notice to Landlord. If Tenant terminates this Lease, Landlord shall reimburse
Tenant for Tenant's reasonable expenditures, including the preparation of
Tenant's Plans.
6.2.3 Responsibility. The approval or acceptance by Tenant of the Site
Information shall not impose any present or future liability or responsibility
upon Tenant or Tenant's Architect, and shall not constitute an opinion,
warranty or representation of any kind by Tenant with respect to the Site
Information, the sufficiency of the engineering design thereof, the quality or
fitness of any materials or fixtures used pursuant thereto, or the compliance
thereof with state or local building codes or with standard accepted design,
architectural, engineering or building practices. Landlord shall indemnify
and defend Tenant against any and all loss, cost, damage, claim, liability and
expense of any kind whatsoever (including liabilities for personal injury,
death, and property damage, attorneys' fees, experts' fees, court costs, costs
of investigation, and settlement costs), incurred by Tenant, or any officer,
director or employee of Tenant, arising out of, resulting from or relating to
the Site Information, the construction of the Building (but excluding any loss
directly resulting from any negligent preparation of Tenant's Plans), the
construction of any other portion of the Shopping Center, and/or any failure
of Landlord to perform its obligations under this Lease.
<PAGE>
6.2.4 Indemnification. Tenant shall indemnify and defend Landlord, its
officers, directors and employees, against any and all loss, cost, damage,
claim, liability and expense of any kind whatsoever (including liabilities for
personal injury, death, and property damage, attorneys' fees, experts' fees,
court costs, costs of investigation, and settlement costs), incurred by
Landlord, or any officer, director or employee of Landlord, arising out of,
resulting from or relating to, the actions taken by Tenant relating to the
construction of the Building and/or any failure of Tenant to perform its
obligations under this Lease.
6.3 Tenant's Plans
Tenant shall cause the General Contractor to construct the Building and other
improvements on the Premises in accordance with Tenant's Plans, which shall be
prepared by Tenant's Architect. Within ninety (90) days after execution and
delivery of this Lease, Tenant shall furnish Tenant's Plans to Landlord.
Tenant's Plans shall contain fixtures (exclusive of trade fixtures), interior
finishes and exterior elevations, and mechanical, automatic fire suppression
systems, plumbing and electrical layouts. Landlord shall have twenty (20)
days after its receipt of Tenant's Plans to specify in writing to Tenant any
revisions that Landlord requests to Tenant's Plans. If Landlord requests
changes in Tenant's Plans, Tenant shall give due consideration to such
request, but shall not be obligated to revise Tenant's Plans, unless required
by Laws or Rules or to conform to the Design Criteria. Landlord shall pay all
additional design and construction costs related to any Landlord requested
revisions, except those necessary to conform with Laws and Rules or the Design
Criteria. If Landlord fails to provide written objections and requested
revisions to Tenant's Plans within the twenty (20) day period set forth above,
Landlord shall be deemed to have approved Tenant's Plans. Tenant at all times
assumes and accepts sole responsibility for Tenant's Plans, notwithstanding
any acceptance thereof by Landlord. The approval or acceptance by Landlord of
Tenant's Plans shall not impose any present or future liability or
responsibility upon Landlord, and shall not constitute an opinion, warranty or
representation of any kind by Landlord with respect to Tenant's Plans, the
quality or fitness of any materials or fixtures used pursuant thereto, or the
compliance thereof with state or local building codes or with standard
accepted design, architectural, engineering or building practices. Tenant may,
from time to time, make change orders to Tenant's Plans ( Change Orders ),
which Landlord shall have the right to approve, which approval shall not be
unreasonably withheld or denied, which affect the exterior of the Premises,
the structure of the Building or which have a material and adverse effect on
the Building or the Shopping Center. Tenant shall indemnify and defend
Landlord against any and all loss, cost, damage, claim, liability and expense
of any kind whatsoever (including liabilities for personal injury, death, and
property damage, attorneys' fees, experts' fees, court costs, costs of
investigation, and settlement costs), incurred by Landlord, or any officer,
director or employee of Landlord, arising out of, resulting from or relating
to Tenant's Plans.
6.4 Tenant's Responsibilities
Tenant shall choose the General Contractor (subject to Landlord's consent,
which shall not be unreasonably withheld or delayed) and shall have the
responsibilities to construct the Premises as set forth in this Lease.
<PAGE>
6.5 Payment
All expenses for the construction of the Shopping Center (including the
Premises, except as provided in this Section 6) shall be the expense of
Landlord, and Tenant shall have no obligation to pay, or to reimburse Landlord
for, any such expenses. Any Change Orders which decrease the Construction
Cost shall offset any Change Orders which increase the Construction Cost, and
the net cost of all Change Orders shall be reflected in the Construction Cost.
Tenant shall promptly submit to Landlord all relevant invoices received by it.
By way of example and not limitation, Landlord shall pay, on or before thirty
(30) days after receipt of an invoice therefor, all costs and expenses for
land acquisition, site work, legal and title services, constructing on--site
and off--site improvements, grading, Building Pad preparation, Landlord's and
Tenant's architectural and engineering services, Tenant's invoices from the
General Contractor (which shall be subject to the approval of Tenant's
Architect and be in a form substantially similar to AIA Document 101
Owner-Contractor Agreement for the construction of the Building) and expenses,
inspections and tests of the construction, surveys, soil and environmental
investigations, environmental remediation, real estate taxes and assessments,
and Landlord's interim financing. Landlord shall not be required to make
more than one payment per month, Landlord's obligation to make payments shall
be subject to the reasonable approval of Landlord's Architect and Landlord's
obligation to make payments shall be subject to the terms and conditions of
Landlord's construction loan agreement.
6.6 Excess Costs
Notwithstanding the foregoing, if the Construction Cost does not equal the
Construction Allowance, then: (a) if the Construction Cost is greater than the
Construction Allowance, Tenant shall, at its option, either (i) pay the
difference between the Construction Cost and the Construction Allowance (the
"Cost Excess"), or (ii) increase Minimum Rent during the initial seven years
of this Lease by an amount sufficient to amortize the Cost Excess in equal
monthly payments over the first seven years of rent payments at an interest
rate of 10% per annum; or (b) if the Construction Cost is less than the
Construction Allowance, Landlord shall, at its option, either (i) pay to
Tenant within thirty (30) days after the Rent Commencement Date the difference
between the Construction Cost and the Construction Allowance (the "Cost
Saving"), or (ii) reduce Minimum Rent during the initial seven years of this
Lease by an amount sufficient to amortize the Cost Saving in equal monthly
payments over the first seven years of rent payments at an interest rate of
10% per annum. Provided, however, that notwithstanding the foregoing, if the
Cost Excess is greater than $200,000, then Landlord may require Tenant to
utilize the preceding option (a)(i).
Landlord shall keep and maintain proper and complete records documenting all
costs and expenses incurred in constructing the Building. Tenant and its
designees may upon request inspect at Landlord's office during normal business
hours any of Landlord's books and records which relate to construction of the
Building.
<PAGE>
6.7 Timing
6.7.1 Commencement. Tenant shall cause construction of the Premises to
commence and Landlord shall commence construction of the Shopping Center
pursuant to the Construction Schedule attached as Exhibit F.
6.7.2 Completion. Tenant shall cause the General Contractor to diligently
continue construction of the Building and to complete such construction in
accordance with the schedule set forth in Exhibit F), Landlord shall
diligently continue construction of the Shopping Center and shall complete
such construction in accordance with the schedule set forth in Exhibit F.
Landlord and Tenant agree that they will cooperate to coordinate their
respective work under the Lease.
6.7.3 Remedies. If at any time Landlord fails to perform any material
obligation under this Section 6 (including failure by Landlord or its general
contractor to complete any item of construction in accordance with Exhibit F),
unless the delay was caused by Tenant or attributable to Force Majeure, and
provided that Tenant shall make reasonable efforts to mitigate its damages,
Tenant, at its option, may do any one or more of the following.
6.7.3.1 Deduct from Minimum Rent due after the Rent Commencement Date a
credit equal to all reasonably documented Tenant's damages (including payroll
and advertising expenses) incurred in connection with any failure by Landlord
to comply with this Section 6 or Exhibit F.
6.7.3.2 Extend the time for completion of any construction by notice to
Landlord.
6.7.3.3 If construction of the Building Pad is not completed by July 1,
1999 or construction of the Common Areas is not completed by November 1, 1999,
Tenant, by notice to Landlord prior to completion of the Building Pad or the
Common Area, may terminate this Lease, in which event Tenant shall have no
further obligation or liability to Landlord, and Landlord shall reimburse
Tenant for all out-of-pocket costs incurred by Tenant in connection with this
Lease.
6.7.3.4 After notice to Landlord and a reasonable opportunity to cure,
perform any construction obligations of Landlord, in which event Landlord
shall pay to Tenant promptly upon receipt to invoices all reasonably
documented costs incurred by Tenant in connection with such performance.
6.7.3.5 Pursue any other right or remedy available at law or equity.
<PAGE>
6.8 Right of Entry
Both Tenant and Landlord, its agents, employees and contractors (including
Tenant's Architect and Landlord's Architect) shall have the right to enter the
Premises and Building prior to the Rent Commencement Date for purposes of
observing or inspecting construction or delivering to or installing in the
Building equipment, fixtures, stock and other personal property. Any such
entry by Tenant shall not be construed as acceptance of the Premises by
Tenant, and Tenant shall not be obligated to pay Minimum Rent or any other
rent or charges prior to the Rent Commencement Date. Each party shall, and
Tenant shall instruct the General Contractor to, reasonably cooperate with the
other party and their agents, employees and contractors with regard to any
such entry. Tenant agrees not to unreasonably interfere with the completion
of the Shopping Center in exercising its right of entry. Each party shall
indemnify and defend the other party against any loss, liability, and expense
arising out of, or having to do with, the activity of indemnifying party or
its agents on the Premises, including any mechanics' lien claim, any claim for
personal injury, death or property damage, and any attorneys' or other
professional fees or costs incurred by as party as to the foregoing. Tenant
shall be responsible for any equipment owned by it and installed on the
Premises and Landlord shall have no liability with respect thereto.
7. SIGNS
7.1 Tenant's Sign
Tenant, at its option and at its own expense, may install and maintain on the
Premises signs of such size, color and design as Tenant elects, subject to
local sign ordinances and obtaining any required governmental approvals and
the approval of Landlord, which shall not be unreasonably withheld or delayed.
Tenant shall also have the right to install a satellite receiving dish on the
roof of the Premises, subject to any required governmental approvals.
7.2 Pylon Sign
Landlord shall install a Shopping Center pylon sign and Tenant's name or
trade name shall be placed on the top panel of such signs in letters at least
as large as any other lettering on such signs, and the square footage of any
other singular tenant's panel on such signs shall not exceed the square
footage of Tenant's panel on such signs. Tenant shall design, pay for and
specify the lettering, display, size, location and coloring of the panel on
its signs, and Tenant shall reasonably approve the remainder of such signs.
If Landlord chooses to install a sign or signs with an electronic reader
board, Tenant shall be entitled to the exclusive use of any electronic reader
board on such signs (except for any electronic reader boards installed on an
Outlot and to be used for the business located on the Outlot). The electronic
reader board shall be metered to the Building and shall be controlled from the
electrical panel located inside the Building. Tenant shall be responsible for
the utility costs for the electronic reader board and shall be responsible for
the maintenance, repair and replacement of the electronic reader board.
<PAGE>
8. TENANT'S PROPERTY
All Tenant's Property of whatever kind and nature kept or installed on the
Premises by Tenant shall not become a part of the realty no matter how affixed
to the Premises. Landlord waives and relinquishes any landlord's lien and any
other rights granted to Landlord by applicable law with respect to Tenant's
Property. Tenant may remove any of Tenant's Property from the Shopping Center
at any time until the expiration or earlier termination of this Lease, whether
such Tenant's Property is attached to the Shopping Center or not. Any
Tenant's Property, and any additions and alterations of Tenant, not removed
prior to the expiration or earlier termination of this Lease, shall become the
property of Landlord and Landlord shall have no obligation to store Tenant's
equipment.
9. USE
9.1 The Premises
9.1.1 The Premises may be used for any lawful retail purpose. The
Premises may be left vacant. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
NEITHER TENANT NOR ANY SUCCESSOR, ASSIGNEE OR SUBTENANT OF TENANT, SHALL HAVE
ANY OBLIGATION, EXPRESS OR IMPLIED, TO OPEN ANY BUSINESS AT THE PREMISES, TO
REMAIN OPEN FOR BUSINESS IN THE EVENT A BUSINESS IS OPENED AT THE PREMISES, TO
REOPEN FOR BUSINESS IN THE EVENT A BUSINESS IS OPENED AT THE PREMISES AND THEN
CLOSES, OR OTHERWISE TO CONDUCT ANY BUSINESS AT THE PREMISES.
9.1.2 Going Dark; Termination.
9.1.2.1 For purposes of this Lease, the Premises shall be deemed to "Go
Dark" if no business with the public has been conducted at the Premises for
three hundred sixty-five (365) consecutive days, excluding any periods during
which Tenant is not conducting business due to casualty, repair, remodeling,
Force Majeure, or other reasons not within Tenant's reasonable control.
9.1.2.2 If the Premises Go Dark, Landlord may notify Tenant that this
Lease shall terminate unless the Premises are opened or reopened, as the case
may be, for business to the public within ninety (90) days after Tenant's
receipt of such notice. If the Premises are opened or reopened for business
to the public within ninety (90) days after Tenant's receipt of such notice,
Landlord's termination notice shall be void, and this Lease shall remain in
full force and effect. If the Premises are not opened or reopened for
business to the public within ninety (90) days after Tenant's receipt of such
notice, Landlord's termination notice shall be effective, and this Lease shall
terminate, and the parties shall be released from any obligations or
liabilities accruing hereunder, effective upon the earlier of (a) ninety (90)
days after Tenant's receipt of Landlord's notice, or (b) Landlord's receipt of
written notice from Tenant that Tenant will not open or reopen the Premises
for business to the public.
<PAGE>
9.1.3 It shall not be considered a default by Tenant if the Premises Go
Dark.
9.2 Use Restrictions on the Shopping Center
Landlord agrees that no portion of the Shopping Center, including the
Premises, shall be used or operated, and Tenant agrees that no portion of the
Premises shall be used or operated:
9.2.1 Unlawful. In violation of applicable Laws or Rules.
9.2.2 Hazardous. In a dangerous or hazardous manner.
9.2.3 Nuisance. As a nuisance, or as an obnoxious use by reason of
unsightliness or excess emission of odors, dust, fumes, smoke, liquid waste,
noise, glare, vibration or radiation; provided, however, that nothing
contained in this subsection shall limit or prohibit the operation of a
supermarket, floral store or department, video store or department, liquor
store or department, bank, or pharmacy in the Shopping Center, nor Tenant's
erection of business communications satellite dishes on the roof of the
Building.
9.2.4 Adult Entertainment. As an adult book store, night club or
discotheque, massage parlor, or any other establishment which provides live
adult entertainment or which sells, rents or exhibits pornographic or obscene
materials determined by reference to community standards.
9.2.5 Bankruptcy Sale. For any fire sale, bankruptcy sale (unless
pursuant to a court order) or auction house operation (provided that any
tenant that goes out of business shall be entitled to hold one going out of
business sale not exceeding four (4) weeks in duration unless a longer period
shall be required pursuant to court order).
9.2.6 Vehicle Facility. As an automobile, truck, trailer or recreational
vehicle sales, leasing, display or repair facility.
9.2.7 Bar or Tavern. As a bar or tavern (or any other establishment
where beer, wine or liquor is served for on-premises consumption). Provided,
however, that a restaurant which primarily serves food and also serves
alcoholic beverages shall be allowed. Provided further, that a bar or tavern
which is in a building with two or more restaurants and which primarily serves
the patrons of those restaurants shall be permitted.
9.2.8 Pawn Shop. As a second-hand store, flea market, pawn shop,
government surplus store, Goodwill Store, salvage store, Salvation Army Store,
surplus store or liquidation store.
9.2.9 Health Club. As a sports, health, fitness, exercise or dance
facility.
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9.2.10 Miscellaneous. As a theater or cinema (except within the area
outlined in orange on the Site Plan attached as Exhibit B); circus; carnival;
bowling alley; doctor's or dentist's office; medical or dental health
facility; veterinary hospital; funeral parlor or mortuary; car wash; game room
or arcade; billiard or pool hall; unemployment office; school or place of
instruction attended by students; business office; post office (unless if
smaller than 2000 square feet); bingo parlor, casino, off track betting
facility, or any betting establishment (except that the sale of state lottery
tickets is not prohibited or restricted); or lawn and garden center.
9.3 Use Restrictions on the Shopping Center (other than the Premises)
As a material inducement to Tenant to enter into this Lease, without which
inducement Tenant would not have entered into this Lease, Landlord agrees that
no portion of the Shopping Center except for the Premises shall be used or
operated:
9.3.1 Food Exclusive. As a supermarket or other store, or department
within a store, for the sale of food, groceries, fruit, produce, dairy
products, vegetables, bakery products, meats, or delicatessen products for
off-site consumption, provided, however that other tenants of the Shopping
Center shall be permitted to sell such items so long as no more than five
percent (5%) of the Rentable Feet of the Shopping Center nor more than five
percent (5%) of the Rentable Feet for each of their respective premises are
used for the sale of such products.
9.3.2 Non-Retail. For any non-retail use, other than a bank or post
office in the in-line space of less than 2,000 square feet, a theater, finance
companies, real estate brokers and consumer finance companies and further up
to two of the Outlots may be used for non-retail purposes.
9.4 Controlled Area
On any property which is both (a) now or hereafter owned or controlled in
whole or in part by Landlord, or by any subsidiary, affiliate or partner of
Landlord, and (b) located within a radius of three miles from any portion of
the Premises, Landlord will not permit the operation of a retail or wholesale
supermarket or other store, or department within a store, for the sale of
food, groceries, fruit, produce, dairy products, vegetables, bakery products,
meats, or delicatessen products. Provided, however, that other tenants' space
in such controlled area shall be permitted to sell such items so long as no
more than one thousand five hundred (1,500) square feet are used for the sale
of such products.
9.5 Use - Remedies
In the event of breach of any of subsections 9.2, 9.3 or 9.4 which is not
cured after notice to Landlord and a reasonable opportunity to cure, Tenant
shall be entitled to injunctive or other equitable relief, in addition to any
rights and remedies available to Tenant under Section 19 or pursuant to
applicable law.
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10. RENT
10.1 Minimum Rent
Beginning with the Rent Commencement Date and continuing until the expiration
or earlier termination of this Lease, subject to the provisions of Section 19,
Tenant shall pay minimum rent ("Minimum Rent") in twelve (12) equal monthly
installments, in advance on or before the first day of each month, prorated
for any partial month, at an annual rate equal to the initial Rentable Feet of
the Premises multiplied by the following rent per square foot:
Years 1-5; $9.00 per square foot
Years 6-10; $9.50 per square foot
Years 11-15; $10.00 per square foot
Years 16-20; $10.50 per square foot
First Option Period; $11.00 per square foot
Second Option Period; $11.50 per square foot
Third Option Period; $12.00 per square foot
Fourth Option Period; $12.50 per square foot
10.2 Rent Reduction
If at least 20,000 square feet of space in the Shopping Center (excluding the
Premises and the theater) are not open for business within eight months of the
Rent Commencement Date, Tenant shall pay Minimum Rent of $8.00 per square foot
until at least such 20,000 square feet of space is open,
10.3 Rent Refund
Promptly after the expiration or termination of this Lease for any reason,
Landlord shall refund to Tenant all rents and other charges paid by Tenant to
the extent they are allocable to any period of time after such expiration or
termination, subject to any amounts owed by Tenant to Landlord.
11. TAXES
Landlord shall pay, before they become delinquent, all general real estate
taxes, all business privilege taxes and annual installments of special
assessments related to the Shopping Center (collectively "Taxes"). Tenant
shall reimburse Landlord for Tenant's Pro Rata Share of Taxes which are due
and payable during the period beginning on the Rent Commencement Date and
continuing until the expiration or earlier termination of this Lease, subject
to the following: (a) Tenant's Pro Rata Share of Taxes will include only
those amounts necessary to pay the general real estate taxes and special
assessments related to the Shopping Center over the longest possible period
permitted by law, even if Landlord pays any such taxes or special assessments
over a shorter period; and (b) Tenant's Pro Rata Share of Taxes shall not
include (i) any special assessments relating to the construction of any
improvements (including site work, signals, utilities and road and/or street
improvements) at or related to the Shopping Center, or (ii) any special
assessments which are levied or assessed prior to the Execution Date, or (iii)
any taxes or special assessments related to any Outlot.
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Taxes shall be deemed "due and payable" on the last date which such Taxes may
be paid without being considered delinquent. In no event shall Tenant have
any obligation whatsoever to pay any Taxes which are due and payable prior to
the Rent Commencement Date or after the last day of the Lease term, even if
such Taxes were levied or assessed during the Lease term and/or were levied or
assessed with respect to any calendar year included (wholly or partially)
within the Lease term.
Landlord shall use its best efforts to apply for and obtain any available tax
abatements or credits relating to Taxes. If Landlord obtains a TIF or
similar tax abatement for the Premises, then Tenant agrees that Tenant's Pro
Rata Share of Taxes during the period when such abatement is in effect (not to
exceed ten (10) years) shall be paid to Landlord to partially reimburse
Landlord for the cost of off-site improvements previously paid for and
installed by Landlord for the benefit of the Shopping Center.
Landlord shall not enter into any tax increment financing agreement or any
other agreement requiring payment of a minimum amount of Taxes, if the Taxes
payable would be higher by signing the agreement, without Tenant's prior
written consent, which will not be unreasonably withheld or delayed, or unless
Landlord agrees to pay the increased taxes.
Tenant shall pay Tenant's Pro Rata Share of Taxes within 30 days after Tenant
receives from Landlord an invoice therefor, together with computations
demonstrating Tenant's Pro Rata Share thereof.
Tenant shall pay any personal property taxes imposed on trade fixtures or
other personal property located at the Premises, but not any personal property
taxes imposed on fixtures or other personal property located anywhere but the
Premises.
Landlord shall promptly notify Tenant of any increase in Taxes. If Landlord
chooses not to protest or seek a reduction in taxes, Tenant, at its option and
in Landlord's name, may protest or seek a reduction or recovery of any Tax.
Landlord shall render to Tenant all assistance reasonably possible, including
joining in and signing any protest or pleading Tenant may request. The cost
incurred by Tenant of any protest or suit shall be deducted from the savings
and retained by Tenant. Tenant shall receive Tenant's Pro Rata Share of any
savings, net of expenses, effected (except that Tenant shall receive one
hundred percent (100%) of any net savings on Taxes on Tenant's trade fixtures
and other personal property); provided, however, that Tenant shall not receive
any reduction in Tenant's Pro Rata Share by virtue of the TIF or similar tax
abatement for the Premises. Any costs in excess of the savings shall be
Tenant's obligation. Any savings remaining after deducting the cost and
Tenant's Pro Rata Share shall be distributed to Landlord.
Landlord shall use reasonable commercial efforts to cause the Shopping Center
to be assessed as a separate tax parcel. Tenant, at Tenant's option, may
apply for the Premises and the Supermarket Parking Lot to be assessed as a
separate tax parcel. If the Premises and the Supermarket Parking Lot are
assessed as separate tax parcels, Tenant shall pay only those Taxes which are
due and payable on such separate parcel, and Tenant shall have no further
obligation to pay any Taxes or Tenant's Pro Rata Share of any Taxes on the
remainder of the Shopping Center.
<PAGE>
12. CAM CHARGES
12.1 Definition
"CAM Charges" shall mean only the reasonable and direct out-of-pocket
expenses incurred by Landlord in performing the Common Area maintenance
services specified in subsection 16.3. Without limiting the foregoing, all of
the following shall be excluded from CAM Charges:
12.1.1 Capital expenditures.
12.1.2 Depreciation.
12.1.3 Finance charges, late charges, late fees or penalties.
12.1.4 Repairs, maintenance or replacements necessitated by the
negligence of Landlord, its employees, agents or contractors.
12.1.5 Repairs, maintenance or replacements covered by insurance.
12.1.6 Energy charges for Common Area lighting.
12.1.7 Costs to clean up or repair the Common Area resulting from
construction, maintenance, remodeling or replacement of buildings.
12.1.8 Taxes.
12.1.9 The cost of any promotional fund or merchant's association
expenses or activities (including costs of advertising, display and
decoration, set--up, take down and clean up of promotions and any direct or
indirect labor costs of Landlord relating thereto).
12.1.10 Maintenance or repair of separate utility lines and systems
designed for use by one (1) user or of lateral utility lines designed for use
by one (1) user and extending from or to common lines.
12.1.11 Any charges for any utilities (including gas, water, electricity,
sewage and trash removal) relating to any tenant space in the Shopping Center.
12.1.12 Salaries and costs of on-site maintenance personnel if such
personnel perform any maintenance or services for any tenant space in the
Shopping Center.
12.1.13 Fees paid to independent maintenance and repair contractors who
are related to or affiliated with Landlord, unless Landlord shows that the
fees and services are necessary and provided at market rate.
12.1.14 Any management fee, in excess of five percent (5%) of CAM
Charges, payable to Landlord or to any third party for the management of the
Shopping Center.
<PAGE>
12.1.15 Overhead Costs (as defined in 12.2 hereof).
12.1.16 Premiums, deductibles and other costs of insurance, including
automobile liability, boiler, machinery, rental loss, and property insurance.
Notwithstanding the foregoing, premiums for the comprehensive general
liability insurance maintained by Landlord pursuant to subsection 13.2 may be
included in CAM Charges if such insurance is obtained from insurance companies
that are unrelated to Landlord. If such insurance is maintained under a
blanket policy, then only the portion of the premium for such blanket policy
reasonably allocable to the Shopping Center may be included in CAM Charges.
12.1.17 Any costs paid or incurred pursuant to subsection 15.1 and/or
related to clean up or removal of any Hazardous Substances from the Shopping
Center.
12.2 Overhead Costs
"Overhead Costs" shall mean overhead and administrative costs, including all
of the following:
12.2.1 Rent and other costs of occupancy (including utilities, office
supplies, office equipment, furniture and fixtures) of any office area or
other space.
12.2.2 Wages, salaries and other compensation paid to, and costs
associated with, management, supervisory and office personnel, other than
personnel costs (including payroll taxes and benefits) for on-site maintenance
for the Shopping Center.
12.2.3 Legal services.
12.2.4 Tools, uniform and other clothing costs.
12.2.5 Travel expenses, meals, lodging, company car and truck expenses of
any kind.
12.2.6 Data processing charges.
12.2.7 Architectural, engineering and inspection fees.
12.2.8 Music expense, donations, advertising expense, dues and
subscriptions.
12.3 Reimbursements
CAM Charges shall be reduced by (a) any monies recovered by Landlord from an
insurance company on a claim for damage to the Common Area; and (b) any monies
recovered for breach of warranty on any item acquired for the performance of
Common Area maintenance. Landlord shall use commercially reasonable efforts
to recover any such reimbursements to which it is entitled.
<PAGE>
12.4 Bids
Upon request by Tenant, Landlord shall obtain at least three (3) bids for any
Common Area maintenance contracts and agrees to provide Tenant with copies of
such bids at least fifteen (15) days before accepting any bid. Landlord shall
accept the lowest bid received from any reasonably qualified contractor,
provided that if Tenant obtains a bid for any Common Area maintenance contract
from a reasonably acceptable contractor which is lower than the lowest bid
received by Landlord, then Landlord shall accept the bid obtained by Tenant.
12.5 Budget and Payment
Subject to Tenant's right to audit and accept Landlord's books and records
related to CAM Charges as provided herein, Tenant shall pay on a monthly in
arrears basis Tenant's Pro Rata Share of CAM Charges. Beginning on the Rent
Commencement Date and continuing until the expiration or earlier termination
of this Lease, prior to each September 1, Landlord shall prepare and deliver
to Tenant a budget for CAM Charges for the succeeding fiscal year, based upon
the actual CAM Charges for the prior twelve (12) month period (except for the
first twelve (12) month period of this Lease). Such budget shall be subject
to the reasonable approval of Tenant. If Tenant does not respond within
thirty (30) days, the budget shall be deemed approved. On the first day of
each calendar month during the twelve (12) month period following approval of
such budget, Tenant shall pay Landlord an amount equal to one twelfth (1/12th)
of Tenant's Pro Rata Share of the approved budget for CAM Charges. If
Landlord and Tenant are unable to agree on a budget for the succeeding
calendar year within thirty (30) days after delivery of the budget by Landlord
to Tenant, Tenant's monthly payments for the succeeding year will be equal to
one-twelfth (1/12th) of Tenant's Pro Rata Share of the actual CAM Charges for
the preceding calendar year. If an item of repair or maintenance is to be
accomplished in phases over a period of calendar years, such as resurfacing of
the drive and/or parking areas, then the Landlord's budget shall separately
identify the anticipated cost, timing and affected area of such work for both
the immediately succeeding and subsequent calendar years.
12.6 Statement
Within forty-five (45) days after the end of each calendar year, Landlord
shall provide to Tenant a statement (the "Statement"), providing an accounting
of all charges incurred by Landlord in connection with the performance of
Common Area maintenance for the Shopping Center. If Tenant has overpaid CAM
Charges, Landlord shall pay the amount of such excess to Tenant when the
Statement is delivered. If Tenant has underpaid CAM Charges, Tenant shall pay
the balance owed to Landlord within thirty (30) days after Tenant's receipt of
the Statement.
12.7 Books and Records; Audit
Landlord agrees to maintain its books and records in connection with the
performance of its duties hereunder in accordance with generally accepted
accounting principles, consistently applied, and to maintain copies of all
contracts, invoices, canceled checks and other documentation reasonably
required to support the billings for CAM Charges for a period of at least
three (3) years after the conclusion of each fiscal year. The failure of
Landlord to include any expenditure
<PAGE>
in the Statement delivered to Tenant shall be deemed a waiver by Landlord of
Landlord's right to demand payment from Tenant for Tenant's Pro Rata Share
thereof unless Tenant shall seek a recalculation of its Pro Rata Share as
provided below in which case Landlord may adjust its statement.
Tenant shall have the right to audit, at Landlord's place of business and at
reasonable time, Landlord's books and records (including receipted invoices,
canceled checks and other supporting materials and documentation necessary to
evidence Landlord's payment of CAM Charges as described above) pertaining to
CAM Charges, Taxes and the operation and maintenance of the Common Areas. If
such audit discloses any error in the determination of CAM Charges or Taxes,
or in calculating Tenant's Pro Rata Share thereof, Landlord shall refund to
Tenant any overcharge or bill Tenant for any undercharge within thirty (30)
days of receipt of notice of the necessary adjustment from Tenant. The cost
of such audit shall be paid by Tenant, unless Tenant shall be entitled to a
refund in excess of five percent of the amount calculated by Landlord, in
which case Landlord shall reimburse Tenant for the reasonable costs of such
audit (whether such audit was performed by Tenant or by a third party).
Tenant shall keep the results of the audit confidential, in the same manner as
it treats its own confidential information.
13. INSURANCE
13.1 Property Insurance
Landlord (with respect to the Shopping Center exclusive of the Building) and
Tenant (with respect to the Building), at its own expense, shall maintain, at
all times beginning on the Execution Date and ending at the expiration or
earlier termination of this Lease, for the mutual benefit of Landlord and
Tenant, insurance on an "All-Risk form with a face amount equal to one
hundred percent (100%) of the replacement value of the insured property, with
a standard co-insurance endorsement of not more than ninety percent (90%), and
including coverage for losses or damages caused by floods if any portion of
the Shopping Center is in a flood plain. If such form does not provide
sprinkler leakage coverage, the policy or policies shall be endorsed to cover
the same in an amount equal to one hundred percent (100%) of the replacement
value of the insured property. CAM Charges shall not include any charges
and/or expenses for insurance required by this subsection.
13.2 Liability Insurance
Landlord (with respect to the Shopping Center) and Tenant (with respect to
the Premises), shall maintain, at all times beginning on the Execution Date
and ending at the expiration or earlier termination of this Lease, for the
mutual benefit of Landlord and Tenant, a Commercial General Liability Policy
or Policies (Insurance Services Office 1986 Form) or its equivalent, including
a contractual liability endorsement. Such insurance to be carried by each
party shall have minimum limits of not less than $2,000,000.00 (combined
single limit), which shall be adjusted from time to time to a commercially
reasonable level. Landlord's insurance shall include coverage for any loss,
liability or damage caused by, occurring at or related to: (a) any
construction by Landlord or Landlord's contractors of the Shopping Center
(including the Building); (b) the Common Areas; or (c) any act or
<PAGE>
omission of Landlord, its agents, employees, licensees, invitees or
contractors on any portion of the Shopping Center. Tenant's insurance shall
include coverage for any loss, liability or damage caused by, occurring at or
related to: (i) any construction by Tenant or Tenant's contractors; (ii) the
Premises (excluding construction by Landlord or Landlord's contractors of the
Building); or (iii) any act or omission of Tenant, its agents, employees,
licensees, invitees or contractors on any portion of the Shopping Center.
13.3 General Requirements
The property insurance and commercial general liability insurance policies
provided for in this Section 13: (a) shall be placed with reputable insurance
companies who are licensed to do business in Pennsylvania and who are listed
in Best's Insurance Reports as having a quality rating of not less than A- and
an adjusted-policyholder- surplus rating of not less than Class X; (b) shall
name as additional insureds each of the parties hereto, their officers,
directors, agents and employees, and such other persons as either party may
reasonably designate; (c) shall not be able to be canceled or materially
changed unless Landlord and Tenant are given written notice of such
cancellation or change at least thirty (30) days in advance; (d) shall provide
for severability of interests; and (e) shall provide that an act or omission
of the insureds or additional insureds which would cause coverage to be voided
or reduced shall not cause coverage for the other additional insureds to be
voided or otherwise reduced.
13.4 Certificates
Upon request, each party shall deliver to the other certificates of insurance
which show that such party has obtained the insurance required under this
Lease. Continuing until the expiration or earlier termination of this Lease,
each party shall deliver to the other a replacement certificate or a renewal
certificate at least thirty (30) days before an insurance policy required
under this Lease is to expire.
13.5 Deductible
Each of Landlord's insurance policies may contain a deductible of no more
than $100,000.00. Each of Tenant's insurance policies may contain a
deductible of no more than $100,000.00. Any portion of any loss, damage or
claim which is not covered by any policy of insurance provided for herein due
to the existence of a deductible provision or other retention in said policy
shall be borne entirely by the party hereunder who is obligated to pay for
such loss, damage or claim as provided in this Lease.
13.6 Blanket Policy
Notwithstanding anything to the contrary contained herein, Tenant and
Landlord may satisfy its obligations under this Section 13 in whole or in part
by means of a so-called blanket policy.
<PAGE>
14. INDEMNITY
14.1 Indemnity by Landlord
Landlord shall indemnify and defend Tenant against any and all loss, cost,
damage, claim, liability and expense of any kind whatsoever (including
liabilities for personal injury, death, and property damage, reasonable
attorneys' fees, reasonable experts' fees, court costs, reasonable costs of
investigation, and settlement costs), incurred by Tenant, or any officer,
director or employee of Tenant, arising out of, resulting from or relating to
any damage or injury occurring during the Lease term, as the same may be
extended, at, on or about the Shopping Center (including the Premises)
resulting from the actions or failure to act of Landlord and which is not the
result of negligence or breach of this Lease by Tenant or any of Tenant's
officers, directors, employees, contractors or assigns.
14.2 Indemnity by Tenant
Tenant shall indemnify and defend Landlord against any and all loss, cost,
damage, claim, liability and expense of any kind whatsoever (including
liabilities for personal injury, death, and property damage, reasonable
attorneys' fees, reasonable experts' fees, court costs, reasonable costs of
investigation, and settlement costs), incurred by Landlord, or any officer,
director or employee of Landlord, arising out of, resulting from or relating
to any damage or injury occurring during the Lease term, as the same may be
extended, at, on or about the Shopping Center resulting from the actions or
failure to act of Tenant and which is not the result of negligence or breach
of this Lease by Landlord or any of Landlord's officers, directors, employees,
contractors or assigns.
15. LANDLORD'S COVENANTS
Landlord hereby covenants and agrees with Tenant as follows:
15.1 Hazardous Substances
Landlord shall take such action as is necessary to enforce the requirements
contained in any leases or occupancy agreements with other tenants or
occupants in the Shopping Center regarding the handling, transportation,
storage, treatment, use or disposition of Hazardous Substances by such other
tenants or occupants. If a Hazardous Substance is found to exist in, on,
under or emanating from the Shopping Center, Landlord shall, at its sole
expense, (a) promptly comply with any reporting requirements of all applicable
Laws and Rules, and (b) remove and dispose of any Hazardous Substances in
accordance with applicable Laws and Rules. Landlord shall, at its sole
expense, seal any unused wells located at the Shopping Center in accordance
with all applicable Laws and Rules. All of the foregoing must be completed by
contractors licensed in accordance with applicable Laws and Rules and must be
completed to the satisfaction of Tenant. If Landlord fails to meet its
obligations under this subsection, Tenant may, after notice to Landlord and
reasonable opportunity to cure, take remedial action with respect to such
Hazardous Substances, and Landlord shall reimburse Tenant for the cost of such
remedial action within 30 days after demand and proof of Tenant payment. It
is the intent of the parties hereto that, except for liability caused by any
release of Hazardous Substances by Tenant, its agents, contractors or
employees, for which Tenant shall
<PAGE>
have the responsibility to abate and clean up, Tenant shall have no liability
for damage or injury caused by, for abatement or clean up of, or otherwise
with respect to, Hazardous Substances, except that Tenant shall be liable for
any release of Hazardous Substances which have been caused by Tenant, its
agents, contractors or employees. If a Hazardous Substance is found to exist
in, on, under or emanating from the Building which has been caused by Tenant,
its agents, contractors or employees, Tenant shall, at its sole expense, (a)
promptly notify Landlord and cooperate with Landlord in complying with any
reporting requirements of all applicable Laws and Rules and (b) remove and
dispose of the Hazardous Substance in accordance with applicable Laws and
Rules. All of the foregoing must be completed by contractors licensed in
accordance with applicable Laws and Rules and must be completed to the
reasonable satisfaction of Landlord. If Tenant fails to meet its obligations
under this subsection, Landlord may, after notice to Tenant and reasonable
opportunity to cure, take remedial action with respect to such Hazardous
Substances, and Tenant shall reimburse Landlord for the cost of such remedial
action within thirty (30) days after demand and proof of Landlord payment.
Under no circumstances shall any amounts paid or incurred by Landlord pursuant
to this subsection and/or for the removal or cleanup of any Hazardous
Substance be included in CAM Charges.
15.2 Licenses and Permits
Landlord will reasonably cooperate with Tenant in any effort by Tenant, which
shall be at Tenant's expense, to obtain any licenses, permits and approvals
from any applicable governmental agencies with respect to the operation of
Tenant's business at the Premises, approvals for signs and approvals for
expansion.
15.3 Shopping Center Buildings
Landlord will construct at the Shopping Center, within the building envelopes
outlined in blue on the Site Plan or on the Outlots, a minimum of 20,000
Rentable Feet of commercial building space, excluding the Building, of which
no more than 5,000 square feet shall be on the Outlots. Landlord will not
erect or permit to be erected any building, structure, kiosks or other
improvement anywhere in the Shopping Center except within such building
envelopes (except for one building which may be constructed on each of the
Outlots in accordance with the terms of this Lease). No building, structure
or other improvement in the Shopping Center other than the Building shall: (a)
exceed one story in height; (b) have a roof or parapet higher than thirty-five
(35) feet above grade, or have any portion of such building, structure or
improvement (including HVAC equipment and other mechanical devices or
screening) higher than four feet above such roof; (c) have any rooftop
equipment unless such equipment is screened in a manner satisfactory to
Tenant; or (d) have a rooftop sign, except for building facade signage if no
part of such signage is higher than thirty-five (35) feet above grade.
<PAGE>
15.4 Common Areas
No change of any nature will be made to the Common Areas as shown on the Site
Plan without the prior written consent of Tenant, which shall not be
unreasonably withheld or delayed. Provided, however, that Landlord may
construct an Automatic Teller Machine and a kiosk in the areas outlined in
yellow on the Site Plan without Tenant's consent. Tenant shall at all times
have clear, unobstructed and adequate means of ingress and egress between each
of the entrances to the Premises and Common Areas and a public street or
highway. At all times beginning on the Rent Commencement Date and ending at
the expiration or earlier termination of this Lease, Landlord will provide
within the portion of the Common Areas shown as parking areas on the Site
Plan, at Landlord's sole expense and at no charge (except to the extent
included in CAM Charges), properly paved, lighted, well-drained and striped
parking areas meeting all specifications contained in this Lease (including
the Site Design Criteria); provided that notwithstanding any different parking
ratio set forth in the Site Design Criteria, (a) the parking ratio for the
Common Areas in general shall be six parking spaces for each one thousand
Rentable Feet of buildings in the Shopping Center (excluding the Expansion
Area) (all of which parking spaces shall meet the requirements of the Site
Design Criteria); and (b) the Supermarket Parking Lot shall at all times
contain no less than two hundred seventy (270) parking spaces (all of which
parking spaces shall meet the requirements of the Site Design Criteria). All
Shopping Center parking shall be for the exclusive use of the tenants,
employees, invitees and customers of the Shopping Center. Landlord shall use
commercially reasonable efforts to require all tenants and occupants of the
Shopping Center and their employees to park their automobiles in a portion of
the parking area reasonably designated for employee parking, which area shall
be located in the part of the Shopping Center least likely to be used by the
customers of Tenant and other tenants and occupants of the Shopping Center.
Tenant shall use commercially reasonable efforts to require its employees to
park their cars in a portion of the parking lot reasonably designated for
employee parking, which area shall be located in the part of the Shopping
Center less likely to be used by customers of tenants and occupants of the
Shopping Center. Landlord will not permit employees of other tenants or other
occupants in the Shopping Center to park in the Supermarket Parking Lot. No
portion of the Common Areas shall be used other than as driveways, walkways,
parking areas and landscaped areas, except that Tenant shall have the right to
use the Supermarket Parking Lot and the Common Areas adjacent to the Premises
for (i) installation and use of shopping cart corrals (to the extent parking
ratios are not reduced below the minimum required), and (ii) parking lot
promotions and sales which do not unreasonably interfere with the operations
of other tenants in the Shopping Center. There shall be no billboards erected
at the Shopping Center. At all times throughout the Lease term, as the same
may be extended, Landlord shall maintain parking area lighting fixtures, which
Landlord agrees shall comply in all respects (including requirements of
minimum foot candles per square foot) with the Site Design Criteria.
15.5 Copies of Notices
Landlord shall send to Tenant a copy of any notice received by Landlord
relating to any of the following: (a) proposed plan for the material widening
of any street adjacent to the Shopping Center; (b) proposed plan for the
material curtailment of utilities to any portion of the Shopping Center; (c)
proposed plan for urban renewal or other public projects or public works
materially affecting the Shopping Center;
<PAGE>
(d) special assessment, reassessment, condemnation or eminent domain
proceedings against or with respect to the Shopping Center; (e) pending or
threatened litigation relating to the Shopping Center which would materially
affect the use of the Premises or Common Areas; (f) violation of health,
pollution control, building, fire, zoning or any other Laws or Rules relating
to the Shopping Center; (g) proposed material change of any applicable zoning
Law or Rule or planned unit development requirement relating to the Shopping
Center; (h) the listing of any part of the Shopping Center in the United
States Environmental Protection Agency's National Priorities List of Hazardous
Waste Sites or any other list of hazardous waste sites maintained by any
federal, state or local agency; (i) any proposed material revocation of any
license, permit or approval relating to the Shopping Center; or (j) any
material adverse fact relating to any physical condition of the Shopping
Center.
15.6 Indemnity
Each of Landlord and Tenant shall indemnify and defend the other party
against any and all loss, cost, damage, claim, liability and expense of any
kind whatsoever (including liabilities for personal injury, death, and
property damage; costs of conducting health-risk or other assessments; costs
of abatement, clean-up, removal, or other remedial action; and reasonable
attorneys' fees, reasonable experts' fees, court costs, reasonable costs of
investigation, and settlement costs), incurred by the other party, or any of
its officers, directors or employees arising out of, resulting from or
relating to any breach by the other party of any covenant contained in this
Section 15.
16. REPAIRS AND MAINTENANCE
16.1 Landlord's Obligations for Building and Premises
Following the later of: (a) final completion of the Building in accordance
with Tenant's Plans as certified by Tenant's Architect; or (b) Rent
Commencement Date, Landlord shall maintain, repair and replace, at Landlord's
sole expense, the structure of the Building and the Premises, including the
roof; foundation; walls; concrete dock ramps (except for routine maintenance);
floors; structural portion of ceilings; electrical services, plumbing, sewer
and other utilities serving the Premises to within five (5) feet of the
outside of the Building; gutters and downspouts. Landlord shall also perform
all maintenance, repair and replacement required to comply with any Law or
Rule applicable to the Premises effective after the Rent Commencement Date,
including NESHAP (National Emissions Standards for Hazardous Air Pollutants)
and ADA (Americans With Disabilities). Landlord shall have reasonable access
to the Premises during business hours, upon reasonable notice, for the purpose
of making any repairs required by this Lease. All maintenance repairs and
replacements required by this subsection 16.1 or subsection 16.3 below shall
utilize materials at least equal to the quality, appearance and durability of
the original materials and shall be done as quickly as is commercially
reasonable and at such times and in such manner as shall minimize
inconvenience to any business which may be conducted in the Premises. On or
before the Rent Commencement Date, Tenant shall assign to Landlord all
assignable guarantees and warranties from contractors and materialmen relating
to any portion of the Building which Landlord is obligated to maintain.
<PAGE>
16.2 Tenant's Obligations for Building
Beginning on the Execution Date and ending at the expiration or earlier
termination of this Lease, Tenant shall do all of the following: (a) perform
all routine maintenance to the interior non-structural portions of the
Building, including but not limited to plumbing fixtures, floor drains, HVAC
and light fixtures (including lamps); (b) perform routine cleaning of the
interior of the Building; (c) replace any broken plate glass for the Building;
(d) pay all charges of utility companies for utilities used in the Building
(other than utility hookup, availability or tap fees); (e) maintain any trash
receptacles, compactors and trash enclosures within or appurtenant to the
Building; (f) cause the Building to comply with all Laws and Rules which are
not the express responsibility of the Landlord; and (g) perform all
maintenance and repairs necessitated by Tenant's failure to construct the
Building in accordance with Tenant's Plans. All maintenance, repairs and
replacements required to be performed by Tenant pursuant to this subsection
16.2 shall be at Tenant's sole expense and shall utilize materials at least
equal to the quality, appearance and durability of the original materials.
16.3 Landlord's Common Area Obligations
Landlord shall do all of the following at Landlord's sole expense (subject to
reimbursement for any expense which is included in CAM Charges as provided in
Section 12):
16.3.1 Maintenance. Operate, manage, maintain, repair, replace, equip
and insure the Common Areas in a manner typically provided for in first class
shopping centers and as required by this Lease, including maintaining,
repairing and replacing (a) the surface and subsurface of the parking lots
(including proper striping thereof), sidewalks, driveways and alleys situated
on the Common Areas in a level, smooth and evenly covered manner; (b) Common
Area pylon, entrance, exit and directional signs, markers and lights as will
be reasonably required from time to time; (c) common storm drains, utility
lines, sewers and other utility systems and services located in the Common
Areas (including any trunk line portion of utility lines, defined as any line
with more than one user); and (d) all parking area lighting fixtures.
16.3.2 Cleanliness. Keep the Common Areas clean, safe and in good
repair, with all trash and garbage for the Shopping Center and for all tenants
of the Shopping Center screened from view by customers of the Shopping Center.
16.3.3 Snow Removal. Remove snow and ice from the Common Areas down to
the pavement at least once every twenty-four (24) hours when there is snow and
ice, and as often as is necessary to prevent any accumulation of two (2)
inches or more. Tenant, at its option, may remove any such accumulation of
snow and ice which Landlord fails to remove, and Landlord shall pay the
reasonable cost of such removal to Tenant. Tenant, at its option, at its own
expense, may plow snow and ice having an accumulation of less than two (2)
inches from the Supermarket Parking Lot and accesses and driveways to and from
the
<PAGE>
Premises and store the same in the Common Areas as agreed to by Landlord for
subsequent hauling away by Landlord.
16.3.4 Landscaping. Maintain and care for, including fertilizing,
watering, mowing and trimming, all grass, shrubs and landscaping, and
maintain, repair and replace irrigation systems and water lines; provided,
however, that if any tenant requires or installs "special" landscaping (i.e.,
beyond the landscaping requirements of the remainder of the Shopping Center),
the maintenance and cost of such landscaping shall be borne solely by such
tenant without cost to other parties and without inclusion in CAM Charges.
16.3.5 Security. Maintain and light all parking lot lights and security
lights (defined as lighting for all entrances, exits, interior roads, pylon
signs, and such other lighting as is necessary to maintain security in the
Shopping Center) at all times when any portion of the Shopping Center is open
for business. Landlord is responsible for security of the Common Areas.
Tenant shall be responsible for security in the Premises.
16.3.6 No Solicitation. Maintain the Common Areas solely for the
convenience and use of Tenant and the other tenants of the Shopping Center and
their respective employees, licensees, customers, invitees, subtenants and
assigns. To the extent permitted by law, Landlord shall not permit the Common
Areas to be used for solicitation, picketing, petitioning, handbilling or any
purpose which creates a disturbance, threatens safety or interferes with the
operations of Tenant or the smooth flow and free passage of people to and from
the Premises. Landlord hereby expressly grants to Tenant the authority, at
Tenant's sole discretion, and at Tenant's risk, to police the Common Areas to
prevent or cause to be removed person engaged in any such activity, provided
Tenant shall not be obligated to take, and shall have no liability for not
taking, any action against such persons. Tenant agrees to indemnify and hold
Landlord, its employees, officers, directors and shareholders harmless from
and against all costs and expenses (including reasonable attorneys' fees)
incurred by such parties as a result of Tenant's activities as described in
the preceding sentence.
16.4 Parking Area Lighting
Notwithstanding the provisions of subsection 16.3.5, the hours of
illumination of all light standards located on the Supermarket Parking Lot
shall be controlled by Tenant and maintained at the level specified in the
Site Design Criteria during such hours after dusk as Tenant elects to remain
open for business, all subject to local ordinances. The charges for
electricity provided to the Supermarket Parking Lot standards shall be
separately metered (or included on Tenant's meter and controlled by Tenant),
paid in full by Tenant and not included in CAM Charges. The charges for
electricity for light standards along the driveway as outlined on the Site
Plan in lime shall be separately metered, shall be on during such hours after
dusk as Tenant elects to remain open and shall be included in CAM; provided,
however, that if Tenant remains open later than other tenants, the incremental
cost of the driveway lighting for such periods Tenant is open for business and
other tenants in the Shopping Center are open for business shall be allocated
pro-rata among such open
<PAGE>
tenants. Tenant shall pay all such costs for periods it is the only tenant
which is open. The remainder of the parking area of the Shopping Center,
exclusive of the Supermarket Parking Lot, shall be lighted by lighting which
is separately metered to Landlord, controlled and paid for by Landlord, with
such lighting being maintained at a reasonably adequate level when any portion
of the Shopping Center is open for business. Except as provided above, none
of the lighting costs for the parking areas of the Shopping Center shall be
included in CAM Charges and Tenant shall not be required to pay any pro rata
share thereof. In the event Tenant closes its business in the Premises,
Tenant shall grant Landlord access to the controls to the Supermarket Parking
Lot light standards and allow Landlord to operate the same at Landlord's
expense, with such expense being included in CAM Charges.
16.5 Emergency Repairs
Notwithstanding anything in this Lease to the contrary, in an emergency,
Tenant, at its option, may make repairs required to be made by Landlord.
Tenant shall make reasonable efforts to notify Landlord of the emergency.
Landlord agrees to pay the reasonable cost thereof to Tenant.
16.6 Tenant's Option to Maintain Supermarket Parking Lot
Notwithstanding anything contained herein to the contrary, Tenant reserves
the right, for any reason whatsoever, at any time upon thirty (30) days' prior
written notice to Landlord, to assume the duties of Landlord to maintain the
Supermarket Parking Lot. If Tenant elects to maintain the Supermarket Parking
Lot, then (a) Tenant shall not during such period be required to pay any
amount of CAM Charges, notwithstanding anything to the contrary contained in
Section 12 or elsewhere in this Lease; (b) Tenant shall maintain and insure
the Supermarket Parking Lot to a level at least equal to the standard employed
in the Shopping Center by Landlord and evidence of such insurance shall be a
condition precedent to Tenant's rights under this Section 16.6; and (c)
Landlord shall continue to maintain and insure the remaining portions of the
Common Areas.
17. ALTERATIONS
17.1 Right to Alter
On or after the Rent Commencement Date, Tenant may make, at its sole expense,
any alterations to the interior and exterior of the Building and Premises
which Tenant deems necessary or desirable, provided such alterations do not
reduce the size of the Building and provided that Tenant complies with all
applicable Laws and Rules and the insurance requirements set forth in this
Lease in making such alterations. For any alterations which affect the
exterior or structure of the Building or Premises, Tenant shall obtain the
consent of Landlord, which shall not be unreasonably withheld or delayed.
17.2 No Mechanics' Liens
Tenant shall have no authority to create or place any lien or encumbrance of
any kind upon, or in any manner to bind, the interest of Landlord in the
Premises. Tenant shall pay within fifteen (15) days all sums due for any
labor, services, materials, supplies or equipment furnished to or for Tenant
and which may be
<PAGE>
secured by any construction, mechanics', materialmen's or other lien against
the Premises and/or Tenant's interest therein. Tenant may contest any such
lien, but notwithstanding any such contest, if such lien shall be reduced to
final judgment and such judgment or any process issued for the enforcement
thereof is not promptly stayed, or if so stayed and such stay thereafter
expires, Tenant shall forthwith pay and discharge said judgment. Tenant shall
file or shall direct the Contractor to file a no-lien stipulation with the
appropriate authorities for construction of the Building and the Premises.
17.3 New Expansion Area
At any time beginning on the Rent Commencement Date and ending at the
expiration or earlier termination of this Lease Tenant, at its option, may
expand the Premises into all or part of the area outlined in pink on the Site
Plan (the New Expansion Area ). Tenant may exercise such option by written
notice to Landlord. If Tenant elects to expand the Premises into the New
Expansion Area, Tenant shall provide Landlord with a drawing showing the
exterior design of the building to be constructed on the New Expansion Area.
The plans and specifications for such expansion shall be prepared by Tenant in
its sole discretion, subject to the requirements of Section 17.1. Tenant
shall perform all work for a New Expansion Area in a good and workmanlike
manner, in compliance with all Laws and Rules and shall carry appropriate
builder's insurance reasonably satisfactory to Landlord. Tenant may finance
the cost of any expansion in the New Expansion Area by either (a) entering
into a mutually agreeable transaction with Landlord (which parties agree to
mutually pursue in good faith for at least 30 days), or (b) paying for the
cost itself as a leasehold improvement. Except as may be otherwise mutually
agreed in writing pursuant to clause (a) of the previous sentence hereof,
there shall be no additional Minimum Rent for the use of the New Expansion
Area or the expansion constructed thereon by Tenant. For the portion of the
Lease term remaining after completion of Tenant's improvements to the New
Expansion Area, the Rentable Feet of the expansion shall be added (i) to the
denominator of the fraction used to determine Tenant's Pro Rata Share, and
(ii) to the Building Area (except for the purposes of calculating Minimum Rent
pursuant to Section 10).
18. ASSIGNMENT AND SUBLETTING
Tenant shall at all times have the right to assign this Lease or sublet all
or part of the Premises without the consent of Landlord (provided that Tenant
shall remain liable for all its obligations after the assignment). If Tenant
assigns this Lease, (a) Landlord and any assignee Tenant will not amend or
terminate this Lease without the prior written consent of SUPERVALU Holdings,
Inc., (b) SUPERVALU Holdings, Inc., in addition to any assignee Tenant, shall
be entitled to all notices, rights to cure, offsets and defenses to which any
assignee Tenant is entitled; and (c) no notice of exercise of an option to
extend this Lease pursuant to subsection 3.2 shall be effective unless signed
by SUPERVALU Holdings, Inc. No assignment of the Lease shall be effective
unless such assignment is in writing, and provides that the assignee assumes
the Lease and Tenant shall have provided an original executed assignment and
assumption agreement to Landlord.
<PAGE>
19. DEFAULT
19.1 Default by Tenant
Landlord shall give Tenant written notice of any default by Tenant under this
Lease. If Landlord notifies Tenant of a monetary default, Tenant shall have
ten (10) Business Days after Tenant's receipt of Landlord's default notice to
cure such default; provided, however, that if the default relates to
Landlord's dispute of Tenant's right to deduct any amount pursuant to this
Lease, Tenant shall not be in default under this Lease unless Landlord
receives a final judgment in its favor regarding the disputed amount and
Tenant does not pay such judgment within five days after Tenant's receipt of
written notice from Landlord of such judgment. If Tenant defaults three times
in the payment of rent within a 12-month period, Tenant shall pay a 5% penalty
of the amount due for the third and subsequent defaults, after notice of each
default by Landlord. If Landlord notifies Tenant of a non-monetary default,
Tenant shall have 30 days after Tenant's receipt of Landlord's default notice
to cure such default (unless such default cannot reasonably be cured within 30
days, in which case Tenant shall have as much time to cure such default as is
reasonably necessary provided Tenant promptly commences and diligently pursues
such cure). Tenant shall not have any implied obligations under this Lease.
Tenant shall not be considered in default under this Lease unless Tenant
breaches, violates or defaults an express provision of this Lease, and does
not cure such breach, violation or default within the time period permitted
hereunder.
19.2 Remedies of Landlord
If Tenant fails to cure any default within the applicable cure period, then
Landlord shall be entitled to all remedies available at law or in equity,
including entry onto the Premises to take full and absolute possession
thereof, provided Landlord makes prompt and reasonable efforts to relet the
Premises at a fair market rental.
19.3 Monetary Default by Landlord
If Landlord fails to pay any amount owed by Landlord pursuant to the terms of
this Lease to anyone other than Tenant, Tenant, at its option, may pay such
amount to such person upon notice to Landlord. Landlord shall reimburse
Tenant for all amounts so paid by Tenant.
If Landlord fails to pay to Tenant any amount when due, Tenant, at its
option, may (a) deduct the amount owed by Landlord, including interest, from
Minimum Rent and other charges due by Tenant to Landlord pursuant to the terms
of this Lease; and/or (b) pursue any other remedy to which Tenant is entitled
at law or in equity. If Landlord disputes Tenant's right to deduct any
amount, Tenant shall not be in default under this Lease unless Landlord
receives a final judgment in its favor regarding the disputed amount and
Tenant does not pay such judgment within 30 days after Tenant's receipt of
written notice from Landlord of such judgment.
19.4 Non-Monetary Default by Landlord
Tenant shall give Landlord written notice of any non-monetary default by
Landlord under this Lease. Landlord shall have 30 days after Landlord's
receipt of Tenant's default notice to cure such default; provided, however,
that if such default cannot
<PAGE>
reasonably be cured within thirty (30) days, Landlord shall have as much time
to cure such default as is necessary provided Landlord promptly commences and
diligently pursues such cure; and provided further, that if the default
relates to a matter which, in Tenant's reasonable judgment, is of an emergency
nature and Tenant notifies Landlord that the default is an emergency, the
Landlord shall have only forty-eight (48) hours (or such lesser period as is
reasonable under the circumstances) to cure such default. If Landlord fails
to cure any such default within such cure period, then Tenant, at its option,
may (a) cure the default, in which event Landlord shall reimburse Tenant for
all reasonable amounts spent on such cure; and/or (b) pursue any other remedy
to which Tenant is entitled at law or in equity, including enjoining any
violation or threatened violation by Landlord of any provision of this Lease.
19.5 Duty to Mitigate
Tenant shall use prompt and reasonable efforts to mitigate its damages under
this Lease.
19.6 Cumulative Remedies
Upon the occurrence of a default under this Lease which is not cured within
the time periods permitted hereunder (if any), the non-defaulting party shall
be entitled to each and every right and remedy contained in this Lease or now
or hereafter existing at law or in equity, which rights and remedies shall be
cumulative.
19.7 Limitations on Damages
Notwithstanding anything contained in the Lease to the contrary, neither
Landlord or Tenant shall be liable to one another for consequential, indirect,
special or punitive damages.
20. DAMAGE OR DESTRUCTION; RESTORATION
20.1 Casualty to Shopping Center (exclusive of the Building)
If any portion of the Shopping Center (other than the Building and other than
the movie theater shown on the Site Plan) is damaged or destroyed by any
casualty, whether or not covered by Landlord's property insurance, Landlord
shall, at its own expense, (a) immediately remove all rubble and debris, (b)
promptly after receipt of the insurance proceeds, which Landlord shall pursue
diligently, commence restoration of the Shopping Center (other than the
Building or the movie theater) to its condition immediately prior to the
casualty, and (c) complete such restoration as soon as practicable but in any
event within eighteen (18) months after the casualty.
20.2 Casualty to the Building
If the Building is damaged or destroyed by any casualty, Tenant, at any time
within 60 days following such casualty, may terminate this Lease (effective as
of the date of said casualty) by written notice to Landlord, if (a) the
estimated cost of restoration of the Building exceeds fifty percent of the
market value of the Building immediately prior to such casualty, or (b) the
casualty occurs during the last two years of the Lease term, as the same may
be extended, or (c) the estimated cost of
<PAGE>
restoration of the Building exceeds the amount of insurance proceeds (adding
back any applicable deductibles) to be received by Tenant for the damage or
destruction to the Building (exclusive of proceeds for Tenant's fixtures,
equipment, property, inventory and business interruption), or (d) restoration
of the Building is prohibited or greatly restricted by applicable Laws and
Rules. If the Lease is terminated, Tenant shall remove all Building rubble
and debris. If this Lease is not so terminated, (i) Tenant shall immediately
remove all Building rubble and debris, (ii) within 90 days after the casualty,
Tenant shall commence restoration of the Building to its condition immediately
prior to the casualty, (iii) Tenant shall complete such restoration as soon as
practicable but in any event within one year after the casualty, and (iv)
Landlord shall assign to Tenant all insurance proceeds relating to the damage
or destruction of the Building. If this Lease is so terminated, (x) Tenant
shall assign to Landlord all insurance proceeds relating to the damage or
destruction of the Building (exclusive of proceeds for Tenant's fixtures,
equipment, property, inventory and business interruption), after deducting any
amounts due from Landlord to Tenant and (y) Tenant shall have a reasonable
time to remove its salvageable fixtures, equipment, property and inventory.
20.3 Rent Abatement
If any casualty to any portion of the Shopping Center would materially
adversely interfere, in Tenant's reasonable judgment, with the operation of
the business at the Premises, and if Tenant, as it is permitted to do at any
time, suspends sales to the public, then all rents and other charges payable
by Tenant under this Lease shall abate from the date of such suspension until
the earlier of (a) the date such business is resumed, or (b) the date thirty
(30) days following the completion of restoration. If any casualty to the
Shopping Center occurs and Tenant has not suspended its business at the
Premises, but adequate parking is not available or access to the Premises is
materially impaired, then for the period between the date of such casualty and
the date of complete restoration thereof, Tenant shall pay to Landlord in lieu
of monthly Minimum Rent, payable on or before the twenty-fifth (25th) day of
the succeeding month, the lesser of (i) one and one-half percent (1-1/2%) of
the Gross Sales from the Premises during such month (excluding sales taxes,
vending machine sales, postage stamp and ticket sales, money order sales, bad
checks and uncollected credit), or (ii) the monthly Minimum Rent which would
otherwise be due for such month.
20.4 Party Wall
In the event any restoration is required pursuant to this Section 20,
Landlord and Tenant shall each be responsible for one-half of the cost of
restoring any common wall between the Building and the remainder of the
Shopping Center.
20.5 Waiver of Claims; Subrogation
Notwithstanding any other provision of this Lease to the contrary, Landlord
and Tenant, and anyone claiming by, through or under Landlord or Tenant as a
result of a right of subrogation or otherwise, hereby release and discharge
the other from any and all claims and damages whatsoever resulting from or
arising out of any fire or other casualty to the Shopping Center to the extent
such claims or damage are covered by insurance.
<PAGE>
21. EMINENT DOMAIN
21.1 Taking
Landlord shall immediately notify Tenant of any proposed taking by
condemnation, the exercise of any power of eminent domain or like process or
deed in lieu thereof ("Taking") of any part of the Shopping Center, and Tenant
may participate and intervene in the trial and settlement of any Taking.
Landlord shall not enter into any such settlement without Tenant's prior
written consent, which consent will not be unreasonably withheld.
21.2 Termination
If there shall be a Taking of (a) any material part of the Premises or the
Supermarket Parking Lot, (b) all or any material part of the Shopping Center,
(c) any right-of-way adjoining or approach or access to the Shopping Center,
or (d) more than ten percent of the parking spaces at the Shopping Center,
then Tenant, by notice to Landlord, may terminate this Lease, effective as of
the date of the Taking.
21.3 Restoration
If there is a Taking of any portion of the Shopping Center and Tenant does
not terminate this Lease, Landlord shall, at its sole expense, as promptly as
possible, restore the Shopping Center, as nearly as practicable, to the
condition immediately prior to the Taking.
21.4 Suspension of Business
If there is a Taking of any part of the Shopping Center or any part of the
rights-of-way adjoining, or approaches or access to, the Shopping Center
which, in Tenant's reasonable judgment, would materially adversely interfere
with the operation of the business at the Premises, and if Tenant, as it is
permitted to do at any time, suspends sales to the public, then all Minimum
Rent and other charges payable by Tenant under this Lease shall abate from the
date of such suspension until the earlier of (a) the date such business is
resumed, or (b) the date 30 days following the completion by Landlord of
restoration of the Shopping Center.
21.5 Rent Abatement
Subject to the provisions of subsection 21.4, if there is a Taking of any
part of the Premises, the Common Areas or any part of the rights-of-way
adjoining, or approaches or access to, the Shopping Center, and Tenant does
not terminate this Lease, all Minimum Rent and other charges due under this
Lease from and after the date of the Taking shall be proportionately reduced.
For the purpose of such reduction, Minimum Rent and other charges payable
under this Lease shall be deemed allocable seventy percent (70%) to the
Premises, twenty percent (20%) to the access ways and the Supermarket Parking
Lot and ten percent (10%) to the balance of the Common Areas.
<PAGE>
21.6 Award
If this Lease is terminated by reason of a Taking, Landlord shall have the
right to, and reserves to itself, all damages and awards arising as a result
of the Taking; provided, however, Tenant shall be entitled to claim, prove and
receive any separate award from the condemning authority as may be allowed for
(a) the book value of all leasehold improvements made by Tenant, (b) Tenant's
moving and relocation expenses, (c) the loss of value or damage to Tenant's
fixtures, plus (d) the loss of the value of Tenant's leasehold interest,
including any New Expansion Area if paid for by Tenant.
21.7 Mortgage Provisions
Each mortgage, trust deed and lien encumbering any part of the Shopping
Center shall specifically provide for the use and application of insurance
proceeds and Taking awards, and shall recognize Tenant's rights upon a
casualty or Taking, in the manner and to the extent set forth in this Lease.
22. ESTOPPEL CERTIFICATES
Each party shall, within thirty (30) days after written request from the
other party (but not more often than twice in any twelve (12) month period),
execute and deliver to the other party a certificate in the form attached
hereto as Exhibit H, or such other information as is reasonably requested.
23. SUBORDINATION
If the Premises are subject to any mortgage or ground lease on the Execution
Date, Landlord will furnish to Tenant, within sixty (60) days after the
Execution Date, a Subordination and Nondisturbance Agreement in the form
attached hereto as Exhibit I (the "Subordination Agreement") executed in
recordable form by Landlord and the holder of such mortgage or ground lease.
If Landlord fails to so deliver the Subordination Agreement, Tenant may
terminate this Lease by notice to Landlord delivered within ninety (90) days
after the Execution Date. Tenant agrees that, if requested by Landlord,
Tenant will enter into a Subordination Agreement with the holder of any
mortgage which may hereafter encumber the Premises, which shall provide that
the Lease will be subordinate to any future mortgage or ground lease provided
the mortgagee enters into the Subordination Agreement.
24. RECORDING
Concurrently herewith the parties shall execute a memorandum of lease in the
form attached hereto as Exhibit J. Landlord shall immediately record, at its
expense, such memorandum of lease in the records of the county where the
Shopping Center is located. Except for such memorandum of lease, this Lease
will not be recorded.
<PAGE>
25. NOTICES
All notices given under this Lease shall be in writing and shall be sent
postage prepaid by either (a) United States certified mail, return receipt
requested, or (b) for delivery on the next Business Day with a
nationally-recognized express courier. All such notices shall be sent to the
following addresses, until such addresses are changed by 30 days' notice:
LANDLORD: Willowbrook Properties, Inc.
d/b/a NBI Development Corporation
1880 Industrial Circle, Suite F
Longmont, CO 80501
With a copy to: Morris D. Weiss
Before March 20, 1999:
Willowbrook Properties, Inc.
d/b/a NBI Development Corporation
701 Brickell Ave., Suite 2100
Miami, FL 33131
After March 20, 1999:
c/o National Bancshares Corporation of Texas
12400 Highway 281 North
San Antonio, TX 78216
With a copy to: Jay H. Lustig
Willowbrook Properties, Inc.
d/b/a NBI Development Corporation
PO Box 505
Belle Vernon, PA 15012
TENANT: SUPERVALU Holdings, Inc.
Attn: Legal Department
11840 Valley View Road
Eden Prairie, MN 55344-3691
(including after assignment)
With A Copy To: SUPERVALU Holdings, Inc.
Attn: Real Estate Department
PO Box 29 Finley Road
Belle Vernon, PA 15012
And with a copy to the Premises.
Notices shall be deemed given as of the date such notice is postmarked, if
sent by certified mail, or is placed with an express courier, if sent by
express courier. If the last day for giving any notice or taking any action
required or permitted under this Lease would otherwise fall on a Saturday,
Sunday, or legal holiday, that last day shall be postponed until the next
legal Business Day.
<PAGE>
26. MISCELLANEOUS
26.1 Entire Agreement; Enforceability
This Lease, including any Recitals and any attached Exhibits, all of which
are made a part of this Lease, contains the entire agreement of the parties
concerning this subject matter. This Lease should be read carefully because
only those terms in writing in this Lease are enforceable. No other terms or
oral promises which are not in this Lease may be legally enforced, and no
promises, projections, inducements or representations made before the
Execution Date will change the terms of this Lease or be binding on any party.
No promises or other terms shall be implied in this Lease.
26.2 Amendments
No amendment of this Lease shall be binding unless it is in writing and
signed by the party against whom enforcement is sought.
26.3 Binding Effect; No Third Party Beneficiaries
This Lease shall both bind and benefit the parties to this Lease and their
respective heirs, personal representatives, successors, and assigns. The
parties do not intend that there be any third party or other beneficiaries of
this Lease except only Landlord, Tenant, and SUPERVALU Holdings, Inc. in the
event the Tenant's interest in this Lease is assigned, and their respective
heirs, personal representatives, successors and permitted assigns. The
covenants, agreements, conditions, terms, obligations, limitations and
undertakings in this Lease shall be construed as covenants running with the
land.
26.4 Waivers; Consents
A party (or SUPERVALU Holdings, Inc. in the event the Tenant's interest in
this Lease is assigned) shall not be deemed to have made a waiver, consent or
approval under this Lease unless it does so in writing, and the mere failure
of such person or entity to act to enforce any provision of this Lease shall
not be considered a waiver, consent or approval and shall not prevent that
person or entity from enforcing any provision of this Lease in the future.
Wherever this Lease requires obtaining the waiver, consent or approval of any
person or entity, such waiver, consent or approval may be granted or withheld
in such person or entity's sole discretion unless this Lease expressly
provides otherwise. Any waiver, consent or approval under this Lease shall
apply only to the matter expressly waived, consented to or approved, and shall
not be deemed to be a waiver, consent or approval of any subsequent breach or
of any other provision of this Lease. Wherever this Lease provides for an
action to be taken at a person or entity's option, the decision whether or not
to exercise such option shall be in such person or entity's sole discretion,
unless otherwise expressly provided.
26.5 Time of the Essence
Time is of the essence with respect to all matters provided in this Lease.
<PAGE>
26.6 Severability
The invalidity or unenforceability of one provision of this Lease will not
affect the validity or enforceability of the other provisions.
26.7 Captions
The section numbers and captions are inserted only as a matter of
convenience, and do not in any way define, limit, or describe the scope or
intent of this Lease. Any references in this Lease to a Section or subsection
shall refer to such Section or subsection of this Lease, unless expressly
provided otherwise.
26.8 Interpretation of including and day
Wherever the word "including" is used in this Lease, or in any recital or
exhibit to this Lease, it shall mean "including without limitation." Wherever
the word "day[s]" is used in this Lease, or in any recital or exhibit to this
Lease, and the word business does not appear immediately before such word,
such word shall mean "calendar day[s]."
26.9 Counterparts
This Lease may be executed in several counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the
same instrument.
26.10 Governing Law
This Lease shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
26.11 No Partnership
Landlord shall not be in any sense a partner of Tenant in the conduct of
Tenant's business, and the relationship between the parties hereto shall be
solely that of landlord and tenant.
27. NO OFFER
The submission of this Lease for examination and negotiation does not
constitute an offer to enter into an agreement, and this Lease shall not be
binding on any party until it is executed and delivered by each party to this
Lease.
28. WAIVER OF TRIAL BY JURY
The parties to this Lease, and any guarantors of this Lease, waive the right
to a trial by jury in any action or proceeding based upon, or related to, the
subject matter of this Lease. This waiver is knowingly, intentionally and
voluntarily made. Landlord and Tenant acknowledge they have each been
represented (or have had the opportunity to be represented) in the signing of
this Lease and in the making of this waiver by legal counsel.
<PAGE>
29. FORCE MAJEURE
Unless expressly provided otherwise, the time within which any party to this
Agreement is required to perform any act shall be extended to the extent that
performance of such act is delayed by Force Majeure, but only if such delay
was beyond that party's reasonable control and was not caused by its fault or
negligence. Force Majeure shall mean acts of god, fire, abnormal weather,
explosion, riot, war, labor disputes, governmental restrictions, inability to
obtain necessary materials, or any other cause beyond such party s reasonable
control. If a delay of performance occurs and such delay is excusable under
this provision, the period for performance shall be extended for a time equal
to the time lost because of the Force Majeure, but only if the party entitled
to such extension gives prompt notice to the other party of the occurrence
causing the delay and if the party so excused acts in good faith and uses due
diligence to perform. The inability to obtain financing or lack of money
shall not constitute Force Majeure, and this provision shall not excuse
non-payment of monies owed hereunder.Tenant and Landlord have executed this
Lease as of the Execution Date.
TENANT:
SUPERVALU Holdings, Inc.
By: /s/ Steven P. Kilgriff
Steven P. Kilgriff
Its: Vice President
LANDLORD:
WILLOWBROOK PROPERTIES, INC.
By: /s/ Jay H. Lustig
Its: CEO
<PAGE>
EXHIBIT A
Rostraver Township, Pennsylvania
LEGAL DESCRIPTION OF SHOPPING CENTER
WILLOWBROOK PLAN OF LOTS
LOT 1
All that certain piece of parcel of ground situated in Rostraver Township,
Westmoreland County, Pennsylvania, being a part of a larger piece of parcel
being described as follows:
Beginning at an iron pin along the right-of-way line of SR 0051; thence along
said right-of-way N63 07'00" W 302.65 feet to a point; thence N26 53'00" E
250.00 feet to a point; thence N63 07'00" W 497.01 feet to a point; thence
along a curve having a chord of S71 53'00" W 35.36 feet with a radius of 25.00
feet to a point; thence S26 53'00" W 200.00 feet ot a point; thence along a
curve having a chord of S18 07'00" E 35.36 feet with a radius of 25.00 feet to
a point; thence N63 07'00" W 100.00feet to a point; thence along a curve
having a chord of N71 53'00" E 35.36 feet with a radius of 25.00 feet; thence
N26 53'00" E 200.00 feet to a point; thence by a curve having a chord of N18
07'00" W 35.36 feet with a radius of 25.00 feet to a point; N63 07'00" W
276.48 feet to a point; thence along a curve having a chord of S71 53'00" W
35.36 feet with a radius of 25.00 feet to a point; thence S26 53'00" W 200.00
feet to a point; thence along a curve having a chord of S18 07'00" E 35.36
feet with a radius of 25.00 feet to a point; thence N63 07'00" W 150.00 feet
to a point; thence along a curve having a chord of N71 53'00" E 35.36 feet
with a radius of 25.00 feet to a point; thence N26 53'00" E 194.75 feet to a
point; thence along a curve having a chord of N18 07'00" W 35.36 feet with a
radius of 25.00 feet to a point; thence N63 07'00" W 190.18 feet to a point;
thence along a curve having a chord of N82 38'35" W 134.70 feet with a radius
of 201.50 feet to a point; thence S77 49'50" W 132.00 feet to a point;thence
along a curve having a chord of N82 38'35" W 208.57 feet with a radius of
312.00 feet to a point; thence N63 07'00" W 121.79 feet to a point; thence
along a curve having a chord of S64 09'39" W 58.88 feet with a radius of 37.00
feet to a point; thence N63 07'00" W 52.67 feet to a point; thence along a
curve having a chord of N34 36'21" E 9.94 feet with a radius of 37.00 feet to
a point; thence along a curve having a chord of N71 53'00" E 123.04 feet with
a radius of 87.00 fet to a point; Thence s63 07'00" E 121.79 feet to a point;
thence along a curve having a chord of S82 38'35" E 175.14 feet with a radius
of 262.00 feet to a point; thence N77 49'50" E 132.00 feet to a point; thence
along a curve having a chord of S82 38'35" E 168.12 feet with a radius of
251.50 feet to a point; thence S63 07'00" e 190.18 feet to a point; thence
along acurve having a chord of N71 53'00" E 35.36 feet with a radius of 25.00
feet to as point; thenceN26 53'00" E 238.74 feet to a point; thence S63 07'00"
E 74.00 feet to a point; thence N26 53'00"E 335.18 feet to a point; thence S63
03'48" E 1024.05 feet to a point; thence S14 04'00" W197.50 feet to an iron
pin, said iron pin also begin the corner of lands now or formerly of Richard
and Agnes Hixson; thence along the lands of Hixson S14 04'00" W 718.04 feet to
an iron pin, the place of beginning; containing 20.25 acres according to a
survey by McMillen Engineering.
<PAGE>
EXHIBIT B
Rostraver Township, Pennsylvania
SITE PLAN
Color Guide
[For reference purposes only, Lease language to control]
Lease Section Description Color
15.3 building envelopes blue
1.17 Premises red
1.20 Shopping Center brown
1.23 Supermarket Parking Lot green
17.3 New Expansion Area pink
9.2.10 theater area orange
1.15 Outlots gray
1.5 Common Areas purple
15.4 kiosk area yellow
16.4 driveway lighting area lime
EXHIBIT C
Rostraver Township, Pennsylvania
PERMITTED ENCUMBRANCES
1. General real estate taxes not yet due and payable.
2. Coal and mining rights and all rights and privileges incident to the
mining of coal heretofore conveyed or reserved by instruments of record; right
of surface, lateral or subjacent support; or any surface subsidence.
3. Excepting and reserving all coal and mining rights, oil and gas and
appurtenant rights and right to maintain and operate a line of telegraph,
telephone and power poles as set forth in deed from Pittsburgh Coal Company to
Jesse Smith, et us., dated April 6, 1939 and recorded in Deed Book Volume
1030, page 458.
4. The following rights of way:
a) Grantor: Jesse Smith and Maude G. Smith
Grantee: Manufacturers Light and Heat Company
granted by instrument dated November 1, 1954, and recorded in
Deed Book Volume 1548, page 304, for 8 inch pipe line.
5. Excepting and reserving from subject property all that certain parcel
of land containing 0.393 acre as conveyed by Maude G. Smith, widow and Dorothy
G. Smith, single to James Sabo and Margaret Sabo, his wife, dated November 27,
1979 and recorded in Deed Book Volume 2346, page 449.
6. All roads, public or private, affecting the premises.
<PAGE>
EXHIBIT D
SURVEY REQUIREMENTS
Rostraver Township, Pennsylvania
The Survey shall be prepared and certified by a land surveyor licensed in the
State in which the Premises is located and who is acceptable to Tenant. The
Survey shall: (a) be made in accordance with the Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted
by ALTA and ACSM in 1992; (b) include the items marked on the attached Table
A; (c) be made pursuant to the Accuracy Standards (as adopted by ALTA and ACSM
and in effect on the date of the Certification) of an Urban Survey; and (d) be
made in accordance with the appropriate state land survey standards. The
Survey shall show the exact location, boundaries, and the Rentable Foot of the
Premises [and shall show the elevations of the principal parts of the
Premises,] and shall disclose no gaps, gores, encroachments, easements,
boundary overlaps or physical matters which would adversely affect the
marketability of title to the Premises [or which would adversely affect or
interfere with the Site Plan or the construction of the Premises in accordance
with the Tenant's Plans].
The Survey shall be certified as follows:
CERTIFICATION
This is to certify to SUPERVALU HOLDINGS, INC. ( SUPERVALU ), and
Commonwealth Land Title Insurance Company (or any other party that SUPERVALU
designates) that I have surveyed the property described above (the Property )
according to the requirements for land surveyors in the State of
_________________; that this survey was made on the ground according to the
field notes shown on this survey; and that this survey is a true
representation of the Property and correctly shows the size, location and the
exterior boundaries of the Property. The survey also correctly shows by
document number all recorded easements described in the commitment for title
insurance issued by Commonwealth Land Title Insurance Company No. ________,
with effective date of ____________, 1999. Adequate ingress to and egress
from the Property is provided by ___________________________________________
[name of streets], which are paved and dedicated public rights-of way
maintained by _____________________________[name of maintaining authority].
The Property does not serve any adjoining property for drainage, ingress and
egress or any other purpose. [I further certify that Parcels _______ through
______ adjoin each other along their common boundaries without gaps or
overlaps.]
<PAGE>
I further certify that a map or plat and the survey on which it is based were
made (i) in accordance with the Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys jointly established and as adopted by the
ALTA/ACSM in 1992 subject to the following exceptions:
____________________________________________________________ [list any
exceptions] and includes the marked items on the attached Table A; and (ii)
pursuant to the accuracy standards (as adopted by ALTA and ACSM and in effect
on this date of certification) of an Urban Survey
Dated: _________________________
______________________________________
_____________ Registered Land Surveyor
Registration No.
______________________________________
Name: ________________________________
Address : __________________________
______________________________________
Telephone: ( )_______________
<PAGE>
TABLE A
OPTION SURVEY RESPONSIBILITIES AND SPECIFICATIONS
NOTE: The Items of Table A must be negotiated between the surveyor and
client. It may be necessary for the surveyor to qualify or expand upon the
description of these items, e.g., in reference to Item 6, there may be a need
for an interpretation of a restriction. The surveyor cannot make a
certification on the basis of an interpretation.
If checked, the following optional items are to be included in the ALTA/ACSM
LAND TITLE SURVEY:
1. Monuments placed (or a reference monument or witness to the corner) at
all major corners of the boundary of the property, unless already marked or
referenced by an existing monument or witness to the corner.
2. Vicinity map showing the property surveyed in reference to nearby
highway(s) or major street intersection(s).
3. Flood zone designation (with proper annotation based on Federal
Insurance Rate Maps or the state or local equivalent, by scaled map location
and graphic plotting only).
4. Land area as specified by the client.
5. Contours and the datum of the elevators.
6. Identify, and show if possible, setback, height and bulk restrictions
of record or disclosed by applicable zoning or building codes (in addition to
those recorded in subdivision maps). If none, so state.
7. (a) Exterior dimensions of all buildings at ground level.
(b) Square footage of:
(i) exterior foot print of all buildings, or gross floor area of all
buildings, at ground level; and
(ii) other areas to be defined by client.
(c) Height of all buildings above grade at a defined location.
8. Substantial, visible improvements (in addition to buildings) such as
signs, parking areas or structures, swimming pools, etc.
9. Parking areas and, if striped, the striping and the type (e.g.,
handicapped, motorcycle, regular, etc.) and number of parking spaces.
10. Indication of access to a public way such as curb cuts, driveways
marked.
11. Location of utilities serving or existing on the property as
evidenced by on-site observation or as determined by records provided by
client, utility companies and other appropriate sources (with reference as to
the source of information) (for example):
(a) railroad tracks and sidings;
(b) manholes, catch basins, valve vaults or other surface indications of
subterranean uses;
(c) wires and cables (including their function) crossing the surveyed
premises, all poles on or within ten feet of the surveyed premises, and the
dimensions of all crosswires or overhangs affecting the surveyed premises; and
(d) utility company installations on the surveyed premises.
12. Governmental Agency survey-related requirements as specified by the
client.
13. Significant observations not otherwise disclosed.
14. _______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
<PAGE>
EXHIBIT E
Rostraver Township, Pennsylvania
SITE DESIGN CRITERIA
[Provided under separate cover]
<PAGE>
EXHIBIT F
Rostraver Township, Pennsylvania
LANDLORD/GENERAL CONTRACTOR CONSTRUCTION COMPLETION SCHEDULE
1. Grading and preparation of the building pad for the Building shall be
completed, Tenant shall be provided with compaction tests on such grading and
preparation, and such Premises improvements as shall be necessary to commence
construction of the Building (including all necessary work relating to site
clearance, material staging area, grading, engineered fill, water retention,
mass earthwork, front and rear access suitable for cement trucks and
construction equipment, and roads to the Building) shall be completed on for
before July 1, 1999.
2. Landlord shall deliver a completed building pad for the Building to
Tenant on or before July 1, 1999.
3. Access to temporary utilities, including electrical service,
construction water and temporary phone, shall be completed on or before July
1, 1999.
4. The site ingress/egress approaches for the Premises shall be completed
on or before October 1, 1999.
5. Construction of the Supermarket Parking Lot shall be completed on or
before 60 days prior to the store opening for business.
6. The construction and erection of all signs and pylon signs required
pursuant to this Lease, with the exception of signs for the Building, shall be
completed on or before 60 days prior to the store opening for business.
7. All utility lines, conduits and piping shall be completed, and
permanent gas service for the Building shall be provided, on or before 90 days
prior to the store opening for business.
8. All utility lines, conduits and piping shall be completed, and
permanent power and electrical service and telephone for the Building shall be
provided, on or before 120 days prior to the store opening for business.
9. All utility lines, conduits and piping shall be completed, and
permanent storm sewer service and lift station for the Building shall be
provided, on or before August 1, 1999.
10. All utility lines, conduits and piping shall be completed, and
permanent water service,mains, hydrants and pipes for the Building shall be
provided, on or before August 1, 1999.
11. All utility lines, conduits and piping shall be completed, and
permanent sanitary sewer service and lift station for the Building shall be
provided, on or before 120 days prior to the store opening for business.
12. All utility lines, conduits and piping shall be completed, and
permanent utilities and services for the remainder of the Shopping Center
shall be provided, on or before 90 days prior to the store opening for
business.
<PAGE>
13. Acceleration and deceleration lanes, turn lanes, curbs, gutters,
medians, rights of way and asphalt paving and striping of all entrances to the
Premises shall be installed on or before November 1, 1999.
14. All traffic control signs, directional arrows, handicapped parking
signs and other markings to direct truck and customer access to and from the
Premises and traffic through the parking areas so as to keep the areas in from
of the front door and parcel pick-up area, if any, of the building free from
parking and open for travel by Tenant's customers shall be erected on or
before November 1, 1999.
15. Landscaping shall be installed on or before November 1, 1999.
16. The Parking Areas, sidewalks, driveways, and service areas shall be
constructed, including paving, curbs, gutters, medians, bumpers, lighting and
striping, on or before 60 days prior to the store opening for business.
Pursuant to the terms of Section 6 of the lease, all of the preceding are
obligations of Landlord.
<PAGE>
EXHIBIT G
Rostraver Township, Pennsylvania
DEFINITION OF GROSS SALES
For purposes of this Lease, the term "Gross Sales" means the entire amount of
the actual sales price of all merchandise sold in the ordinary course of
business to retail customers at the Premises by Tenant, or any subtenant of
Tenant, during the Lease term, as the same may be extended. All of the
following shall be excluded from "Gross Sales":
1. Any sums collected and paid out for sales or excise taxes based on the
sale of merchandise and required by law, whether now or hereafter in force, to
be paid by Tenant or its subtenant or collected from its customers, to the
extent that such taxes have been included in the gross sales price.
2. The exchange or transfer of merchandise between the stores of Tenant
or its subtenant, provided such exchanges or transfers of merchandise are made
solely for the convenient operation of the business of Tenant or its subtenant
and not for the purpose of consummating a sale made at, in, from, or upon the
Premises.
3. The amount of returns to shippers or manufacturers.
4. The amount of any promotional allowances.
5. The amount of any cash or credit refund made upon any sale where the
merchandise sold, or some part thereof, is returned by the purchaser.
6. Sales of fixtures.
7. Sales from vending machines.
8. Sales of postage stamps.
9. Sales of liquor, alcohol, cigarettes and tobacco.
10. Rental fees or sales of services.
11. Sales of tickets (including airline and lottery tickets).
12. Sales of money orders.
13. Tips and gratuities paid to employees of Tenant or its subtenant
(whether in cash, by credit card or by charge account).
14. Bad checks and uncollected credit and charge accounts.
15. Any sums and credits received in settlement of claims for loss or
damage to merchandise in stock or transit to Tenant or its subtenant.
<PAGE>
16. Any sale in bulk of all or substantially all of Tenant's or its
subtenant's inventory in connection with the sale or transfer of Tenant's or
its subtenant's business or the cessation of such business.
17. Any rent and other occupancy charge paid by any subtenant,
concessionaire, licensee, or other third party.
18. Any deposits, receipts, fees and other amounts relating to any
banking facility or business, regardless of whether said banking facility or
business is operated by Tenant or by any subtenant, concessionaire, licensee
or other third party.
19. Gift certificates.
20. Sales of cardboard and produce boxes.
21. Any reimbursement for, and/or handling fee paid in connection with,
coupons (whether manufacturers' coupons or store coupons).
<PAGE>
EXHIBIT H
Rostraver Township, Pennsylvania
ESTOPPEL CERTIFICATE
Dated: ______________________
To: ______________________
______________________
______________________
Re: Lease (the "Lease") dated _____________________ between
__________________, as Landlord, and SUPERVALU Holdings, Inc., Tenant, for
Premises located in Rostraver Township, Pennsylvania.
Ladies and Gentlemen:
The undersigned certifies to you, to the best of the undersigned's knowledge,
as follows:
1. The Lease is in full force and effect and has not been amended or
modified except as set forth in Exhibit A.
2. Minimum Rent of $_________ has been paid through _____________.
3. The undersigned has not given or received a notice complying with the
notice provisions in the Lease relating to a default which has not yet been
cured [OTHER THAN ___________________________].
4. The Rent Commencement Date of the Lease was ________________________.
The expiration date of the present term of the Lease, excluding unexercised
renewals, is _________________________.
_____________________________________
By: ________________________________
Its: ________________________________
<PAGE>
EXHIBIT I
Rostraver Township, Pennsylvania
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Agreement is made by Willowbrook Properties, Inc. ("Landlord"),
____________________ ("Mortgagee") and SUPERVALU HOLDINGS, INC., ("Tenant") as
of the ____ day of _________, _____ (the "Execution Date").
RECITALS:
A. Landlord is the owner of certain property (the "Shopping Center")
situate in the Rostraver Township, County of Westmoreland, State of
Pennsylvania and more particularly described in Exhibit A attached hereto:
B. Landlord and Tenant are parties to a lease dated March 12, 1999 as
amended from time to time thereafter (said lease as so amended hereinafter
referred to as Lease) covering a portion of the Shopping Center ("Leased
Premises") which Leased Premises are more fully described in the Lease;
C. The Shopping Center is to be encumbered by a certain ________________
("Mortgage") to secure certain obligations of Landlord to Mortgagee, which
Mortgage is more fully described as follows:
_______________________________ executed by Landlord to Mortgagee dated
________________ and recorded in the office of ________________, County of
________________, State of ____________ as Document No. ______________.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Mortgagee hereby gives its consent to the Lease. Mortgagee warrants
and represents to Tenant that it is the owner of the Mortgage; that the
Mortgage has not been assigned and that Mortgagee has caused no other liens or
encumbrances to be created against the Shopping Center other than the
Mortgage.
2. Tenant, for itself and its successors and assigns, does hereby agree
that all right, title and interest which Tenant, its successors and assigns,
may have in and to the Leased Premises or any part thereof, shall be, and the
same hereby is made, subject and subordinate to the lien of the Mortgage, with
the same force and effect as though the Mortgage had been executed, delivered
and recorded prior to the date of the Lease, provided that Mortgagee hereby
agrees that all condemnation awards and property insurance proceeds payable
with respect to the Shopping Center shall be applied and paid in the manner
set forth in the Lease.
3. So long as Tenant is not in default, beyond any applicable cure
period, in the payment of rent or in the performance of any of the terms,
covenants or conditions of the Lease requiring performance on the part of
Tenant, (a) Mortgagee will not join Tenant as a party defendant in any action
or proceeding for the purpose of foreclosing the Mortgage; (b) any sale or
transfer of the Shopping Center or of Landlord's interest in the Lease,
pursuant to foreclosure of the Mortgage or voluntary conveyance or other
proceeding in lieu of foreclosure, will be subject and subordinate to Tenant's
possession under the Lease; and (c) the Lease will continue in full force and
effect according to its terms.
4. So long as Tenant is not in default, beyond any applicable cure
period, in the payment of rent or in the performance of any of the terms,
covenants or conditions of the Lease requiring performance on the part of
Tenant, if the Shopping Center shall be transferred to and owned by Mortgagee,
or any assignee of Mortgagee or purchaser at judicial sale or any transferee
under an action in lieu thereof, by reason of foreclosure or other remedial
proceedings brought by Morgagee or any assignee of Mortgagee or by any other
similar manner, Tenant's rights to possession of the Leased Premises under the
Lease shall not be terminated thereby, rather Tenant shall attorn to and be
bound to Mortgagee or any such assignee, purchaser or transferee under all of
the terms, covenants and conditions of the Lease for the balance of the term
thereof remaining; and Mortgagee or any such assignee, purchaser or transferee
shall be bound, as the landlord, to Tenant under all of the terms, covenants
and conditions of the lease for the balance of the term thereof remaining except
that neither Mortgagee nor any such assignee, purchaser or transferee shall
be:
4.1 Bound by any rent or additional rent which Tenant may have paid
for more than thirty (30) days in advance of its due date to any prior
landlord.
4.2 Bound by any material amendment to the Lease entered into
subsequent to the date of this Agreement which has not been consented to by
Mortgagee which consent shall not be unreasonably withheld or delayed.
4.3 Bound by any provision of the Lease restricting the use of
properties owned by Mortgagee, other than the Shopping Center for purposes
which compete with Tenant.
4.4 Subject to personal liability for any act or omission of Landlord
or any prior lessor under the Lease, provided, however, that Mortgagee or any
such assignee, purchaser or transferee shall be subject to any other remedies
of Tenant under the Lease, including but not limited to any offsets which
Tenant may be entitled to exercise against rent or other amounts paid or to be
paid under the Lease.
5. Subject to the provisions hereof, the Lease now is, and shall at all
times continue to be, subject and subordinate in each and every respect to the
lien of the Mortgage and to any and all amendments and renewals thereof.
6. This Agreement shall be binding upon and shall inure to the benefit of
Landlord, Morgagee and Tenant, and their respective heirs, personal
representatives, transferees, successors and assigns. Except as provided in
Section 7 or 8, no action on the part of any party to this Agreement shall be
construed to be a waiver, release or relinquishment of any rights under this
Agreement unless said waiver, release or relinquishment is expressly contained
in an instrument executed by the party against whom the waiver, release or
relinquishment is being enforced.
7. Tenant agrees that, during the term of the Mortgage, Tenant shall
furnish to said Mortgagee the same notice or notices of default by Landlord
that Tenant is required to furnish to Landlord under the Lease and Mortgagee
shall have the same rights and period to cure such default as Landlord has
under the Lease.
8. Mortgagee agrees to notify Tenant in writing of any release,
termination or satisfaction of the Mortgage.
<PAGE>
9. This Agreement is made and executed under and in all respects is to be
governed by and construed in accordance with the laws of the State of
Pennsylvania.
10. Any notices required or given under this Agreement shall be in
writing and shall be sent by U.S. Certified Mail, postage prepaid and shall be
sent to the following addresses:
To Mortgagee: __________________________________
__________________________________
__________________________________
__________________________________
To Landlord: __________________________________
__________________________________
__________________________________
__________________________________
To Tenant: SUPERVALU INC.
Attn: Legal Department
11840 Valley View Road
Eden Prairie, MN 55344
The addresses for such notices may be changed by written notice to the other
part of at least 30 days given as provided above. Notices given as provided
above shall be deemed complete upon mailing.
11. This Agreement may be signed in counterparts and each counterpart
shall be effective as an original when a counterpart has been signed
by all parties.
12. This agreement contains the entire agreement between the parties
concerning the matters addressed herein and no representations, inducements,
promises, understandings or agreements (whether express or implied and whether
oral or written) made before the execution of this Agreement will change the
terms of this Agreement. No covenants shall be implied into any of the terms
or provisions of the Agreement. This Agreement may be changed or modified
only by a writing that all parties have signed. This Agreement shall not be
binding on any party until it is executed and delivered by each party hereto.
The parties hereto have executed this Agreement as of the Execution date.
LANDLORD:
WILLOWBROOK PROPERTIES, INC.
d/b/a NBI DEVELOPMENT CORPORATION
By: _____________________________
Its: _____________________________
<PAGE>
TENANT:
SUPERVALU HOLDINGS, INC.
By: _____________________________
Its: _____________________________
MORTGAGEE:
________________________________
By: ____________________________
Its: ____________________________
ACKNOWLEDGMENTS
STATE OF __________ )
) ss.
COUNTY OF __________ )
On this day of ___________, 199__, before me, a Notary Public in and for
said County, personally appeared _____________________, to me personally
known, who being by me duly sworn, did say that he/she is ____________________
of ____________________, and acknowledged the execution of the foregoing
instrument to be the voluntary act and deed of said ___________________ by it
voluntarily executed.
___________________________________
Notary Public
Commission Expiration Date:
<PAGE>
STATE OF ___________ )
) ss.
COUNTY OF ___________ )
On this day of ___________, 199__, before me, a Notary Public in and for
said County, personally appeared _____________________, to me personally
known, who being by me duly sworn, did say that he/she is ____________________
of ____________________, and acknowledged the execution of the foregoing
instrument to be the voluntary act and deed of said ___________________ by it
voluntarily executed.
___________________________________
Notary Public
Commission Expiration Date:
STATE OF ____________ )
) ss.
COUNTY OF __________ )
On this day of ___________, 199__, before me, a Notary Public in and for
said County, personally appeared _____________________, to me personally
known, who being by me duly sworn, did say that he/she is ____________________
of ____________________, and acknowledged the execution of the foregoing
instrument to be the voluntary act and deed of said ___________________ by it
voluntarily executed.
___________________________________
Notary Public
Commission Expiration Date:
<PAGE>
EXHIBIT J
Rostraver Township, Pennsylvania
MEMORANDUM OF LEASE
This Memorandum of Lease is entered into by SUPERVALU HOLDINGS, INC., a
Missouri corporation ( Tenant ) and Willowbrook Properties, Inc., a Delaware
corporation, d/b/a NBI Development Corporation ( Landlord ) as of the ______
day of ____________, 1999 (the Execution Date").
RECITALS:
A. Landlord and Tenant have entered into a certain lease dated March ___,
1999 (the "Lease"), whereby Landlord has leased to Tenant certain real
property, together with all improvements thereon, located in the City of
Rostraver Township, County of Westmoreland, State of Pennsylvania, which is
outlined in red on the site plan attached hereto as Exhibit B and made a part
hereof (the "Premises"). The Premises are part of the shopping center which
is to be constructed on the property legally described on Exhibit A attached
hereto and made a part hereof (the "Shopping Center").
B. The parties wish to give notice of the existence of the Lease,
pursuant to 21 P.S. Sec 405 (Purdon 1998).
NOW, THEREFORE, in consideration of $1.00 and other good and valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Lease. Pursuant to the terms and conditions of the Lease,
Landlord has demised and leased to Tenant and Tenant has hired and taken from
Landlord, the Premises as described above. The name and address of the
Landlord and Tenant are as noted above.
2 Commencement Date. The commencement date of the Lease March ___,
1999 (the "Execution Date").
3. Initial Term. Subject to certain provisions of the Lease which
provide for earlier termination, the initial term of the Lease shall end twenty
(20) years following the Rent Commencement Date. The Rent Commencement Date
of this Lease is the earlier of (a) Tenant's opening of the Building for
business with the public; or (b) the later of (i) ten months after Landlord
delivers a completed Building Pad to Tenant; (ii) all improvements to the
Common Areas necessary for operation of the supermarket to be operated in the
Building (including all three driveways) are completed; and (iii) all
improvements shown on the highway occupancy permit, including traffic signals,
are completed. Common areas are all areas of the Shopping Center which are
not contained within the blue lines of any building envelope on the site plan
attached hereto as Exhibit B, including all parking areas, utilities to the
point where they enter a building, landscaped areas, sidewalks, driveways and
alleys. ("Common Areas"). Common Areas also include all easements, accesses,
improvements, and rights serving or benefiting the Shopping Center, even if
not located at the Shopping Center.
4. Options to Extend. Provided the Tenant is not in default under
the lease, the Tenant has the right and privilege to extend the Lease for one
(1) extension term of five (5) years and one (1) extension term of four (4)
years and ten (10) months, the first such period commencing upon the
expiration of the initial term. The date of expiration of the second and
final extended term, if exercised, shall be twenty (20) years after the Rent
Commencement Date plus nine (9) years and ten (10) months. The Tenant does
not have a right of refusal or option to purchase the Premises or the Shopping
Center.
5. Access. Pursuant to the Lease, Tenant, it employees, licensees,
customers, invitees, subtenants and assigns have the right to use the Shopping
Center Common Areas without charge in common with Landlord and other tenants
and occupants of space within the Shopping Center and their respective
employees, licensees, customers, invitees, subtenants and assigns.
6. Use Restrictions. The Lease contains the following restrictions
on the uses at the Shopping Center:
6.1 The Premises may be used for any lawful retail purpose,
subject to the restrictions hereinafter set forth. The Premises may be left
vacant.
<PAGE>
6.2 No portion of the Shopping Center, including the Premises,
shall be used or operated for any of the following:
6.2.1 Unlawful. In violation of applicable Laws or Rules.
6.2.2 Hazardous. In a dangerous or hazardous manner.
6.2.3 Nuisance. As a nuisance, or as an obnoxious use by
reason of unsightliness or excess emission of odors, dust, fumes, smoke,
liquid waste, noise, glare, vibration or radiation; provided, however, that
nothing contained in this subsection shall limit or prohibit the operation of
a supermarket, floral store or department, video store or department, liquor
store or department bank, pharmacy, in the Shopping Center, nor Tenant's
erection of business communications satellite dishes on the roof of the
Building.
6.2.4 Adult Entertainment. As an adult book store, night
club or discotheque, massage parlor, or any other establishment which provides
live adult entertainment or which sells, rents or exhibits pornographic or
obscene materials determined by reference to community standards.
6.2.5 Bankruptcy Sale. For any fire sale, bankruptcy sale
(unless pursuant to a court order) or auction house operation (provided that
any tenant that goes out of business shall be entitled to hold one going out
of business sale not exceeding four (4) weeks in duration unless a longer
period shall be required pursuant to court order).
6.2.6 Vehicle Facility. As an automobile, truck, trailer
or recreational vehicle sales, leasing, display or repair facility.
<PAGE>
6.2.7 Bar or Tavern. As a bar or tavern (or any other
establishment where beer, wine or liquor is served for on-premises
consumption). Provided, however, that a restaurant which primarily serves
food and also serves alcoholic beverages shall be allowed. Provided further,
that a bar or tavern which is in a building with two or more restaurants and
which primarily serves the patrons of those restaurants shall be permitted.
6.2.8 Pawn Shop. As a second-hand store, flea market, pawn
shop, government surplus store, Goodwill Store, salvage store, Salvation Army
Store, surplus store or liquidation store.
6.2.9 Health Club. As a sports, health, fitness, exercise
or dance facility.
6.2.10 Miscellaneous. As a theater or cinema (except
within the area outlined in orange on the Site Plan attached as Exhibit B);
circus; carnival; bowling alley; doctor's or dentist's office; medical or
dental health facility; veterinary hospital; funeral parlor or mortuary; car
wash; game room or arcade; billiard or pool hall; unemployment office; school
or place of instruction attended by students; business office; post
office(unless if smaller than 2000 square feet); bingo parlor, casino, off
track betting facility, or any betting establishment (except that the sale of
state lottery tickets is not prohibited or restricted); or lawn and garden
center.
6.3 No portion of the Shopping Center except for the Premises
shall be used or operated:
6.3.1 Food Exclusive. As a supermarket or other store, or department
within a store, for the sale of food, groceries, fruit, produce, dairy
products, vegetables, bakery products, meats, or delicatessen products for
off-site consumption, provided, however that other tenants of the Shopping
Center shall be permitted to sell such items so long as no more than five
percent (5%) of the rentable feet of the Shopping Center nor more than five
percent (5%) of the rentable feet for each of their respective premises are
used for the sale of such products. Rentable feet is the actual number of
square feet of finished building space, including any and all floors, but
excluding mezzanine not used for sale purposes, measuring each floor to the
outside of exterior walls and to the center of any common walls ("Rentable
Feet").
6.3.2 Non-Retail. For any non-retail use, other than a bank or post
office in the in-line space of less than 2,000 square feet, a bank, a theater,
finance companies, real estate brokers and consumer finance companies and
further up to two of the Outlots may be used for non-retail purposes. Outlots
are the areas outlined in black on the site plan attached as Exhibit B
("Outlots").
<PAGE>
7. Controlled Area. Pursuant to the Lease, on any property which is
both (a) now or hereafter owned or controlled in whole or in part by Landlord,
or by any subsidiary, affiliate or partner of Landlord, and (b) located within
a radius of three miles from any portion of the Premises, Landlord will not
permit the operation of a retail or wholesale supermarket or other store, or
department within a store, for the sale of food, groceries, fruit, produce,
dairy products, vegetables, bakery products, meats, or delicatessen products.
Provided, however, that other tenants' space in such controlled area shall be
permitted to sell such items so long as no more than one thousand five hundred
(1,500) square feet are used for the sale of such products.
8. No Modification. The terms and conditions of the Lease are
incorporated by reference into this Memorandum of Lease as if such terms were
written out at length. In the event of a conflict between this Memorandum of
Lease and the Lease, the terms and conditions of the Lease shall govern. For
a complete statement of the rights, privileges and obligations created under
and by the Lease, reference is hereby made to the Lease.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Tenant and Landlord have executed this Memorandum of Lease as of the Execution
Date.
TENANT: LANDLORD:
WILLOWBROOK PROPERTIES, INC.
SUPERVALU HOLDINGS, INC. d/b/a NBI DEVELOPMENT CORPORATION
By: _____________________ By: _______________________________
Its: _____________________ Its: _______________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this, the day of March, 1999, this instrument was acknowledged before
me, a notary public, by _______________________, who acknowledged
himself/herself to be a duly authorized, elected and acting
________________________of SUPERVALU HOLDINGS, INC., a Missouri corporation,
and that he/she as such officer being authorized to do so, executed the
foregoing MEMORANDUM OF LEASE on behalf of said corporation for the purposes
therein contained by signing the name of the corporation by himself/herself
as.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
___________________________________
Notary Public
___________________________________
(Printed Signature)
My Commission Expires:
______________________________
My County of Residence is:
______________________________
<PAGE>
ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF ALLEGHENY )
On this, the day of March, 1999, this instrument was acknowledged before
me, a notary public, by _______________________, who acknowledged
himself/herself to be a duly authorized, elected and acting
________________________of WILLOWBROOK PROPERTIES, INC., a Delaware
corporation, d/b/a NBI Development Corporation and that he/she as such officer
being authorized to do so, executed the foregoing MEMORANDUM OF LEASE on
behalf of said corporation for the purposes therein contained by signing the
name of the corporation by himself/herself as.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_______________________________
Notary Public
______________________________
(Printed Signature)
My Commission Expires:
______________________________
My County of Residence is:
______________________________
<TABLE> <S> <C>
<CAPTION>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-START> Jul-01-1998
<PERIOD-END> Mar-31-1999
<CASH> 1,884
<SECURITIES> 0
<RECEIVABLES> 1,778
<ALLOWANCES> 239
<INVENTORY> 2,874
<CURRENT-ASSETS> 6,574
<PP&E> 10,559
<DEPRECIATION> 2,731
<TOTAL-ASSETS> 14,584
<CURRENT-LIABILITIES> 6,539
<BONDS> 1,415
<COMMON> 101
0
5
<OTHER-SE> 6,301
<TOTAL-LIABILITY-AND-EQUITY> 14,584
<SALES> 11,831
<TOTAL-REVENUES> 13,546
<CGS> 8,211
<TOTAL-COSTS> 9,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 190
<INTEREST-EXPENSE> 202
<INCOME-PRETAX> 778
<INCOME-TAX> 281
<INCOME-CONTINUING> 497
<DISCONTINUED> (238)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 259
<EPS-PRIMARY> .02
<EPS-DILUTED> .01
<FN>
This schedule contains summary financial information extracted from the
consolidated financial statements of NBI, Inc. for the nine months ended
March 31, 1999 and is qualified in its entirety by reference to such financial
statements.
</TABLE>
