United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
FRESH'N LITE, INC.
(Name of Small Business Issuer in its charter)
Texas 75-2337102
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1705 Whaley, Longview, Texas 75605
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (903) 758-2811
Securities to be registered under Section 12(b) of the Act:
Name of each exchange on which each class is to be
Title of each class registered
------------------- --------------------------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-SB/A-2 includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which can be identified by the use of forward-
looking terminology such as, "may," "believe," "expect," "intend," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. All statements other than statements of historical fact
included in this Form 10-SB/A-2, including, without limitation, the statements
under "Description of Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Market for Common Equity and
Related Stockholder Matters" and the "Financial Statements" located elsewhere
herein regarding the Company's financial position and liquidity, its ability to
service its indebtedness, its strategic plans including its ability to implement
a franchise plan or change restaurant concepts, its application for listing on
the Nasdaq SmallCap Market, and other matters, are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors with respect to
any such forward-looking statements, including certain risks and uncertainties
that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in this Form 10-SB/A-2,
including, without limitation, in conjunction with the forward-looking
statements included in this Form 10-SB/A-2. Important factors that could cause
actual results to differ materially from those in the forward-looking statements
herein include, but are not limited to, the timing and extent of changes in
wholesale food prices, development and construction delays, labor shortages,
uncertainties about competition, government regulation and the ability of the
Company to meet its stated business goals. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
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Part I
Item 1. Description of Business
History.
Fresh'n Lite, Inc. (the "Company"), is a Texas corporation. The Company
originally was incorporated as a Delaware corporation on May 9, 1990, under the
name "Bosko's, Inc." On November 9, 1992, the Bosko's, Inc. name was changed to
"Fresh'n Lite, Inc."
In October 1995, the Delaware corporation merged into its wholly-owned
subsidiary, F'NL, Inc., a Texas corporation. F'NL, Inc. was the surviving
corporation in the merger. F'NL, Inc. then changed its name to "Fresh'n Lite,
Inc." The purpose of the merger was to convert the Delaware corporation into a
Texas corporation.
The Company was formed in connection with the creation of a restaurant
in Marshall, Texas, which was named "Bosko's 3 N 1 D-Lite." In the past, the
Company has operated restaurants in the Texas cities of Marshall, Tyler,
Longview, Nacogdoches and Texarkana. Each of these restaurants has been closed
or sold as the Company has developed its restaurant concept and as the Company
has focused on middle class urban markets in the Dallas/Forth Worth metropolitan
area.
Company Business.
The Company currently operates three full-service restaurants located
in the Texas cities of Dallas, The Colony and Valley Ranch (Irving) under the
name "Fresh'n Lite Cafe & Grill." The Company also operates a full-service cafe
and grill in Richardson, Texas, under the name "Street Talk Cafe."
The Company's restaurants offer low-fat and non-fat meals and food
items, including a wide selection of sandwiches, salads, pizzas, steaks,
seafood, Tex-Mex and other food items and desserts that appeal to
health-conscious customers. The Company believes that its restaurants' offerings
do not sacrifice taste and represent a health-conscious alternative to
traditional restaurant fare.
The majority of the Company's food items are prepared to order using
fresh meats, cheeses, and vegetables. While the restaurants offer full-service
casual dining, the menus are designed to permit quick food preparation. The
restaurants offer drive-thru and take-out service.
The Company intends to focus on the Street Talk Cafe concept and may
convert some or all of the Fresh'n Lite Cafe & Grill restaurants to the Street
Talk Cafe format. The differences between the Street Talk Cafe concept and the
Fresh'n Lite Cafe & Grill concept primarily relate to the restaurant's design
and decor. In the Company's Street Talk Cafe restaurant, the dining area is
divided into separate areas identified by decor and signage that represents Wall
Street, a sports memorabilia shop, an antique store, a country general store, a
farmer's market and a sidewalk cafe. Dividing the dining area into smaller units
is intended to promote a more private dining atmosphere for the Company's
customers. The Company believes that its customers will perceive the Street Talk
Cafe concept as offering a quieter, less- bustling dining experience than is
offered in an undivided dining area. The Company also believes that the Street
Talk Cafe decor is distinctive from competing restaurants and is aesthetically
attractive.
The Company believes that its menu offerings are competitive in price
relative to other casual dining restaurants that do not emphasize low-fat and
non-fat food items. The Company believes that many consumers will perceive that
the Company's restaurants offer high-quality food selections that can be part
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of a healthy eating regimen for the same price as food selections offered by
competitors that would be less appropriate as part of a healthy eating regimen.
The Company's primary supplier of goods is Consolidated Companies, Inc.
("Conco"). As of February 17, 1995, Conco entered into a five-year primary
distribution agreement with the Company (the "Primary Distribution Agreement"),
pursuant to which Conco has agreed to provide 90% of the products that are
required by the Company and that Conco can provide. The Company currently
purchases approximately 90% of its inventory from Conco. The Company purchases
items from Conco, as-needed, on a net-30 day basis. The Company is current in
its account with Conco. The Company also has accounts with other suppliers to
ensure product availability in the event that Conco is unable to meet the
Company's needs in the future. In connection with entering into the Primary
Distribution Agreement, Conco purchased 133,332 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), in March, 1995, for
$199,999.
Control Systems.
The Company utilizes point of sale computer systems at all of the
Company's restaurants. This system allows the Company to monitor the restaurants
on a daily basis via computer modems and tracking software. These systems assist
the Company in maintaining control of inventory, supplies and labor costs.
Concept and Strategy.
The Company offers high-quality food products that appeal to
health-conscious consumers. The Company's restaurants offer reasonably-priced
items in a comfortable and attractive atmosphere at reasonable prices. The
Company currently focuses on middle-class urban markets in the Dallas/Fort Worth
metropolitan area. The Company's restaurants offer a wide selection of
sandwiches, salads, pizzas, steaks, seafood, Tex-Mex and other food items and
desserts.
The Company's restaurants are designed to offer full service to the
casual diner with food preparation time comparable to fast-food restaurants.
This allows rapid turnover of lunch-time crowds.
The Company's restaurants offer drive-thru or take-out service.
The Company currently intends to concentrate its expansion efforts in
the Dallas/Fort Worth metropolitan area. The Company believes that this area can
support up to 20 additional Street Talk Cafe restaurants. The Company's strategy
is to grow through: identifying appropriate target markets within the
Dallas/Fort Worth metropolitan area and constructing new Street Talk Cafe
restaurants in such markets.
The Company also may consider expanding through franchising.
Currently, the Company has not entered into any leases for additional
locations for Street Talk Cafe restaurants. The Company's expansion plans are
subject to the following: (1) identification of appropriate locations, (2) the
successful negotiation of ground or building leases on acceptable terms, (3) the
availability of capital or other financing for the construction of new
restaurants, (4) the availability of full-time and part-time employees, and (5)
economic and competitive conditions. No assurances can be given that the Company
will be able to implement successfully its expansion strategy.
Pricing.
The Company competes on price with other casual dining restaurants in
order to gain acceptance for the Company's restaurants. With other restaurant
chains offering value pricing on many items, the Company believes that it is
necessary to be price competitive in order to attract new customers. As the
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Company's restaurants mature and develop repeat customers, the Company may
consider increasing prices. Any such price increase, of course, would be subject
to pricing strategies at competing restaurants.
Management and Employees.
The Company believes that attracting and maintaining superior employees
will continue to be vital to its success. Thus, managers' compensation packages
include performance bonuses and other incentives. As a result, the Company's
restaurant managers are expected to meet high standards in terms of store
margins, sales volumes and overall atmosphere in their restaurants. The Company
currently has 12 full-time and 85 part-time employees in its operations.
All personnel are provided with a detailed operations manual which
outlines their job duties, safety standards, Company policies and food handling
and preparation responsibilities. The employees are expected to comply with all
information contained in the Company's operations manual.
The Company expects to hire approximately three full-time management
personnel and thirty part-time hourly personnel with the opening of each new
restaurant operation. The Company anticipates that the cost of compensating
these personnel will be approximately 25% of the annual operating revenue
generated by each new restaurant operation. The initial cost of hiring and
training personnel for each new restaurants will be included in the restaurant's
start-up costs.
Competition.
The Company competes with other restaurants, including restaurants that
offer products similar to those offered by the Company and restaurants that
offer other food types. The Company faces competition from local restaurant
businesses, including one-store restaurants and regional restaurant chains.
The Company also competes with national restaurant companies. Marketing
and pricing strategies may be dictated by large, well-established national
chains. As economic conditions change, product prices at major restaurant chains
may be lowered to entice customers to eat out more. To the extent the Company
competes with local franchises of these national restaurant chains, the
Company's prices will have to be competitive to attract customers and to gain
market share in new locations. However, in competing with franchises of national
restaurant chains, the Company has the advantage of paying no franchise fees to
a franchisor. The Company believes that this allows for higher operating margins
for each dollar of revenue generated.
National restaurant companies also have the benefit of substantial
financial resources for advertising and other marketing promotions which the
Company does not have. By initially concentrating its efforts on the Dallas/Fort
Worth metropolitan area, the Company hopes to gain name recognition through
advertisements and promotions with the local media.
Regulation.
Restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire, and other authorities and are also subject to
state and local licensing and regulation with regard to the sale of alcoholic
beverages and food. Each of the Company's restaurants currently serves alcoholic
beverages pursuant to alcohol licenses issued by the Texas Alcoholic Beverage
Commission. The Company has experienced no material problems in its current
operations in complying with state and local regulatory authorities.
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Trademarks.
The Company has been granted a trademark registration for the name
"Fresh'n Lite Deli Cafe" and "Fresh'n Lite Deli and Grill." The Company also has
applied for trademark and service mark registration of the name "Street Talk
Cafe." No assurances can be given regarding the outcome of this later
application. The Company has not filed for trademark registration of the name
"Fresh'n Lite Cafe & Grill," primarily because the Company may convert its
Fresh'n Lite Cafe & Grill restaurants to Street Talk Cafe restaurants.
Registration of trademark names does not assure the Company that its
use of the name is incontestable until five years after registration issues and
the Company files an additional affidavit with the trademark office. There are
other users of the name "Fresh'n Lite," several of which began use of the name
before the Company, but none of these users have made any claim regarding the
use of this name by the Company. Whether another user could restrict the
Company's use of the name will depend upon the facts of the particular case,
including priority of use, priority of registration, the area of use, the type
of use and the generic or descriptive nature of the name.
Item 2: Management's Discussion and Analysis
Overview.
The Company was organized in June of 1990 as Bosko's, Inc. under the
laws of the State of Delaware. In November of 1992 the Company changed its name
to Fresh'n Lite, Inc. and in November of 1995 merged into a Texas corporation
also bearing the name Fresh'n Lite, Inc.. The Company currently owns and
operates 3 Fresh'n Lite Cafe & Grill restaurants, in Dallas, Irving (Valley
Ranch), and The Colony, Texas. The Company also operates one Street Talk Cafe
restaurant which opened May 9, 1998 in Richardson, Texas. The Company intends to
expand by opening additional Street Talk Cafe restaurants on a Company owned
basis in the Dallas/Ft Worth metropolitan area.
Comparison of Year Ended December 31, 1996 and December 31, 1997.
Operating revenues for 1996 were $2,602,533, with a gross profit of
$1,862,111 (71.5%), and operating income of $282,327, before adding royalty
revenues of $34,744, which increased operating income to $317,101.
Operating revenues for 1997 were $3,106,144 a 19.4% increase from 1996,
with a gross profit of $2,215,200 (71.4 %), and operating income of $166,862
which included a one time charge of $169,075 for the accelerated amortization of
start up costs associated with the closing of the Nacogdoches, Texarkana, and
Longview facilities. Prior to this charge operating income was $335,937. The
Company discontinued its franchise operation in early 1996 therefore no royalty
revenues or franchise fees are reflected in the 1997 numbers. The 19.4% increase
in revenues over 1996 is attributed to the opening of the Irving (Valley Ranch),
and The Colony, Texas facilities.
Comparison of Three Months Ended March 31, 1998 and 1997.
For the thirteen weeks ending March 31, 1998 the Company generated
revenues of $798,219 compared to revenues in the same period 1997 of $712,352, a
12.1% gain, a profit of $215,435 compared to a net operating loss of $174,558 in
the first quarter of 1997. The difference in profitability from 1997 to 1998 is
attributed to the following factors; (1) in the first quarter of 1997 the
Company accelerated the amortization of costs in the amount of $169,075
associated with the closing of the Nacogdoches and
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Texarkana, Texas facilities; (2) in the first quarter of 1997 the Company had a
one time charge of $50,000 for professional fees associated with the Company's
filing to trade on the Nasdaq Over the Counter Bulletin Board; (3) in the first
quarter of 1998 the Company realized a one time gain of $111,593 on the sale of
the Nacogdoches, Texas facility; and (4) in the first quarter of 1998 the
company realized rental income of $28,086 on a temporary lease of the Texarkana
facility.
Liquidity and Capital Resources.
Historically the Company has required capital to fund the operations
and capital expenditure requirements of its Company-owned restaurants.
From January 4, 1995 through December 12, 1997 the Company received
proceeds in the amount of $2,219,500 from intra-state offerings of the Company's
securities. Approximately $287,600 of the proceeds from the offerings were used
to cover offering related costs, including underwriting discounts and
commissions. See "Recent Sales of Unregistered Securities." The remaining
proceeds were used for the development of additional restaurants, the
acquisition of the Company's corporate headquarters, and general corporate
purposes. The Company's corporate headquarters were purchased for $1,250,000
which was the appraised value of the facility. See "Certain Relationships and
Related Transactions."
The Company met fiscal 1997 capital requirements with cash generated by
operations, the proceeds from the 1997 intra-state offering, and borrowing on
notes payable. In fiscal 1997 the Company's operations generated approximately
$644,352 in cash, as compared to $551,804 in fiscal 1996 and $461,811 in fiscal
1995. The Company's restaurant operations are labor intensive and do not have
significant receivables or inventory. The Company receives trade credit based
upon negotiated terms in purchasing food and supplies and ordinarily operates
with a relatively small level of working capital.
The Company's principal capital requirements are the funding of new
restaurant development or acquisitions and remodeling of existing units. During
fiscal 1997, the Company constructed and opened one unit in The Colony, Texas
and began construction of a second unit in Richardson, Texas, and purchased its
corporate headquarters. The total capital outlay for the year was $2,288,392.
Opening additional Company-owned restaurants is a key component of the Company's
expansion plans.
On May 29, 1998 the Company issued $1,500,000 of 6% Convertible
Debentures due May 29, 2000 (the "Debentures"), in a private placement to three
accredited investors (the "Investors"). The private placement yielded $1,335,000
in net proceeds to the Company (after deduction of the placement agent's fees
and fees of counsel for the investors). In connection with the private
placement, the Company also issued to the Investors warrants to purchase up to
an aggregate of 75,000 shares of the Company's Common Stock. The Company issued
to the placement agent a warrant to purchase up to 50,000 shares of the
Company's Common Stock. The exercise price for the warrants are $4.40 per share,
which is equal to 110% of the average closing bid prices of the Company's Common
Stock for the five trading days immediately preceding May 29, 1998.
The Debentures can be converted into shares of the Company's Common
Stock. The number of shares of Common Stock to be issued upon any such
conversion will be determined based upon the lesser of (a) $4.00 per share, (the
closing bid price of the Common Stock on May 28, 1998), or (b) the average
closing bid prices of the Company's Common Stock for the five trading day period
ending on the trading day immediately preceding the date on which such Debenture
is converted, multiplied by a discount ranging from 25% to 17.5%. The Company
granted to the investors certain registration rights with respect to the shares
of Common Stock underlying the Debentures and the warrants. See "Recent Sales of
Unregistered Securities."
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The Investors have agreed to purchase an additional $1,500,000 of 6%
Convertible Debentures on or about August 27, 1998, subject to certain
conditions. Among other things, the second tranche of the financing is subject
to the effectiveness of a registration statement, registering for resale the
shares of Common Stock underlying the Debentures and Warrants.
In March of 1997 the Company was able to refinance it's existing debt
with East Texas National Bank in Marshall, Texas in order to extend the due
dates from 1997 to March of the year 2000. The refinancing was done on a renewal
basis as the notes came due under the same terms and conditions as the
predecessor notes.
Additionally, the Company's management has determined that in order to
reduce the amount of intangible assets on its balance sheet the amortization of
capitalized franchise costs will be accelerated from a 60 month schedule which
is reflected in the 1997 financial statements to a 24 month schedule with the
balance of $57,333 to be expensed in 1998. The net difference between the two
methods will result in an additional expense of $38,222 in 1998.
Year 2000 Disclosure.
The Company uses current versions of widely used, publicly available
software for its accounting, data processing, and point of sale computer
requirements. The providers of the software utilized by the Company have stated
that there will be no failures in the programs used by the Company resulting
from the year 2000. The Company does not utilize any customized software. The
Company has not yet determined the impact, if any, that year 2000 issued may
have on its vendors. However, the Company believes there are adequate
alternative vendors that can supply products and services to the Company if
necessary. Finally, the Company's business is not highly dependent upon
electronic data processing. In conclusion, the Company does not believe it is at
a material risk from year 2000 issues.
Item 3: Description of Property
Restaurant Locations.
The following table provides information with respect to each of the
Company's restaurant properties. The Dallas, Irving, The Colony, Texarkana,
Longview and Richardson buildings are owned, with a lease on the land. The
Company's current plan is to secure a 20-year lease with an option to purchase
on any land to be used for an additional restaurant.
Location Square Feet Lease Expiration Date
- ---------------------------------------------------- ----------------------
Dallas, Texas 4,500 sq. ft. February 21, 2015
Irving (Valley Ranch), Texas 4,700 sq. ft. November 15, 2016
The Colony, Texas 4,700 sq. ft. October 15, 2017
Texarkana, Texas 3,308 sq. ft. February 1, 2014
Longview, Texas 3,500 sq. ft. January 6, 2012
Richardson, Texas 4,700 sq. ft. December 15, 2017
The Company no longer operates restaurants in the Texarkana and
Longview locations. The Company's lease on the Longview land included an option
to purchase the property which expired in 1997. In connection with the Company's
proposed sale of the building on the Longview property, the Company solicited
and received an extension of the purchase option through December 15, 1998. The
Company currently intends to exercise the purchase option and simultaneously
sell the land and the
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Company's building to a single purchaser. The Company has entered into a written
agreement for this sale and the transaction is expected to close during the
third quarter of 1998. In addition, the Company is negotiating with potential
purchasers of the Texarkana location and expects that the Texarkana building
will be sold and the Texarkana ground lease will be assumed by the end of 1998.
The Company currently plans to convert the Dallas restaurant from the
Fresh'n Lite Grill and Cafe concept to the Street Talk Cafe concept. The
anticipated cost of this conversion is approximately $200,000.
Headquarters Location.
The Company owns a building located at 1705 Whaley, Longview, Texas.
The Company utilizes approximately 5,000 sq. ft. of the building for its
administrative operations. The Company leases the remainder (approximately
15,000 sq. ft.) to another company. The Company purchased the headquarters land
and building in December 1997 from a company that is partially owned by Messrs.
Stanley L. Swanson and Curtis A. Swanson, both directors and officers of the
Company. See "Certain Relationships and Related Transactions."
Item 4: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned as of June 19, 1998 by (i) each person of record
known to the Company who beneficially owns 5% or more of the outstanding Common
Stock, (ii) the named executive officers of the Company, (iii) each director of
the Company, and (iv) all directors and executive officers as a group.
Amount and Nature Percent of
Name and Address of Owner of Ownership Class
- --------------------------------------- ----------------- ----------
Stanley L. & Carole Swanson
1705 E. Whaley
Longview, Texas 76505.................... 1,303,921 (1) 19.4%
Curtis A. & Kim Swanson
1705 E. Whaley
Longview, Texas 75605.................... 607,000 (2) 8.9%
Edward Dmytryk................................ 20,000 *
Henry Leonard................................. 25,000 *
Robert Lilly ................................. 53,572 (3) *
All directors and executive officers as a
group (5 persons)........................... 2,009,493 30.4%
- ----------------------
* Less than 1%.
(1) Includes 100,000 shares that are not outstanding, but are issuable upon
exercise of options held by Stanley L. Swanson that are currently
exercisable.
(2) Includes 200,000 shares that are not outstanding, but are issuable upon
exercise of options held by Curtis A. Swanson that are currently
exercisable.
(3) Includes an aggregate of 53,572 shares that are not outstanding, but are
issuable upon exercise of two options held by Robert Lilly ("Mr. Lilly)
that are currently exercisable.
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<TABLE>
<CAPTION>
Item 5: Directors, Executive Officers, Promoters, and Control Persons.
The directors and executive officers of the Company are set forth
below.
In Office
Name Age Position Since
- ---------------------- ----- ------------------------------------------- ----------
<S> <C> <C>
Stanley L. Swanson 53 Chief Executive Officer, Chairman of the 1990
Board of Directors, and President
Curtis A. Swanson 30 Director, Treasurer, Chief Financial Officer 1990
Jean Hedges 38 Controller 1993
Carole A. Swanson 55 Secretary 1990
Edward Dmytryk 50 Director 1992
Robert (Bob) Lilly 57 Director 1995
Henry Leonard 49 Director, President and Chief Operating 1997
Officer
</TABLE>
All directors hold office until the next annual meeting of the
shareholders of the Company, and until their successors are elected and
qualified. Officers hold office until the first meeting of the Board of
Directors following the annual meeting of shareholders, subject to earlier
removal by the Board of Directors.
Family relationships among officers and directors: Stanley L. Swanson
("Mr. Stan Swanson") and Carole A. Swanson ("Ms. Carole Swanson") are husband
and wife. Curtis A. Swanson ("Mr. Curtis Swanson") is the son of Mr. Stan and
Ms. Carole Swanson.
Business Experience of Directors & Officers.
Stanley L. Swanson, a founder of the Company, has served as President,
Chief Executive Officer, and Chairman of the Board since its inception in May,
1990.
Curtis A. Swanson has been Chief Financial Officer, Executive Vice
President, and Treasurer of the Company since its inception in May, 1990.
Jean M. Hedges ("Ms. Hedges") has been Corporate Controller for the
Company since September 1993. Ms. Hedges has had extensive CPA firm experience
and brings a 10-year record as a controller and business manager to the Company.
Prior to her employment with the Company, Ms. Hedges was the controller of
Stainback Casting, a manufacturer based out of Tyler, Texas, from 1992 to 1993.
Carole A. Swanson, a co-founder of Fresh'n Lite, Inc., has served as
Secretary of the Company since its inception in May, 1990.
Edward C. Dmytryk ("Mr. Dmytryk") has been a Director of the Company
since 1992. Mr. Dmytryk is currently the chief executive officer and principal
owner of Benchmark, Inc., a metal fabricating company located in Fort Worth,
Texas. From 1988 until January, 1995, Mr. Dmytryk was the chief operating
officer for Bollinger Industries International, located in Irving, Texas.
Henry Leonard ("Mr. Leonard") has been President and Chief Operating
Officer of the Company since December 1997. Prior to joining the Company in
1997, Mr. Leonard was President of Casa Ole' ALM, L.L.C., a franchise market
partner joint venture with Casa Ole' Restaurants, Inc. From 1995 to 1996, Mr.
Leonard was Director of New Concept Development for Papa Gino's of American,
Inc. From
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1974 to 1994, Mr. Leonard served in a variety of posts for Pizza Systems /
Summit Concepts (d.b.a Mazzio's and Ken's Pizza) including President and Chief
Operating Officer.
Robert (Bob) Lilly has been a director of the Company since March,
1995. Mr. Lilly is currently the owner of Professional Imaging & Promotions,
Inc., a photography and graphics imaging company located in Graham, Texas.
Item 6: Executive Compensation
The following table sets forth certain compensation information
regarding the Company's Chief Executive Officer. No officer of the Company
received compensation during the most recent fiscal year in an amount exceeding
$100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Long Term
Compensation Compensation
------------ -------------------
Securities Underlying
Name and Principal Position Fiscal Year Salary Options/SARs(#)
- ----------------------------------------- ------------- -------------- ---------------------
<S> <C> <C>
Mr. Stan Swanson, Chief Executive Officer 1997 $24,700 100,000
1996 $24,700 -0-
1995 $24,700 -0-
Option/SAR Grants in Last Fiscal Year
Individual Grants
- ----------------------------------------------------------------------------------------------------------
% of Total
Number of Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Fiscal-Year Price-($/Sh) Expiration Date
- ------------------- -------------------- ------------ ---------------- ------------------
Mr. Stan Swanson 100,000 18.4% $2.50 December 31, 2001
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of
Underlying Unexercised In-the-
Unexercised Money
Options/SARs at FY- Options/SARs at
Shares Acquired Value Realized ($) End (#) FY-End ($)
Name on Exercise (#) Exercisable Exercisable
- ------------------- ---------------- ------------------ -------------------- -----------------------
Mr. Stan Swanson -0- -0- 100,000 $50,000(1)
</TABLE>
- -------------------
(1) Calculated based on a December 31, 1997, fair market value of $3.00 per
share, less the exercise price of $2.50 per share.
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Potential Employment Agreement.
Upon the hiring of Mr. Leonard as President and Chief Operating Officer
of the Company, the Company began negotiating an employment agreement with Mr.
Leonard. The Company is currently in the process of finalizing a five-year
employment agreement with Mr. Leonard. Mr. Leonard is to receive 25,000 shares
of Common Stock as a signing bonus. The employment agreement provides Mr.
Leonard with an annual salary of $75,000 per year with $25,000 a year increases
for the five-year term of the employment agreement. The employment agreement
also provides, as part of Mr. Leonard's base compensation, an option to purchase
250,000 shares of Common Stock exercisable over a five-year period in increments
of 50,000 per year with the first exercise date set at December 15, 1998.
Finally, pursuant to the employment agreement, Mr. Leonard may receive
additional incentive compensation based on the Company's achievement of
projected net cash flow. The incentive would allow Mr. Leonard to purchase
20,000 shares of Common Stock per year and up to a 50% cash bonus as a percent
of his base salary each year. The employment agreement also provides other
typical employment benefits and a two-year non-compete restriction upon
termination.
Director Compensation.
No remuneration is paid to the Board of Directors for their service in
that office, except that Mr. Lilly is paid $500 for each meeting, plus expenses,
and he has been granted an option to acquire 50,000 shares. However, in the
future the directors may receive a nominal director's fee for their attendance
at meetings of the Company's Board of Directors, and reimbursement for actual
expenses incurred in attending such meetings.
On December 1, 1995, the Company entered into an agreement with a
director, Mr. Lilly, whereby Mr. Lilly receives $1,500 plus the grant of an
option to acquire Common Stock of the Company at not less than 100% of the fair
market value as of the grant date, for each promotional appearance made by Mr.
Lilly on behalf of the Company. This agreement superseded a previous agreement
between Mr. Lilly and the Company through which Mr. Lilly acquired options to
purchase 3,752 shares of Common Stock at $.10 per share.
Pursuant to the superseded agreement, Mr. Lilly was granted an option
to acquire stock at $.10 per share in a manner so that the difference between
the price of $.10 per share and the fair market value of the stock at the time
of the issuance of the grant multiplied by the number of shares equaled $2,500
for each day of promotional appearances that Mr. Lilly made before December 1,
1995 on behalf of the Company. Options covering 3,572 shares were granted for
personal appearances made by Mr. Lilly on behalf of the Company before December
1, 1995.
Stock Option Plan.
On March 1, 1997, the Board of Directors of the Company adopted its
1997 Incentive Stock Option Plan pursuant to which 200,000 shares of the
Company's stock were set aside for the purpose of the granting of incentive
stock options to directors and key employees of the Company. The purchase price
of the stock purchased pursuant to the exercise of such an option is required to
be not less than 100% of the fair market value of the stock on the date of the
grant of the option. This plan was approved by the shareholders on May 23, 1997.
Under the 1997 Incentive Stock Option Plan, an option for 50,000 shares
has been granted to Mr. Lilly for service as a member of the Board of Directors
with a purchase price of $1.50 per share. This option extends until March 1,
2000. Also under the 1997 Incentive Stock Option Plan, Roland R.
12
<PAGE>
Jehl and Douglas K. Tabor, who served as directors for one-year terms expiring
during 1997, have been granted an option for 25,000 shares each for service as
members of the Board of Directors, with a purchase price of $1.50 per share.
These options extend until October 19, 2000.
The Company applies APB Opinion 25 and related interpretations in
accounting for the Stock Option Plan. In 1995, the FASB issued FASB Statement
No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), which, if fully
adopted by the Company, would change the methods the Company applies in
recognizing the cost of the Stock Option Plan. Adoption of the cost recognition
provisions of SFAS 123 is optional and the Company has decided not to elect
these provisions of SFAS 123. The Company recorded no stock-based compensation
costs in 1997, 1996, or 1995. Had the fair values of options been recognized as
compensation expense, costs would have increased by $228,270 ($172,270 after
tax) in 1997 and $90,108 (no tax effect) in 1995. No options were granted in
1996. The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts.
Item 7: Certain Relationships and Related Transactions
F'NL Investments, LLC.
Recently, Mr. Curtis Swanson, a director, treasurer, and chief
financial officer, and Mr. Dmytryk, a director, formed F'NL Investments, LLC, a
Texas limited liability company, which has entered into a franchise agreement
with the Company for the establishment of a restaurant in Arlington, Texas. The
franchise restaurant was to be located at 900 Six Flags Dr. in Arlington. FN'L
Investments, LLC paid a $50,000 franchise fee to the Company and agreed to pay
the Company royalties of 5% of gross revenues. The directors have elected to
allow F'NL Investments, LLC to convert this restaurant to a pizza restaurant
because of demographics and to open the franchise restaurant in Arlington at a
location to be determined in the future. F'NL Investments, LLC will not be
required to pay additional franchise fees when the new franchise site is
selected.
At December 31, 1996, the Company held a note receivable from F'NL
Investments, LLC. The note was in the amount of $31,345 plus interest at a rate
of 9%. The entire principal amount, along with interest, was repaid prior to the
maturity date of April 30, 1996. The note was for salary payments made on behalf
of F'NL Investments, LLC by the Company in connection with payroll services it
was providing F'NL Investments, LLC in paying employees of F'NL Investments,
LLC.
At December 31, 1997, the Company held a note receivable from Mr.
Curtis Swanson, an officer, director and shareholder of the Company, in the
amount of $124,500. The note related to operating expenses of the Arlington
franchise location. The note bears interest at 5% and is payable in two
semiannual installments of $77,845, together with interest beginning on June 30,
1998.
Four Seasons Marine & Cycle, Inc.
In December 1997, the Company bought its corporate headquarters for
$1,250,000 from Four Seasons Marine & Cycle, Inc. ("Four Seasons"). Messrs.
Curtis Swanson and Stan Swanson, directors and officers of the Company, each own
43% of Four Seasons. The purchase price was based on the appraised value of the
facility. In addition, the transaction was approved by the Board of Directors of
both Four Seasons and the Company.
13
<PAGE>
Item 8: Description of Securities
The Company has only one class of capital stock consisting of Common
Stock, of which it is authorized to issue 50,000,000 shares. No share of Common
Stock is entitled to preference over any other share, and each share is equal to
every other share in all respects. Holders are entitled to one vote for each
share with respect to all matters voted upon by shareholders, including the
election of directors; are entitled to receive dividends as may be declared by
the Board of Directors out of funds legally available therefor; and are entitled
to share pro rata in the distribution of assets available for such purpose in
the event of liquidation. No preemptive rights attach to ownership of shares of
Common Stock.
Part II
Item 1: Market for Common Equity and Related Stockholder Matters
Market Information and Holdings.
The Company's Common Stock began trading on the Nasdaq Over the Counter
Bulletin Board under the symbol "FLTT" on May 9, 1997. As of June 22, 1998,
there were approximately 204 shareholders of record. The following table sets
forth for the quarters indicated the high and low bid prices of the Company's
Common Stock as reported by the Nat'l Daily Quotation Services, Inc. The prices
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not represent actual transactions.
Dividends.
The Company has not declared any cash dividends on its common stock
during the fiscal years ended December 31, 1996 and December 31, 1997 nor during
the first quarter ended March 31, 1998. No restrictions exist on the Company's
ability to pay dividends on its common stock in the future.
1997 High Low
- ---------------------- ------------------- -------------------
First Quarter N/A N/A
Second Quarter $3.000 $2.500
Third Quarter $3.750 $2.500
Fourth Quarter $3.625 $2.125
1998 High Low
- ---------------------- ------------------- -------------------
First Quarter $3.000 $1.649
Second Quarter $4.0625 $1.656
The Company has applied for listing of the Common Stock on the Nasdaq
SmallCap Market. No assurances can be given that such listing will be granted.
Item 2: Legal Proceedings
The Company is not presently a party to any litigation.
14
<PAGE>
Item 3: Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
Item 4: Recent Sales of Unregistered Securities
Sales of Units.
During 1997, the Company sold 198,450 units for an aggregate offering
price of $10.00 per unit. Each unit consisted of four shares of Common Stock and
two warrants to purchase shares of Common Stock. Each warrant entitles the
holder to purchase one share of Common Stock per warrant, for $3.00 per share,
on or before June 25, 2001. The total amount raised through the sale of such
units was $1,984,500, of which $56,600 was paid in underwriting commissions.
In connection with the Company had entered into an underwriting
agreement with Dillon-Gage Securities, Inc. ("Dillon-Gage"). After 56,600 units
were sold, the underwriting agreement was terminated and Dillon-Gage refunded
$10,000 of expenses previously advanced. Dillon-Gage retained a 10% commission
of $56,600. The Company then completed the sale of units.
The Company is registered as an issuer broker dealer with the Texas
Securities Board. The offering of the units was made only to residents of the
State of Texas. The Company relied on the Section 3(a)(11) intrastate offering
exemption of the Securities Act of 1933 as amended, for the sale of these
securities. The sale of units concluded on December 12, 1997.
Sale of 6% Convertible Debentures.
On May 29,1998, the Company issued $1,500,000 of the Debentures to the
Investors. The private placement yielded $1,335,000 in net proceeds to the
Company (after deduction for the payment of the placement agent's fees and fees
of counsel for the Investors). In connection with the private placement, the
Company also issued to the Investors warrants to purchase up to an aggregate of
75,000 shares of the Company's Common Stock. The Company issued to the placement
agent a warrant to purchase up to 50,000 shares of the Company's Common Stock.
The exercise price for the warrants is $4.40, which is equal to 110% of the
average closing bid prices of the Company's Common Stock for the five trading
days immediately preceding May 29, 1998.
The Debentures can be converted into shares of the Company's Common
Stock. The number of shares of Common Stock to be issued upon any such
conversion will be determined based upon the lesser of (a) $4.00 (the closing
bid price of the Common Stock on May 28, 1998), or (b) the average closing bid
prices of the Company's Common Stock for the five trading day period ending on
the trading day immediately preceding the date on which such Debenture is
converted, multiplied by a discount ranging from 25% to 17.5%. The Company
granted to the investors certain registration rights with respect to the shares
of Common Stock underlying the Debentures and the warrants.
The Investors have agreed to purchase an additional $1,500,000 of the
Debentures on or about August 27, 1998, subject to certain conditions. Among
other things, the second tranche of the financing is subject to the
effectiveness of a registration statement, registering for resale the shares of
Common Stock underlying the Debentures and the warrants.
The Debentures were sold in an exempt private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
15
<PAGE>
Item 5: Indemnification of Officers and Directors
Liability and Indemnification.
The Company is a Texas corporation. Texas' corporation laws include
provisions that may provide exculpation and indemnification to officers and
directors. Such provisions could diminish the rights of shareholders to sue
officers or directors. The Company's Articles of Incorporation exculpate the
Company's directors from personal liability to the Company, except to the extent
a Texas statute precludes such elimination of personal liability. The Company's
Bylaws provide that the Company may advance expenses to, and indemnify, the
Company's directors, officers, employees, agents and other persons, all to the
fullest extent allowed by applicable law.
16
<PAGE>
Part F/S -- Financial Statements
Fresh'n Lite, Inc.
INDEX TO FINANCIAL STATEMENTS
Contents
Audited Financial Statements
Independent Auditors Report........................................18
Balance Sheets.....................................................19
Statements of Income...............................................21
Statements of Changes in Shareholders' Equity......................22
Statements of Cash Flows...........................................23
Notes to Financial Statements......................................24
Interim Financial Statements
Balance Sheets.....................................................40
Income Statement...................................................42
Statements of Cash Flow............................................43
Notes to Interim Financial Statements..............................44
17
<PAGE>
Independent Auditors' Report
Board of Directors,
Fresh'n Lite, Inc.
Longview, Texas
We have audited the accompanying balance sheet of Fresh'n Lite, Inc. as of
December 31, 1997, and the related statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fresh'n Lite, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ T. G. PROTHRO & COMPANY, PLLC
Certified Public Accountants
Tyler, Texas
March 3, 1998
Members, American Institute of Certified Public Accountants
Members, Texas Society of Certified Public Accountants
18
<PAGE>
Fresh'n Lite, Inc.
Balance Sheet
December 31, 1997
1997
-----------
ASSETS
CURRENT ASSETS
Cash ........................................... $ 20,393
Inventory ...................................... 26,571
-----------
Total Current Assets ...................... 46,944
-----------
PROPERTY AND EQUIPMENT (Pledged)
Buildings ...................................... 3,774,141
Land ........................................... 135,000
Capitalized Land Leases ........................ 2,175,000
Leasehold Improvements ......................... 30,113
Vehicles and Equipment ......................... 1,250,302
-----------
Total Property and Equipment .............. 7,364,556
Accumulated Depreciation ....................... (430,325)
-----------
Property and Equipment - Net .............. 6,934,231
-----------
OTHER ASSETS
Assets Held for Sale,
Net of Accumulated Depreciation .............. 909,835
Corporate organizational Costs and Other Assets,
Net of Accumulated Amortization .............. 32,651
Deferred Franchise System Cost,
Net of Accumulated Amortization .............. 57,333
Notes Receivable - Related Party ............... 164,543
Total Other Assets ........................ 1,164,362
-----------
TOTAL ASSETS .............................. $ 8,145,537
-----------
19
<PAGE>
Fresh'n Lite, Inc.
Balance Sheet
December 31, 1997
1997
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses ........................................... $ 340,635
Accounts Payable ........................................... 52,864
Bank Overdraft ............................................. 48,104
Note Payable - Short Term .................................. 10,249
Income Taxes Payable ....................................... 8,808
Current Portion of Capital Lease Obligations ............... 32,139
Current Portion of Notes Payable - Long Term ............... 465,015
----------
Total Current Liabilities ............................. 957,806
OTHER LIABILITIES
Capital Lease Obligations, net of Current Portion .......... 2,313,713
Notes Payable - Long Term, net of Current Portion .......... 1,101,437
Deferred Income Tax Liability .............................. 141,200
----------
Total Liabilities ..................................... 4,513,616
----------
CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, $0.01 Par Value; 50,000,000 Shares Authorized;
6,158,482 Shares Issued and Outstanding .................. 61,585
Additional Paid in Capital ................................. 3,278,499
Retained Earnings .......................................... 293,087
----------
3,633,171
Less: Treasury Stock, at Cost, 1,250 Shares (1,250)
----------
Total Shareholders' Equity ............................ 3,631,921
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............ $8,145,537
See accompanying notes to financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Fresh'n Lite, Inc.
Statements of Income
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
SALES ...................................... $ 3,106,144 $ 2,602,533 $ 1,840,756
COST OF SALES .............................. (890,944) (740,422) (522,180)
----------- ----------- -----------
GROSS PROFIT .......................... 2,215,200 1,862,111 1,319,576
Franchise Royalties Earned ................. -- 34,774 5,211
Franchise Fees Earned ...................... -- -- 50,000
----------- ----------- -----------
Total Gross Profit and Franchise Income 2,215,200 1,896,885 1,373,787
EXPENSES
Salaries and Contract Labor ................ 744,750 590,517 473,757
Payroll and Other Taxes .................... 145,993 118,574 92,619
Professional Fees .......................... 95,662 88,542 17,646
Advertising and Promotional ................ 129,274 64,878 42,275
Rent ....................................... 33,079 47,423 48,932
Insurance .................................. 61,424 41,525 46,390
Telephone .................................. 41,346 20,823 22,765
Travel ..................................... 12,269 5,763 8,412
Utilities .................................. 100,331 86,794 67,926
Depreciation ............................... 233,891 162,793 122,633
Amortization ............................... 206,480 133,731 137,445
Interest ................................... 105,131 155,466 106,265
Linen and Laundry .......................... 39,918 22,452 10,291
Repairs and Maintenance .................... 40,062 19,164 12,261
Supplies ................................... 12,247 12,099 8,116
Miscellaneous .............................. 46,591 19,240 11,730
----------- ----------- -----------
Total Expenses ........................ 2,048,338 1,579,784 1,229,463
----------- ----------- -----------
OPERATING INCOME ...................... 166,862 317,101 144,324
Income Tax Expense:
Current ............................... 8,800 -- --
Deferred .............................. 47,200 94,000 --
----------- ----------- -----------
NET INCOME ............................ $ 110,862 $ 223,101 $ 144,324
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Fresh'n Lite, Inc.
Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 1997, 1996 and 1995
Additional Retained Total
Common Paid In Earnings Treasury Shareholders'
Stock Capital (Deficits) Stock Equity
--------- ------------ ---------- ----------- -------------
<S> <C> <C>
Balances, January 1, 1995 . $ 49,279 $ 999,520 $ (185,200) $ (1,250) $ 862,799
Net Income ........... -- -- 144,324 144,324
Sale of Common Stock,
291,734 Shares ..... 2,918 365,334 -- 144,324
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1995 52,647 1,364,854 (40,876) (1,250) 1,375,375
Net Income ........... -- -- 223,101 223,101
Sale of Common Stock,
291,734 Shares ..... 2,264 563,736 -- 566,000
Stock Issuance Costs . -- (159,980) -- (159,980)
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1996 54,911 1,768,610 182,225 (1,250) 2,004,496
Net Income ........... -- -- 110,862 110,862
Sale of Common Stock,
667,400 Shares ..... 6,674 1,661,826 -- 1,668,500
Stock Issuance Costs . -- (151,937) -- (151,937)
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1997 $ 61,585 $ 3,278,499 $ 293,087 $ (1,250) $ 3,631,921
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Fresh'n Lite, Inc.
Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
----------- ----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ........................................ $ 110,962 $ 223,101 $ 144,324
----------- ----------- -----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation .................................. 223,881 162,793 122,633
Amortization .................................. 206,480 133,731 137,445
Deferred Income Taxes ......................... 47,200 94,000 --
Change in Net Capital Leases .................. (15,167) (6,414) (2,476)
No Change in Assets and Liabilities: .......... 618 8,172 (11,063)
(Increase) Decrease in Inventory ......... (15,173)
Increase (Decrease) in Accounts Payable .. 5,854 (13,074)
Increase (Decrease) in Accrued Expenses .. 45,924 (50,505) 96,121
Increase in Income Taxes Payable ......... 8,800 -- --
----------- ----------- -----------
Total Adjustments ............................. 533,490 328,703 317,487
----------- ----------- -----------
Net Cash Provided by Operating Activities: 644,352 551,804 461,811
----------- ----------- -----------
Cash Flows from Investing Activities:
Capital Expenditures .............................. (2,288,392) (771,327) (928,617)
Expenditures for Preopening/Remodel
Costs and other Assets .......................... -- (74,708) (54,495)
(Increase) Decrease in Note Receivable - Related Party . (133,198) 9,712 (41,057)
(Increase) Decrease in Deferred Stock Issuance Cost
and Deferred Franchise System Costs .................. (10,000) 90,624 (72,392)
----------- ----------- -----------
Net Cash Used in Investing Activities .... (2,431,590) (755,699) (1,096,561)
----------- ----------- -----------
Cash Flows from Financing Activities:
Sale of Common Stock, net of Stock Issuance Costs . 1,168,500 406,020 200,001
Financing through Bank Overdrafts ................. 48,103 (31,004) 10,675
Borrowings on Notes Payable ....................... 1,451,239 144,694 487,550
Principal payments on Notes Payable ............... (877,871) (312,570) (57,825)
----------- ----------- -----------
Net Cash Provided by Financing Activities 1,789,971 207,140 640,401
----------- ----------- -----------
NET INCREASE IN CASH .......................... 2,733 3,245 5,651
CASH AT BEGINNING OF YEAR .............................. 17,640 14,395 8,744
----------- ----------- -----------
CASH AT END OF YEAR ............................... $ 20,373 $ 17,640 $ 14,395
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ORGANIZATION AND OPERATIONS
Fresh'n Lite, Inc., "the Company" (a Texas corporation since October, 1995) was
incorporated as Bosko's, Inc., in May 1990 as a Delaware corporation. In
December 1992 the corporate title was changed to Fresh'n Lite, Inc. in order to
have its restaurants' names more reflective of its products. The Company's
restaurants changed their names throughout 1992, which resulted in significant
costs being capitalized during that year. In 1995, the Company merged from a
Delaware corporation into F'NL, Inc., a Texas corporation. Immediately, the
Company changed its name to Fresh'n Lite, Inc.
Prior to 1994, the Company's restaurants provided healthy foods and beverages in
a "fast food" deli atmosphere. During 1994, the Company expanded all restaurants
into "full service" restaurants, offering dinner menus and a wait staff. During
1995, the Company closed the Texarkana, Longview and Nacogdoches restaurants and
reopened them as Aunt Bea's Home Cooking. During 1997, the Company closed the
Texarkana, Longview, and Nacogdoches restaurants. All of the Company's
restaurants are now located in the Dallas/Ft. Worth Metroplex.
Following is a summary of the Company's restaurants:
Location Date Opened/Status
- ---------------------------------------- ------------------
Tyler, Texas (sold August 1994,
Repurchased March 1995,
Closed December 1997) February 1991
Longview, Texas (Closed 1997) March 1992
Nacogdoches, Texas (Closed 1997) May 1993
Texarkana, Texas (Closed 1997) June 1994
Dallas (Frankford Avenue), Texas July 1995
Irving (Valley Ranch), Texas February 1997
The Colony, Texas October 1997
Richardson, Texas Under Construction
Other restaurant locations are under consideration.
INVENTORY
Inventory consists of food and beverage products and paper supplies stated at
the lower of cost (determined on the first-in, first-out basis) or market value.
PROPERTY AND EQUIPMENT
Property and equipment items are stated at cost. Expenditures for maintenance
and repairs are charged to expense as incurred. Major improvements are
capitalized. Significantly all Property and Equipment is pledged against the
Company's notes payable.
24
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has satisfactory title for all owned assets, except for the
Corporate headquarters, including land, purchased during the year ended December
31, 1997. These assets were purchased pursuant to a contract for sale dated
December 1, 1997, which transfers title via warranty deed to the Company upon
payment in full and fulfillment of all other obligations under the contract.
RESTAURANT PREOPENING/REMODEL COSTS
During the period of construction or major remodel of the Company's East Texas
restaurants, the Company capitalized certain costs pertaining to these
restaurants. These costs include interest, salaries, advertising, contract
labor, rent, repairs, supplies, and other costs that relate to either the
preopening period, in the case of a new restaurant, or the remodeling period, in
the case of a major remodel of an existing restaurant. Once the new restaurants
open or existing restaurants' major remodels were completed, capitalization
ceased. During the year ended December 31, 1997, certain of these costs were
reclassified as building costs. The remaining costs were fully amortized as a
result of the East Texas restaurants costs being closed.
DEFERRED STOCK ISSUANCE COSTS
The Company offered stock for sale during 1996, using an Underwriter for the
first time. As costs and expenses were incurred pursuant to the stock offering,
they were deferred until the stock sale took place. When the stock sale took
place in 1996, these costs, which aggregated $159,980, reduced the additional
paid in capital realized from the sale. During the year ended December 31, 1997,
additional attorney's fees and expense totaling $151,937 were incurred and
reduced the additional paid in capital realized from 1997 stock sales.
DEFERRED FRANCHISE SYSTEM COSTS
During 1995, 1996, and 1997, the Company incurred certain internal, as well as
external, costs as it developed its franchise system. Substantially all internal
phases of the franchise system were in place by February of 1996. The Company
amortizes total deferred franchise system costs over five years, beginning in
February of 1996. Total amortization of deferred franchise system cost in 1997
and 1996 were $17,941 and $14,430, respectively. No costs were amortized during
1995, as the franchise system was not operational.
FRANCHISE FEES
The Company has sold one franchise to a franchisee that is an entity partially
owned by an officer/stockholder of the Company. The terms of the franchise
require a $50,000 fee to be paid to the Company. The Company recognizes this
payment as revenue when it has completed its obligations under the franchise
agreement. At December 31, 1995, the Company had no further obligation under
this initial franchise and has received the fee of $50,000.
25
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In addition to the franchise fee, the Company earns royalties based upon 5% of
the franchisee's gross sales. The Company recognizes franchise royalty revenue
when earned, not when received. During 1996, the Company's only franchise was
closed by its owner. Accordingly, the Company earned no royalties during 1997.
At December 31, 1996, the Company had earned $34,774 from royalties, of which
$7,500 was not paid at year end. At December 31, 1995, the Company had earned
$5,211 from such royalties which was not paid at year end. The Company is still
promoting its franchise operations and hopes to secure additional franchises in
the near future.
ADVERTISING AND PROMOTIONAL COSTS
All advertising and promotional costs are charged to operations when incurred.
Advertising and promotional costs were $ 129,274 for the year ended December 31,
1997. Advertising and promotional costs were $64,878 and $42,275 for the years
ended December 31, 1996 and 1995, respectively.
DEPRECIATION AND AMORTIZATION
Leasehold improvements are amortized over the terms of the underlying leases
using the straight-line method. Buildings are depreciated over the estimated
useful lives of twenty years using the straight-line method. Vehicles and
equipment are depreciated over the estimated useful lives of five to ten years
using the straight-line method.
CAPITALIZED LAND LEASES
At December 31, 1997, the Company was leasing land for its restaurants in
Longview, Texas; Texarkana, Texas; Dallas (Frankford Avenue), Texas; Irving
(Valley Ranch), Texas; The Colony, Texas; and Richardson, Texas. For financial
reporting purposes, such leases are capitalized at an amount equal to the lesser
of the present value of the lease payments or market value. No depreciation is
being recorded on the capitalized land leases.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. The Company paid no cash for income taxes in 1997 and paid
$231,790 for interest in 1997. The Company paid no cash for income taxes in 1996
and paid $177,370 for interest in 1996. The Company paid no cash for income
taxes in 1995 and paid $112,889 for interest in 1995.
26
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of tax currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes.
The differences relate primarily to depreciable assets (use of different
depreciation methods and lives for financial statement and income tax purposes),
capitalized land leases (capitalized for financial statement purposes but not
for income tax purposes) and basis of accounting (cash basis for income tax
purposes and accrual basis for financial statement purposes).
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes also
are recognized for operating losses and tax credits that are available to offset
future taxable income.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates that affect certain reported
amounts and disclosures. These estimates are based on management's knowledge and
experience. Accordingly, actual results could differ from these estimates.
CONSIDERATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts at high quality
financial institutions. The balances are at all times within federal insurance
limits. The Company believes their cash management policies effectively address
their cash in bank credit risk. All restaurant sales are either cash or credit
card. The credit card sales are approved at point of sale with very little risk
of loss.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior periods' financial
statements in order to conform them to the classifications used for the current
year.
COMPENSATED ABSENCES
The Company requires employees to use their earned vacation prior to the end of
each year. If the employees fail to use their compensated absences prior to
year-end, they lose their benefit. Accordingly, no liability has been accrued in
the accompanying financial statements for compensated absences.
27
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ASSETS HELD FOR SALE
In accordance with SFAS 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", the Company has reclassified
certain assets from "Property and Equipment" to "Assets Held for Sale" in the
accompanying financial statements. Management identified assets totaling
$1,101,700, net of accumulated depreciation totaling $191,865, as being held for
sale during the year ended December 31, 1997. The assets reclassified were land,
capitalized land lease, building, furniture and equipment and leasehold
improvements of the Company's Longview and Nacogdoches restaurants that were
closed during the year ended December 31, 1997. Management is unable to provide
an expected disposal date, but is actively pursuing selling the assets as
quickly as possible while maximizing potential sales proceeds. Depreciation on
the reclassified assets was ceased at the point management committed to a plan
to dispose of the assets.
<TABLE>
<CAPTION>
NOTE 2 - INVENTORY
A summary of inventory, by restaurant location, is as follows:
1997
------------
<S> <C>
Tyler, Texas (Inventory will be transferred to other locations).............. $ 5,179
Dallas (Frankfort Avenue), Texas............................................. 6,058
Irving (Valley Ranch), Texas................................................. 7,819
The Colony, Texas............................................................ 7,515
Richardson, Texas............................................................ -
------------
Total Inventory.................. $ 26,571
============
</TABLE>
28
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 3 - CORPORATE ORGANIZATIONAL COSTS
Corporate Organizational Costs consist of the following:
Accumulated
Costs Amortization
---------- ------------
Balances, January 1, 1997..................... $ 42,695 $ 41,542
Additions............................ -- 1,153
Balances, December 31, 1997................... $ 42,695 $ 42,695
========= ==========
Other costs included with Corporate Organizational Costs in the balance sheet
aggregated $32,651 as of December 31, 1997.
<TABLE>
<CAPTION>
NOTE 4 - INCOME TAXES
1997 1996 1995
--------- --------- ---------
<S> <C>
Earnings before income taxes ................... $ 166,862 $ 317,101 $ 144,324
Add (Deduct):
Timing differences ......................... 50,884 (60,341) 10,851
--------- --------- ---------
Taxable income before net operating loss 217,746 256,760 155,175
Net operating loss utilized ........ 191,877 256,760 155,175
--------- --------- ---------
Taxable Income ............... $ 25,869 $ -- $ --
========= ========= =========
Current income tax expense ..................... $ 8,800 $ -- $ --
========= ========= =========
</TABLE>
During the year ended December 31, 1997 the Company completely utilized its tax
loss carryforwards totaling $191,877 to offset taxable income.
29
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 4 - INCOME TAXES (Continued)
Deferred taxes result from differences in the bases of assets and liabilities
for income tax and financial statement purposes. The source of the differences
and the tax effect creating the balance at December 31, 1997, 1996 and 1995 are
as follows:
1997 1996 1995
--------- --------- ---------
Deferred tax assets:
Net operating loss carryforward .. $ -- $ (53,405) $(127,908)
Valuation allowance .............. -- -- 11,962
---------
Net deferred tax asset ....... -- (53,405) (115,946)
--------- --------- ---------
Deferred tax liabilities:
Difference in depreciation methods 124,000 97,800 48,500
Deduction of startup costs ....... 15,900 82,750 95,040
Cash to accrual conversion ....... (3,000) (47,900) (35,060)
Other ............................ 13,100 14,755 7,466
--------- --------- ---------
Net deferred tax liability ... 150,000 147,405 115,946
--------- --------- ---------
Balance ...................... $ 150,000 $ 94,000 $ --
========= ========= =========
NOTE 5 - NOTE PAYABLE-SHORT TERM
Note payable-short term at December 31, 1997 consisted of the following:
AFCO Credit Corporation, dated July 25, 1997, due May 28, 1998, interest rate at
10.5%, payable in 9 monthly payments of $2,619 beginning August 28, 1997 and the
balance at
maturity. $ 10,249
=========
30
<PAGE>
<TABLE>
<CAPTION>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 6 - NOTES PAYABLE-LONG TERM (Continued)
Notes payable-long term at December 31, 1997 consisted of the following:
<S> <C>
Amount
------------
East Texas National Bank, dated June 30, 1997, due June 20, 2000, interest rate
at 9.50%, payable in 36 monthly payments of $3,594 beginning June 30, 1997 and
the balance atmaturity, including interest, collateralized by the Company's real
and personal property in Gregg, Nacogdoches and Bowie counties, Texas........... $ 321,794
East Texas National Bank, dated January 28, 1994, due January 28, 1998, interest
rate at 8.50%, payable in 36 monthly payments of $ 3,282 beginning February 7,
1994 and thebalance at maturity, including interest, collateralized by the
Company's real and personal property in Gregg, Nacogdoches and Bowie counties,
Texas........................................................................... 282,953
East Texas National Bank, dated November 1, 1995, due October 12, 1998, interest
rate at 10.25%, payable in 35 Monthly payments of $1,864 beginning November 12,
1995 and the balance at maturity, including interest, collateralized by a second
lien on the Company's Frankford Avenue leasehold estate in Dallas, and by a
security interest in various equipment, fixtures and other personal property at
that location................................................................... 128,481
Related Parties:
Carole A. Swanson, dated March 12, 1997, due September 15, 2001, interest
rate at 9.26%, payable in 50 monthly payments of $ 478 beginning April 15,
1997 and the balance at maturity, including interest, collateralized by a
second lien on a Company automobile....................................... 18,152
Four Seasons, Inc., dated December 1, 1997, due December 1, 2012, interest
rate at 10%, payable in 180 monthly payments of $8,060 beginning January 1,
1998 and the balance at maturity, including interest, subject to contract
for sale dated December 1, 1997............................................ 750,000
Infinity Financial Services, dated March 13, 1997, due March 27, 2002,
interest rate at 9.99%, payable in 60 monthly payments of $522 beginning
April 27, 1997 and the balance at maturity, including interest, secured by
Company automobile......................................................... 21,850
Infinity Financial Services, dated March 13, 1997, due March 27, 2002,
interest rate at 9.99%, payable in 60 monthly payments of $373 beginning
April 27, 1997 and the balance at maturity, including interest, secured by
a Company automobile....................................................... 15,820
Bank One, Texas, NA, dated May 9, 1997, due, June 15, 2002, interest rate
at 9.65%, payable in 59 monthly payments of $474 beginning June 15, 1998
and the balance at maturity, including interest, secured by a Company
automobile................................................................. 21,062
Frost National Bank, dated March 31, 1995, due May 31, 2000, interest rate
at 11.990%, payable $241 monthly, including interest, secured by a Company
automobile................................................................. 6,340
------------
</TABLE>
31
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 6 - NOTES PAYABLE-LONG TERM (Continued)
Amount
-----------
Total Notes Payable-Long Term............................ 1,566,452
(465,015)
-----------
Less Current Portion............................................
Notes Payable-Long Term, net of Current Portion..........$1,101,437
==========
During the years ended December 31, 1997, 1996 and 1995, the Company capitalized
as building and equipment costs $124,199, $44,500, and $12,347, respectively, in
interest related to the above notes payable.
Notes Payable-Long Term are expected to mature over the next five years as
follows:
1998.................................... $ 465,015
1999.................................... 59,061
2000.................................... 341,940
2001.................................... 49,742
2002.................................... 40,818
Later Years............................. 609,876
-------------
Total $ 1,566,452
=============
NOTE 7 - LEASES
Following is a summary of the Company's operating and capital leases:
Tyler, Texas restaurant (land and building):
The sublease term is from April 1, 1995 to July 31, 1999. Minimum lease
rentals are $1,500 per month with no contingent rentals. The lease
includes a five year option at the same terms and conditions as during
the primary term. This has been classified as an operating lease.
Longview, Texas restaurant (land):
The lease term is for twenty years, beginning January 6, 1992. Minimum
lease rentals are $1,000 per month for the first 36 months, $1,300 per
month for the next 24 months, $1,500 per month for the next 60 months
and $1,600 per month for the final 120 months. The lease includes
contingent rentals based upon a percentage of gross sales, that becomes
due if the contingent rentals exceed the minimum rentals. No contingent
rentals have become due as of December 31, 1997. The lease also
contains an option to purchase the land for $160,000 within the first
five years of the lease. Management elected not to exercise their
option on the land. This lease has been classified as a capital lease.
32
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 7 - LEASES (Continued)
Texarkana, Texas restaurant (land):
The lease term is for twenty years beginning February 1, 1994. Minimum
lease rentals are $1,547 per month for the first 36 months, $1,949 per
month for the next 60 months, $2,258 per month for the next 60 months,
$2,615 per month for the final 84 months, with no contingent rentals.
The lease also contains an option to purchase the land for $200,000
during the first three years of the lease. Management elected not to
exercise their option on the land. This lease has been classified as a
capital lease.
Dallas (Frankford Avenue), Texas restaurant (land):
The lease term is for twenty years beginning February 21, 1995. Minimum
lease rentals are $4,250 per month for the first 60 months, $4,583 per
month for the next 60 months, $5,167 per month for the next 60 months,
and $5,417 per month for the final 60 months, with no contingent
rentals. The lease also contains two five year extensions at $5,750 per
month for the first five year period and $6,083 per month for the
second five year period. This has been classified as a capital lease.
Irving (Valley Ranch), Texas restaurant (land):
The lease term is for twenty years beginning November 15, 1996. Minimum
lease rentals are $3,625 per month for the first 60 months, $4,167 per
month for the next sixty months, $4,667 per month for the next 60
months, and $5,250 per month for the final 60 months with no contingent
rentals. The lease also contains two five year extensions, the first at
market rate, but not to exceed $7,083 per month, and the second at
market rate. This lease has been classified as a capital lease.
The Colony, Texas restaurant (land):
The lease term is for twenty years beginning October 15, 1997. Minimum
lease rentals are $4,300 per month for the first 60 months, $4,575 per
month for the next 60 months, $4,900 per month for the next 60 months,
and $5,117 per month for the final 60 months with no contingent
rentals. The lease also contains an option to purchase the land for
$550,000 at any time during, but not after, the first three years of
the initial term of the lease. This lease has been classified as a
capital lease.
Richardson, Texas restaurant (land):
The lease term is for twenty years beginning December 15, 1997. Minimum
lease rentals are $4,667 per month for the first 48 months, $4,947 per
month for the next 36 months, $5,244 per month for the next 36 months,
$5,559 per month for the next 36 months, $5,892 per month for the next
36 months, $6,246 per month for the next 36 months, and $6,620 per
month for the final 36 years with no contingent rentals. The Company
has the option to renew the lease for one term of ten years. This lease
has been classified as a capital lease.
33
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 7 - LEASES (Continued)
Computers and related equipment:
The lease is with AT&T Capital Corporation, dated October 5, 1993. The
lease term is for 60 months beginning October 14, 1993. Minimum lease
rentals are $579 per month. This lease has been classified as an
operating lease.
OPERATING LEASES
At December 31, 1997 the Company was leasing its Tyler restaurant land and
building as well as certain computer equipment under operating leases. The
annual minimum lease payments under noncancelable operating leases as of
December 31, 1997 are as follows:
Years Ending December 31:
1998 $ 23,790
1999 9,000
2000 --
2001 --
2002 --
Later Years --
Total Minimum Lease Payments $ 32,790
==========
CAPITAL LEASES
At December 31, 1997, the Company was leasing the land for its Longview, Texas;
Texarkana, Texas; Dallas (Frankford Avenue), Texas; Irving (Valley Ranch),
Texas; and Richardson, Texas restaurants under capital leases. The economic
substance of the leases is that the Company is financing the acquisition of the
assets through the leases, and accordingly, it is recorded in the Company's
assets and liabilities.
The following is a schedule by years of future minimum lease payments required
under the capital leases, together with their present value as of December 31,
1997:
34
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 7 - LEASES (Continued)
Years Ending December 31:
1998 $ 229,491
1999 243,492
2000 245,490
2001 248,572
2002 263,277
Later Years 3,982,809
-------------
Total Minimum Lease Payments $ 5,213,131
Less Amount Representing Interest (2,867,819)
-------------
Present Value of Minimum
Lease Payments 2,345,312
Less Short Term Portion (32,139)
-------------
Present Value of Minimum Lease
Payments, net of Current Portion $ 2,313,173
=============
During the year ended December 31, 1997, the Company recognized $129,203 in
interest cost related to the above capital leases. During the year ended
December 31, 1996, the Company recognized $78,755 in interest cost related to
the above capital leases. During the year ended December 31, 1995, the Company
charged to expense $51,738 in interest costs related to the above capital
leases.
NOTE 8 - SUMMARY OF NONCASH TRANSACTIONS
Following is a summary of noncash investing and financing activities for the
years ended December 31:
<TABLE>
1997 1996 1995
--------------- ------------- --------------
<S> <C> <C>
Exchange Common Stock for Furniture
And Equipment $ -- $ -- $ 34,901
Exchange Common Stock for Building Costs 500,000 -- 89,650
Exchange Common Stock for Deferred
Stock Issuance Costs -- -- 5,000
Exchange Common Stock for Debt Repayment -- -- 38,700
Capital Lease Obligations 1,010,000 400,000 500,000
Accrued Deferred Stock Issuance Cost (151,937) -- (82,935)
Accrued Tyler Equipment Purchase -- -- 7,682
--------------- ------------- --------------
Total Noncash Investing and Financing Activities $ 1,358,063 $ 400,000 $ 592,998
=============== ============= ==============
</TABLE>
35
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 9 - CONTINGENCIES
Litigation was threatened against the Company by AT&T Capital Corporation
regarding an equipment lease entered into by the Company. The potential claim
was for approximately $30,000. Counsel has advised the Company on April 12, 1997
that AT&T had agreed not to pursue its claims against the Company and that the
likelihood of a non-favorable outcome was nominal at all times.
Suit was filed against the Company in 1994 for damages arising from an employee
accident involving a meat slicer. The Company has paid the employee's medical
expenses of $2,014 during 1995. The employee was seeking unspecified additional
amounts for lost wages, pain and suffering, disfigurement and impairment. The
suit was scheduled for mediation on May 22, 1996 and for trial on July 8, 1996.
During 1996 the Company settled this claim for $14,000.
During the year ended December 31, 1997, a plaintiff filed suit against
the Company for an alleged breach of lease and service agreement with
regards to restaurant locations that have been closed. Plaintiff has
demanded approximately $27,000 in damages and other costs. Management
denies responsibility in the suit, but may agree to an out of court
settlement for a lesser amount in order to bring an expeditious end to
the matter. No estimate of a potential settlement amount has been
included in the accompanying financial statements as it is not
reasonably estimable.
NOTE 10 - RELATED PARTY TRANSACTIONS
On February 17, 1995, the Company sold 133,333 shares of common stock to the
Company's largest food distributor for $200,000, pursuant to a stock purchase
agreement. The agreement binds the Company to purchase 90% of its food products
from the distributor for five years, as well as to repurchase the common stock
at the original price if one of two repurchasing events occur. As of December
31, 1996, the Company's obligation under this agreement has expired. The Company
is unaware of and has not been notified that any repurchasing events have
occurred.
At December 31, 1997, the Company held a note receivable from an
officer/shareholder of the Company in the amount of $124,500. The note bears
interest at 5% and is payable in two semiannual installments of $77,845,
together with interest beginning on June 30, 1998.
At December 31, 1997, the Company held a note receivable from a shareholder of
the Company in the amount of $15,000. The note bears interest at 9% and is
payable in two semiannual installments of $8,018, together with interest
beginning on June 30, 1998.
At December 31, 1997, the Company held a note receivable from a company, owned
by a shareholder of the Company in the amount of $17,653. The note bears
interest at 9% and is payable in twelve monthly installments of $1,543, together
with interest beginning on February 1, 1998.
36
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 11 - STOCK OPTIONS (Continued)
At December 31, 1997, the Company held a note receivable from a sister
corporation in the amount of $7,390. The note bears interest at 10% and is
payable in one installment of $7,390, together with interest on March 1, 1998.
The Company has a long-term operating lease agreement with a corporation that
owns a significant amount of the Company's stock. Minimum rents receivable are
$8,500 per month for five years and the lease covers office and retail space at
the Company's headquarters occupied by the corporation.
NOTE 11 - STOCK OPTIONS
On May 23, 1997, the Board of Directors of the Company adopted its 1997
Incentive Stock Option Plan pursuant to which 200,000 shares of the Company's
common stock were set aside for the purpose of granting of incentive stock
options to directors and key employees of the Company. The purchase price of the
stock purchased pursuant to the exercise of such an option is required to be not
less than 100% of the fair market value of the stock on the date of the grant of
the option, or 110% of such value in the case of a holder of 10% of the stock of
the Company. This plan was approved by shareholders on May 23, 1997. None of
these stock options have been exercised.
On March 1, 1995, the Board of Directors of the Company adopted its 1995
Incentive Stock Option Plan pursuant to which 100,000 shares of the Company's
common stock were set aside for the purpose of granting of incentive stock
options to directors and key employees of the Company. The purchase price of the
stock purchased pursuant to the exercise of such an option is required to be not
less than 100% of the fair market value of the stock on the date of the grant of
the option. This plan was approved by shareholders on October 19, 1995.
Under the Plan, an option for 50,000 shares has been granted to one shareholder
for service as a member of the Board of Directors with a purchase price of $1.50
per share and expires March 1, 2000. Also, under the Plan, two other Directors
have been granted options for 25,000 shares each for service as members of the
Board with a purchase price of $1.50 per share and expire on October 19, 2000.
None of these stock options have been exercised.
Under a contract approved by the Board of Directors, a consulting company was
granted options to purchase 300,000 shares of the Company's common stock with a
purchase price of $2.50 per share and expiring on October 10, 2002. Also, under
employment contracts approved by the Board of Directors, two officers of the
Company were granted options to purchase 100,000 shares each of the Company's
common stock with a purchase price of $3.00 per share expiring December 31,
2002. At December 31, 1997, none of these options had been exercised.
The company applies APB Opinion 25 and related interpretations in accounting for
the Plans. In 1995, the FASB issued FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123"),
37
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 11 - STOCK OPTIONS (Continued)
which, if fully adopted by the Company, would change the methods the Company
applies in recognizing the cost of the Plans. Adoption of the cost recognition
provisions of SFAS 123 is optional and the Company has decided not to elect
these provisions of SFAS 123. The Company recorded no stock-based compensation
costs in 1997, 1996, or 1995. Had the fair values of options been recognized as
compensation expense, costs would have increased by $228,270 ($172,270 after
tax) in 1997 and $90,108 (no tax effect) in 1995. No options were granted in
1996. The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts.
A summary of the status of the Company's stock options as of December 31, 1995,
1996, and 1997 and the changes during the year ended on those dates is presented
below.
<TABLE>
1995
----
# Shares of Weighted
Underlying Average
Options Exercise Prices
----------------- -------------------
<S> <C> <C>
Outstanding at beginning of the year................................... 0 N/A
Granted................................................................ 103,572 $ 1.45
Exercised.............................................................. 0 N/A
Forfeited.............................................................. 0 N/A
Expired................................................................ 0 N/A
Outstanding at end of the year......................................... 103,572 $ 1.45
Exercisable at end of the year......................................... 103,572 $ 1.45
Weighted-average FV of options granted during the year................. $ .87 --
1996
----
# Shares of Weighted
Underlying Average
Options Exercise Prices
----------------- -------------------
Outstanding at beginning of the year 103,572 $ 1.45
Granted 0 N/A
Exercised 0 N/A
Forfeited 0 N/A
Expired 0 N/A
Outstanding at end of the year 103,572 $ 1.45
Exercisable at end of the year 103,572 $ 1.45
38
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1997
NOTE 11 - STOCK OPTIONS (Continued)
1997
# Shares of Weighted
Underlying Average
Options Exercise Prices
----------------- -------------------
Outstanding at beginning of the year 103,572 $ 1.45
Granted 543,500 2.67
Exercised 0 N/A
Forfeited 0 N/A
Expired 0 N/A
Outstanding at end of the year 647,072 2.47
Exercisable at end of the year 647,072 2.47
Weighted-average FV of options granted during the year $ .42 -
</TABLE>
The fair value of each stock option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions: dividend yield of 0%, risk-free interest rate of 5.57% and 7.8%,
expected lives of 1 1/4 years and 3 1/4 years, and volatility of 74.9%
respectively for 1997 and 1995.
<TABLE>
<CAPTION>
The following table summarizes information about stock options outstanding at
December 31, 1997:
Options Outstanding Options Exercisable
Number Weighted Avg. Number
Range of Outstanding at Remaining Weighted Avg. Exercisable at Weighted Avg.
Exercise Prices 12/31/97 Contr. Life Exercise Price 12/31/97 Exercise Price
- --------------------- ----------------- ---------------- -------------- ------------- --------------
<S> <C> <C>
$.10 - $1.50 103,572 2.49 $ 1.45 103,572 $ 1.45
$1.50 - $3.00 543,500 4.86 $ 2.67 543,500 $ 2.67
$.10 - $3.00 647,072 4.48 $ 2.47 647,072 $ 2.47
- --------------------- ----------------- ---------------- -------------- ------------- --------------
</TABLE>
NOTE 12 - RESTAURANT PREOPENING/REMODEL COSTS
A summary of Restaurant Preopening/Remodel Costs, by restaurant location, is as
follows:
Accumulated
Costs Amortization
----------- ------------
Balances, January 1, 1997..................... $ 685,778 $ 397,217
Additions............................ - 187,387
Transfers to building costs.......... (122,552) (21,378)
Dispositions......................... (563,226) (563,226)
Balances, December 31, 1997................... $ - $ -
=========== ============
39
<PAGE>
Fresh'n Lite, Inc.
Balance Sheet
For the Three Month Period Ending
March 31, 1998
ASSETS March 31, 1998
--------------
(unaudited)
CURRENT ASSETS
Cash .................................................. $ 201,163
Inventory ............................................. 26,468
-----------
Total Current Assets ......................... 227,631
PROPERTY AND EQUIPMENT (Pledged)
Buildings ............................................. 4,545,522
Land .................................................. 135,000
Capitalized Land Leases ............................... 2,175,000
Leasehold Improvements ................................ 30,113
Vehicles and Equipment ................................ 1,398,060
-----------
Total Property and Equipment - Net ........... 8,283,695
Accumulated Depreciation .............................. (466,475)
-----------
Property and Equipment - Net of Depreciation . 7,817,220
OTHER ASSETS
Assets Held for Sale, Net of Accumulated Depreciation . 441,373
Franchise System ...................................... 51,333
Restaurant Preopening / Remodel Costs and Other Assets,
Net of Accumulated Amortization ..................... 30,683
Notes Receivable - Related Parties .................... 146,005
-----------
TOTAL OTHER ASSETS ........................... 669,394
TOTAL ASSETS ................................. 8,714,256
===========
40
<PAGE>
Fresh'n Lite, Inc.
Balance Sheet
For the Three Month Period Ending
March 31, 1998
LIABILITIES AND SHAREHOLDERS EQUITY March 31, 1998
--------------
CURRENT LIABILITIES (unaudited)
Accrued Expenses .......................................... $ 320,854
Accounts Payable .......................................... 62,357
Current Portion of Capital Lease Obligations .............. 32,139
Current Portion of Notes Payable - Long Term .............. 215,020
-----------
TOTAL CURRENT LIABILITIES ........................ 630,370
OTHER LIABILITIES
Capital Lease Obligations, Net of Current Portion ......... 2,313,173
Notes Payable - Long Term, Net of Current Portion ......... 1,484,590
Deferred Income Tax Liability ............................. 141,200
-----------
TOTAL LIABILITIES ................................ 3,938,963
SHAREHOLDERS EQUITY
Common Stock, $.01 Par Value; 50,000,000 Shares Authorized;
6,356,852 Shares Issued and Outstanding ................. 63,568
Additional Paid In Capital ................................ 3,574,071
Retained Earnings - Prior ................................. 293,087
Retained Earnings - Current ............................... 215,436
-----------
Less Treasury Stock, at Cost .............................. (1,250)
TOTAL SHAREHOLDERS EQUITY ........................ 4,144,912
-----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ........ 8,714,245
===========
41
<PAGE>
Fresh'n Lite, Inc.
Income Statement
For the Three Month Periods Ending
March 31, 1997 and March 31, 1998
March 31, March 31,
1997 1998
---------- -----------
(Unaudited)
SALES ........................... $ 712,352 $ 798,219
COST OF SALES ................... (204,967) (205,156)
--------- ---------
GROSS PROFITS .......... 507,385 593,063
EXPENSES
Salaries and Contract Labor ..... 208,836 228,022
Payroll and other Taxes ......... 32,024 39,882
Professional Fees ............... 53,892 8,428
Advertising and Promotional ..... 18,568 15,258
Rent ............................ 35,644 50,579
Insurance ....................... 13,804 17,121
Telephone ....................... 7,858 5,309
Travel .......................... 3,750 3,231
Utilities ....................... 25,045 23,592
Depreciation .................... 38,464 36,150
Amortization .................... 192,294 14,850
Interest ........................ 19,744 33,846
Linen and Laundry ............... 5,284 11,575
Repairs and Maintenance ......... 17,718 20,129
Supplies ........................ 6,518 9,307
Miscellaneous ................... 2,500 0
--------- ---------
TOTAL EXPENSES ......... 681,943 517,306
--------- ---------
OPERATING INCOME (LOSS) (174,558) 75,757
Profit/ Loss) on sale of Assets -- 111,593
Rental Income ................... -- 28,086
Income Tax (Expense) Benefit
Current ................ -- --
Deferred ............... -- --
--------- ---------
NET INCOME ............. (174,558) 215,436
42
<PAGE>
<TABLE>
<CAPTION>
Fresh'n Lite, Inc.
Statement of Cash Flow
For the Three Month Periods Ending
March 31, 1997 and March 31, 1998
March 31, March 31,
1997 1998
--------- -----------
<S> <C>
(Unaudited)
Cash Flows from Operating Activities
Net Income (Loss) ......................................... $(174,558) $ 215,436
Adjustments to Reconcile Net Income to
Net Cash provided by Operating Activities:
Depreciation ..................................... 38,464 36,150
Amortization ..................................... 192,294 14,850
Net Change in Assets and Liabilities:
Decrease / (Increase) in Inventory ............... (27,768) 103
(Decrease) / Increase in Accounts Payable ........ (18,070) (57,660)
(Decrease) / Increase in Accrued Expenses ........ (40,018) (19,781)
--------- ---------
Total Adjustments ................................ 144,902 (26,338)
--------- ---------
Net Cash Provided by Operating Activities ........ (29,656) 189,098
Cash Flows from Investing Activities:
Capital Expenditures ............................. (239,804) (919,139)
Expenditures for Preopening/Remodel Costs
and Other Assets ............................... (24,020) 0
(Increase) / Decrease in Notes Receivable ........ (19,221) 18,538
Increase in Deferred Franchise System Costs ...... (39,969) 0
Net Proceeds from Sale of Assets ................. 0 461,580
--------- ---------
Net Cash Used in Investing Activities ... (323,014) (439,021)
Cash Flows from Financing Activities:
Sale of Common Stock ............................. 698,000 297,555
Borrowing on Notes Payable ....................... 385,000 633,158
Principal Payments on Notes Payable .............. (556,727) (500,000)
--------- ---------
Net Cash Provided By Financing Activities 526,273 430,713
NET INCREASE / (DECREASE) IN CASH ................ 173,603 180,790
CASH AT BEGINNING OF YEAR ................................. 19,640 20,373
--------- ---------
CASH AT END OF PERIOD ..................................... 193,243 201,163
</TABLE>
43
<PAGE>
Fresh'n Lite, Inc.
Notes To Interim Financial Statements
For the Three Month Period Ending
March 31, 1998
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of Fresh'n Lite, Inc as of March
31, 1997 and March 31, 1998 have been prepared by the Company, pursuant to the
rules and regulations of the Securities and Exchange Commission. The Company
owns and operates 4 restaurants under the names of "Fresh'n Lite Cafe & Grill"
and "Street Talk Cafe".
The information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly state the operating results for the respective periods.
However, these operating results are not necessarily indicative of the results
expected for the full fiscal year. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principals have been omitted pursuant to such
rules and regulations. The notes to the condensed consolidated financial
statements should be read in conjunction with the notes to the consolidated
financial statements contained in the May 1, 1997 Form 10-KSB. Company
management believes that the disclosures are sufficient for interim financial
reporting purposes.
NOTE 2 - SALE OF RESTAURANT FACILITY
On March 17, 1998 the Company sold its facility in Nacogdoches, Texas. The
Company realized a gain of $111,593 on the sale of this facility which was
previously classified as "assets held for sale."
NOTE 3 - SUBSEQUENT EVENT
On April 3, 1998 the Board of Directors approved a plan to repurchase up to
100,000 shares of the Company's Common Stock. Repurchases will be made from time
to time in open market transactions. All repurchases will be made in accordance
with applicable securities regulations, and the timing of the repurchases will
be dependent upon market conditions, share price, and other factors. The
repurchased Common Stock may be used by the Company to meet the needs of its
various stock option plans, or for other corporate purposes.
On April 8, 1997 the Board of Directors approved an increase in the previously
approved stock repurchase plan from 100,000 to 150,000 shares.
44
<PAGE>
<TABLE>
<CAPTION>
Part III
Item 1: Index to Exhibits
Attached hereto are the exhibits as required.
Exhibit No. Description of Exhibit Page No.
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1* Articles of Incorporation --
2.2* Amendment to Articles of Incorporation --
2.3* By-Laws --
3.1 Warrant Agreement filed as an exhibit to the Company's Form 10-KSB --
dated February 28, 1997 and incorporated by reference
6.1** Primary Distribution Agreement dated as of February 17, 1995, by and 47
between Consolidated Companies, Inc. on the one hand and Fresh'n Lite
Inc. on the other
6.2CE*** Lease with Option to Purchase dated as of January 6, 1992 by and 52
between Gibson Properties, Inc. on the one hand and Bosko's, Inc. on
the other
6.3CE*** Restaurant Lease dated as of September 15, 1997 by and between USRP 68
(Midon), LLC on the one hand and Fresh'n Lite, Inc. on the other
6.4CE*** Ground Lease dated as of February 21, 1995 by and between Peter D. 91
Fonberg Investments on the one hand and Fresh'n Lite, Inc. on the other
6.5CE*** Ground Lease dated as of July 15, 1996 by and between MacArthur 104
Partners, Ltd. on the one hand and Fresh'n Lite, Inc. on the other
6.6CE*** Ground Lease Agreement dated as of April 11, 1997 by and between 132
Robert M. Farrell Development, Ltd. on the one hand and Fresh'n Lite,
Inc. on the other
6.7CE*** Lease Agreement dated as of November 7, 1990 by and between Harold 158
Wilder on the one hand and Bosko's, Inc. on the other
6.8CE*** 1997 Stock Option Plan 166
6.9** Franchise Agreement dated as of October 1, 1995 by and between 174
Fresh'n Lite, Inc. on the one hand and F'NL Investments, LLC on the
other
6.10CE*** Lease with Option to Purchase dated as of October 15, 1993 by and 218
between Connor Patman and Steve and Ann M. Raffaelli on the one
hand and Fresh'n Lite, Inc. on the other
6.11CE*** Sublease Agreement dated as of May 25, 1998 by and between Jason 225
Sukiennik, Jennifer Sukiennik and Pete Sukiennik on the one hand and
Fresh'n Lite, Inc. on the other
27.1** Financial Data Schedule 238
* Previously filed as an exhibit to the Company's Registration Statement
on Form 10-SB (File No. 001-13559) filed with the Securities and
Exchange Commission on November 10, 1997.
** Filed herewith.
*** Previously filed as a paper exhibit, pursuant to a hardship exemption, to the Company's Registration
Statement on Form 10-SB (File No. 001-13559) filed with the Securities and Exchange Commission on
November 10, 1997.
</TABLE>
45
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this amendment to its registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Fresh'n Lite, Inc.
(Registrant)
Date: June 24, 1998 /s/ Curtis A. Swanson
---------------------
Curtis A. Swanson, Chief Financial Officer
46
PRIMARY DISTRIBUTION AGREEMENT
This Primary Distribution Agreement (hereinafter called "Agreement") is
made as of this 17th day of February, 1995, between Fresh'n Lite, Inc., a Texas
corporation having its principal offices located at 2804 Judson Road, Longview,
Texas, (hereinafter called "Fresh'n Lite") and Consolidated Companies, Inc., a
Louisiana corporation having its principal offices located at 2450 Severn
Avenue, Suite 514, Metairie, Louisiana 70009, (hereinafter called "Conco").
WHEREAS, Conco distributes products, including produce, disposables, paper
products, small wares, chemicals and janitorial supplies;
WHEREAS, Conco has invested $200,000 into Fresh'n Lite, Inc., for the
purchase of Common Stock of Fresh'n Lite, Inc. (the "Common Stock"), as of the
date hereof (hereinafter called "Investment Date"); and
WHEREAS, in consideration of this investment the parties desire to enter
into this Agreement where Conco will be appointed supplier for ninety percent
(90%) of the products purchased by Fresh'n Lite that are products distributed by
Conco;
NOW, THEREFORE, for and in consideration of the mutual promises hereinafter
made by the parties, Fresh'n Lite and Conco hereby agree as follows:
1. Definitions.
(a) "Product" or "Products" shall mean the typical
products which fit the Fresh'n Lite menu items and
are handled by Conco as a broadline food service
company, including food products, produce,
disposables, paper products, small wares, chemicals
and janitorial supplies.
(b) "Requirements" shall mean ninety percent (90%) of
Fresh'n Lite's requirements of the Products.
2. Sale of Requirements/Term. Conco shall sell to Fresh'n Lite
and Fresh'n Lite shall purchase from Conco the Requirements
of the Products for a period ending on the earlier of (i)
five (~) years from the Investment Date or (ii) when Conco
shall sell or otherwise dispose of any of the Common Stock.
The parties agree that Fresh'n Lite's obligation to purchase
its Requirements shall apply only to the Products.
Subject to the following limitation, Fresh'n Lite's
obligation to purchase its Requirements from Conco shall
apply to all Fresh'n Lite locations to which Conco is able
to distribute the Products within the delivery period
requirements of Fresh'n Lite for its current restaurant
locations. These current restaurant locations are described
in more detail in Exhibit 1, attached hereto
PRIMARY DISTRIBUTION AGREEMENT 47
<PAGE>
and by this reference made a part hereof. The parties
acknowledge that the terms of this Agreement are not binding
on any franchise locations that Fresh'n Lite does not have
the power to bind under applicable franchising or other
laws. However, Fresh'n Lite agrees to use its best efforts
to promote the Products to these franchise locations in
order to encourage the franchisee to purchase the Products.
Conco agrees to use its best efforts within its current
capabilities to ship all orders made by Fresh'n Lite within
the delivery period requirements of Fresh'n Lite as
described above.
3. Price and Terms. The prices to be paid by Fresh'n Lite for
the Products shall be the best and most competitive prices
offered by Conco to any of its customers for the Products at
the time that an order is placed by Fresh'n Lite. For
Products delivered to the new locations of Fresh'n Lite
restaurants established after the date hereof the terms
will be "weekly" as such term is currently being utilized
by Conco, and for Products delivered to the current
restaurants of Fresh'n Lite, the terms will be "thirty-days"
as such term is currently being utilized by Conco.
4. Indemnity. Conco agrees to indemnify Fresh'n Lite of and
from any and all costs, expenses, damages, suits or claims
relating to or arising out of or in any way related to the
use of the Products by Fresh'n Lite or by any of its
customers that might reasonably expect to be affected by a
defect in the Products.
Conco agrees to indemnify, defend and hold harmless Fresh'n
Lite from any loss, claim, suit or liability arising out of
or as a result of any breach or violation by Conco of any of
the warranties, covenants or other provisions of this
Agreement. Fresh'n Lite agrees to indemnify, defend and hold
harmless Conco of and from any loss, claims, suit or
liability arising out of or as a result of the breach or
violations by Fresh'n Lite of any of the warranties,
covenants or provisions of this Agreement. The provisions of
this Section shall survive the term of this Agreement and
continue in effect thereafter.
5. Notice. Any notices required to be given under this
Agreement shall be deemed to have been given when in writing
and (1) actually hand-delivered to the other party, at the
address below, or (2) deposited in the United States mail,
postage prepaid, certified mail, return receipt requested
and addressed:
to Fresh'n Lite at: Fresh'n Lite, Inc.
2804 Judson Road
Longview, Texas 75605
Attention: Mr. Stanley L. Swanson
PRIMARY DISTRIBUTION AGREEMENT 48
<PAGE>
cc: Mr. Curtis A. Swanson
Fresh'n Lite, Inc.
2804 Judson Road
Longview, Texas 75601
to Conco at: Consolidated Companies, Inc.
2450 Severn Avenue, Suite 514
Metairie, Louisiana 70009
Attention: Mr. Victor Jerry Kurzweg, III
cc: Mr. Joseph Salpietra
Consolidated Companies, Inc.
524 West 61st Street
Shreveport, Louisiana 71106
6. Waiver. The failure of either party at any time to require
performance by the other party of any provisions hereof
shall in no way affect the right to require such
performance at any time thereafter. Waiver by either party
of a breach of any provision hereof shall not constitute a
waiver of any other breach of the same or any other such
provision nor constitute a waiver of the provision itself.
7. Relationship of Parties. This Agreement does not constitute
Conco the agent or legal representative of Fresh'n Lite for
any purpose whatsoever. Conco is not granted any express or
implied authority to assume or create any obligation or
responsibility on behalf of Fresh'n Lite or to bind Fresh'n
Lite in any manner whatsoever. This Agreement does not
constitute Fresh'n Lite the agent or legal representative of
Conco for any purpose whatsoever. Fresh'n Lite is not
granted any express or implied authority to assume or create
any obligation or responsibility on behalf of Conco or to
bind Conco in any manner whatsoever. Neither Fresh'n Lite
nor Conco are the employee, agent, partner or joint venture
of the other and neither Fresh'n Lite nor Conco shall hold
itself out to the public as such.
8. Construction. This instrument is intended by the parties as
a final expression of their agreement and as a complete and
exclusive statement of its terms. No course of prior
dealings between the parties and no usage of trade shall be
relevant or admissible to supplement, explain, or vary any
of the terms of this Agreement. Acceptance of, or
acquiescence in, the course of performance rendered under
this or any prior agreement shaj1 not be relevant or
admissible to determine the meaning of this Agreement even
though the accepting or acquiescing party has knowledge of
the nature of the performance and an opportunity to make
objection. No representations, under standings, or
agreements have been made or relied upon in the making of
this Agreement other than those specifically set forth
herein. This Agreement may
PRIMARY DISTRIBUTION AGREEMENT 49
<PAGE>
be modified only by an instrument signed by both parties or
their duly authorized agents. In the event of any conflict
between this Agreement and any purchase order, this
Agreement shall control.
9. Assignment. Neither party may assign any of its rights or
duties under this Agreement without the prior written
consent of the other party hereto and any attempted
assignment without such written consent shall be null and
void and without legal effect.
10. Warranties of Conco. Conco hereby represents and warrants
to Fresh'n Lite that:
(a) Conco is a corporation duly organized, validly existing
and in good standing with the laws of the State of
Louisiana; it has all requisite corporate power and
authority and is entitled to carry on its business as
now being conducted, both in the State of Louisiana and
in the State of Texas;
(b) Neither the execution, deliver nor performance of this
Agreement by Conco will conflict with any provision of
Conco's Articles of Incorporation or Bylaws or any
franchise, mortgage, deed of trust, license, lease,
agreement, understanding, law, rule or regulation or
any order, judgment or decree tO which Conco is a party
or by which it may be bound or affected. Conco has the
full power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby.
The Board of Directors of Conco has approved the form,
term and provisions of this Agreement and the
transactions contemplated hereby and all other
proceedings required to be taken by it to authorize the
execution, delivery and performance of this Agreement
and the agreements relating hereto have been properly
taken and this Agreement constitutes the valid and
binding obligation of Conco;
(c) Conco has the capacity and expertise to supply Product
to Fresh'n Lite in quantities sufficient to meet the
Requirements of Fresh'n Lite.
11. Warranties of Fresh'n Lite. Fresh'n Lite hereby represents
and warrants to Conco that:
(a) Fresh'n Lite is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware; it has all requisite corporate power
and authority and is entitled to carry on with its
business as now being conducted;
(b) Neither the execution, delivery nor performance of this
Agreement by Fresh'n Lite will conflict with any
provision of Fresh'n Lite's Articles
PRIMARY DISTRIBUTION AGREEMENT 50
<PAGE>
of Incorporation or Bylaws or any franchise, mortgage,
deed of trust, license, lease, agreement,
understanding, law, rude or regulation or any order,
judgment or decree to which Fresh'n Lite is a party or
by which it may be bound or affected. Fresh'n Lite has
the full power and authority to enter into this
Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Fresh'n
Lite has approved the form, term and provisions of this
Agreement and the transactions contemplated hereby and
all other proceedings required to be taken by it to
authorize the execution, delivery and performance of
this Agreement and the agreements relating hereto have
been properly taken and this Agreement constitutes the
valid and binding obligation of Fresh'n Lite.
All of the foregoing representations and warranties shall
survive the termination of this Agreement.
12. Benefit. This Agreement sha11 be binding upon and inure to
the benefit of Conco, Fresh'n Lite, and their respective
successors and assigns; provided that this Agreement may
not be assigned by either party without the prior written
consent of the other party.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS AND ASPECTS BY THE LAWS OF THE STATE OF TEXAS AND
THE PARTIES HEREBY AGREE THAT ANY LEGAL ACTION CONCERNING
THIS AGREEMENT SHALL BE BROUGHT IN A COURT OF COMPETENT
JURISDICTION IN GREGG COUNTY, TEXAS.
EXECUTED TO BE EFFECTIVE as of the day and year first written above.
FRESH'N LITE, INC.
By: /s/ Stanley L. Swanson
-------------------------------------
Stanley L. Swanson, its President
CONSOLIDATED COMPANIES, NC.
By: /s/ Victor Jerry Kurzweg III
--------------------------------------
Victor Jerry Kurzweg, III its
Chief Executive Officer
PRIMARY DISTRIBUTION AGREEMENT 51
<PAGE>
EXHIBIT 1
---------
Current Restaurant Locations of Fresh'n Lite:
2804 Judson Road
Longview, Texas 75601
1122 North Street
Nacogdoches, Texas 75961
3520 Summerhill Road
Texarkana, Texas 75502
EXHIBIT 6.2.CE
LEASE WITH
OPTION TO PURCHASE
THE STATE OF TEXAS ss.
ss.
COUNTY OF GREGG ss.
This Lease is made and entered into this 6th day of January, 1992, by
and between GIBSON PROPERTIES, INC., a Texas Corporation, referred to in this
lease as Lessor, and BOSKO'S, INC., a Texas Corporation, referred to in this
lease as Lessee.
ARTICLE 1. DEMISE OF LEASED PREMISES
In consideration of the mutual covenants and agreements set forth in this lease,
and other good and valuable consideration, Lessor does hereby demise and lease
to Lessee and Lessee does hereby lease from Lessor, that certain property
located in Longview, Gregg County, Texas, more particularly described in Exhibit
A attached to this lease. The property is referred to in this lease as the "the
premises" or "the leased premises."
Lessee is to have and to hold the leased premises, together with all
rights, privileges, easements, appurtenances, and immunities belonging to or in
any way appertaining to the leased premises, including, but not limited to, any
and all easements, rights, title, and privileges of Lessor, existing now or in
existence at any time during the lease term, in, to, or under adjacent streets,
sidewalks, alleys, party walls, and property contiguous to the leased premises
and reversions which may later accrue to Lessor as owner of the leased premises
by reason of the closing of any street, sidewalk, or alley.
ARTICLE 2. LEASE TERM
Fixed Commencement and Termination Date
ss. 2.01. This lease shall be for a term of twenty (20) years, referred to as
the lease term, commencing on the 1st day of the month in which operation of the
business for which the property is being leased begins or commencing one hundred
twenty (120) days after execution of this Lease, whichever is sooner, and
continuing thereafter for said twenty (20) year period, subject, however to
earlier termination as provided in this lease.
Termination
ss. 2.02. This lease shall terminate and become null and void without further
notice on the expiration of the term specified in ss. 2.01, and any holding over
by Lessee after the expiration of that term shall not constitute a renewal of
the lease or give Lessee any rights under the lease in or to the leased
premises.
ARTICLE 3. RENT
ss. 3.01. Lessee agrees to pay to Lessor as rent for the use and occupancy of
the lease premises the greater of the "minimum yearly rent" as set forth in ss.
3.02 below or the "lease rent" as set forth in ss. 3.03 below.
52
<PAGE>
Minimum Yearly Rent
ss. 3.02. Minimum yearly rent shall be payable in the following amounts:
a. $12,000.00 per year during the first three (3) years of this lease;
b. $15,600.00 per year during years 4 and 5 of this lease;
c. $18,000.00 per year during years 6-10 of this lease; and
d. $19,200.00 per year during years 11-20 of this lease.
Lease Rent
ss. 3.03. Lease rent shall be payable in the following amounts:
a. 3.0% of gross sales during years 1-5 of this lease; and
b. 3.5% of gross sales during years 6-20 of this lease.
For purposes of this Lease, "gross sales" shall not include
federal or state sales taxes.
For the purpose of ascertaining the amount payable as lease
rent, Lessee agrees to prepare and maintain on the leased premises adequate
records that will show inventories and receipts of merchandise at the leased
premises and daily receipts from all sales and other transactions on or from the
leased premises by Lessee and nay other persons conducting any business on or
from the leased premises. At the time of each transaction, Lessee or any other
person conducting the transaction on or from the leased premises will record all
receipts from sales and other transactions, whether for cash or credit, in a
cash register or registers having a cumulative total and sealed in a manner
approved by Lessor, and having such other features as approved by Lessor. Lessee
further agrees to maintain on the leased premises all sales, use, value added,
gross receipts, and occupation tax returns with respect to the lease year, and
all pertinent original sales records. Pertinent original sales records shall
include all cash register tapes, serially numbered sales slips, and originals of
all mail orders filled by lessee from the leased premises or processed by lessee
at the leased premises and filled from some location other than the leased
premises.
Lessee shall furnish to Lessor, on a monthly basis, copies of
Lessee 5 monthly profit and loss statements. Further, Lessor and authorized
representatives of Lessor shall have the right to examine the records described
in the preceding paragraph at the leased premises during Lessee 5 regular
business hours upon three (3) days' notice to Lessee. If, on examination of the
books or records of Lessee, an error shall be revealed in favor of Lessor that
results in additional percentage rental due Lessor in excess of $100.00, then
the reasonable costs of the examination must be paid by Lessee to Lessor.
Otherwise, Lessor will bear the cost of the examination.
Time and Manner of Payment.
ss. 3.04. All minimum yearly rent due under this article shall be paid by Lessee
on a monthly basis and in advance, on the 1st day of each month of each year
beginning on the 1st day of the month in which operation of the business for
which the property is being leased begins. All lease rent due under this
53
<PAGE>
article shall be paid by Lessee on a monthly basis on the 10th day of the month
following the month for which lease rent is being paid. All installments of rent
shall be paid in lawful money of the United States to Lessor in Longview, Texas.
Interest on Delinquent Payments
ss. 3.05. Rent installments unpaid for thirty (30) days shall bear interest at
the rate of eighteen percent (18.00%) per annum, commencing on the day after
each such installment was due and continuing until the installment is paid as
provided in ss. 3.04 above.
ARTICLE 4. TAXES
Payment by Lessee
ss. 4.01. In addition to the rent specified in Article 3, Lessee shall pay and
discharge all taxes, general and special assessments, and other charges of every
description which are levied on or assessed against the leased premises, whether
such taxes and/or assessments are made against Lessor or Lessee, and all
interests in the leased premises and all improvements and other property on the
leased premises during the term of this lease, whether belonging to Lessor or to
Lessee. Lessee shall pay all such taxes, charges, and assessments to Lessor or
directly to the taxing authority charged with their collection not less than
fifteen (15) days before the same shall become delinquent, and Lessee agrees to
indemnify Lessor and save Lessor harmless from all such taxes, charges, and
assessments. Lessee shall have the right in good faith at its own sole cost and
expense (in its own name or in the name of Lessor, or both, as Lessee may
determine appropriate) to contest any such taxes, charges, and assessments, and
shall be obligated to pay the contested amount, plus any penalties and interest
imposed, only if and when finally determined to be due.
Payment by Lessor
ss. 4.02. At any time that the payment of any item of taxes, special
assessments, or governmental charges which Lessee is obligated to pay under the
provisions of ss. 4.01 remains unpaid and uncontested later than fifteen (15)
days before the same shall become delinquent, Lessor may give written notice to
Lessee of its default under ss. 4.01, specifying the default. If Lessee
continues to fail to pay the taxes, special assessments, or governmental
charges, or to contest the same in good faith within ten (10) days of such
written notice, Lessor may pay the items specified in the notice, and Lessee
covenants to reimburse Lessor on demand any amount paid or expended by Lessor
for this purpose, with interest on the amount at the rate of eighteen percent
(18%) per annum from the date of payment by Lessor until reimbursement by
Lessee. If Lessor pays any such item which has not been paid by Lessee within
the time required in ss. 4.01 or successfully contested by Lessee without giving
ten (10) days notice, Lessee shall nevertheless reimburse Lessor for such item,
but without interest.
ARTICLE 5. UTILITIES
Lessee shall pay or cause to be paid all charges for water, heat, gas,
electricity, sewers, and all other utilities used on the leased premises
throughout the term of this lease, including any connection fees.
54
<PAGE>
ARTICLE 6. USE OF PREMISES
Primary Purpose
ss. 6.01. Lessee shall have the right to use the leased premises as a
restaurant. In this connection, and without detracting from the foregoing, it is
understood and agreed that the primary purpose for which the leased premises
have been leased and hired is for the development and construction of a
commercial building more particularly described on Exhibit B.
Illegal Use Not Permitted
ss. 6.02. Lessee agrees not to use all or part of the leased premises or any
building situated upon the leased premises for any use or purpose in violation
of any valid and applicable law, regulation, or ordinance of the United States,
the State of Texas, or the City of Longview, or other lawful authority having
jurisdiction over the leased premises; provided, however, that there shall be no
violation by Lessee of this provision unless and until Lessor has notified
Lessee in writing, specifying the alleged violation and until there has been a
final adjudication that the specified use is in violation of the law,
regulation, or ordinance specified in the written notice, and that the specified
law, regulation, or ordinance is valid and applicable to the leased premises,
and until Lessee has had a reasonable time after the final adjudication to cure
the specified violation.
ARTICLE 7. CONSTRUCTION BY LESSEE
General Conditions
ss. 7.01. Lessee shall have the right at any time and from time to time during
the term of this lease, to erect, maintain, alter, remodel, reconstruct,
rebuild, and replace buildings and other improvements on the leased premises,
and correct and change the contour of the leased premises, subject to the
following general conditions:
a. The cost of any such work shall be borne and paid for by Lessee.
b. The leased premises shall at all times be kept free of mechanics and
materialmen's liens.
c. Lessor shall be notified of the time of commencement and the
general nature of any such work, other than routine
maintenance of existing buildings or improvements, at the time
of commencement.
d. The provisions of ss. 7.04 concerning Lessor's approval of plans
shall be followed.
Blockage of Roadway
ss. 7.02. It is further understood and agreed by and between Lessor and Lessee
that during the construction period and otherwise, Lessee and/or Lessee's
contractor(s) will not allow or cause the blockage of the roadway or any
existing right-of-ways. Further Lessee agrees that neither Lessee nor Lessee's
contractor(s) will do anything to cause a hazard to Lessee or Lessor, or to any
of Lessee's or Lessor's tenants, agents, employees, guests and/or invitees.
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Easements, Dedications, Zoning, and Restrictions
ss. 7.03. Lessor shall cooperate with Lessee concerning easements, dedications,
zoning, and restrictions of the leased premises as follows:
a. Easements and Dedications. In order to provide for the more orderly
development of the leased premises, it may be necessary, desirable, or
required that street, water sewer, drainage, gas, power lines, and
other easements and dedications and similar rights be granted or
dedicated over or within portions of the leased premises. Lessor
shall, on request of Lessee, join with Lessee in executing and
delivering such documents, from time to time, and throughout the term
of this lease, as may be appropriate, necessary, or required by the
several governmental agencies, public utilities, and companies for the
purpose of granting such easements and dedications.
b. Zoning. In the event that Lessee deems it necessary or appropriate to
obtain use, zoning, or subdivision and precise plan approval and
permits for the leased premises, or any part of them, Lessor agrees to
execute such documents, petitions, applications, and authorizations as
are appropriate or required to submit the leased premise, or any part
of them, for the purposes of obtaining conditional use permits, zoning
and rezoning, tentative and final tract approval, precise plan
approval, and further, for the purposes of annexation to or the
creation of districts and governmental subdivisions. Lessor shall
execute these documents from time to time as requested by Lessee.
c. Restrictions. At the request of Lessee, Lessor shall, from time to
time, execute and deliver or join in the execution and delivery of
such documents as are appropriate, necessary, or required to impose on
the leased premises covenants, conditions, and restrictions providing
for the granting of exclusive uses of the leased premises, or any part
of them, the establishment of common and parking areas, the
establishment of party walls, and provisions for the enlargement of
the common parking areas by the establishment of mutual and reciprocal
parking rights and the rights of ingress and egress, and other like
matters, all of which are for the purpose of the orderly development
of the leased premises as a commercial unit.
d. Expenses. The cost and expense of any action required of Lessor under
Subsection (a) through (c) above shall be borne solely by Lessee.
Lessor's Approval of Plans
ss. 7.04. Lessor's approval of construction, additions, and alterations of
buildings or other improvements on the leased premises shall be governed by the
following provisions:
a. Written Approval Required. No building or other improvement shall be
constructed on plans, specifications, and other proposed location of
the building or other improvement has received the written approval of
Lessor and the building or other improvement complies with the
approved plans, specifications, and proposed location. No material
addition to or alteration of any building or structure erected on the
leased premises shall be commenced until plans and specifications
covering the exterior of the proposed addition or alteration shall
have been first submitted to and approved by Lessor.
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b. Submission of Plans. Lessee shall, at its own expense, engage a
licensed architect or engineer to prepare plans and specifications for
the construction of a commercial building or for the construction of
any other buildings or improvements or additions or alterations to any
buildings or improvements which require Lessor's approval under
Subsection (a) above. Lessee shall submit two (2) copies of detailed
working drawings, plans, and specifications for the construction of a
commercial building to Lessor for approval within sixty (60) days
after execution of this lease. If Lessee wishes to construct any other
buildings or improvements or make any additions or alterations to
buildings or improvements for which the approval of Lessor is required
under Subsection (a) above, Lessee must submit two (2) copies of
detailed working drawings, plans, and specifications for any such
projects for Lessor's approval prior to commencement of the project.
c. Approval by Lessor. Lessor will promptly review and approve all plans
submitted pursuant to Subsection (b) above or note in writing any
required changes or corrections which must be made to the plans. Any
required changes or corrections must be made and the plans resubmitted
to Lessor within fifteen (15) days after the corrections or changes
have been noted. Failure of Lessor to object to such resubmitted plans
and specifications within thirty (30) days shall constitute Lessor 5
approval of the changes. Minor changes in work or materials, not
affecting the general character of the building project, may be made
at any time without the approval of Lessor, but a copy of the altered
plans and specifications shall be furnished to Lessor.
d. Exception to Lessor's Approval. The following items do not require
submission to, and approval by, Lessor:
i. Such minor repairs and alterations as may be
necessary to maintain existing structures and
improvements in a useful state of repair and
operation.
ii. Such changes and alterations as are required by an
authorized public official having authority or
jurisdiction over such buildings or improvements in
order to comply with legal requirements.
e. Effect of Approval. The approval by Lessor of any plans and
specifications applies only to the conformity of such plans and
specifications to the general architectural plan for the leased
premises, and such approval shall not be withheld reasonably. Lessor's
approval does not constitute approval of the architectural or
engineering design, and Lessor, by approving such plans and
specifications, assumes no liability or responsibility for the
architectural or engineering design or for any defect in any building
or improvement constructed from the plans or specifications.
Ownership of Buildings, Improvements, and Fixtures
ss. 7.05. Any and all buildings, improvements, additions, alterations, and
fixtures, except furniture and trade fixtures, constructed, placed, or
maintained on any part of the leased premises during the lease term shall be
considered part of the real property of the premises and shall remain on the
premises and become the property of Lessor on termination of this lease.
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Right to Remove Improvements
ss. 7.06. Lessee shall have the right at any time during Lessee's occupancy of
the leased premises, or within a reasonable time thereafter, to remove any and
all furniture, machinery, equipment, or other trade fixtures, owned or placed by
Lessee, its sublessees or licensees, in, under, or on the leased premises, or
acquired by Lessee, as long as same is not attached to the leased premises,
whether before or during the lease term, but prior to the termination of the
lease Lessee must repair any damage to any buildings or improvements on the
premises resulting from their removal. Any such items which are not removed by
the termination date of the lease shall become the property of Lessor as of that
date.
ARTICLE 8. PROHIBITION AGAINST
ENCUMBERING THE LEASEHOLD ESTATE
Prohibition of Lessee's Right to Encumber
ss. 8.01. Lessee shall not, at any time, encumber the leasehold interest, by
deed of trust, mortgage, or other security instrument.
ARTICLE 9. REPAIRS, MAINTENANCE AND RESTORATION
Lessee's Duty to Maintain and Repair
ss. 9.01. At all times during the term of this lease, Lessee will keep and
maintain, or cause to be kept and maintained, all buildings and improvements
which may be erected on the leased premises in a good state of appearance and
repair, reasonable wear and tear excepted, at Lessee's own expense.
Damage or Destruction
ss. 9.02. In the event any building or improvement constructed on the leased
premises is damaged or destroyed by fire or any other casualty, regardless of
the extent of such damage or destruction, Lessee shall, within ninety (90) days
from the date of such damage or destruction, begin to repair, reconstruct, or
replace the damaged or destroyed building or improvement and pursue the repair,
reconstruction, or replacement with reasonable diligence so that the building
shall be restored to substantially the condition it was in prior to the
happening of the casualty; provided, however, that if commencement or completion
of this restoration is prevented or delayed by reason of war, civil commotion,
acts of God, strikes, governmental restrictions or regulations, or
interferences, fire or other casualty, or any other reason beyond the control of
Lessee, whether similar to any of those enumerated or not, the time for
commencing or completing, or both, of the restoration will automatically be
extended for the period of each such delay.
ARTICLE 10. MECHANICS' LIENS
Lessee shall not cause or permit any mechanic's liens or other liens to
be filed against the fee of the leased premises or against Lessee's leasehold
interest in the land or any buildings or improvements on the leased premises by
reason of any work, labor, services, or materials supplied or claimed to have
been supplied to Lessee or to anyone holding the leased premises or any part of
them through or under Lessee. If such a mechanic's lien or materialman's lien is
recorded against the leased premises or any buildings or improvements on the
premises, Lessee shall either cause the same to be removed or, if Lessee in good
faith desires to contest the lien, take timely action to do so, at Lessee's sole
expense. If Lessee contests the lien, Lessee agrees to indemnify Lessor and hold
Lessor harmless from all liability for damages occasioned by the lien or the
lien contest and shall, in the event of a judgment of foreclosure on
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the lien, cause the lien to be discharged and removed prior to execution of the
judgment. Such indemnification by Lessee shall be accomplished by placing in an
escrow account held by Lessor in Lessor's name 1.5 times the amount of such
mechanic's and/or materialman's lien filed against the property. In the event of
the filing of any mechanic's and/or materialman's lien described herein, all
funds to be held in escrow will be paid to Lessor within 15 days of the filing
of said lien.
ARTICLE 11. CONDEMNATION
Interests of Parties
ss. 11.01. In the event the leased premises or any part of the leased premises
are taken for public or quasi-public purposes by condemnation as a result of any
action or proceeding in eminent domain, or are transferred in lieu of
condemnation to any authority entitled to exercise the power of eminent domain,
the interests of Lessor and Lessee in the award or consideration for the
transfer and the effect of the taking or transfer on this lease shall be as
provided by this article.
Total Taking-Termination
ss. 11.02. If the entire leased premises are taken or so transferred as
described in ss. 11.01, this lease and all of the rights, title and interest
under the lease shall cease on the date title to the premises or part of the
premises vests in the condemning authority, and the proceeds of the condemning
authority, and the proceeds of the condemnation shall be divided as follows:
eighty percent (80%) to Lessor and twenty percent (20%) to Lessee.
Partial Taking-Termination
ss. 11.03. If only part of the leased premises is taken or transferred as
described in ss. 11.01, this lease shall terminate if, in Lessee's opinion, the
remainder of the premises is in such location, or in such form, shape, or
reduced size, that Lessee's business cannot be effectively and practicably
operated on the remaining premises. In that event, this lease and all rights,
title, and interest under this lease shall cease on the date title to the
portion of the premises taken or transferred vests in the condemning authority.
The proceeds of the condemnation shall be divided as follows: eighty percent
(80%) to Lessor and twenty percent (20%) to Lessee.
Partial Taking-Continuation With Rent Abatement
ss. 11.04. If part of the leased premises is taken or transferred as described
in ss. 11.01 and, in Lessee's opinion, the remainder of the premises is in such
location and in such form, shape, or size that Lessee's business can be
effectively and practicably operated on the remaining premises, this lease shall
terminate as to the portion of the premises taken or transferred as of the date
title to such portion vests in the condemning authority, but shall continue in
full force and effect as to the portion of the leased premises not taken or
transferred. From and after that date, the rental required to be paid by Lessee
to Lessor shall be reduced during the unexpired portion of this lease to that
proportion of the annual rent which the value of the part of the leased premises
not so taken bears to the value of the total of the leased premises, such values
to be determined as of the date immediately before any actual taking. The
proceeds of the condemnation shall be divided as follows: eighty percent (80%)
to Lessor and twenty percent (20%) to Lessee.
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Voluntary Conveyance
ss. 11.05. Nothing in this article prohibits Lessor from voluntarily conveying
all or part of the leased premises to a public utility, agency, or authority
under threat of a taking under the power of eminent domain. Any such voluntary
conveyance shall be treated as a taking within the meaning of this article.
ARTICLE 12. INSURANCE AND INDEMNIFICATION
Insurance on Buildings and Improvements
ss. 12.01. At all times during the term of this lease, Lessee shall keep all
buildings and other improvements located or being constructed on the leased
premises insured against loss or damage by fire, with extended coverage
endorsement or its equivalent. This insurance shall be carried by insurance
companies authorized to transact business in Texas, selected by Lessee and
approved by Lessor. The insurance shall be paid for by Lessee and shall be in
amounts not less than eighty percent (80%) of the fair insurable value of the
buildings and other improvements. Such policy or policies of insurance shall
name both Lessor and Lessee as a named insured and shall provide that any loss
of $1,000.00 or less shall be payable solely to Lessee, which sum Lessee shall
use for repair and restoration purposes and any loss over $1,000.00 shall be
made payable jointly to Lessor and Lessee.
Liability Insurance
ss. 12.02. At all times during the term of this lease, Lessee shall provide and
keep in force during the term of this lease, liability insurance covering Lessor
and Lessee for liability for property damage and personal injury. This insurance
shall be carried by one or more insurance companies duly authorized to transact
business in Texas, selected by Lessee and approved by Lessor, and shall be paid
for by Lessee. The insurance provided pursuant to this section shall be in the
amount of not less than $100,000.00 for property damage and not less than
$300,000.00 for one person and $1,000,000.00 for one accident for personal
injury. This insurance shall protect Lessor and Lessee against liability to any
employees or servants of Lessee and to any other person or persons whose
property damage or personal injury arises out of or in connection with the
occupation, use, or condition of the leased premises.
Construction Liability Insurance
ss. 12.03. Lessee agrees to obtain and maintain (to the extent reasonably
procurable) construction liability insurance at all times when demolition,
excavation, or construction work is in progress on the premises. This insurance
shall be carried by insurance companies authorized to transact business in the
State of Texas, selected by Lessee and approved by Lessor, and shall be paid for
by Lessee. The insurance shall have limits of not less than $100,000.00 for
property damage and $300,000.00 for one person and $1,000,000.00 for one
accident for personal injury and shall protect Lessor and Lessee, as well as any
other person or persons Lessee may designate, against all liability for injury
or damage to any person or property in any way arising out of demolition,
excavation, or construction work on the premises.
Certificates of Insurance
ss. 12.04. Lessee shall furnish Lessor with certificates of all insurance
required by this article. Lessee agrees that if it does not keep this insurance
in full force and effect, Lessor may notify Lessee of this failure, and if
Lessee does not deliver to Lessor certificates showing all such insurance to be
in full force and effect within ten (10) days after this notice, Lessor may, at
its option, take out and/or pay the premiums on the insurance needed to fulfill
Lessee's obligations under the provisions of this article. Upon
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demand from Lessor, Lessee shall reimburse Lessor the full amount of any
insurance premiums paid by Lessor pursuant to this section, with interest at the
rate of eighteen percent (18%) per annum from the date of Lessor's demand until
reimbursement by Lessee.
Indemnification of Lessor
ss. 12.05. Lessor shall not be liable for any loss, damage, or injury of any
kind or character to any person or property arising from any use of the leased
premises, or any part of the leased premises, caused by any defect in any
building, structure, improvement, equipment, or facility on the leased premises
or caused by or arising from any act or omission of Lessee, or of any of its
agents, employees, licensees, or invitees, or by or from any accident, fire, or
other casualty on the land, or occasioned by the failure of Lessee to maintain
the premises in safe condition. Lessee waives all claims and demands on its
behalf against Lessor for any such loss, damage, or injury, and agrees to
indemnify and hold Lessor entirely free and harmless from all liability for any
such loss, damage, or injury of other persons, and from all costs and expenses
arising from any claims or demands of other persons concerning any such loss,
damage, or injury.
ARTICLE 13. ASSIGNMENT AND SUBLEASE
Lessee may sell or assign its leasehold estate in its entirety or any
portion of it, or may sublet the leased premises or any portion of it, or may
sublet the leased premises or any portion of them or any portion of any building
or other improvement erected on the premises, at any time and from time to time,
and the rights of Lessee, or any successors or assignee of Lessee, may pass by
operation of law. It is agreed, however, that each such transfer, assignment or
sale shall be subject to the obligations to Lessor as set forth in this lease,
and shall not release Lessee of Lessee's obligations under this lease. It is
further agreed that each such transfer, assignment or sale shall be subject to
Lessor's written consent, which said consent shall not be unreasonably withheld
by Lessor.
ARTICLE 14. DEFAULT AND REMEDIES
Termination on Default
ss. 14.01. Should Lessee default in the performance of any covenant, condition,
or agreement in this lease, and not correct the default within ten (10) days
after receipt of written notice from Lessor to Lessee and lender as required by
Section 8.02, Lessor may declare this lease, and all rights and interest created
by it, to be terminated. Upon Lessor's electing to terminate, this lease shall
cease and come to an end as if the day of Lessor's election were the day
originally fixed in the lease for its expiration Lessor or Lessor's agent or
attorney may resume possession of the premises and relet them for the remainder
of the term at the best rent obtainable for the account Lessee, who shall make
good any deficiency.
Other Remedies
ss. 14.02. Any termination of this lease as provided in this article shall not
relieve Lessee from the payment of any sum or sums that are due and payable to
Lessor under the lease at the time of termination, or any claim for damages then
or previously accruing against Lessee under this lease, and any such termination
shall not prevent Lessor from enforcing the payment of any such sum or sums or
claim for damages by any remedy provided for by law, or from recovering damages
from Lessee for default under the lease. All rights, options, and remedies of
Lessor contained in this lease shall be construed and held to be cumulative, and
no one of them shall be exclusive of the other, and Lessor shall have the right
to pursue any one or all of such remedies or any other remedy or relief which
may be provided by law,
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whether or not stated in this lease. No waiver by Lessor of a breach of any of
the covenants, conditions, or restrictions of this lease shall be construed or
held to be a waiver of any succeeding or preceding breach of the same or any
other covenant, condition, or restriction contained in this lease.
Subleases Not Affected
ss. 14.03. The exercise by Lessor of any remedy shall not affect the existence
of subleases which were entered into with Lessee in accordance with the terms of
this lease and which cover any portion of the leased premises.
ARTICLE 15. LESSOR'S WARRANTIES AND COVENANTS
Warranty of Title
ss. 15.01. Lessor hereby represents and warrants that it is the owner in fee
simple absolute of the leased premises, subject only to the following covenants,
conditions, restrictions, easements, and other matters of record as reflected on
Exhibit D which is attached hereto and made a part hereof for all purposes.
Warranty of Quiet Enjoyment
ss. 15.02. Lessor covenants and agrees that as long as Lessee pays the rent and
other charges as provided in this lease and observes and keeps the covenants,
conditions, and terms of this lease, Lessee shall lawfully and quitely hold,
occupy, and enjoy the leased premises during the term of this lease without
hindrance or molestation by Lessor or any person claiming under Lessor, except
such portion of the leased premises, if any, as shall be taken under the power
of eminent domain.
ARTICLE 16. GENERAL PROTECTIVE PROVISIONS
Right of Entry and Inspection
ss. 16.01. Lessee shall permit Lessor or Lessor's agents, representatives, or
employees to enter on the leased premises for the purposes of inspection,
determining whether Lessee is in compliance with the terms of this lease,
maintaining, repairing, or altering the premises, or showing the leased premises
to prospective lessees, purchasers, mortgagees, or beneficiaries under trust
deeds.
No Partnership or Joint Venture
ss. 16.02. The relationship between Lessor and Lessee at all times shall remain
solely that of landlord and tenant and not be deemed a partnership or a joint
venture.
Force Majeure
ss. 16.03. It is expressly understood and agreed that if the construction of the
building provided for in Section 7.03 of this lease or the curing of any default
(other than failure to pay rent, insurance premiums, or ad valorem taxes) or the
performance of any other covenant, agreement, obligation, or undertaking
contained in this lease is delayed by reason of war, civil commotion, act of
God, governmental restrictions, regulations, or interference, fire or other
casualty, or any other circumstances beyond Lessee's control or beyond the
control of the party obligated or permitted under the terms of this lease to do
or perform the same, regardless of whether any such circumstance is similar to
any of those
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enumerated or not, each party so delayed shall be excused from doing or
performing the same during the period of delay.
No Termination on Bankruptcy
ss. 16.04. Neither bankruptcy, insolvency, assignment for the benefit of
creditors, nor the appointment of a receiver shall affect this lease so long as
Lessee and Lessor or their respective successors or legal representatives
continue to perform all covenants of this lease.
No Waiver
ss. 16.05. No waiver by either party of any default or breach of any covenant,
condition, or stipulation contained in this lease shall be treated as a waiver
of any subsequent default or breach of the same or any other covenant,
condition, or stipulation of this lease.
Release of Lessor
ss. 16.06. If Lessor sells or transfers all or part of the leased premises and
as a part of the transaction assigns its interest as Lessor in and to this
lease, then from and after the effective date of the sale, assignment, or
transfer, Lessor shall have no further liability under this lease to Lessee,
except as to matters of liability which have accrued and are unsatisfied as of
that date, it being intended that the covenants and obligations of Lessor
contained in this lease shall be binding on Lessor and its successors and
assigns only during and in respect of their respective successive periods of
ownership of the fee.
Joint and Several Liability
ss. 16.07. If more than one Lessee or Lessor is named under this lease, the
obligation of all such Lessees or Lessors shall be, and is, joint and several.
ARTICLE 17. OPTION TO PURCHASE
ss. 17.01. Lessor hereby grants to Lessee for the first five (5) year period of
this lease, an option to purchase the premises (surface only) on the following
terms and conditions:
a. Lessee may exercise this option only by sending notice to
Lessor at the address shown in ss. 19.01. below by registered
mail, postage prepaid.
b. The full purchase price for the premises shall be the sum of
$160,000.00, payable in cash, which sum represents the value
of the real property at the time of execution of this Lease,
plus the value of any improvements made to the property.
c. The promissory note described in subparagraph (b) of this
Section shall be secured by a deed of trust which shall be a
first lien on the property.
d. On close of Lessee's exercise of this option, Lessor shall
convey to Lessee good and marketable title to the premises
(surface only), as evidenced by a title insurance policy in
the full amount of the purchase price issued by U.S. Title
Company, Inc., subject only to such liens, encumbrances,
clouds, and conditions as may be approved in writing by Lessee
and subject to the execution of a reciprocal easement granting
ingress and egress and
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customer parking over those areas described in Exhibit C,
attached to and incorporated into this lease. Such reciprocal
easement shall be in a form acceptable to Lessor.
e. On exercise of this option, all real property taxes levied or
assessed against the premises as shown by the latest available
tax bill shall be prorated between Lessee and Lessor on the
basis of 30-day months as of 12:00 midnight on the date of the
closing.
ARTICLE 18. PARKING EASEMENT
ss. 18.01. Throughout the term of this lease, including any extensions or
renewals of the lease, and upon the purchase of the property by Lessee in
accordance with the terms of Article 17, Lessee and its officers, agents,
employees, suppliers, invitees, and customers, have a right to use the area
marked "Parking Lot" on Exhibit C, attached to and incorporated into this lease,
for vehicular parking and ingress to and egress from the leased premises, under
the terms and conditions set forth below. This right constitutes a nonexclusive
easement and is shared in common and on the same terms with the other tenants in
the shopping center.
a. Vehicles may be parked only in spaces designated by Lessor as
parking spaces, either by painted lines or otherwise as Lessor
deems fit.
b. Use of the parking lot by Lessee and Lessee's officers,
agents, employees, suppliers, invitees, and customers must be
in accordance with reasonable rules and regulations adopted by
Lessor and communicated to Lessee by written notice.
c. Lessor and Lessee will maintain the parking lot described on
Exhibit C. Costs of such maintenance shall be borne by Lessor
and Lessee on a pro rata basis according to the number of
square feet of the entire project owned or leased by Lessee
and Lessor, respectively.
ss. 18.02. It is acknowledged and understood by and between Lessor and Lessee
that the right to use the parking lot described on Exhibit "C" and the right of
ingress and egress to the leased premises described herein shall be mutual to
both Lessor and Lessee and to any and all other successors and/or assigns of
Lessor and Lessee.
ARTICLE 19. HAZARDOUS MATERIALS
Hazardous Materials
ss. 19.01. For the purposes of this Instrument, Lessor and Lessee agree that,
unless the context otherwise specifies or requires, the following terms shall
have the following meanings:
a. "Hazardous Materials" shall mean (i) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.), as amended from time to time, and
regulations promulgated thereunder; (ii) any "hazardous
substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), as amended from time to time,
and regulations promulgated thereunder; (iii) asbestos; (iv)
polychlorinated biphenyls; (v) underground storage tanks, whether
empty, filled or partially filled with any substance, (vi) any
substance the presence of which on the Property is prohibited by
any applicable governmental requirements and regulations
("Governmental Requirements");
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and (vii) any other substance which by any Governmental
Requirements requires special handling or notification of any
federal, state, or local governmental entity in its
collection, storage, treatment, or disposal.
b. "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter
occurring) of any improvements, facilities, soil, groundwater,
air or other elements on or of the Property by hazardous
Materials, or the contamination of the buildings, facilities,
soil, groundwater, air, or other elements on or of any other
property as a result of Hazardous Materials at any time
(whether before or after the date of this Instrument)
emanating from the Property.
Representations and Warranties
ss. 19.02. Lessor represents and warrants that, to the best of Lessor's
knowledge and belief, no Hazardous Materials are now located on the Property,
and neither Lessor nor, to Lessor's knowledge, any other person has ever caused
or permitted any Hazardous materials to be placed, held, located, or disposed of
on, under, or at the property or any part thereof.
Lessee represents and warrants that Lessee will not
intentionally or unintentionally cause or permit any Hazardous materials as
defined in ss. 19.01 to be brought upon, kept, or used in or about the property
or any part thereof by Lessee, its agents, employees, contractors, or invitees.
Covenants
ss. 19.03. Lessor and Lessee mutually agree to give notice to the other party
immediately upon either party's acquiring knowledge of the presence of any
Hazardous Materials on the property or of any Hazardous Materials Contamination
with a full description thereof. Lessee agrees to promptly comply with any
Governmental Requirements requiring the removal, treatment or disposal of such
Hazardous Materials or Hazardous Materials Contamination and provide the other
party with satisfactory evidence of such compliance and to provide Lessor,
within thirty (30) days after demand by Lessor, with a bond, letter of credit or
similar financial assurance evidencing to Lessor's satisfaction that the
necessary funds are available to pay the cost of removing, treating and
disposing of such Hazardous Materials or Hazardous Materials Contamination and
discharging any assessments which may be established on the property as a result
thereof.
Indemnification
ss. 19.04. Lessee hereby agrees to defend, indemnify, and hold harmless Lessor
from any and all liabilities (including strict liability), actions, demands,
penalties, losses, costs, or expenses (including without limitation attorneys'
fees and expenses, and remedial costs), suits, costs of any settlement or
judgment and claims of any and every kind whatsoever which may now or in the
future be paid, incurred or suffered by or asserted against Lessor by any person
or entity or governmental agency as a result of Lessee's violation of any
prohibition, covenant or warranty contained herein concerning the use,
disposition, sale and/or storage of any Hazardous Materials or Hazardous
Materials Contamination.
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ARTICLE 20. MISCELLANEOUS
Delivery of Rents and Notices
ss. 20.01. All rents or other sums, notices demands, or requests from one party
to another may be personally delivered or sent by mail, certified or registered,
postage prepaid, to the addresses stated in this section and shall be deemed to
have been given at the time of personal delivery or at the time of mailing.
All payments, notices, demands, or requests from Lessee to Lessor shall
be given or mailed to Lessor at P.O. Box 6238, Longview, Texas 75608, or at such
other address as requested by Lessor in writing.
All payments, notices, demands, or requests from Lessor to Lessee shall
be given or mailed to Lessee at 500 East Houston, Marshall, Texas 75670, or at
such other address as requested by Lessee in writing.
Multiple Parties
ss. 20.02. If more than one Lessor or Lessee is named in this lease, service of
any notice on any one Lessee or Lessor shall be deemed service on all Lessees or
Lessors, respectively.
Parties Bound
ss. 20.03. This agreement shall be binding upon and inure to the benefit of the
parties to the lease and their respective heirs, executors, administrators,
legal representatives, successors, and assigns.
Texas Law to Apply
ss. 20.04. This agreement shall be construed under and in accordance with the
laws of the State of Texas, and all obligations of the parties created by this
lease for performable in Gregg County, Texas.
Legal Construction
ss. 20.05. In case any one or more of the provisions contained in this agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, this invalidity, illegality, or unenforceability shall not affect any
other provision of the lease, and this agreement shall be construed a if the
invalid, illegal, or unenforceable provision had never been contained in the
lease.
Prior Agreements Superseded
ss. 20.06. This agreement constitutes the sole and only agreement of the parties
to the lease and supersedes any prior understandings or written or oral
agreements between the parties respecting the subject matter of the lease.
Amendment
ss. 20.07. No amendment, modification, or alteration of the terms of this lease
shall be binding unless it is in writing, dated subsequent to the date of this
lease, and duly executed by the parties to this lease.
d
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Rights and Remedies Cumulative
ss. 20.08. The rights and remedies provided by this lease agreement are
cumulative, and the use of any one right or remedy by either party shall not
preclude or waive its right to use any and all other remedies. The rights and
remedies provided in this lease are given in addition to any other rights the
parties may have by law, statute, ordinance, or otherwise.
Attorney's Fees and Costs
ss. 20.09. If, as a result of a breach of this agreement by either party, the
other party employs an attorney or attorneys to enforce its rights under this
lease, then the breaching party agrees to pay the other party the reasonable
attorney's fees and costs incurred to enforce the lease.
Time of Essence
ss. 20.10. Time is of the essence of this agreement.
THIS LEASE has been executed by the parties on the date and year first
above written.
LESSOR
GIBSON PROPERTIES, INC.,
a Texas Corporation
By:
Richard Gibson
Chairman of the Board
LESSEE
BOSKO'S, INC.,
a Texas Corporation
By:
Name:
Title:
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EXHIBIT 6.3CE
RESTAURANT LEASE
FRESH N LITE, INC.
THIS Lease (the "Lease") is made and entered into this 15th day of
September, 1997, by and between USRP (MIDON), LLC, a Texas limited liability
company (hereinafter called "Landlord"), and FRESH 'N LITE, INC., a Texas
corporation (hereinafter called "Tenant"). For and in consideration of the
rental and of the covenants and agreements hereinafter sct forth to be kept and
performed by Tenant, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, the Building or Buildings and the Leased Property as defined
below, for the term and at the rental amount, and subject to and upon all of the
terms, covenants, and agreements hereinafter set forth.
1. DEFINITIONS
1.1 Building and Buildings. The word "Building" as used in this Lease
shall mean the one (1) one-story restaurant building located on the site more
particularly described on Exhibit A or, if more than one, the word "Buildings"
as used in this Lease shall mean the restaurant buildings located on the sites
more particularly described on Exhibit A.
1.2 Personal Property. The furniture, fixtures and equipment owned by
Landlord and used by Tenant at the Premises, more particularly described on
Exhibit A.
1.3 Premises. The word "Premises" as used in this Lease shall mean the
fee interest in the underlying ground and driveways and parking areas outside of
the Building or Buildings as shown on Exhibit A.
1.4 Leased Property. he word "Property" as used in this Lease mean the
Premises with respect to each restaurant.
1.5 Equipment. The word "Equipment" as used in this Lease shall mean
collectively, the furniture, fixtures and equipment owned by Tenant and located
in any Building or on any Premises.
1.6 Restaurant Operations. The Equipment, inventory, contract rights,
leasehold improvement, and other items of personal property, whether tangible or
intangible, used by the Tenant in the operation of such restaurant.
1.7 Taxes. The real property taxes and personal property taxes
applicable to any Leased Property and Restaurant Operations pursuant to Sections
5.2 and 5.3.
1.8 Guarantor. Guarantor shall mean Curtis A. Swanson, Sr., an
individual.
1.9 Completion Date. The date when Tenant has delivered all
documentation required to delivered to Landlord pursuant to Section 8.1 hereof.
1.10 Purchase Agreement. The Purchase and Sale Agreement between Auto
Wash Enterprise, Inc. and Fresh 'N Lite dated June 16, 1997.
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2. TERM
2.1 The Term of this Lease shall be for a period or twenty (20) years,
commencing on the date (the "Rent Commencement Date") that Landlord acquires the
Premises under the Purchase Agreement. Provided, however, if the Purchase
Agreement is terminated without Landlord acquiring the Premises, this Landlord
shall terminate and Landlord and Tenant shall have no continuing rights or
obligations hereunder. A "Lease Year" shall commence on the first clay of the
month following the Rent Commencement Date (if the Rent Commencement Date is
other than the first day of a month) and end 12 months thereafter.
2.2 Option to Renew Lease. Tenant shall have the option upon
twenty-four (24) months prior written notice in each instance to renew the Lease
for one (1) additional term of ten (10) years on the same terms and conditions
as herein set forth.
2.3 Acknowledgment of Commencement Date. Landlord and Tenant shall
execute a written acknowledgment of commencement and shall attach it hereto as
Exhibit C.
3. RENT
Tenant shall pay to Landlord as rent for the Leased Property the sums
shown on Exhibit D, payable in advance, without deduction, offset, prior notice
or demand, only by ACH Transfer.
4. ADDITIONAL SECURITY AND FINANCIAL STATEMENTS
4.1 Guaranty. Guarantor shall irrevocably and unconditionally guaranty
all obligations of Tenant under this Lease, and shall execute a Guaranty
Agreement, in form attached hereto as Exhibit E.
The Guaranty Agreement shall terminate on the Completion Date.
4.2 Financial Statements. During the term of this Lease, including any
renewal terms, Tenant and Guarantor shall deliver to Landlord annual financial
statements of Tenant and Guarantor, prepared in accordance with generally
accepted accounting principles, certified by the chief executive officer or
chief financial officer of Tenant or Guarantor within sixty (60) days following
the close of such year. If Tenant or Guarantor has audited financial statements
available, they shall deliver such audited financial statements to Landlord.
5. TAXES
5.1 Payment of Taxes. Tenant shall pay, as additional rent hereunder,
all real property taxes applicable to the Leased Property during the term of the
Lease and shall assume all obligations for taxes prior to the Rent Commencement
Date. Payment of taxes shall be made to Landlord on or before thirty (30) days
prior to the due date of such taxes, and Landlord shall promptly remit the
payment to the appropriate taxing authorities. Landlord shall be responsible for
any interest or penalties associated with taxes paid subsequent to the due date
therefore only in the event Landlord receives payment from Tenant on or before
thirty (30) days prior to such due date. In the event such real property taxes
required to be paid by Tenant cover any period of time before or after
expiration of the term of this Lease, Tenant's share of such taxes shall be
equitably prorated to cover only the period of time within the fiscal tax year
during which this Lease is in effect. Landlord shall forward copies of all tax
bills within fifteen (15) days after Landlord's receipt thereof.
5.2 Definition of "Real Property Taxes". As used herein, the term "real
property tax" shall include any form of assessment, license fee, rent tax, sales
tax on rental receipts, levy, or tax imposed by
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any authority having the direct or indirect power to tax, including any city,
county, state, or federal government, or any school, agricultural, lighting,
drainage, or other improvement district hereof, as against any legal or
equitable interest of Landlord in any Leased Property or in the real property of
which any Premises is a part, as against Landlord's right to rent or other
income therefrom.
5.3 Personal Property Tax.
(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon leasehold improvements, fixtures, furnishings, Personal
Property and Equipment.
(b) If any Equipment shall be assessed with Landlord's real
property, Tenant shall pay to Landlord the taxes attributable to such Equipment
within ten (10) days after receipt of a written statement setting forth the
taxes applicable to the Equipment.
5.4 Without limiting in any way Tenant's other obligations under this
Lease, Tenant agrees to deposit in a segregated bank account in Tenant's name,
during each month of the term of this Lease on the same day that rent is due
hereunder, an amount equal to one-twelfth (1/12) of the estimated annual amount
of Taxes. Tenant shall deliver bank statements to Landlord which, on a quarterly
basis reflect all deposits and withdrawals from such escrow account. Tenant
hereby grants Landlord a security interest in the escrow account to secure
Tenant's obligations under the Lease. From and after the date of any default
under this Lease, Tenant agrees to transfer the balance in such account to a
non-interest bearing escrow account in Landlord's name, and to make all future
deposits into such escrow account maintained by Landlord. Monthly escrow
payments shall be based upon the estimated amounts for the year in question, and
shall be increased or decreased annually to reflect the projected actual amount
of all taxes. If Tenant should fail to pay any taxes, assessments or
governmental charges required to be paid by it hereunder, in addition to any
other remedies provided herein, Landlord may, in its sole discretion, pay such
taxes, assessments and governmental charges. Any sums so paid by Landlord shall
be deemed to be additional rental owing by Tenant to landlord and due and
payable upon demand as additional rent with interest at the rate of twelve
percent (12.00%) from the date of the payment by Landlord.
5.5 If at any time during the term of the Lease the present method of
taxation shall be changed so that, in lieu of the whole or any part of any
taxes, assessments, levies or charges levied, assessed or imposed on real estate
and the improvements there shall be levied, assessed or imposed on Landlord a
capital levy or other tax directly on the rents received from Tenant and/or any
assessment, levy or charge measured by or based in whole or in part, upon such
rents, then all such tax, assessments, levies or charges, or the part thereof so
measured or based, shall be deemed to be included with the term tax for the
purposes hereof and shall be paid by Tenant.
5.6 Tenant may contest by appropriate proceedings, the amount, validity
or application of any taxes by appropriate proceeding diligently conducted in
good faith provided that (a) such proceedings shall suspend the collection
thereof, (b) no part of the Leased Property or of any rent would be subject to
loss, sale or forfeiture before determination of any contest, (c) Landlord would
not be subject to any criminal liability for failure to pay, (d) such
proceedings shall not affect the payment of rent hereunder or prevent Tenant
from using any Leased Property for its intended purposes, and (e) Tenant shall
notify Landlord of any such proceedings at which the amount of contest exceeds
$10,000.00 within 20 days after the commencement thereof, and shall describe
such proceedings in reasonable detail. Tenant will conduct all such contest in
good faith and with due diligence and will, promptly after the determination of
such contest, pay and discharge all amounts which shall be determined to be
payable therein. In the event Tenant elects to dispute and Contest any taxes, it
shall provide Landlord with a surety bond in the amount of taxes in dispute.
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5.7 Landlord covenants and agrees that if there shall be any refunds or
rebates of the Taxes paid by Tenant, such refunds or rebates shall belong to
Tenant. Any refunds received by Landlord shall be deemed trust funds and as such
are to be received by Landlord in trust and paid to Tenant forthwith. Tenant
will, upon the request of Landlord, sign any receipts which may be necessary to
secure the payment of any such rents or rebates.
6. USE
6.1 Use. The Leased Property shall be used and occupied by Tenant only
as a Fresh 'N Lite restaurant. Tenant shall not change the use of any Leased
Property as set forth above without Landlord's prior written consent, which
consent shall not unreasonably be withheld. Tenant will not do or permit any act
or thing that is contrary to any legal requirement or insurance requirement, or
that impairs the value of any Leased Property or any part thereof or that
materially increases the dangers, or poses unreasonable risk of harm, to third
parties (in on or off any Leased Property) arising from activities then, or that
constitutes a public or private nuisance or waste to any Leased Property or any
part thereof. Tenant shall not conduct any activity on any Premises or use any
Leased Property in any manner (i) which would cause any Leased Property to
become a hazardous waste treatment, storage or disposal facility within the
meaning of, or otherwise bring any Leased Property within the ambit of, the
Resource Confirmation and Recovery Act of 1976, 42 U.S.C. ss. 6901, et seq., or
any similar state law or local ordinance; (ii) so as to cause a release or
threat of release of hazardous waste from any Leased Property within the meaning
of, or otherwise bring any Leased Property within the ambit of, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
U.S.C. ss. 960-157, or any similar state law or local ordinance or any other
environmental law; or (iii) so as to cause a discharge of pollutants or
effluents into any water source or system, or the discharge into the air of any
emissions, which would require a permit under the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1251, et seq., or the Clean Air Act, 42 U.S.C.
ss. 741, et seq, or any similar state or local ordinance.
6.2 Compliance with the Law. Tenant shall, at Tenant's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders,
and requirements in effect during the team hereof, regulating the use by Tenant
of the Building and any Leased Property. Tenant shall not use or permit the use
of the Building or any Leased Property in any manner that will tend to create
waste or a nuisance, or otherwise expose Landlord or any Leased Property to any
liability.
6.3 Condition of Leased Property. Tenant hereby accepts all of the
Leased Property in their condition as of the date of the possession hereunder,
subject to all applicable zoning, municipal , county, and state law, ordinances,
and regulations, including private easements and restrictions, governing and
regulating the use of any Leased Property, and accepts this Lease subject
thereto and to all matters disclosed thereby, and by any exhibits attached
hereto. Tenant acknowledges that neither Landlord nor Landlord's agent has made
any representation or warranty as to the suitability of any Leased Property for
the construction activities to be undertaken by Tenant pursuant to Section 8.1
hereof or for the conduct of Tenant's business.
6.4 Tenant's Covenants and Indemnity. Tenant shall not dispose of or
otherwise allow the release of any hazardous waste or materials in, on, or under
the Premises, or any adjacent property or in any improvements placed on the
Premises. Tenant represents and warrants to Landlord that Tenant's intended use
of any Leased Property does not involve the use, production, disposal or
bringing onto any Premises of any hazardous waste or materials. Tenant shall
promptly comply with all statutes, regulations and ordinances, and with all
orders, decrees or judgments of governmental authorities or courts having
jurisdiction, relating to the use, collection, treatment, disposal, storage,
control, removal or clean up of
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hazardous waste or materials, in, on or under any Leased Property or any
adjacent property, or incorporated in any improvements, at Tenant's expense.
After written notice to Tenant and reasonable opportunity for Tenant to
effect such compliance, Landlord may, but is not obligated to, enter upon any
Leased Property and take such actions and incur such costs and expenses to
effect such compliance as it deems advisable to protect its interest in any
Leased Property; provided, however, that Landlord shall not be obligated to give
Tenant notice and an opportunity to effect such compliance if (i) such delay
might result in material adverse harm to landlord or any Leased Property, (ii)
Tenant has already had actual knowledge of the situation and a reasonable
opportunity to effect such compliance, or (iii) an emergency exists. Whether or
not Tenant has actual knowledge of the release of hazardous waste or materials
in, on or under any Leased Property or any adjacent property as the result of
Tenant's use of any Leased Property, Tenant shall reimburse landlord for the
full amount of all costs and expenses incurred by Landlord in connection with
such compliance activities, and such obligation shall continue even after the
termination of this Lease. Tenant shall notify Landlord immediately of any
release of any hazardous waste or materials in, on or under any Leased Property.
Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, damages, demands, losses, liens, liabilities,
obligations, fines, penalties, charges, judgments, clean up costs, remedial
actions and other proceedings and costs and expenses (including, without
limitation, attorneys' fees and disbursements) which may be imposed on, incurred
or paid by, or asserted against Landlord or any Leased Property by reason of, or
in connection with (i) any misrepresentation or breach of warranty, or (ii) the
acts or omissions of Tenant, or any sublessee or other person for whom Tenant
would otherwise liable, resulting in the release of any hazardous waste or
materials, or (iii) arising directly or indirectly from or out of or in any way
connected to Tenant's use, storage, ownership, possession, or control of
hazardous substances in, on or under any Leased Property which directly or
indirectly result in the Leased Property or any other property becoming
contaminated with hazardous substances. Tenant hereby agrees upon notification
to clean up from any Leased Property or any other property any contamination
caused by its activity including, without limitation, use, storage, ownership,
possession or control of hazardous substances in, on or under any Leased
Property including, without limitations, any remedial action required by
applicable governmental authorities. Tenant further acknowledges that it will be
solely responsible for all costs and expenses relating to the clean up of
hazardous substances from any Leased Property or any other properties which
become contaminated within hazardous substances as a result of Tenant's
activities in , on or under any Leased Property.
The term "hazardous substances" and "hazardous waste or materials"
shall mean: Any substance or material defined or designated as a hazardous or
toxic waste, hazardous or toxic material, a dangerous, hazardous, toxic, or
radioactive substance, or other similar term, by any federal, state, or local
environmental statute, regulation, or ordinance presently in effect or that may
be promulgated in the future, as such statutes, regulations, and ordinances may
be amended from time to time including, but not limited to, the statutes listed
below:
Federal Resource Conservation and Recovery Act of 1976, 42ss. 6901 et
seq.
Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 49 U.S.C. ss. 1801, et seq.
Federal Clean Air Act, 42 U.S.C. ss. 7401-7626.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977,
33 U.S.C. ss. 151, et sq.
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Federal Insecticide Fungicide, and Rodenticide Act, Federal Pesticide
Act of 1978, 7 U.S.C., Paragraph 13, et seq.
Federal Toxic Substance Control Act, 15 U.S.C. ss. 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. ss. 300 (1), et seq.
6.5 Insurance Cancellation. Notwithstanding the provisions of Section
6.1 above, no use shall be made or permitted to be made of any Leased Property
nor acts done which will cause the cancellation of any insurance policy covering
any Property or any other property of which any Premises may be a part.
7. UTILITIES
Tenant shall pay prior to delinquency for all water, gas, heat, light,
power, telephone, sewage and city assessments, air conditioning, ventilation,
janitorial, landscaping, fire protection monitoring service, and all other
materials and utilities supplied to any Leased Property. Landlord has no
responsibility to maintain or pay for any utilities on any Leased Property
8. MAINTENANCE AND REPAIRS: ALTERATIONS AND ADDITIONS
8.1 Initial Tenant Finish-Out. Tenant shall, beginning on the Rent
Commencement Date, construct, in a good and workmanlike manner, the tenant
improvements on the Leased Property more particularly described on Exhibit A-1.
On or before __________, 1998, Tenant shall provide the following documents for
Landlord's review: (i) lien waivers from the general contractor responsible for
construction of the Building; (ii) contractor's certificate of substantial
completion of the Building; and (iii) certificate of occupancy. Tenant shall be
solely responsible for paying all costs and expenses incurred in connection with
constructing the tenant improvements, and hereby indemnifies Landlord from any
cost, expense or liability associated with such development activities. All
improvements which may hereafter be placed or erected upon the demised premises
shall be constructed and maintained in full compliance with the laws, rules and
regulations applicable to the Leased Property. During the period of any
improvement or construction on the Leased Property, Landlord shall have the
right and privilege, at its option, of posting upon the demised premises one or
more notices of non-responsibility in the manner and form provided by law.
8.2 Tenant shall at its sole cost and expense keep and maintain all
Leased Property and Building, including sidewalks, landscaping and driveways
located on the premises, in good order and condition and repair, normal wear and
tear, casualty or condemnation excepted, and shall suffer no waste with respect
thereto. Tenant shall at its sole cost and expense make all needed repairs to
and replacements of the Leased Property and Building, interior and exterior,
structural or nonstructural, ordinary and extraordinary, including but not
limited to any roof, air conditioning, and heating systems, replacements of
cracked or broken glass, repair of parking areas and driveways, and shall keep
the plumbing units, pipes and connections free from obstruction and protected
against ice and freezing. Landlord has no responsibility to maintain or pay for
any part of the maintenance or replacement of the Leased Property or Building.
8.3 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Leased Property and Building to Landlord
in good condition, broom clean, ordinary wear
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and tear excepted. Tenant shall repair any damage to the Leased Property or
Building caused by the removal of Tenant's Equipment pursuant to Section 8.5
below, which repairs shall include the patching and filling of holes thereof,
the repair of structural damage of any kind or type, the repair or replacement
of all damaged mechanical equipment and all heating, air conditioning, and
ventilating equipment.
8.4 Landlord's Rights. If Tenant fails to perform Tenant's obligations
under any of the provisions of this Section 8, Landlord shall give Tenant
written notice to do such acts as are reasonably required to maintain any Leased
Property in good order and condition. If, within thirty (30) days of such
notice, Tenant fails to commence to do the work and diligently prosecute it to
completion, or, with respect to items which are not reasonably susceptible to
being remedied within such thirty (30) day period, within the period during
which the work may reasonably be completed, then Landlord shall have the right,
(but not the obligation) to do such acts and expend such funds at the expense of
Tenant as are reasonably required to perform such work satisfactorily. Any
amount so expended by Landlord shall be paid by Tenant within ten (10) days
after billing for same, with interest at twelve percent (12.00%) per annum from
the date of such work. Landlord shall have no liability to Tenant for any
damage, inconvenience, or interference with the use of any Leased Property by
Tenant as a result of performing any such work.
8.5 Alterations and Additions.
(a) Tenant shall not make any alterations to any structure
component of any Building but not limited to exterior walls and foundations,
without the express written consent of the Landlord; provided however, that the
Landlord will not unreasonably delay or withhold consent.
(b) Tenant shall provide Landlord with written notice of each
contractor or subcontractor performing work on any Leased Property. Landlord's
consent to the selection of such contractors or subcontractors shall not be
required for construction on the Leased Property not exceeding $50,000.00.
Landlord shall have the right to approve any contractors or sub-contractors for
work on any Property which is reasonably expected to exceed $50,000.00, which
approval shall not be unreasonably withheld.
(c) All alterations, changes, additions, improvements, and
utility installations (whether or not such utility installations constitute
trade fixtures of Tenant) which may be made to any Leased Property or Building,
shall at the expiration or earlier termination of this Lease, become the
property of the Landlord and remain upon and be surrendered with the Leased
Property. The Equipment, inventory and any other personal property, to the
extent owned by Tenant, other than that which is affixed to any Building or
Premises so that it cannot be removed without material damage to such Building
or Premises, shall remain the property of the Tenant, and may be removed by the
Tenant subject to the provisions of Section 8.2, at any time during the term of
this Lease when Tenant is not in default of any of the provisions of this Lease.
9. ENTRY BY LANDLORD.
Landlord and Landlord's agents, shall have the right on reasonable
prior notice to enter any Building or Premises to inspect the same or to
maintain or repair the Leased Property or any portion thereof or to show any
Leased Property to prospective purchasers or lenders, or during the last three
(3) months of the term of the Lease to any prospective Tenant. Landlord shall
have the right to use any and all means which Landlord may deem prior to open
the door to any Building in an emergency of any type.
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10. LIENS
Tenant shall keep all Leased Property free from any and all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant and shalt indemnify and hold harmless and defend the Landlord from any
and all liens and/or encumbrances arising out of any work performed or materials
furnished by or at the direction to the Tenant. In the event that any such lien
is imposed, Tenant shall have thirty (30) days from the date of imposition to
cause the lien to be released of record or bonded around. Failure to do so by
Tent shall allow Landlord, in addition to all other remedies provided herein by
law, the right, but by no means the obligation, to cause the lien to be released
by such means as it shall deem proper, including payment of the claim giving
rise to the lien. All such sums paid by Landlord and all expenses incurred by it
in connection therewith including attorney's fees and costs, shall be payable to
landlord by Tenant on demand with interest at twelve percent (12.00%) per annum.
Landlord shall have the right at all times to post and keep posted on any Leased
Property any notices permitted or required by law, or which the Landlord shall
deem proper, for the protection of the Landlord and any Property, and/or any
other party having an interest therein, from mechanic's and materialman's liens.
The Tenant shall give to Landlord at least ten (10) days written notice of the
expected date of commencement of any work relating to alterations and/or
additions to the Leased Property.
11. INDEMNITY
11.1 Tenant shall defend, indemnify, and hold harmless Landlord from
and against any and all claims arising from Tenant's use of any Leased Property
or the conduct of its business or from any activity, work, or thing done,
permitted, or suffered by Tenant in or about any Leased Property and shall
further defend, indemnify, and hold harmless landlord from and against any and
all claims arising from any breach, or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act or negligence of Tenant, or any of its agents, contractors,
or employees, and from and against any and all costs, attorneys' fees, expenses,
and liabilities incurred in connection with such claim or any action or
proceeding brought thereon. In case any action or proceeding be brought against
Landlord by reason of any such claim whatsoever, Tenant, upon notice from
landlord, shall defend same at Tenant's expense by counsel reasonably
satisfactory to landlord. However, Tenant shall not be liable for any damage or
injury occasioned by the negligence or intentional acts of landlord or its
designated agents, or employees.
11.2 Exemption of Landlord from Liability. Except for intentional acts
or gross negligence of the Landlord, its agents and employees, Landlord shall
not be held liable for injury or damage which may be sustained by the person,
goods, wares merchandise, or property of Tenant, or by any agent or other person
claiming by or under Tenant which might be caused by or resulting from fire,
steam, electricity, gas, water, or rain, which may leak or flow from or into any
part of any Leased Property, from breakage, leakage, obstruction, or other
effects of the pipes, sprinklers, wires, appliances, plumbing, heating, air
conditioning, ventilating, or lighting fixtures of the same, whether the said
damage or injury results from condition arising in, on or under any Building or
Premises or upon other portions of the property of which the Premises are a part
or from other sources. Landlord shall not be liable for any damages arising from
any act or neglect of any other tenant (if any) of any Building or Premises, or
property of which any Premises is a part. Tenant shall defend. indemnify and
hold harmless Landlord from and against any and all claims by any person which
may arise from the matters mentioned in this Section 11.2 except for intentional
acts or negligence of the Landlord, its agents and employees.
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12. INSURANCE
12.1 Liability Insurance. Tenant shall, at Tenant's expense, procure
and maintain at all times during the term of this Lease, a policy of
comprehensive public liability insurance insuring Landlord and Tenant against
any liability arising out of the ownership, use, occupancy, or maintenance of
any Leased Property. Such insurance shall at all time be in an amount of not
less than $3,000,000.00. In addition, if Tenant serves liquor at the premises,
Tenant shall maintain at least $1,000,000.00 of liquor liability insurance. The
limits of such insurance shall not limit the liability of the Tenant. All
insurance required under this Section 12 shall be with companies rated A or
better in Best's Insurance Guide. Tenant shall deliver to Landlord certificates
of insurance evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord, provided that in the event Tenant
fails to procure and maintain such insurance, Landlord may (but shall not be
required to), procure same at Tenant's expense after ten (10) days prior written
notice. No such policy shall be cancelable or subject to reduction of coverage
or other modification except after thirty (30) days prior written notice to
Landlord by the insurer. All such policies shall be written as primary policies,
no contributing with and not in excess of coverages which the Landlord may
carry. Tenant shall, within twenty (20) days prior to the expiration of such
policies, furnish Landlord with renewals or binders or Landlord may order such
insurance and charge the cost to the Tenant, which amounts shall be payable by
Tent on demand Tenant shall have the. right to provide such insurance coverage
pursuant to blanket policies which the Tenant may have in force provided such
blanket policies expressly afford coverage of any Leased Property and to
Landlord as is required by this Lease.
12.2 Property Insurance. Tenant shall, at Tenant's expense, procure and
maintain at all times during the term of this Lease, the policy or policies of
insurance covering loss or damage to any Property and Building in the amount of
the full replacement value thereof, and providing protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, sprinkler leakage, flood and special extended peril (all
risk). Tenant shall pay the entire amount of such annual insurance premiums and
shall deliver to Landlord certificates of insurance evidencing such insurance
with loss payable clauses satisfactory to Landlord, provided that in the event
Tenant fails to provide and maintain such insurance, Landlord may but shall not
be required) procure same at Tenant's expense after ten (10) days prior written
notice. No such policy shall be cancelable or subject to reduction of coverage
or other modification except after thirty (30) days prior written notice to
Landlord by the insurer. All such policies shall be written as primary policies,
not contributing with and not in excess of coverages which the Landlord may
carry. Tenant shall, within twenty (20) days prior to the expiration of such
policies, furnish Landlord with renewals or binders or Landlord may order such
insurance and charge the cost to the Tenant, which amounts shall be payable by
Tenant on demand Such insurance shall provide for payment of losses thereunder
to Landlord or the holder of a first mortgage or deed of trust on any of the
Leased Property. Any loss proceeds shall be made available for the purposes of
replacing or rebuilding the permanent Leased Property if required under Section
13 and in which event, such funds shall be segregated from the general funds of
Landlord.
12.3 Waiver of Subrogation. Landlord and Tenant shall waive any and all
rights or recovery against the other or against the officers, employees, agents
and representatives of the other, on account of loss or damage occasioned to
such waiving party or its property or the property of others under its control
caused by fire or any of the extended coverage risks described above to the
extent that such loss or damage is insured. Landlord and/or Tenant shall give
notice to the insurance carrier or carriers involved that the foregoing mutual
Waiver of Subrogation option is contained in this Lease. The waivers provided
for in this Section 12.3 shall be applicable and effective only in the event
such waivers are obtainable from the insurance carriers concerned.
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13. DAMAGE TO PREMISES
13.1 Partial or total Damage-Insurance Available. In the event of
damage causing a partial or total destruction of the Building during the term of
this Lease and there is made available to the Landlord, pursuant to Section l2.0
above, insurance proceeds for such damage, Landlord shall utilize all such
insurance proceeds and cause the Building to be promptly repaired to the
condition existing immediately prior to such damage, with this Lease to continue
in full force and Tenant shall deposit with Landlord or make available to
Landlord the amount reasonably estimated by landlord to be required in addition
to any available insurance proceeds to complete the repairs or construction
("Tenant Repair Deposit") within ten (10) days alter notice to Tenant by
Landlord. The amount of the Tenant Repair' Deposit shall not limit Tenant's
liability if insufficient insurance is available to construct the Building, and
Tenant shall pay any such deficiency to Landlord upon demand; conversely if
after such reconstruction there is any balance in the Tenant Repair Deposit,
such excess will promptly be refunded to Tenant within ten (10) days after
reconstruction is completed. Provided, however, if Landlord has not begun
reconstruction or repairs within thirty (30) days after the later of (i) receipt
of available insurance proceeds or (ii) receipt of the Tenant Repair Deposit, or
it is not reasonably anticipated that such repair or reconstruction be completed
within a 180-day period after commencement of reconstruction, Tenant may
terminate this by written notice to Landlord, in which event the available
insurance proceeds wilt be used to restore the property to a safe condition in
compliance with all applicable laws and ordinances, with any balance refunded to
Tenant.
13.2 Repair Not Permitted. In the event that a Building may not be
repaired as required herein under applicable laws and regulations
notwithstanding the availability of insurance proceeds and any Tenant Repair
Deposit, this shall be terminated as to such Leased Property effective with the
date of the damage occurrence, in which event the available insurance proceeds
will be used to restore the to a safe condition in compliance with all
applicable laws and ordinance, with any balance refunded to Tenant.
13.3 Damage to Building or Personal Property During Last Six Months of
Term. In the event of any total or partial destruction to the Building occurring
during the last six (6) month period of the term of this Lease (or any extension
thereof), and notwithstanding the provisions of Sections 13.1 above, Landlord
shall have the right for the longer of (i) a period of sixty (60) days following
the event giving rise to the casualty or damage, or (ii) the period fifteen (15)
days following the receipt of insurance proceeds to terminate this Lease as to
such Leased Property, in which event the available insurance proceeds will be
used to restore the Property to a safe condition in compliance with all
applicable laws and ordinances, with any balance refunded to Tenant. Provided,
however, if Tenant has properly exercised any option that it may have to renew
the Lease Term, this Section 13.3 shall not be applicable.
13.4 Abatement of Rent. In the evidence of any total or partial
destruction for the period between the date of damage until the repairs are
completed, and/or in the event of termination of this Lease with respect to the
Building, for the period between the date of the damage and the date of
termination, the rent payable by Tenant with respect to such Property shall be
reduced in direct proportion to which the area of the Building is unusable to
the total area or improvements leased by Tenant. Tenant's obligation to resume
the payment of rent and other charges with respect to a damaged Building shall
recommence on the earlier of sixty (60) days after completion of any required
construction of the Building or the date on which Tenant first opens for
business to the public. This right to a partial, abatement of rent shall be
Tenants sole remedy as a result of any damage Landlord shall not be required to
make any repair or restoration of injury or damage to any Equipment, any
improvement or property installed on the Premises by or at the expense of Tenant
Such items shall be replaced by Tenant at Tenant's sole cost and expense.
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14. CONDEMNATION
If all, or a partial portion of any Leased property shall be taken or
appropriated for public or quasi-public use by the right of eminent domain,
(with or without litigation), or transferred by agreement in connection with
such public or quasi-public use, either Landlord or Tenant shall have the right
at its option (exercisable within thirty (30) day of the receipt of notice of
such taking), to terminate this Lease as to such Leased Property as of the date
possession is taken by the condemning authority. A substantial portion of the
Leased Property shall be deemed to be taken or appropriated if it would
substantially interfere with the economical operation of the restaurant
Operating at the Leased Property. No award for any partial or entire taking
shall be apportioned, and except as provided in the next sentence, Tenant hereby
assigns to Landlord any award which may be made in such taking appropriation, or
condemnation, together with any and ail rights of Tenant now or her arising in
such award. Landlord has no interest, however, in any award made to Tenant for
the taking of Equipment belonging to Tenant; for the interruption of or damage
of to Tenant's business, or to Tenant's. unamortized cost of leasehold
improvements, in the event of a partial taking which does not result in a
termination of this Lease with respect to the Leased Property, rent shall be
abated from the date of the taking, in the proportion which the par of the
Building made unusable bears to the rented area of the Building immediately
prior to the taking or appropriation. Any award to the Landlord by reason of
such partial taking shall be made available for reconstruction, if the Lease is
not terminated, and shall be segregated from the Landlord's general funds No
temporary taking of any Property and/or of the Tenant's rights therein, or under
this Lease, shall terminate this Lease to such Leased Property or give Tenant
any right to any abatement of rent Any award made for such temporary taking
shall belong entirely to Tenant.
15. ASSIGNMENT AND SUBLETTING
15.1 Landlord's Consent Required. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate, or encumber this Lease or any interest therein,
nor permit such assignment by operation of law, and shall not sublet any Leased
Property or any part thereof, without the prior express written consent of the
Landlord, which consent shall not be unreasonably withheld. Landlord may
condition such consent upon any assignee or subtenant providing Landlord with
evidence of financial capability and restaurant operating experience
satisfactory to Landlord. Any attempt to do so without such consent being in
hand, shall be wholly void and shall constitute a breach of this Lease.
15.2 No Release of Tenant. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligations to be performed by
Tenant under this Lease, whether occurring before or after such assignment or
subletting. The consent by Landlord to any assignment or subletting shall not
relieve Tenant from the obligation to obtain Landlord's express written consent
to any other assignment or subletting. The acceptance of any rt by Landlord from
any person shall not be deemed to be a waiver by Landlord of any provision of
this Lease or to consent to any assignment, subletting or other transfer.
15.3 By Landlord. This Lease shall be fully assignable by Landlord or
its assigns.
16. SUBORDINATION
16.1 Subordination. At Landlord's option, this Lease shall be subject
and subordinate to all ground or underlying leases hereinafter executed
affecting any Leased Property, and to the lien of any mortgages or deeds of
trust in any amount or amounts whatsoever now or hereafter placed on or against
the land or improvements or either thereof of which the Premises are a part
without the necessity of the execution and delivery of any further instrument,
on the part of the Tenant, to effectuate such
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subordination. If any mortgagee, trustee, or ground lessor shall elect to have
this Lease prior to the lien of its mortgage deed of trust or ground lease, and
shall give written notice thereof to Tenant, this Lease shall be deemed prior to
such mortgage, deed of trust or ground lease, on the date of the recording
thereof.
16.2 Subordination Agreements. Tenant covenants and agrees to execute
and deliver upon demand, without charge, such further instruments evidencing
such subordination of this to such ground or underlying leases and to the lien
of any such mortgages or deeds of trust as may be required by Landlord.
16.3 Quiet Enjoyment. Landlord covenants and agrees with Tenant that
upon Tenant paying rent and other monetary sums due under this Lease, performing
its covenants and conditions of the Lease and upon recognizing any subsequent
lessor under a ground or underlying lease or any purchaser as Landlord, Tenant
shall and may peaceably and quietly have, hold, and enjoy the Leased Property
for the term of the Lease as against any adverse claim of Landlord or any party
claiming under Landlord subject, however, to the terms of the Lease.
16.4 Attornment. In the event any pings are brought for default under
any ground or underlying lease, or in the event of foreclosure or the exercise
of a power of sale under any mortgage or deed or trust made by Landlord
governing any Leased Property, the Tenant shall attorn to the lessor under the.
ground or underlying lease or the purchaser upon any such foreclosure, or sale,
and recognize such lessor or purchaser as the Landlord under this Lease,
provided said lessor or purchaser expressly agrees in writing to be bound by the
terms of this Lease.
16.5 Non-Disturbance. Tenant's agreement to subordinate or attorn
pursuant Section 16.1 and 16.4 is expressly contingent upon Tenant receiving a
commercially reasonable and acceptable non-disturbance agreement at no cost to
Tenant.
17. DEFAULT REMEDIES
17.1 Default. The occurrence of any of the following shall constitute a
material default and breach of this by Tent:
(a) Any failure by Tenant to pay the rent or any other
monetary sums required to be paid hereunder (where such failure continues for
ten (10) days after written notice by Landlord to Tenant);
(b) The abandonment or vacation of any Leased Property by the
Tenant or the sale by Tenant of all or a part o the Restaurant Operations,
unless pursuant to a permitted assignment or sublease pursuant to Section 15, or
pursuant to a temporary cessation of business due to casualty or remodeling;
(c) A failure by Tenant to observe aid perform any other
provision of this Lease to be observed or performed by Tenant, where such
failure continues for thirty (30) days after written notice thereof by the
Landlord to the. Tenant. however, if the nature of the default is such that the
fault cannot be reasonably cured within the thirty (30) day period, Tenant shall
not be deemed to be in default if Tenant shall within such period of time
commence such cure and thereafter diligently prosecute the same to completion;
or
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt, or of a petition for reorganization
or arrangement under any law relating to bankruptcy; the appointment or.
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a trustee or receiver to take possession of substantially all of the Tenant's
assets located at any Premises or of Tenant's interest in this Lease where
possession is not restored to Tenant within thirty (30) days; or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at any Premises or of Tenant's interest in this Lease, where such
seizure is riot discharged within thirty (30) day:
17.2 Remedies. In the event of any such material default or breach by
Tenant, Landlord may, at any time thereafter, without limiting Landlord in the
exercise of any right or remedy at law or in equity which Landlord may have by
reason of such default or breach:
(a) Maintain this Lease in full force and effect and recover
the rent and other monetary charges as they become due, without terminating
Tenant's right to possession irrespective of whether Tenant shall have abandoned
any Leased Property. In the event Landlord elects not to terminate the Lease,
Landlord shall have the right to attempt to relet all or any portion of any
Leased Property at such rent and upon such conditions and for such a term, and
to do all acts necessary to maintain or preserve any Leased property as landlord
deems reasonable and necessary without electing to terminate the Lease,
including removal of all persons and property from each Leased Property:
(b) Terminate Tenant's right to possession of one or more
(including all) of all Leased Property by any lawful means in which case this
Lease shall terminate with respect to such Leased Property (collectively, the
"Terminated Leased Property") and Tenant shall immediately surrender possession
of the Terminated Property to the Landlord. In such event Landlord shall be
entitled to recover possession of the Terminated Leased Property from Tenant and
those claiming though or under Tenant, and Landlord may continue the Restaurant
Operations itself or through an affiliate, and Tenant hereby assigns to Landlord
its interest in the following as security for Tenant's obligation hereunder:
Tenant's interest in the Fresh 'N Lite tradename and in any liquor license of
Tenant. Such termination of this Lease and repossession of the Terminated Leased
Property shall be without prejudice to any remedies which Landlord might
otherwise have for arrears of rent or for a prior breach of the provisions of
this Lease. In case of such termination, Tenant shall indemnify Landlord against
all cost and expenses and loss of rent (loss of rent for the Terminated Leased
Property all be determined in accordance with Items of expense for which Tenant
shall indemnify Landlord shall include the costs and expenses incurred in
collecting amounts due from Tenant under this (including attorneys' fees,
litigation expenses and the like); the damages incurred by Landlord by reason of
Tenant's default, including, the cost of recovering possession of the Terminated
Premises, expenses of reletting including necessary repairs of the Leased
Property; and all Landlord's other reasonable expenditure approximately caused
by the termination. All sums due in respect of the foregoing shall be due and
payable immediately upon notice from Landlord that a cost or expense has ben
incurred without of this Lease in the event proceedings are brought under the
Bankruptcy Code, including proceedings brought by Landlord which relate it any
way to this Lease including without limitation, proceedings for the termination,
assumption or assignment thereof, or proceedings to secure adequate protection
for Landlord or proceedings involving objections to the allowance of Landlord's
claim, then Landlord shall paid, in addition to any wd a!] amounts due Landlord
pursuant to the terms of this such other amount as shall be sufficient to cover
all costs and expenses incurred by Landlord with respect to the proceeding,
which costs and expenses shall include the reasonable compensation, costs,
expenses, disbursements and advances of Landlord its agents and attorneys.
Landlord my elect by written notice to Tenant within 60 days following
such termination to be indemnified for loss of rent by a lump sum payment
representing the difference between the amount of rent which would have been
paid in accordance with this Lease for the Terminated Leased Property for the
remainder of the Lease term (using the Base Kent which would have been paid ii'
accordance with this Lease plus all taxes, insurance and other expenses required
to be paid by Tenant hereunder) and the aggregate fair market rent of the
Terminated Leased Property for the remainder of the Lease term,
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estimated as of the date of the termination, both of which amounts shall be
discounted using a discount rate equal to Treasury Securities with maturity date
approximately equal to the remaining term of the Lease.
Should Landlord fail to make the election provided for above, Tenant
shall indemnify Landlord for the. loss of rent by a payment at the end of each
month during the Terminating Lease term representing the difference between the
rent which would have been paid in accordance with this Lease and the rent
actually received by Landlord with respect to the Premises (using the Base Rent
which would have been paid in accordance with this plus all taxes, insurance and
other expenses required to paid by Tenant hereunder). Without any previous
notice or demand separate actions may be maintained by Landlord against Tenant
from time to time to rover any damages which at the commencement of any action,
have then or theretofore: become due and payable to Landlord under this Article
without waiting until the end of the original term of this Lease.
In the event that this Lease shall be terminated as hereinabove
provided or by summary proceedings or otherwise, Landlord may at any time and
from time to time relet the Terminated Leased Property in whole or in part
either in its own name or as agent of Tenant for any period equal to or greater
or less than the remainder of the then current term of this Lease for any rental
which it may deem reasonable to any Tenant it may deem suitable and satisfactory
and for any use and purpose which it may deem appropriate. Upon each reletting
all rental received by Landlord from such reletting shall be applied first to
the payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting and
of such alterations and repairs as are necessary for the reletting; third to the
payment of rent due and unpaid hereunder; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may become due and
payable hereunder. Upon a reletting of the Terminated Leased Property, Landlord
shall not in any event be required to pay Tenant any surplus of any sums
received by the Landlord in excess of the rent payable in accordance with this
Lease. Unpaid installments of rent or other monies due shall bear interest from
the date due at the rate of twelve percent (12.00%) per annum.
17.3 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering any Leased Property.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
five percent (5.00%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the cost Landlord will
incur by reason of late payment by Tenant
17.4 Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than ten (10) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises, whose name and address shall have been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligation, provided,
however, that if the nature of Landlord's obligation is such that more than ten
(10) days are required for performance, then Landlord shall not be in default if
Landlord commences performing within such ten (10) day period and thereafter
diligently prosecutes same to completion. Tenant agrees that any such mortgagee
or deed of trust holder shall have the right to cure such default on behalf of
Landlord within ten (10) calendar days after receipt of such notice. Tenant
further agrees not to invoke any of its remedies under this Lease until said ten
(10) days have elapsed.
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18. MISCELLANEOUS
18.1 Estoppel Certificate.
(a) Tenant shall at any time upon not less than twenty (20)
days prior written notice from Landlord, execute, and deliver to Landlord a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect), and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of any Leased Property.
(b) Tenant's failure to deliver such statement within such
time shall be conclusive upon Tenant (i) that this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not more
than one month's rent has been paid in advance.
18.2 Transfer of Landlord's Interest. In the event of a bona fide sale
or conveyance by Landlord of Landlord's interest in any Leased Property or in
any other property in which any Premises may be a part: other than a transfer
for security purposes only, if Landlord is not in default under any provision of
this Landlord shall be relieved from and after the date specified in any such
notice of transfer of all obligations and liabilities accruing thereafter on the
part of the Landlord with respect to the transferred Leased Property, provided
that any funds in the hands of Landlord at the time of transfer in which Tenant
has an interest, shall be delivered to the successor of the Landlord and
provided Landlord's assignee assumes all such obligations. This shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee provided all Landlord's obligations hereunder are assumed in writing by
the transferee.
18.3 Captions; Attachment; Defined Terms.
(a) Captions of the paragraphs of this Lease are for
convenience only and shall not be deemed to be relevant in resolving any
questions of interpretation of any section of this Lease.
(b) Exhibits attached hereto, and addendums and schedules
initialed by the parties, are deemed by attachment to constitute part of this
Lease and are incorporated herein.
18.4 Entire Agreement. This instrument along with any exhibits and
attachments hereto constitutes the entire agreement between Landlord and Tenant
relative to the Leased Property. This agreement and the exhibits and attachments
may be altered, amended, or revoked only by an instrument in writing signed by
both Landlord and Tenant Landlord and Tenant hereby agree that all prior or
contemporaneous oral agreements between and among themselves and their agents or
representatives relating to the leasing of any Property are merged in or revoked
by this agreement.
18.5 Severability. The invalidity of any provision of this Lease, as
determined by a Court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
18.6 Time; Joint and Several Liability. Time is of the essence of
this Lease in each and every provision hereof. All the terms covenants, and
conditions contained in this Lease to be performed by either
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party, if such party shall consist of more than one person or organization,
shall be deemed to be joint and several, and all rights and remedies of the
parties shall be cumulative and non-exclusive of any other remedy at law or in
equity.
18.7 Waiver. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to render necessary the obtaining of Landlord's
express written consent to or approval of any subsequent act by the Tenant. The
acceptance of rent hereunder by Landlord shall not be a waiver of any succeeding
breach by Tenant of any provision hereof, other than the failure of Tenant to
pay the particular rent so accepted, regardless of Landlord's knowledge of such
succeeding breach at the time of acceptance of such rent.
18.8 Surrender of Premise. The voluntary or other surrender of this
Lease by the Tenant, or mutual cancellation thereof shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to him
or any or all such subleases or subtenancies.
18.9 Holding Over. If Tenant remains in possession of all or any part
of any Leased Property after the expiration of the term of this Lease, with or
without the express or implied consent of the Landlord, such tenancy shall be
from month to month only, and not a renewal of this Lease or an extension for
any further term. In such case, rent and other monetary sums due hereunder shall
be payable in the amount and at the time specified in this Lease and such
month-to-month tenancy shall be subject to every other term, covenant, and
agreement contained herein.
18.10 Signs.
(a) Tenant shall have the right to erect such signs as it
shall elect, all in accordance with legal requirements.
(b) Any such signs described above shall be removed at the
expiration or earlier termination of the Lease at Tenant's expense and Tenant
shall repair any damage to any Leased Property resulting from such removal. If
Tenant fails to do so, Landlord may cause such removal and repair on Tenant's
behalf at Tenant's experience.
18.11 Reasonable Consent. Except as limited elsewhere in this Lease,
wherever in this Lease Landlord and/or Tenant is required to give its/his
consent or approval to any action on the part of the other, such consent or
approval shall not be unreasonably withheld or delayed. In the event of failure
to give any such consent, the other party shall be entitled to specific
performance of law and shall have such other remedies as are reserved to it
under this Lease, but in no event shall Landlord or Tenant be responsible in
monetary damages for failure to give consent unless consent is withheld
maliciously or in bad faith.
18.12 Interest on Past Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
twelve percent (12.00%) per annum from the due date. Payment of such interest
shall not excuse or cure any default by Tenant under this Lease. Payment of such
interest is in addition to the late charge specified in section 17.3 of this
Lease.
18.13 Recording. Tenant shall not record this Lease without Landlord's
prior express written consent. Landlord and Tenant shall, at the request of
either and at Tenant's expense, execute and record a short form or memo of
Lease.
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18.14 Costs of Suit.
(a) If Tenant or Landlord shall bring any action for any
relief against the other, declaratory or otherwise arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of any
Leased Property, the prevailing party shall be entitled to an award of its
reasonable attorneys' fees and costs. Such fees and costs shall include those
fees and costs incurred at trial, on appeal, or in any bankruptcy proceeding.
(b) Should Landlord, without fault on Landlord's part, be made
a party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using any Leased Property
by license of Tenant, or for the foreclosure of any lien for labor, material
furnished to or for Tenant or any such other person or otherwise arising out of
or resulting from any act or transaction of Tenant, or of any such person,
Tenant covenants to defend, indemnify, and hold Landlord harmless from any
judgement rendered against Landlord or any Leased Property, or any part thereof,
and all costs and expenses, including reasonable attorney fees, incurred by
Landlord in or in connection with such litigation.
18.15 Binding Effect; Choice of Law. The parties hereto agree that all
provisions hereof are to be construed as both covenants, and conditions as
though the words importing such covenants and conditions were used in each
separate paragraph hereof. Subject to any provisions hereof restricting
assignment or subletting by the Tenant, all of the provisions hereof shall bind
and inure to the benefit of the parties hereto, their respective heirs, legal
representative, assigns, and successors. This shall be governed by the laws of
the State of Texas.
18.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
LEASE OR ANY EXHIBIT HERETO OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR
STATEMENTS (WHETHER VERBAL OR WRITTEN) MADE BY THE PARTIES HEREIN.
18.17 Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represent and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms.
18.18 Representation of Landlord. Landlord represents and warrants that
(i) it holds fee or leasehold title to the Leased Property subject to the Lease
and has full power and authority to enter into this Lease; and (ii) each
individual executing this Lease on behalf of Landlord represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of the
corporate general partner of Landlord in accordance with a duly adopted
resolution of the Board of Directors of said corporation, and that this Lease is
binding upon Landlord in accordance with its terms.
18.19 Triple Net Lease. It is the intent of Landlord and Tenant that
this Lease shall be an absolute triple-net lease, and that all costs, expenses
or charges with respect to the Leased Property are the responsibility of Tenant.
18.20 Notices. Any notice provided or permitted to be given under this
Lease must be in writing and may be served by depositing same in the United
States mail, addressed to the party to be notified,
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postage prepaid and certified, with return receipt requested, by delivering the
same in person to such party, or by delivering the same by confirmed facsimile.
Notice given in accord herewith shall be effective upon the earlier of receipt
at the address of the addressee or on the second (2nd) day following deposit of
same in the United States mail as provided for herein, regardless of whether
same is actually received. For purposes of notice, the addresses of the partes
shall be as follows:
If to Tenant: Curtis A. Swanson, Sr.
Fresh 'N Lite
2804 Juson Road, Second Floor
Longview, Texas 75605
Telephone No.
Facsimile No.
If to Landlord: U. S. Restaurant Properties Operating L. P.
5310 Harvest Hill Road, Suite 270, Lock Box 168
Dallas, Texas 73230
Attn: David Pettijohn
Telephone No. 214-387-1487
Facsimile No. 214-490-9119
Either party may change its address for notice by giving ten (10) days prior
written notice thereof to the other party.
18.21 Equipment Purchase. Landlord shall have the option to purchase
the Equipment upon any termination of this Lease, exercisable by delivery of
written notice to Tenant on or before five (5) days prior to any schedule
termination date and at any time before five (5) days after any termination
pursuant to Section 17. The purchase price shall be the lesser of (i) $50,000.00
or (ii) the appraised value of the Equipment, payable in cash at the closing of
the sale. The appraised value of the Equipment shall be established by three
qualified appraisers, one of whom shall be selected by Landlord, one of whom
shall be selected by the Tenant, and the third shall be selected by the mutual
consent of the two (2) appraisers so selected. The purchase price shall be the
average of the two appraisals which are closest to each other in value. The
appraisers shall be instructed to appraise the value of the equipment if sold at
public auction, and the appraisals shall be delivered to Landlord and Tenant
within ten (10) days after submission to the appraisers. For purposes hereof, a
qualified appraiser shall mean a person with at least five (5) years experience
in the purchase, sale or appraisal of restaurant equipment that is not employed
or affiliated with Landlord, Tenant or their affiliates. The reasonable costs of
such appraisal shall be paid by Landlord.
18.22 Limitation of Landlord's Liability. In no event shall Landlord
have any liability on account of its obligations under this Lease exceeding the
net equity value of its interest in the Leased Premises.
LANDLORD:
---------
USRP (MIDON), LLC
By:
-----------------------------
Its:
-----------------------------
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TENANT:
------
FRESH 'N LITE, INC.
By:
----------------------------
Its:
----------------------------
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared , of USRP (MIDON), LLC, a Texas limited
liability company, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, in the capacity
therein stated, and as the act and deed of said limited liability company.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of , 1997.
-------- ----
[SEAL] -------------------------------------
Notary Public, State of Texas
STATE OF ss.
ss.
COUNTY OF ss.
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared ---------------------, of FRESH 'N LITE,
INC., a ------------------------corporation,known to me to be the person and
officer whose name is subscribed to in the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as the act and deed of
said corporation.
GIVEN UNDER MY AND SEAL OF OFFICE this day of , 1997.
---- ----------
-------------------------
[SEAL] Notary Public, State of
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EXHIBIT A
[PREMISES DESCRIPTION]
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EXHIBIT C
[ACKNOWLEDGMENT OF COMMENCEMENT DATE]
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EXHIBIT A-1
[TENANT'S WORK]
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EXHIBIT D
[RENT SCHEDULE]
1. Payment of Base Rent. During the term of this Lease, and subject to
adjustment as provided in Paragraph 3 below, Tenant covenants and agrees to pay
to Landlord minimum rental (the "Base Rent") for the Leased Property as
determined in accordance with Paragraph 2 below. The Annual Base Rent shall be
payable in equal monthly installments and shall be payable in advance. One such
monthly payment shall be due and payable on or before the Rent Commencement Date
hereof and each subsequent monthly installment shall be due and payable on or
before the first (1st) day of each succeeding calendar month during the initial
term and any duly exercised renewal term hereof. Rent for any fractional month
or year at the beginning or the end of the term hereof shall be prorated and
payable in advance. All payments of Base Rent shall be made to the Landlord as
the same shall become due, without demand, reduction or set-off of any kind, in
lawful money of the United States of America at the address of Landlord as
specified in the Lease, or to such other party or at such other place as
hereinafter may be designated by Landlord by written notice to the Tenant at
least ten days prior to the next ensuing monthly rental payment date.
2. Base Rent. Prior to the disbursement of the Construction Costs to
Tenant, the annual Base Rent for the Leased Property shall equal $56,005.00. The
Base Rent shall be increased on the first day of Lease Year four (4) and
thereafter, on each third anniversary thereof throughout the term of this Lease
(including renewal periods), by an amount equal to six percent (6.00%) of the
Base Rent for the immediately preceding month.
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EXHIBIT 6.4CE
GROUND LEASE
THIS LEASE ("Lease") is made and entered into this 21st day of
February, 1995 by and between Peter D. Fonberg Investments (hereinafter called
"Landlord") and Fresh'n Lite, Inc. (hereinafter called "Tenant").
1. DEMISED PREMISES: Landlord, for and in consideration of the Covenants
hereinafter contained and made on the part of the Tenant, does hereby demise and
lease unto Tenant, and Tenant does hereby lease from Landlord, the parcel of
land ("Land") which is located in Dallas, County of Dallas, State of Texas,
containing approximately 33,810 square feet, not including roads or public right
of ways, being more particularly described in Exhibit A attached hereto and made
a part hereof, together with and subject to Landlord's easement rights and
appurtenances thereto, together with and subject to the rights of ingress,
egress and parking over, across and upon the Land for the entire term of this
lease, and all improvements now located thereon, and all easements and
appurtenances in Landlord's adjoining and adjacent land, highways, roads,
streets, lanes, whether public or private, reasonably required for the
installation, maintenance, operation and service of sewers, war gas, drainage,
electricity and other utilities and for drive-ways and approaches to and from
abutting highways, streets, and roads for the use and benefit of the above
described parcel of real estate including the improvements to be erected thereon
(the Land, together with the improvements to be erected thereon are sometimes
referred to herein collectively as the "Premises"). Tenant acknowledges that it
is leasing the Land subject to all easements (whether express or implied),
including those of record, for rights of ingress, egress and parking over,
across and upon the Land for the benefit of all adjoining landowners.
2. LEASE TERM:
a. Primary Term. The term of this Lease shall commence on the date of
last execution hereof and end twenty (20) years from the date upon which Tenant
is obligated to pay its first payment of Base Annual Rental described in
paragraph 3 below. When the term hereof is ascertainable and specifically fixed,
or otherwise agreed to by Landlord and Tenant, Landlord and Tenant shall enter
into a supplement agreement, which shall specif the actual date for the
expiration of the original term of this Lease and for the commencement of
accrual of rent payable hereunder by Tenant.
b. Option to Extend. Landlord does hereby grant to Tenant the right,
privilege and option to extend this lease for a period of five (5) years from
the date of expiration hereof, upon the same terms and conditions as herein
contained, except rental as herein contained, upon notice in writing to Landlord
of Tenant's intention to exercise said option, given at least six (6) months
prior to the expiration of the term hereof. Ir the event that Tenant shall have
exercised said option to extend the term of this Lease, Landlord does hereby
grant to Tenant the right, privilege and option again to extend this Lease for
one (1) successive period of five (5) years, upon the same terms and conditions
except rental as herein contained, upon notice to Landlord of Tenant's intention
to exercise each said option, given at least six (6) months prior to the
expiration of the preceding extension of the term hereof.
3. RENTAL: Tenant agrees to pay as rental for the use and occupancy of the
Premises, at the times and in the manner hereinafter provided, the following
sums of money.
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"Base Annual Rental": Tenant, in consideration of said demise, does
hereby Covenant and agree with Landlord to pay to Landlord annualized rents (but
payable monthly) as follows:
Term Base Annual Rental Monthly Rental
- ---- ------------------ --------------
Years 1-5 $51,000 $4,250
Years 6-10 $55,000 $4,583
Years 11-15 $62,000 $5,167
Years 16-20 $65,000 $5,417
First Renewal Term $69,000 $5,750
Second Renewal Term $73,000 $6,083
in advance, without notice or invoice from Landlord, upon tile first day of
every month during the term hereof commencing upon opening of the Fresh'n Lite
Restaurant (the "Restaurant") or two hundred and ten (210) days the date of this
Lease, whichever is sooner and ending upon termination of this Lease, whichever
is sooner and ending upon termination of this Lease. In the event such rental
shall be determined to commence on a day other than the first day of a month
then the Base Annual Rental for the period from such commencement date until the
first day of the month next following shall be prorated accordingly. Tenant's
duty and obligations to pay the Base Annual Rental is a separate and independent
covenant of Tenant separate and apart from and not contingent upon Landlord's
performance or failure to perform its obligations under this Lease and Tenant's
remaining obligations under this Lease.
All sums of money due under the terms of this Lease including Base
Annual Rental shall be paid or mailed to:
Peter D. Fonberg Investments
5452 Glen Lakes, Suite #203
Dallas, Texas 75231
or to such other payee or address as Landlord may designate, in writing, to
Tenant.
4. COVENANTS AND REPRESENTATIONS: Landlord hereby represents that all water and
gas mains, electric power lines, sanitary and storm sewers (the "Utilities") are
located at the property line, in the public right-of-way, of the demised
premises and are available and adequate for Tenant's intended use In the event
Tenant determines that the Utilities are unacceptable for its needs, Tenant,
within sixty (60) days of the last execution hereof, may (i) elect, at Tenant's
expense, to extend the Utilities to meet its needs, or (ii) deliver written
notice to Landlord of the unacceptability of such Utilities and the requirements
necessary to make such Utilities acceptable and if Landlord fails to remedy the
problem within thirty (30) days of receipt of such notice, Tenant may terminate
this Lease. In the event the Utilities are acceptable or Tenant elects to make
them acceptable, Tenant agrees to extend the Utilities to the western boundary
of the Premises.
5. CONSTRUCTION PERMITS - TERMINATION:
a. On or before ninety (90) days from the date hereof, Tenant shall
make a determination that it can obtain such licenses, permits and other
administrative approvals (hereinafter collectively called "Permits") as may be
necessary to Construct and operate a restaurant together with signage acceptable
to Tenant (provided such signage meets the requirements of the City sign
ordinance and the construction of any pylon or billboard sign will not impede
the right of Landlord to signage on the remainder of its property abutting the
Premises), including Tenant's identification pole sign, in accordance with
Tenant's plans and specifications, as such plans and specifications may be
hereafter changed or modified by Tenant with Landlord's prior written consent,
which consent will not be unreasonably withheld.
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b. Unless Tenant delivers written notice to Landlord within ninety (90)
days from tile date hereof that Tenant is unable to obtain the Permits, Tenant
shall be deemed to have accepted the Premises and this Term and be presumed to
have obtained the Permits. However, if within such ninety (90) day period,
Tenant has delivered written notice to Landlord that Tenant has instituted legal
proceedings or is exhausting administrative remedies in order to procure the
necessary Permits, Tenant shall have an additional thirty (30) days within which
to satisfy itself that it may obtain the Permits (the "Extension Period").
Tenant agrees to apply for permits without unreasonable delay upon execution
hereof. Provided Tenant has diligently pursued the issuance of building permits
from the City of Dallas, if, at the expiration of the Extension Period, Tenant
has not satisfied itself that it can obtain all necessary Permits, Tenant shall
have the right to terminate this Lease without liability.
6. TAXES:
a. Landlord represents and warrants that all taxes on the Land, except
current taxes not delinquent, have been paid in full. Landlord, after receipt of
any tax notice or bill on the Premises, shall promptly furnish Tenant with a
copy of such document.
b. Tenant covenants and agrees to pay, before they become delinquent,
all ad valorem real property taxes and special assessment affecting the Premises
which accrue and are payable for the period commencing (120) days from the date
of this Lease. Tenant acknowledges that it will receive from Landlord a combined
tax statement representing taxes for the Premises and Landlord's adjoining land,
and Tenant agrees to pay its proportionate share of such taxes as determined on
a pro-rata per square foot basis.
c. If Tenant desires to contest any ad valorem real property taxes or
assessments or the validity of any tax and gives Landlord written notice of this
intention, then Tenant may contest the assessment or tax without being in
default hereunder; provided, however, that Tenant shall post a bond with
Landlord or otherwise provide for the payment of such taxes or assessments
reasonably acceptable to Landlord, so that Landlord may insure the payment of
such taxes or assessments if Tenant's contests of such tax or assessment shall
fail. Landlord agrees to cooperate with any such effort by Tenant. Tenant agrees
to indemnify Landlord and hold Landlord harmless from all costs, expenses and
damages whatsoever arising out of any such contest by Tenant.
7. LIENS AND ENCUMBRANCES: The Landlord and Tenant covenant each with the other
not to permit any lien to be filed against the Premises on account of
non-payment or dispute with respect to labor or materials furnished in
connection with construction or any subsequent repairs, modifications or
additions thereto nor shall the parties permit any judgement, lien or attachment
to lie against the Premises for any reason. Should any lien of any nature be
filled against the Premises the party from whose fault or alleged debt such lien
arises shall within thirty (30) days cause such lien to be removed by
substitution of collateral or otherwise.
In the event that Tenant, any subtenants or assigns acquire personal
property to be installed and used upon the premises subject to a conditional
sales contract, chattel mortgage or other security agreement, Landlord agrees to
execute and deliver to any such secured creditor a waiver of any lien Landlord
may have upon such personal property. Such waiver will be on a form reasonably
acceptable to Landlord authorizing the secured creditor to enter upon the
Premises and remove such personal property in the event of default under the
terms of the security agreement. Tenant agrees to indemnify defend, and hold
Landlord harmless from and against any claims, causes of action, damages,
expenses (including
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attorneys' fees) and loss incident to, resulting from, or in any way arising out
of Tenant's failure to keep the Premises free from liens and encumbrances
described in this Paragraph 7.
Any memo of lease or construction contract shall contain a notice no
Contractor, materialman or laborer may file any liens impacting the fee title to
the property. Any such lien shall on the face of such claim shall be asserted
solely against the leasehold interest of the Tenant.
8. INSURANCE:
a. Tenant covenants and agrees at its own expense to insure and keep
insured the building or buildings constructed by Tenant thereon against loss or
damage by fire and by extended coverage for not less than one hundred percent
(100%) of insurable value in responsible insurance companies licensed in the
state in which the Premises are located. Subject to the terms of paragraph 17
hereof, such insurance to be made payable in case of loss to Tenant and Landlord
as named insured, with the insurer agreeing to give Landlord fifteen (15) days
notice of cancellation. In the event that Tenant shall mortgage its leasehold
estate, the mortgagee shall also be named as an additional insured.
b. Tenant shall also maintain and keep in force for the mutual benefit
of Landlord and Tenant general public liability insurance against claims for
personal injury, death, or property damage occurring in, on or about the
Premises or sidewalks or premises adjacent to the Premises to afford protection
to the limit of not less than $1,000,000.00 in respect to injury or death of a
single person and to the limit of not less than $2,000,000.00 in respect to any
one accident and to the limit of $500,000.00 in respect to property damage.
c. In the event that either party shall at any time deem the limits or
cost of such insurance to be excessive or insufficient, the proper and
reasonable limits for such insurance to be maintained in force shall be
determined by arbitration in accordance with the Rules of the American
Arbitration Association.
d. Each party hereto waives any and every claim which arises or may
arise in its favor and against the other party hereto during the term of this
Lease for any and all loss of, or damage to, any of its property which loss or
damages is insured. Because the above mutual waiver shall preclude the
assignment of any claim by way of subrogation (or otherwise) to any insurance
company (or any other person), each party agrees to immediately give to each
insurance company that has issued policies relating to the Property written
notice of the terms of the mutual waiver, and to have such insurance policies
properly endorsed, if necessary, to prevent the invalidation of such insurance
coverages by reason of such waivers.
9. USE AND RESTRICTION:
a. "Use" means the operation of a healthier choice restaurant on the
Premises. Tenant shall comply with and abide by all applicable governmental
laws, ordinances and regulations in its use of the Premises.
b. Provided that Tenant has performed all of its covenants and
obligations under this Lease arid is not otherwise in default hereunder and
provided that Landlord is continuing to operate as a Fresh'n Light under its
original concept, Landlord agrees during the term of this Lease and any options
that Landlord will refrain from leasing land owned by Landlord adjacent to the
Premises to (i) any restaurant whose primary gross sales from this restaurant
(being defined as 80% or more) are delicatessen foods; (ii) Eureka; (iii) Fresh
Choice; and (iv) Bless Your Heart. If Tenant ceases to operate as a Fresh 'n
Light
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under its orig concept or if Tenant subleases the Premises to another party,
then the provisions of this Paragraph 9b shall be null, void, and of no further
force or effect.
10. LEASE IMPROVEMENTS:
a. Landlord shall have the right to approve Tenant's plans and
specifications for Lease improvements and any subsequent alterations to the
Premises, which approval shall not be unreasonably withheld. If Landlord fails
to respond to Tenant's written request for approval within twenty (20) days
after receipt of Tenant's plans, Landlord's approval shall be deemed granted.
b. Tenant shall have the right to change its exterior signage provided
such signage does not impact the visibility of other signage on Landlord's
adjacent property and complies with the sign ordinances of the City of Dallas
and make interior nonstructural alterations and improvements to the Premises
without the consent of Landlord. Tenant shall have the right to remove any such
nonstructural alterations at any time during the term of this Lease, or any
extension or renewal thereof provided Tenant repairs all damage to the Premises
as a result of such removal within a reasonable time.
c. Throughout the term of this Lease, Tenant shall, at its sole cost
and expense, provide security for the Premises and repair and maintain the
Premises (including parking area and drives) in first class condition and repair
and with appropriate lighting to maintain a safe and secure environment in
accordance with all applicable laws, rules, ordinances, orders, and regulations
of any federal, state, county, municipal, and other governmental entities having
jurisdiction over the Premises, and all applicable rules, orders, and
regulations of the insurance underwriting board having jurisdiction over the
insurance companies insuring all or any part of the Premises. Tenant shall, at
its sole cost and expense, diligently and promptly make or cause to be made all
necessary repairs and replacements to the Premises to maintain or comply with
the foregoing sentence. Landlord shall not be required to furnish any services
or facilities or make any repairs to the Premises. Without diminishing the
foregoing obligations of Tenant, should Tenant fail to make any necessary
repairs within thirty (30) days after notification by Landlord of such failure,
Landlord may, but shall in no event be required to, make such repairs for
Tenant's benefit and the expense thereof shall constitute additional rent which
shall be immediately paid by Tenant to Landlord upon demand. In addition,
Landlord shall have any and all other remedies provided hereunder for a default
by Tenant should Tenant fail to comply with the foregoing.
d. Tenant shall be responsible for, and shall bear all costs and
expenses associated with, any and all alterations to the Premises which may be
required by tile Americans With Disabilities Act of 1990 (the "ADA"), and for
the accommodation of disabled individuals who may be employed from time to time
by Tenant, or any disabled customers, clients, guests, or invitees or
sublessees. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all liability incurred arising from the failure of the Premises
to conform with the ADA, including the cost of making any alterations,
renovations or accommodations required by the ADA or any government enforcement
agency, or any courts, and any and all fines, civil penalties, and damages
awarded against Landlord resulting from the violation of the ADA, and all
reasonable legal expenses and court costs incurred in defending claims made
under the ADA, including without limitation reasonable consultants and
attorneys' fees, expenses and court costs. The terms and provisions of this
paragraph shall survive the termination or expiration this Lease.
e. Notwithstanding any provision of this Lease to the contrary,
Landlord and Tenant agree that Tenant shall have performed substantial
completion of construction of the Restaurant in conformity with the plans and
specifications approved by Landlord within nine (9) months from the date of this
Lease. Tenant's failure to comply with this obligation shall constitute a
default by Tenant of its covenants and
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obligations under this Lease and will entitle Landlord to its remedies in the
event of default as provided in this Lease and under applicable law.
11. ASSIGNMENT AND SUBLETTING: Tenant may, after obtaining the prior written
consent of Landlord, sublet or assign this Lease or its rights hereunder to any
person, firm or corporation having experience in the operation of Tenant's type
of business as described in Paragraph 9, which consent will not be unreasonably
withheld. In such event Tenant shall remain liable for the payment of all rent
and other charges required to be paid hereunder and for the performance of all
terms, covenants and conditions herein undertaken by Tenant. Without limitation,
it is agreed that Tenant shall have the right to mortgage or otherwise encumber
its leasehold interest.
12. MORTGAGING OF LEASEHOLD ESTATE: In the event that Tenant shall mortgage its
leasehold estate and the mortgagee or holders of the indebtedness secured by the
leasehold mortgage or trust deed shall notify Landlord in the manner hereinafter
provided for the giving of notice of the execution of such mortgage or trust
deed and name the place for service of notice upon such mortgage or holder of
indebtedness, then, in such event, Landlord hereby agrees for the benefit of
such mortgagees or holders of indebtedness from time to time:
a. That Landlord will give to any such mortgagee or holder of
indebtedness simultaneously with service on Tenant a duplicate of any and all
notices or demands given by Landlord to Tenant from time to time asserting a
breach by Tenant of any of its obligations under this Lease.
b. That such mortgagee or holder of indebtedness shall have the
privilege of performing any of Tenant's covenants hereunder or of curing any
default by Tenant hereunder or of exercising any election, option or privilege
conferred upon Tenant by the terms of this Lease.
c. That, except for the right to terminate contained in Paragraph 5 of
this Lease, no right, privilege or option to cancel or terminate this Lease
available to Tenant shall be deemed to have been exercised effectively unless
joined in by any such mortgagee or holder of the indebtedness.
13. DEFAULT:
a. The following shall be events of default hereunder: (1) Tenant fails
to pay when due any of the Base Rent or other charges provided for herein, (2)
Tenant fails to promptly keep and perform any other covenant in this Lease;
provided further, however Landlord shall, prior to taking any action for such an
event of default, give Tenant notice specifying the default(s), and Tenant shall
have fifteen (15) days after receipt of said notice to correct any non-monetary
default, or (3) Tenant vacates all or a portion of the Premises. If Tenant fails
to correct said default(s) within the specified time periods, Landlord may
terminate this Lease and re-enter the Premises and take possession thereof,
re-take possession but not terminate this Lease, or exercise such other rights
and pursue such other remedies and damages against Tenant as a result of
Tenant's breach as provided by law.
b. In the event Landlord consents to an assignment or sublease of this
Lease or the Premises, and should any default occur requiring notice as
hereinbefore provided in this Article 13, Landlord agrees that it will use
reasonable efforts to furnish Tenant with a copy of such notice at the same time
that it is sent to such assignee or sublessee. In the event that such default is
not corrected by such assignee or sublessee during the specified time periods,
Tenant shall have an additional period of ten (10) days to correct such default,
and upon correction of such default, Tenant shall have the right and option to
resume actual possession of the Premises as Tenant hereunder for the unexpired
term of this Lease.
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c. Should there be any default or breach of this breach on the part of
Landlord, Tenant shall give Landlord written notice thereof, and Landlord shall
correct such breach or default within thirty (30) days after such notice. Should
Landlord fail to correct such breach or default, Tenant may pursue any legal or
equitable remedy to which it is entitled.
14. HOLDING OVER: In the event Tenant continues to occupy the Premises after the
last day of the term hereby created, or after the last day of any extension of
said Term, and the Landlord elects to accept rent thereafter, a tenancy from
month to month only shall be created (and not for any longer period) at one
hundred fifty percent (150%) of the immediately prior month's rent.
15. CONDEMNATION:
a. In the event all of the land is taken or condemned by any competent
authority, this Lease will terminate as of the earlier of the date of possession
of the Premises by the condemning authority or the date of the title transfer.
Tenant shall have the right to prosecute its claim for an award based on its
leasehold estate and the damage to its business only. In the event a substantial
portion, as defined in the immediately succeeding paragraph, of the Premises is
taken or condemned by any competent authority, Tenant shall have the right (i)
to terminate the Lease as of the earlier of the transfer of title or the date of
the taking of possession by the condemning authority, in which event any
unearned rent paid or credited will be refunded by Landlord to Tenant, or (ii)
to continue the Lease in full force and effect with a reduced fixed rental
commensurate with the reduced area and/or reduced utility of the Premises as
mutually determined in lieu of the amount of Base Rent hereinabove provided,
which reduced rental will become effective upon the earlier of the date of tide
transfer or the date of such taking. Tenant shall elect between these rights and
give notice to Landlord of its election within sixty (60) days after the date
when possession of the pertinent portion of the Premises is required by the
condemning authority. In the event less than a substantial portion of the
Premises is taken by the condemning authority, then the Base Rent shall not be
affected.
b. A "substantial portion", as used in the foregoing Subparagraph a, is
defined to be any of the following: (i) any part of the Building; (ii) fifteen
percent (15%) or more of the parking area; (iii) fifteen percent (15) or more of
the Land; (iv) loss through the taking of condemnation of direct access from the
Premises to any adjacent street or highway; or (v) a portion of land or
improvements the absence of which would have a substantial adverse impact on
Tenant's business conducted on or from the Premises.
c. If any award is made for the condemning or taking of all or any part
of the Premises during the original term of this Lease or any of the Extension
Periods, then Landlord and Tenant shall share in any award made for condemning
or taking the improvements to the extent of their interest in the Premise.
Tenant's interest shall be comprised solely of Tenant's leasehold estate and
damage to its business.
d. Termination of the Lease because of condemnation shall be without
prejudice to the rights of either Landlord or Tenant to recover from the
condemnor compensation and damages for the injury and loss sustained by them as
a result of such taking and Tenant shall have the right to make a claim against
the condemning authority solely for loss of profits or damage to its business by
the taking or condemnation.
16. COVENANT OF TITLE AND QUIET ENJOYMENT: Landlord covenants that Landlord
is well seized of and has good title to the Premises free and clear of all
liens, encumbrances and restrictions, except as may be shown by a current title
commitment for the Land. Landlord warrants and will defend
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the title thereto, and will indemnify Tenant against any damage and expense
which Tenant may suffer by reason of any lien, encumbrance, restriction or
defect in the title or description herein of the Premises. If, at any time,
Landlord's title or right to receive rent hereunder is disputed, or there is a
change of ownership of Landlord's estate by act of the parties or operation of
law, Tenant may withhold rent thereafter accruing until Tenant is furnished
proof satisfactory to it as to the party entitled thereto.
17. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS:
a. If the building on the Premises shall be damaged by fire or other
casualty prior to the last five (5) years of the original term of this Lease,
the Premises shall be restored to the same condition as prior to the damage. It
is understood and agreed that if the cost of the restoration exceeds the amount
of the insurance recovery, Tenant will pay such excess. In no event will rent
abate during any period of untenantability.
b. If the building on the Premises shall be damaged by fire or other
casualty during the last five (5) years of the original term of this Lease, or
during any option period of this Lease, to the extent of fifty percent (50%) or
more of the insurable value of the building, Tenant may, at Tenant's option, to
be evidenced by notice given to Landlord within thirty (30) days after the
occurrence of such damage or destruction, elect to terminate this Lease as of
the date of the damage or destruction and, in such event, all of the insurance
proceeds shall be paid over to the Landlord.
c. If the building on the Premises shall be damaged by fire or other
casualty during the last five (5) years of the original term of this Lease, or
during any option period of this Lease, to the extent of less than fifty percent
(50%) of the insurable value of the building, then Tenant shall be obligated to
restore the Premises to the same condition as prior to the damage. It is
understood and agreed that if the cost of the restoration exceeds the amount of
insurance recovery, Tenant will pay such excess. In no event will rent abate
during any period of untenantability.
18. TRADE FIXTURES: Landlord agrees that all trade fixtures, machinery,
equipment, furniture or other personal property of whatever kind and nature kept
or installed on the Premises by Tenant or its subtenants shall not become the
property of Landlord or a part of the realty (if not permanently affixed to the
Premises or ordinarily considered a part of the realty including but not limited
to lighting fixtures, plumbing and the HVAC system) and may be removed by Tenant
or its subtenants, in their discretion, at any time and from time to time during
the entire term of this Lease and any renewals, provided Tenant shall first and
promptly repair any damage to Premises resulting from the removal. Upon request
of Tenant or Tenant's assignees or subtenants, Landlord shall execute and
deliver any real estate consent or waiver forms submitted by any vendors,
landlords, chattel mortgagees or holders or owners of any trade fixtures,
machinery, equipment, furniture or other personal property of any kind and
description kept or installed on the Premises by any subtenant setting forth the
fact that Landlord waives, in favor of such vendor, lessor, chattel mortgagee or
any holder or owner, any lien, claim, interest or other right therein superior
to that of such vendor, landlord, chattel mortgagee, owner or holder. Landlord
shall further acknowledge that property covered by such consent to waiver forms
is personal property and is not to become a part of the realty no matter how
affixed thereto and that such property may be removed from the Premises by the
vendor, Landlord, chattel mortgagee, owner or holder at any time upon default by
the Tenant, or subtenant in the terms of such chattel mortgage or other similar
documents, free and clear of any claim or lien of Landlord, provided Tenant
shall first and promptly repair any damage to Premises resulting from the
removal.
19. NON-DISTURBANCE AND ATTORNMENT:
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a. If at the execution of this Lease there are any present mortgage(s),
Lien(s) or encumbrance(s) against the Premises, Landlord shall have the
mortgagee(s), lienholder(s) or other secured party(ies), as a further condition
precedent to the Commencement Date, execute non-disturbance agreement(s)
providing that such holder(s) will recognize Tenant's Lease of the Land and will
not disturb Tenant's quiet possession of the Land as long as Tenant is not in
default of any of the provisions of this Lease. Before Landlord shall have the
right to further encumber the Land or seek any modification or extension of
existing encumbrances, Landlord must first secure for Tenant's benefit a written
non-disturbance agreement, in the form set forth above, and accordingly, Tenant
will then execute and deliver such further instruments subjecting this Lease to
the lien of any such loan or mortgage and agreeing to attorn to said
mortgagee(s) based on their priority as shall be required by such mortgagee.
b. If Landlord defaults in making payment under any mortgage or
mortgages, or if Landlord is in breach or in default of any such mortgage or
mortgages in any respect, Tenant shall have the right and option to make all
rental payments thereafter becoming due under this Lease to the mortgagee in
lieu of Landlord, upon notice therefrom, and payments so made shall discharge
the obligation of Tenant hereunder respecting the payment of Base Rent.
20. LANDLORD'S RIGHT OF ACCESS: Landlord, its employees, agents and
representatives, shall have the right to enter upon the Premises at any time for
the purpose of making inspections or performing any work which Landlord elects
to undertake (although it shall have no obligation whatsoever to do so) made
necessary by reason of Tenant's default hereunder; provided, however, that,
excepting cases of an emergency or unless Landlord obtains the Tenant's prior
consent, Landlord shall not enter the Premises without notification to Tenant at
least twenty-four (24) hours in advance.
21. INDEMNITY: Except for the claims, rights, recovery and causes of action that
Landlord has released in Paragraph 8.c. above, Tenant shall indemnify, defend,
and hold Landlord, its employees, partners, directors, officers, agents,
invitees and contractors, from and against all claims, causes of action,
damages, losses, costs, and expenses (including attorneys' fees) resulting or
arising from or in connection with any and all injuries or death of any person
or damage to any property caused or alleged to have been caused by any acts,
omissions, or negligence of Tenant, its employees, officers, directors, agents,
customers, invitees, or guests, or any parties contracting with Tenant relating
to the Premises including, without limitation, environmental conditions caused
during the term of this Lease. The foregoing shall not apply to the gross
negligence or wilful misconduct of Landlord. This paragraph 21 shall survive the
expiration or termination of this Lease.
22. EVIDENCE OF TITLE: Within thirty (30) days from the date of last execution
of this Lease, Tenant at Tenant's expense shall apply for leasehold title
insurance from a title company acceptable to Tenant in the amount of not less
than One Hundred and Fifty Thousand and no/100 ($150,000.00) dollars, or that is
required by law, or the title insurer, effective as of the date hereof, showing
title in Landlord. If such report discloses any conditions, restrictions, liens,
encumbrances, easements or covenants not previously disclosed to Tenant and
which, in Tenant's reasonable opinion, would affect Tenant's use and enjoyment
of the Premises, and appurtenant easements, Landlord shall have sixty (60) days
from the date of issuance of such title report, binder or commitment to cure
such defects and to furnish a title report, binder or commitment showing such
defects cured or removed. If such defects in title are not so cured within sixty
(60) days, Tenant may, at its option, give written notice to Landlord within
five (5) days thereafter terminating this Lease. In the event this Lease is so
terminated, all monies, deposits and instruments shall be returned to the
respective parties. Immediately upon final execution of the Lease, Landlord
shall deliver to Tenant's title company, if so required, all prior title
evidence in Landlord's possession.
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23. BORING AND PERCOLATION CONTINGENCIES: Tenant shall have the right, within
thirty (30) days from the date hereof, to perform such boring and percolation
tests as may be required to determine the physical characteristics, including
the water table of substrata, of the Premises. In the event any such report
indicates, in Tenant's sole judgment, that the Premises are unsatisfactory for
Tenant's intended use, Tenant may, at its option, declare this Lease to be null
and void and of no further force and effect. Tenant agrees to keep the results
of such surveys, studies, tests, or borings confidential and, in the event
Tenant terminates this Agreement based on such results, Tenant will deliver the
originals and all copies of such results to Landlord. Tenant covenants and
agrees that the Premises shall not be damaged or impaired in any way as a result
of such activities on the Premises, and hereby agrees to indemnify, defend, and
hold Seller harmless from and against any and all claims, causes of action,
damages and expenses (including attorneys' fees) incident to, resulting from, or
in any way arising out of Tenant's, or Tenant's agents' or representatives',
presence in, on, or about the Premises, or out of any such test, inspection, or
study conducted by Tenant on the Premises without regard to the underlying cause
or causes of such claims, causes of action, damages or expenses. Such indemnity
shall survive the term of this Lease or any termination hereof.
24. SURVEY: Tenant may order a current certified topographical survey by a
licensed surveyor within thirty (30) days from the last execution of this Lease
If said survey discloses unsuitable or interfering easements or encroachments or
that the location, area, dimensions and shape of the demised premises are not as
represented by Landlord, then Tenant shall have the right to terminate this
Lease, by written notice to Landlord within such thirty (30) day period, and
declare same null and void and of no force and effect and all monies, deposits
and instruments shall be returned to the respective parties.
25. ENVIRONMENTAL MATTERS: Tenant shall have the right to conduct an
environmental audit of the Premises, at its cost, within ninety (90) days from
the date hereof. Such audit shall be conducted pursuant to standard quality
control assurance procedures reasonably satisfactory to Landlord and Tenant.
Tenant shall determine within said ninety (90) day period whether the audit
discloses condition(s) which, in Tenant's reasonable opinion, make the Premises
unsuitable for its purposes. If Tenant fails to advise Landlord that it is
dissatisfied with the condition of the Premises within such ninety (90) day
period, Tenant shall be deemed to have approved the condition of the Premises.
Notwithstanding anything stated elsewhere in this Lease, if Tenant is not
satisfied with the condition of the Premises and so timely notifies Landlord
within said ninety (90) day period, this Lease shall terminate and neither party
shall have any further liability or responsibility thereunder and, in such
event, Landlord shall return to Tenant all sums deposited by Tenant with
Landlord pursuant to the terms of this Lease. Tenant hereby indemnifies,
defends, and holds Landlord harmless from any damages, costs, losses, claims, or
causes of action relating to or in any way arising out of such environmental
audits allowed by this paragraph. Tenant hereby agrees that no activity will be
conducted on the Premises that will produce any environmentally hazardous or
sensitive substances or which violate any statute of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment ("Hazardous Substance"). Tenant shall be responsible for obtaining
any required permits in paying any fees and providing any testing required by
any governmental agency and the Premises will not be used in any manner for the
storage of any Hazardous Substances except for the storage of such materials
that are used in the ordinary course of Tenant's business and are stored in a
manner and location meeting all applicable laws. Tenant will not install any
underground storage tanks of any type and will not allow any surface or
subsurface conditions to exist or come into existence that constitute or with
the passage of time may constitute a public or private nuisance or a Hazardous
Substance. If hazardous materials are brought onto or found on the Property,
same shall be immediately removed with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all applicable laws by
Tenant. Landlord hereby agrees to indemnify and hold Tenant harmless from any
expense, cleanup costs, or other damage from any Hazardous Substance or other
condition on the Premises that violates any state or federal statute or
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regulation and which Hazardous Substance or condition existed prior to the date
of this Lease. Tenant hereby agrees to indemnify and hold harmless Landlord from
any expense, cleanup costs, or other damage from any Hazardous Substance or
other existing condition on the Premises that violates any state or federal
statute or regulation and which Hazardous Substance or condition was created on
or subsequent to the date of this Lease. The terms of this paragraph 26 shall
survive the expiration or termination of this Lease.
26. ADDITIONAL SITE IMPROVEMENTS: Tenant agrees to construct, compact, fill,
grade, pave and stripe on the cross hatched land owned by Landlord as shown on
Exhibit "A" in accordance with plans, specifications, and cost approved by
Landlord prior to the commence of work. Landlord agrees to reimburse Tenant for
all reasonable costs for such work within thirty (30) days of satisfactory
completion of the work. Landlord agrees to maintain, repair and replace if
necessary said cross hatched areas. In the event Landlord fails to maintain,
repair or replace, Tenant shall have the right but not the obligation to enter
upon said lands and perform any and all work necessary to provide for the
ingress, egress and parking required for the operation of Tenant upon its
premises. In the event Tenant undertakes any repair, maintenance or replacement,
Landlord shall, upon demand, reimburse Tenant for all reasonable costs therefor.
27. NOTICES: Notices or demand required to be seen or served by either party to
this Lease by the other party shall be deemed to have been duly given or served
only if in writing and either personally delivered or deposited in the U.S.
Mail, Certified Mail, return receipt requested, postage prepaid, addressed as
follows:
To The Landlord At: 5452 Glen Lakes, Suite #203, Dallas, Texas 75231
Attn: Mitchell Fonberg
To The Tenant At: 2804 Judson Road, Second Floor, Longview, Texas 75605
Attn: Stanley Swanson or Curtis Swanson
Such addresses may be changed from time to time by either party by serving
notices as provided above. Notwithstanding anything herein to the contrary,
Landlord shall be under no obligation or duty to provide notices to any
mortgagee, Tenant, subtenant, or other party unless such party has provided to
Landlord in writing its name and address and statement of interest as it
pertains to this Lease.
28. ENTIRE AGREEMENTS: MODIFICATION; SEVERABILITY: This Lease contains the
entire agreement between the parties hereto and no representations, inducements,
promises or agreements, oral or otherwise, entered into prior to the execution
of this Lease, will alter the covenants, agreements and undertakings herein set
forth This Lease shall not be modified in any manner, except by an instrument in
writing executed by the parties. If any term or provision of this Lease or the
application thereof to any person or circumstances shall to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each term
and provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
29. NUMBER AND GENDER: All of the terms and words used in this Lease regardless
of the number and gender in which they were used, shall be deemed and construed
to include any other number (singular or neuter), as the context or sense of
this Lease or any paragraph or clause hereof may require the same as if the
words had been fully and properly written in the number and gender.
30. APPLICABLE LAW: This Lease shall be construed and interpreted in accordance
with the laws of the State of Texas, and venue for any actions in connection
herewith shall lie in Dallas County, Texas.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease to
become effective as of the date first written above.
LANDLORD:
PETER D. FONBERG INVESTMENTS
By:
Name:
Title:
TENANT:
FRESH'N LITE,
a Delaware corporation
By:
Name:
Title:
103
EXHIBIT 6.5CE
VALLEY RANCH LEASE
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GROUND LEASE
THIS LEASE ("Lease") is made and entered into this day of , 1996
("Effective Date") by and between MacArthur Partners, Ltd. (hereinafter called
"Landlord") and Fresh 'N Lite, Inc. (hereinafter called "Tenant").
1. DEMISED PREMISES: Landlord, for and in consideration of the covenants
hereinafter contained and made on the part of the Tenant, does hereby demise and
lease unto Tenant, and Tenant does hereby lease from Landlord, the parcel of
land ("Land") which is located in Irving, County of Dallas, State of Texas,
containing approximately 36,000 square feet, not including roads or public right
of ways, being more particularly described in Exhibit A attached hereto and made
a part hereof, together with and subject to Landlord's easement rights and
appurtenances thereto, together with and subject to the rights of ingress,
egress and parking over, across and upon the Land for the entire term of this
Lease, and all improvements now located thereon, and all easements and
appurtenances in Landlord's adjoining and adjacent land, highways, roads,
streets, lanes, whether public or private, reasonably required for the
installation, maintenance, operation and service of sewers, water, gas,
drainage, electricity and other utilities and for drive-ways and approaches to
and from abutting highways for the use and benefit of the above described parcel
of real estate including the improvements to be erected thereon (the Land,
together with the improvements to be erected thereon are sometimes referred to
herein collectively as the "Premises"). Tenant acknowledges that it is leasing
the Land subject to all easements, including any of record, for rights of
ingress, egress and parking over, across and upon the Land for the benefit of
all adjoining landowners. Tenant will be doing business as Fresh N' Lite Cafe
and Grill.
2. LEASE TERM:
a. Primary Term. The term of this Lease shall commence on the Effective
Date and end on the last day of the month in which the twentieth anniversary of
the Rent Commencement Date occurs. As used herein the term "Rent Commencement
Date" shall mean the earlier of (i) July 15, 1996 or (ii) the date upon which
the Fresh N' Lite Restaurant (the "Restaurant") is open for business to the
public. When the term hereof is ascertainable and specifically fixed, or
otherwise agreed to by Landlord and Tenant, Landlord and Tenant shall enter into
a recordable supplement to the Lease Memorandum, which shall specify the actual
date for the expiration of the original term of this Lease and the Rent
Commencement Date. If for any reason, Landlord and Tenant do not enter into such
a supplemental agreement, the Rent Commencement Date shall be July 15, 1996.
b. Option to extend. Landlord does hereby grant to Tenant the right,
privilege and option to extend this Lease for a period of five (5) years from
the date of expiration of the original term of this Lease, upon the same terms
and conditions except rental as herein contained, upon notice in writing to
Landlord of Tenant's intention to exercise said option, given at least six (6)
months prior to the expiration of the original term of this Lease. In the event
that Tenant shall have exercised said first extension option, Landlord does
hereby grant to Tenant the right, privilege and option again to extend this
Lease for an additional period of five (5) years after expiration of the first
extension period; upon the same terms and conditions except rental as herein
contained, upon notice in writing to Landlord of Tenant's intention to exercise
said option, given at least six (6) months prior to the expiration of the first
extension period. Notwithstanding any provision of this paragraph 2 to the
contrary, Tenant shall not be entitled to exercise either such extension option
if at the time of exercise Tenant shall be in default of any of its covenants or
agreements under this Lease.
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3. RENTAL: Tenant agrees to pay as rental for the use and occupancy of the
Premises, at the times and in the manner hereinafter provided, the following
sums of money:
"Base Annual Rental": Tenant, in consideration of said demise, does
hereby covenant and agree with Landlord to pay to Landlord annualized rents (but
payable monthly) as follows:
Term Base Annual Rental Monthly Rental
Years 1-5 $43,500.00 $3,625.00
Years 6-10 $50,000.00 $4,166.66
Years 11-15 $56,000.00 $4,666,66
Years 16-20 $63,000.00 $5,250.00
First Renewal Term Market Rate (hereinafter defined) but not to
exceed $85,000.00
Second Renewal Term Market Rate
in advance, without notice or invoice from Landlord, upon the first day of every
month during the term hereof commencing upon the Rent Commencement Date and
ending upon termination of this Lease. In the event the Rent Commencement Date
shall be a date other than the first day of a month then the Base Annual Rental
for the period from such Rent Commencement Date until the first day of the month
next following shall be prorated accordingly. Tenant's duty and obligations to
pay the Base Annual Rental is a separate and independent covenant of Tenant
separate and apart from and not contingent upon Landlord's performance or
failure to perform its obligations under this Lease and Tenant's remaining
obligations under this Lease.
As used herein, the term "Market Rate" shall mean the fair market
rental rate of the Premises determined in accordance with the following
provisions of this paragraph. Not later than thirty (30) days after Landlord
shall receive written notice of Tenant's exercise of an extension option,
Landlord shall give Tenant written notice (the "Market Rate Notice") of the
Market Rate for the applicable extension period. In the event that Tenant shall,
in good faith, disagree with the Market Rate set forth in the Market Rate
Notice, Tenant shall, within ten (10) days after receipt of the Market Rate
Notice, provide Landlord with written notice containing Tenant's good faith
opinion of Market Rate together with substantiation in reasonable detail of the
basis for Tenant's opinion (said notice herein called "Tenant's Notice"). Should
Tenant fail to give Tenant's Notice within such ten-day period, Tenant shall be
deemed to have approved the Market Rate set forth in the Market Rate Notice,
which shall thereupon become the Market Rate for the applicable extension
period. In the event that Tenant timely gives Tenant's Notice, Tenant and
Landlord shall negotiate in good faith to establish Market Rate by mutual
agreement; provided, however, should Tenant and Landlord fail to reach agreement
within ten (10) days after receipt by Landlord of Tenant's Notice, then Market
Rate shall be determined by appraisal as hereinafter provided. Landlord and
Tenant shall jointly select one(1) Qualified Appraiser (hereinafter defined). If
the parties do jointly select one Qualified Appraiser, the Qualified Appraiser
so selected shall be instructed to promptly determine the Market Rate. If the
parties fail to jointly select one Qualified Appraiser within ten (10) days
after a written request by either party to make the joint selection, Landlord
and Tenant shall each select one Qualified Appraiser. If either party fails to
select a Qualified Appraiser within ten (10) days after written notice the other
party that the other party has selected a Qualified Appraiser, then the Market
Rate shall
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be the rate designated by the other party in the Market Rate Notice or Tenant's
Notice, as the case may be. The two Qualified Appraisers so selected shall be
instructed to promptly determine, independent of the other, the Market Rate. If
two Qualified Appraisers are selected, and either Qualified Appraiser fails to
deliver a written report to Tenant and Landlord with its determination of Market
Rate within fifteen (15) days after the first Qualified Appraiser has delivered
its written determination of Market Rate to Tenant, Landlord and the other
Qualified Appraiser, then market Rate shall be the Market Rate as determined by
the first Qualified Appraiser. If two Qualified Appraisers are selected and the
difference between the two amounts of their determinations of Market Rate timely
made does not exceed five percent (5%) of the lesser of such amounts, then the
Market Rate shall be the average of the Market Rates determined by each of the
two Qualified Appraisers. If two Qualified Appraisers are selected and the
difference between the two amounts of their determinations of Market Rate timely
made exceeds five percent (5%) of the lesser of such amounts, then the two
Qualified Appraisers shall select a third Qualified Appraiser, who shall
promptly determine the Market Rate. In the event that the two Qualified
Appraisers fail to select a third Qualified Appraiser within ten (10) days after
written notice to both of them of the need for a third Qualified Appraiser, then
Landlord and Tenant shall promptly apply to the local office of the American
Arbitration Association for the appointment of a third Qualified Appraiser. Of
the three appraisals, the appraisal which differs most in terms of dollar amount
from the average of the three appraisals shall be excluded and the average of
the remaining two appraisals shall be the Market Rate. The determination of
Market Rate by appraisal as hereinabove provided shall be final and binding on
the parties; provided, however, in no event shall (i) Market Rate in the first
extension period be less than Base Annual Rent in years 16-20; and (ii) Market
Rate in the second extension period be less than Base Annual Rate in the first
extension period. If the procedure set forth above is implemented and if for any
reason whatsoever (including, without limitation, the institution of any
judicial or other legal proceeding by either party), the Market Rate for such
extension period shall be the Market Rate set forth by Landlord in the Market
Rate Notice until such time as Market Rate is finally determined, and Landlord
and Tenant shall, by appropriate payment to the other, correct any overpayment
or underpayment which may have been made prior to such final determination. If
one Qualified Appraiser is jointly selected, the parties shall each pay one-half
of the fees and expenses of such Qualified Appraiser. If two or more Qualified
Appraisers are selected, each of Landlord and Tenant shall pay the fees and
expenses of the Qualified Appraiser selected by it, and they shall each pay
one-half of the fees and expenses of the third Qualified Appraiser, if any. A
"Qualified Appraiser" as used herein shall be an M.A.I. appraiser having at
least ten (10) years experience in appraising commercial real estate similar in
character to the Premises in Dallas County, Texas.
All sums of money due under the terms of this Lease including Base
Annual Rental shall be paid or mailed to:
Mac Arthur Partners, Ltd. Attn: Richard E. LeBlanc
8235 Douglas Avenue, Suite 805
Dallas, Texas 75225
or to such other payee or address as Landlord may designate, in writing, to
Tenant.
4. COVENANTS AND REPRESENTATIONS: Landlord hereby represents that all water and
gas mails, electric power lines, telephone lines, fire protection utilities,
fire sprinkler systems, sanitary and storm sewers (the "Utilities") are located
at the property line, in the public right-of-way, of the Premises and are
available and meet the specifications set forth on Exhibit B attached hereto and
made a part hereof (the "Utilities Specifications").
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Tenant shall pay when due all bills for water, heat, gas, telephone and
electricity and other Utilities used on the Premises and shall all connection
charges, capital recovery fees, utility expansion charges, tax fees, sewer
rents, sewer charges and all other similar fees and charges associated
therewith.
5. CONSTRUCTION PERMITS - ZONING:
a. Promptly after the Effective Date, Tenant at its cost, shall submit
to the appropriate governmental authorities all necessary applications to cause
the Premises to be rezoned to permit the sale of liquor by the drink on the
Premises (the "Zoning Condition") and Tenant shall diligently prosecute such
application to completion prior to July 16, 1996 (the "Contingency Period"), and
Landlord shall have exercised reasonable efforts to cooperate with Tenant. In
the event that Tenant shall not have satisfied the Zoning Condition prior to
expiration of the Contingency Period, Tenant may terminate this Lease by written
notice to Landlord given at any time prior to the end of the Contingency Period.
b. During the Contingency Period, Tenant shall, at its expense, apply
for and prosecute diligently any and all licenses, permits and other
administrative approvals required by any applicable governmental authority for
the construction, ownership and operation of the Restaurant on the Premises (the
"Permit Condition"). In the event that Tenant shall not have satisfied the
Permit Condition prior to the end of the Contingency Period or Tenant may
terminate this Lease by written notice to the Landlord given at any time prior
to the end of the Contingency Period.
c. During the Contingency Period Landlord at its expenses (i) shall
prepare and submit to the appropriate governmental authorities all necessary
subdivision plants and dedications to cause the Land to comply with all
governmental ordinances and regulations applicable to the subdivision of the
property of which the Land is a part for sale, lease, and development and (ii)
shall diligently prosecute the same to completion, approval, and filing in the
real property records of Dallas County, Texas (the "Platting Condition"). In the
event that Landlord shall not have satisfied the Platting Condition prior to the
expiration of the Contingency Period, Tenant may terminate this Lease by written
notice to Landlord given at any time prior to the end of the Contingency Period.
d. Tenant at its expense shall apply for and prosecute diligently such
approvals as may be required for the use of construction materials acceptable to
Tenant for the construction of the Restaurant on the Premises. In the event that
Tenant shall not have satisfied this condition within thirty (30) days after the
Effective Date, Tenant may terminate this Lease by written notice to Landlord
given prior to the expiration of the 30-day period.
6. TAXES:
a. Landlord represents and warrants that all taxes on the Land, except
current taxes not delinquent, have been paid in full. Landlord, after receipt of
any tax notice or bill on the Premises, shall promptly furnish Tenant with a
copy of such document. Landlord, at its expense, shall cause the Land to be
subdivided into a separate tax parcel.
b. Tenant covenants and agrees to pay directly to the taxing authority
or authorities, before they become delinquent, all ad valorem real property
taxes, special assessments, impact fees, user fees, development fees, land use
exactions or any other fees, levies or charges affecting the Premises levied,
assessed, accrued or payable for the period commencing on the Rent Commencement
Date and continuing for the remainder of the term.
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c. Tenant shall pay without abatement, deduction or setoff all personal
property taxes, general and special assessments and other charges of every
description levied on or assessed against all personal property located on the
Premises during the term of this Lease. Except for those taxes being diligently
contested in good faith by appropriate proceedings, Tenant shall make all such
payments directly to the charging authority before delinquency and before any
fine, interest or penalty shall become due or be imposed by operation of law for
their non-payment.
d. If by law any tax to be paid by Tenant may be paid in installments,
Tenant may elect to pay such tax in installments as it becomes due during the
term hereof.
e. If Tenant desires to contest the validity or amount of any taxes or
assessments for which Tenant is responsible under this Lease and gives Landlord
written notice of this intention, then Tenant may contest the assessment or tax
without being in default hereunder; provided, however, that Tenant shall post a
bond with Landlord or otherwise provide for the payment of such taxes or
assessments in a manner reasonably acceptable to Landlord, so that Landlord may
insure the payment of such taxes or assessment if Tenant's contest of such tax
or assessment shall fail. Landlord agrees to cooperate with any such effort by
Tenant; provided, Landlord shall not be obligated to incur any expense in
connection with such content. In no event will Tenant permit the Premises to be
forfeited to any taxing authority. Landlord may pay directly to the taxing
authority, or direct the holder of any bond or escrow deposit to pay, any unpaid
taxes, assessments or charges, together with penalties and interest thereon if
Tenant is not in good faith pursuing a protest of such taxes, assessments or
charges or to prevent the sale of the Premises by applicable taxing authorities
as a consequence of Tenant's failure to pay any such amounts accruing during the
term. if Landlord pays all or any portion of such taxes, assessments or charges,
Tenant shall, upon demand, pay to Landlord, as additional rental, hereunder, the
amount so paid by Landlord together with interest thereon from the date paid by
Landlord until repaid by Tenant at the rate per annum (the "Default Rate") equal
to the lesser of (i) the maximum non-usurious rate allows by Texas law or (ii)
the prime rate announced from time to time by Texas Commerce Bank National
Association, its successors or assigns, plus five percent (5%).
f. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, costs, expenses, damages, liabilities, fines and
penalties incurred by Landlord in connection with, arising out of or resulting
from the imposition of any taxes, assessments or other charges for which Tenant
is responsible under this Paragraph 6.
7. LIENS AND ENCUMBRANCES: Tenant shall not permit any lien to be filed against
the Premises on account of non-payment or dispute with respect to labor or
materials furnished in connection with construction or any subsequent repairs,
modifications or additions thereto, nor shall Tenant permit any judgment, lien
or attachment to lie against the Premises for any reason. Should any lien of any
nature be against the Premises Tenant shall within twenty (20) days cause such
lien to be paid and discharged. Tenant may in good faith and at Tenant's expense
contest the validity of any such asserted lien, claim or demand, in which event
Tenant shall bond around such lien or claim in accordance with Texas law. In no
event shall Tenant have any right, authority or power to bind Landlord or any
interest of Landlord in the Land for any claim for labor or material or for any
other charge or expense incurred in the construction or alteration of
improvements on the Land.
In the event that Tenant, any subtenants or assigns acquire personal
property to be installed and used upon the Premises subject to a conditional
sales contract, chattel mortgage or other security agreement, Landlord agrees to
execute and deliver to any such secured creditor a waiver of any lien Landlord
may have upon such personal property. Such waiver will be on a form reasonably
acceptable
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to Landlord authorizing the secured creditor to enter upon the Premises and
remove such personal property in the event of default under the terms of the
security agreement. Tenant agrees to indemnify, defend, and hold Landlord
harmless from and against any claims, causes of action, damages, expenses
(including attorneys' fees) and loss incident to, resulting from, or in any way
arising out of Tenant's failure to keep the Premises free from liens and
encumbrances described in this Paragraph 7.
Any memo of lease shall contain a notice no contractor, materialman or
laborer may filed any liens impacting the fee title to the property. Any such
lien shall on the face of such claim shall be asserted solely against the
leasehold interest of the Tenant.
Landlord represents and warrants that all assessments made on the Land
under the Permitted Exceptions have been paid in full.
8. INSURANCE:
a. Tenant covenants and agrees at its own expense to insure and keep
insured the improvements constructed by Tenant on the Premises against
"insurable risks" for not less than ninety percent (90%) of "actual replacement
cost" in responsible insurance companies licensed in the state in which the
Premises are located. Subject to the terms of Paragraph 17 hereof, such
insurance to be made payable in case of loss to Tenant and Landlord as named
insured, with the insurer agreeing to give Landlord thirty (30) days notice of
cancellation. "Insurance risks" shall mean those risks covered by the Texas
Standard Form Fire and Extended Coverage Policy (including fire and direct loss
by windstorm, hurricane, hail, explosion, riot, civil commotion, smoke, aircraft
and land vehicles) sonic shock wave and leakage from fire protective equipment.
"Actual replacement cost" shall be confirmed from time to time (but not more
frequently than once in any twelve (12) calendar months) at the request of
Landlord by one of the insurers.
b. Tenant shall also maintain and keep in force for the mutual benefit
of Landlord and Tenant comprehensive general public liability insurance against
claims for personal injury, death, or property damage occurring in on or about
the Premises or sidewalks or premises adjacent to the Premises to afford
protection to the limit of not less than $1,000,000.00 in respect to injury or
death of a single person and to the limit of not less than $2,000,000.00 in
respect to any one accident and to the limit of $500,000.00 in respect to
property damage.
c. In the event that either party shall at the times indicated below
deem the limits of such insurance to be excessive or insufficient in accordance
with commercially reasonable standards for similar properties in the area of the
Premises, the proper and reasonable limits for such insurance to be maintained
in force shall be determined by arbitration in accordance with the rules of the
American Arbitration Association. The limits of insurance hereinabove provided
shall be reviewed on the fifth anniversary of the Effective Date and on each
third anniversary thereafter and shall be adjusted, if necessary, so that the
amount of such coverage is at all times generally equal to the limits described
herein measured in 1995 U.S. Dollars and otherwise in accordance with
commercially reasonable standards for similar properties in the area of the
Premises.
d. Tenant shall secure an appropriate clause in, or an endorsement to,
each policy of insurance required to be provided by it hereunder pursuant to
which the respective insurance companies waive subrogation and rights of
recovery or permit the insured to agree with the Landlord to waive any claim it
might have against Landlord. The waiver of subrogation or permission for waiver
of any such claim shall extend to the agent of each party hereto and their
respective contractors and employees and,
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in the case of Tenant, shall also extend to all persons occupying or using all
or any part of the improvements from time to time. So long as the applicable
insurance policy includes a waiver of subrogation and agreement to waive
liability and insofar as may be permitted by the terms of the insurance policies
carried by it, both Landlord and Tenant hereby release the other with respect to
any claim (including a claim for negligence) which it might otherwise have
against the other party hereto for loss, damage or destruction with respect to
its property or injury to persons by fire or other casualty or other occurrence
to the extent such loss, damage or destruction is paid by insurance proceeds.
9. USE AND RESTRICTION:
a. Tenant shall use the Premises solely for the construction,
operations, maintenance and repair of an approximately 5,000 square foot full
service restaurant with drive-through window or pick up service. Without
Landlord's prior written consent, Tenant may not use the Premises for any other
purpose.
b. All times during the term of this Lease, Tenant shall continuously
operate the Restaurant on the Premises, provided Tenant may, in the exercise of
its sole discretion, determine the hours and days of regular operation of the
Restaurant. Temporary cessation of operation for remodeling, alteration or
repair of the improvements shall not constitute an abandonment or vacation of
the Premises by Tenant.
c. All times during the term of this Lease, Tenant shall be
responsible, at its sole cost and expense, to comply with any and all laws,
rules, regulations, orders, ordinances and other similar matters of any
applicable governmental authority having jurisdiction over the Premises and the
occupancy and operation of the Restaurant thereon.
d. Provided that Tenant has performed all of its covenants and
obligations under this Lease and is not otherwise in default hereunder, Landlord
agrees during the term of this Lease and any extension periods that Landlord
will refrain from leasing land owned by Landlord adjacent to the Premises to any
restaurant whose primary gross sales (being defined as 80% or more) are derived
from the sale of health oriented foods.
10. LEASE IMPROVEMENTS:
a. Tenant shall, at Tenant's sole cost, risk and expense, construct,
erect and diligently pursue completion of the Restaurant on the Premises. The
Restaurant shall be constructed in a good and workmanlike manner in accordance
with plans and specifications approved by Landlord as hereinafter provided and
in accordance with all applicable laws, regulations, ordinances, rules,
standards and guidelines of any governmental authority having jurisdiction over
construction of improvements on the Premises.
b. Prior to the commencement of construction, Landlord shall have the
right to approve Tenant's plans and specifications for all improvements and any
subsequent alterations to the Premises, which approval shall not be unreasonably
withheld. Tenant's plans and specifications shall include plans and
specifications for any buildings or structures to be constructed on the Land,
site plans showing parking areas and driveways and plans and specifications for
any exteriors signage and landscaping. Tenant's plans and specifications will be
fashioned similarly to the existing prototype store at Frankford and Preston,
with the exception of materials necessary for uniformity per request of City. If
Landlord fails
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to respond to Tenant's written request for approval within thirty (30) days
after receipt of Tenant's final construction plans and specifications,
Landlord's approval shall be deemed granted.
c. Tenant shall have the right to change its exterior signage provided
such signage does not impact the visibility of other signage on Landlord's
adjacent property and complies with the sign ordinances of the City of Irving
and make interior nonstructural alterations and improvements to the Premises
without the consent of Landlord. Tenant shall have the right to remove any such
no-structural alterations at any time during the term of this Lease, or any
extension or renewal thereof provided Tenant repairs all damage to the Premises
as a result of such removal within a reasonable time.
d. Throughout the term of this Lease, Tenant shall, at its sole cost
and expense, provide security for the Premises and repair and maintain the
Premises (including parking area, sidewalks and drives) in first class condition
and repair in accordance with all applicable laws, rules, ordinances, orders,
and regulations of any federal, state, county, municipal, and other governmental
entities having jurisdiction over the Premises (including parking area,
sidewalks and drives) in first class condition and repair in accordance with all
applicable laws, rules, ordinances, orders, and regulations of any federal,
state, county, municipal, and other governmental entities having jurisdiction
over the Premises, and all applicable rules, orders, and regulations of the
insurance underwriting board having jurisdiction over the insurance companies
insuring all or any part of the Premises. Tenant shall, at its sole cost and
expense, diligently and promptly make or cause to be made all necessary repairs
and replacements to the Premises to maintain or comply with the foregoing
sentence. Landlord shall not be required to furnish any services or facilities
or make any repairs to the Premises. without diminishing the foregoing
obligations of Tenant, should Tenant fail to make any necessary repairs within
thirty (30) days after notification by Landlord of such failure, Landlord may,
but shall in no event be required to, make such repairs for Tenant's benefit,
and the expense thereof shall constitute additional rent which shall be
immediately paid by Tenant to Landlord upon demand together with interest at the
Default Rate from the date of expenditure by Landlord to the date of repayment
by Tenant. In addition, Landlord shall have any and all other remedies provided
hereunder for a default by Tenant should Tenant fail to comply with the
foregoing.
e. Tenant shall be responsible for, and shall bear all costs and
expenses associate with, any and all alterations to the Premises which may be
required by the Americans With Disabilities Act of 1990 (the "ADA"), and for the
accommodation of disabled individuals who may be employed from time to time by
Tenant, or any disabled customers, clients, guests, or invitees or sublessees.
Tenant shall indemnify, defend and hold Landlord harmless from and against any
and all liability incurred arising from the failure of the Premises to conform
with the ADA, including the cost of making any alterations, renovations or
accommodations required by the ADA or any government enforcement agency, or any
courts, and any and all fines, civil penalties, and damages awarded against
Landlord resulting from the violation of the ADA, and all reasonable legal
expenses and court costs incurred in defending claims made under the ADA,
including without limitation reasonable consultants' and attorneys' fees,
expenses and court costs. The terms and provisions of this paragraph shall
survive the termination or expiration of this Lease.
f. Notwithstanding any provision of this Lease to the contrary,
Landlord and Tenant agree that Tenant shall have performed substantial
completion of construction of the Restaurant in conformity with the plans and
specifications approved by Landlord within nine (9) months from the Effective
Date of this Lease. Tenant's failure to comply with this obligation shall
constitute a default by Tenant of its covenants and obligations under this Lease
and will entitle Landlord to its remedies in the event of defaults as provided
in this Lease and under applicable law.
g. Except as otherwise provided in this Lease with respect to Tenant's
right to remove certain personal property and trade fixtures, all improvements
to the Premises at the expiration or earlier
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termination of the Lease shall, without compensation to Tenant, become
Landlord's property free and clear of all claims to or against such improvements
by Tenant or anyone claiming, by, through or under Tenant.
h. At Landlord' sole cost and expense, Landlord will, prior to
commencement of construction by Tenant, (i) remove from the Land all existing
improvements and (ii) complete any site grading and/or other preparation
necessary for drainage from the Premises to be compatible with the drainage plan
for Landlord's adjacent property.
i. Landlord will provide to Tenant specifications for parking lot
lights so that parking lot lights on the Premises and on Landlord's adjacent
property will be the same. Tenant shall install and maintain parking lot lights
on the Premises in accordance with such specifications.
j. At all times during the term, Tenant shall install and maintain in a
neat and attractive condition landscaping and seasonal plantings around the
Restaurant building. Tenant's landscape plan from time to time in effect shall
be subject to Landlord's prior written approval.
11. ASSIGNMENT AND SUBLETTING:
Tenant shall not assign or in any manner transfer this Lease or any
estate or interest therein, or sublet the Premises or any part thereof or for
any license, concession or other right of occupancy or any portion of the
Premises without the prior written consent of Landlord. Landlord agrees that it
will not withhold consent in a wholly unreasonable and arbitrary manner;
however, in determining whether or not to grants its consent, Landlord shall be
entitled to take into considerations factors such as Landlord's desired tenant
mix, the reputation and net worth of the proposed transferee. In addition,
Landlord shall also be entitled to charge Tenant a reasonable fee for processing
Tenant's request. Consent by Landlord to one or more assignments or sublettings
shall not operate as a waiver of Landlord's rights as to any subsequent
assignments and sublettings.
If Tenant is a corporation, partnership or other entity and if at any
time during the term of this Lease the person or persons who own a majority of
either the outstanding voting rights or the outstanding ownership interests of
Tenant at the time of the execution of this lease cease to own a majority of
such voting rights or ownership interests (except as a result of transfer by
devise or decent), such cessation or loss of majority voting rights or ownership
interests shall constitute a transfer or assignment subject to the immediately
preceding paragraph. The loss of a majority of such voting rights or ownership
interest shall not apply, however, if at the time of the execution of this
Lease, Tenant is a corporation and the outstanding voting share of capital stock
of Tenant are listed on a recognized security exchange or over-
the-counter-market or if Tenant is a corporation and the corporation issues
additional shares for the purpose of raising capital for the corporation and not
for the purpose of avoiding the restriction on assignment and transfer provided
in the immediately foregoing paragraph and the person or persons who own a
majority of the outstanding voting rights at the time of execution of this Lease
continue to have the controlling interest in the corporation.
Any assignee or sublessee of an interest in and to this Lease shall be
deemed by acceptance of such assignment or sublease or by taking actual or
constructive possession of the Demised Premises to have assumed all of the
obligations set forth in or arising under this Lease. Such assumption shall be
effective as of the earlier of the date of such assignment or sublease or the
date on which the assignee or sublessee obtains possession of the Premises.
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Notwithstanding any assignment or subletting, Tenant and any guarantor
of Tenant's obligations under this Lease shall at all times remain fully
responsible and liable for the payment of the rent herein specified and for
compliance with all of its other obligations under this Lease (even if future
assignments and sublettings occur subsequent to the assignment or subletting by
Tenant, and regardless of whether or not Tenant's approval has been obtained for
such future assignments and sublettings). Moreover, in the event that the rental
due and payable by a sublessee (or a combination of the rental payable under
such sublease plus any bonus or other consideration therefor or incident
thereto) exceeds the rental payable under this Lease, or if with respect to a
permitted assignment, permitted license or other transfer by Tenant permitted by
Landlord, the consideration payable to Tenant by the assignee, licensee or other
transferee exceeds the rental payable under this Lease, then Tenant shall be
bound and obligated to pay Landlord all such excess rental and other excess
consideration with ten (10) days following receipt thereof by Tenant from such
sublessee, assignee, licensee or other transferee as the case may be. Finally,
in the event of an assignment or subletting, it is understood and agreed that
all rentals paid to Tenant by an assignee or sublessee shall be received by
Tenant in trust for Landlord, to be forwarded immediately to Landlord without
offset or reduction of any kind; and upon election by Landlord such rentals
shall be paid directly to Landlord as specified in Section 3 of this Lease (to
be applied as a credit and offset to Tenant's rental obligation).
Subject to Section 12 of this Lease, Tenant may mortgage, pledge or
otherwise encumber its interest in this Lease, provided in no event, shall any
such mortgage, pledge or encumbrance attach to or become a lien on the Premises
or any interest therein other than the leasehold interest and other rights
granted to Tenant under this Lease.
In the event of the transfer and assignment by Landlord of its interest
in this Lease and Premises to a person expressly assuming Landlord's obligations
under this Lease, Landlord shall thereby be released from any further
obligations hereunder, and Tenant agrees to look solely to such successor in
interest of the Landlord for performance of such obligations. Any security given
by Tenant to secure performance of Tenant's obligations hereunder may be
assigned and transferred by Landlord to such successor in interest and Landlord
shall thereby be discharged of any further obligation relating thereto.
12. MORTGAGING OF LEASEHOLD ESTATE:
In the event that Tenant shall mortgage its leasehold estate and the
mortgagee or holders of the indebtedness secured by the leasehold mortgage or
trust deed shall notify Landlord in the manner hereinafter provided for the
giving of notice of the execution of such mortgage or must deed and name the
place for service of notice upon such mortgage or holder of indebtedness, then,
in such event, Landlord hereby agrees for the benefit of such mortgagees or
holder of indebtedness from time to time:
a. That Landlord will give to any such mortgagee or holder of
indebtedness simultaneously with service on Tenant a duplicate of any and all
notices or demands given by Landlord to Tenant from time to time asserting a
breach by Tenant of any of its obligations under this Lease.
b. That such mortgagee or holder of indebtedness shall have the
privilege of performing any of Tenant's covenants hereunder or of curing any
default by Tenant hereunder or of exercising any election, option or privilege
conferred upon Tenant by the terms of this Lease within the time period set
forth in Paragraph 13.a.
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c. That, except for the right to terminate contained in Paragraph 5 of
this Lease, no right, privilege or option to cancel or terminate this Lease
available to Tenant shall be deemed to have been exercised effectively unless
joined in by any such mortgagee or holder of the indebtedness.
13. DEFAULT:
a. The following shall be events of default hereunder: (1) Tenant fails
to pay when due any of the Base Annual Rent or other amount provided herein to
be paid by Tenant, (2) Tenant fails to promptly keep and perform any other
covenant in this Lease; provided further, however, Landlord shall, prior to
taking any action for such an event of default, given Tenant notice specifying
the default(s), and Tenant shall have fifteen (15) days after receipt of said
notice to correct any non-monetary default, or (3) Tenant vacates or abandons
all or a portion of the Premises. If Tenant fails to correct said default(s)
within the specified time periods, Landlord may terminate this Lease by written
notice to Tenant and re-enter the Premises and take possession thereof, re-take
possession but not terminate this Lease, and exercise such other rights and
pursue such other remedies and damages against Tenant as a result of Tenant's
breach as provided by law or in equity. No act by or on behalf of Landlord under
this Paragraph 13.a shall constitute a termination of this Lease unless Landlord
gives Tenant written notice of termination. Landlord shall not have any
obligation to relet the Premises.
b. In the event Landlord consent to an assignment or sublease of this
Lease or the Premises, and should any default occur requiring notice as
hereinbefore provided in this Paragraph 13, Landlord agrees that it will use
reasonable efforts to furnish Tenant with a copy of such notice at the same time
that it is sent to such assignee or sublessee. In the event that such default is
not corrected by such assignee or sublessee during the specified time periods,
Tenant shall have an additional period of ten (10) days to correct such default,
and upon correction of such default, Tenant shall have the right and option to
resume actual possession of the Premises as Tenant hereunder for the unexpired
term of this Lease.
c. Should there be any default or breach of this Lease on the part of
Landlord, Tenant shall give Landlord written notice thereof, and Landlord shall
correct such breach or default within thirty (30) days after such notice. Should
Landlord fail to correct such breach or default, Tenant may pursue any legal or
equitable remedy to which it is entitled.
d. Should Tenant fail to perform any covenant or obligation required by
this Lease to be kept or performed by it, Landlord may, but shall not be
obligated to, perform any such covenant or obligation. Tenant shall, upon
demand, reimburse Landlord for any amount incurred by Landlord in the
performance of any such covenant or obligation together with interest thereon at
the Default Rate from the date of expenditure by Landlord to the date of
reimbursement by Tenant.
14. HOLDING OVER:
In the event Tenant continues to occupy the Premises after the last day
of the term hereby created, or after the last day of any extension of said term,
and the Landlord elects to accept rent thereafter, a tenancy from month to month
shall be created (and not for any longer period) at one hundred fifty percent
(150%) of the immediately prior month's rent.
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15. CONDEMNATION:
a. In the event all of the fee title to the Land is taken or condemned
by any competent authority, this Lease will terminate as of the earlier of the
date of possession of the Premises by the condemning authority or the date of
the title transfer. Tenant shall have the right to prosecute its claim for an
award based on the leasehold estate and Landlord shall have the right to
prosecute its claim for an award based on the value of Landlord's reversionary
interest in the Premises taking into account the leasehold estate created by
this Lease, the amount of rental paid and to be paid by Tenant hereunder and all
of the other terms and provisions of this Lease. In the event a substantial
portion, as defined in the immediately succeeding paragraph, of the Premises is
taken or condemned by any competent authority, Tenant shall have the right (i)
to terminate the Lease as of the earlier of the transfer of title or the date of
the taking of possession by the condemning authority, in which event any
unearned rent paid or credited will be refunded by Landlord to Tenant, or (ii)
to continue the Lease in full force and effect with a reduced fixed rental
commensurate with the reduced area and/or reduced utility of the Premises as
mutually determined in lieu of the amount of Base Annual Rent hereinabove
provided, which reduced rental will become effective upon the earlier of the
date of title transfer or the date of such taking. Tenant shall elect between
these rights and give notice to Landlord of its election within sixty (60) days
after the date when possession of the pertinent portion of the Premises is
required by the condemning authority. In the event less than a substantial
portion of the Premises is taken by the condemning authority, then the Ease Rent
shall be reduced as in (ii) above.
b. A "substantial portion", as used in the foregoing Subparagraph a, is
defined to be any of the following: (i) any part of the Restaurant building;
(ii) fifteen percent (15%) or more of the parking area; (iii) fifteen percent
(15%) or more of the Land; (iv) loss through the taking of condemnation of
direct access from the Premises to any adjacent street or highway; or (v) a
portion of land or improvements the absence of which would have a substantial
adverse impact on Tenant's business conducted on or from the Premises.
c. If any award is made for the condemning or taking of all or any part
of the Premises during the original term of this Lease or any of the extension
periods, then Landlord and Tenant shall share in any award made for condemning
or taking the improvements to the extent of their interest in the Premises. The
respective interests of Landlord and Tenant in any such award shall be as set
forth in the second sentence of Paragraph 15.a above.
d. Termination of the Lease because of condemnation shall be without
prejudice to the rights of either Landlord or Tenant to recover from the
condemnor compensation and damages for the injury and loss sustained by them as
a result of such taking and Tenant shall have the right to make a claim against
the condemning authority for loss of profits or damage to its business by the
taking or condemnation.
16. COVENANT OF TITLE AND QUIET ENJOYMENT:
Landlord covenants that Landlord is well seized of and has good title
to the Premises free and clear of all liens, encumbrances and restrictions,
except as may be shown by a current title commitment for the Land. Landlord
warrants and will defend the title to the Premises against any person claiming
by, through or under Landlord but not otherwise. If, at any time, Landlord's
title or right to receive rent hereunder is disputed, or there is a change of
ownership of Landlord's estate by act of the parties or operation of law, Tenant
may withhold rent thereafter accruing until Tenant is furnished proof
satisfactory to it as to the party entitled thereto.
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17. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS:
a. If the building on the Premises shall be wholly or partially damaged
or destroyed by fire or other casualty prior to the last five (5) years of the
original term of this Lease, Tenant shall restore the Premises to the same
condition as prior to the damage. Insurance proceeds will be made available to
Tenant for that purpose, but it is understood and agreed that if the cost of the
restoration exceeds the amount of the insurance recovery, the Tenant will pay
such excess. In no event will rent abate during any period of untenantability.
b. If the building on the Premises shall be damaged or destroyed by
fire other casualty during the last five (5) years of the original term of this
Lease, or during any option period of this Lease, to the extent of fifty percent
(50%) or more of the actual replacement cost of the building (herein called
"substantial damage", Tenant may, at Tenant's option, to be evidenced by notice
given to Landlord within thirty (30) days after the occurrence of such damage or
destruction, elect to terminate this Lease as of the date of the damage or
destruction and, in such event, all of the insurance proceeds shall be paid over
to the Landlord. The extent of damage or destruction shall be determined by an
independent architect mutually acceptable to Landlord and Tenant. If the
building suffers less than substantial damage or if the building suffers
substantial damage and Tenant does not terminate the Lease by written notice to
Landlord within the time period specified above, Tenant shall restore the
Premises to the same condition as prior to the damage. Insurance proceeds will
be made available to Tenant for that purpose, but it is understood and agreed
that if the cost of restoration exceeds the amount of the insurance recovery,
the Tenant will pay such excess. In no event will rent abate during any period
of untenantability.
c. In the event that Tenant is obligated by the terms and provisions
hereof to repair, restore or reconstruct the building or other improvements
situated on the Premises but fails to commence to do so within six (6) months
following the casualty event and thereafter diligently prosecute the same to
completion within twelve (12) months following such casualty, Landlord may
terminate this Lease by written notice to Tenant, such termination to be
effective immediately.
18. TRADE FIXTURES: Landlord agrees that all trade fixtures, machinery,
equipment, furniture or other personal property of whatever kind and nature kept
or installed on the Premises by Tenant or its subtenants shall not become the
property of Landlord or a part of the realty (if not permanently affixed to the
Premises or ordinarily considered a part of the realty such items which would
ordinarily be considered a part of the realty to include but not limited to
lighting fixtures installed in the ceiling, plumbing and the HVAC system) and
may be removed by Tenant or its subtenants, in their discretion, at any time and
from time to time during the entire term of this Lease and any renewals,
provided Tenant shall first and promptly repair any damage to Premises resulting
from the removal. Upon request of Tenant or Tenant's assignees or subtenants,
Landlord shall execute and deliver any real estate consent or waiver forms
submitted by any vendors, landlords, chattel mortgagees or holders or owners of
any trade fixtures, machinery, equipment, furniture or other personal property
of any kind and description kept or installed on the Premises by any subtenant
setting forth the fact that Landlord waives, in favor of such vendor, lessor,
chattel mortgagee or any holder or owner, any lien, claim, interest or other
right therein superior to that of such vendor, landlord, chattel mortgagee,
owner or holder. Landlord shall further acknowledge that property covered by
such consent to waiver forms is personal property and is not to become a par of
the realty no matter how affixed thereto and that such property may be removed
from the Premises by the vendor, Landlord, chattel mortgagee, owner or holder at
any time upon default by the Tenant or subtenant in the terms of such chattel
mortgage or other similar documents, free and clear of any claim or lien of
Landlord, provided Tenant shall first and promptly repair any damage to Premises
resulting from the removal.
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19. NON-DISTURBANCE AND ATTORNMENT:
a. If at the execution of this Lease there are any present mortgage(s),
Lien(s) or encumbrance(s) against the Premises, Landlord shall have the
mortgagee(s), lienholder(s) or other secured party(ies), as a further condition
precedent to the Rent Commencement Date, execute nondisturbance agreement(s)
providing that such holder(s) will recognize Tenant's Lease of the Land and will
not disturb Tenant's quiet possession of the Land as long as Tenant is not in
default of any of the provisions of this Lease. Before Landlord shall have the
right to further encumber the Land or seek any modification or extension of
existing encumbrances, Landlord must first secure for Tenant's benefit a written
non-disturbance agreement, in the form set forth above, and accordingly, Tenant
will then execute and deliver such further instruments subjecting this Lease to
the lien of any such loan or mortgage and agreeing to attorn to said
mortgagee(s) based on their priority as shall be required by such mortgagee.
b. If Landlord defaults in making payment under any mortgage or
mortgages, or if Landlord is in breach or in default of any such mortgage or
mortgages in any respect, Tenant shall have the right and option to make all
rental payments thereafter becoming due under this Lease to the mortgagee in
lieu of Landlord, upon notice therefrom, and payments so made shall discharge
the obligation of Tenant hereunder respecting the payment of Base Annual Rent.
20. LANDLORD'S RIGHT OF ACCESS:
Landlord, its employees, agents and representatives, shall have the
right to enter upon the Premises at any time for the purpose of making
inspections or performing any work which Landlord elects to undertake (although
it shall have no obligation whatsoever to do so) made necessary by reason of
Tenant's default hereunder; provided, however, that, excepting cases of an
emergency or unless Landlord obtains the Tenant's prior consent, Landlord shall
not enter the Premises without notification to Tenant at least twenty-four (24)
hours in advance.
21. INDEMNITY:
Except for the claims, rights, recovery and causes of action that
Landlord has released in Paragraph 8.d. above, Tenant shall indemnify, defend,
and hold Landlord, its employees, partners, directors, officers, agents,
invitees and contractors, harmless from and against all claims, causes of
action, damages, losses, costs, and expenses (including attorneys' fees)
resulting or arising from or in connection with any and all injuries or death of
any person or damage to any property caused or alleged to have been caused by
any acts, omissions, or negligence of Tenant, its employees, officers,
directors, agents, customers, invitees, or guests, or any parties contracting
with Tenant relating to the Premises including, without limitation,
environmental conditions caused during the term of this Lease. The foregoing
shall not apply to the gross negligence or willful misconduct of Landlord. This
paragraph 21 shall survive the expiration or termination of this Lease.
22. RECORDING:
Tenant and Landlord agree to execute and record a short form or
memorandum of this Lease in the form attached hereto as Exhibit C and made a
part hereof. The cost of all documentary stamps, or
D
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conveyancing, transfer tax and recording fees shall be paid equally by the
parties hereto. Tenant may not record a copy of this Lease. Tenant's recordation
of the Lease shall constitute a default hereunder.
23. EVIDENCE OF TITLE:
Within thirty (30) days after the Effective Date, Tenant at Tenant's
expense shall apply for leasehold title insurance, from a title company
acceptable to Tenant in the amount of not less than One Hundred and Fifty
Thousand and no/100 ($150,000) dollars, or that is required by law, or the title
insurer, effective as of the date hereof, showing good and indefeasible title in
fee simple in Landlord subject only to the liens and encumbrances set forth on
Exhibit D attached hereto and made a part hereof (the "Permitted Exceptions").
If such report discloses any conditions, restrictions, liens, encumbrances,
easements or covenants other than the Permitted Exceptions, Landlord shall have
sixty (60) days from the date of issuance of such title report, binder or
commitment to cure such defects and to furnish a title report, binder or
commitment showing such defects cured or removed. If such defects in title are
not so cured within sixty (60) days, Tenant may, at its option, given written
notice to Landlord within five (5) days thereafter terminating this Lease. In
the event this Lease is so terminated, all monies, deposits and instruments
shall be returned to the respective parties. Immediately upon final execution of
the Lease, Landlord shall deliver to Tenant's title company, if so required, all
prior title evidence in Landlord's possession.
24. BORING AND PERCOLATION CONTINGENCIES:
Tenant shall have the right, within thirty (30) days from the date
hereof, to perform such boring and percolation tests as may be required to
determine the physical characteristics, including the water table of substrata,
of the Premises. Tenant agrees to keep the results of such surveys, studies,
tests, or borings confidential and, in the event Tenant terminates this
Agreement based on such results, Tenant will deliver the originals and all
copies of such results to Landlord. Tenant covenants and agrees that the
Premises shall not be damaged or impaired in any way as a result of such
activities on the Premises, and hereby agrees to indemnify, defend, and hold
Seller harmless from and against any and all claims, causes of action, damages
and expenses (including attorneys' fees) incident to resulting from, or in any
way arising out of Tenant's or Tenant's agents' or representatives', presence
in, on, or about the Premises, or out of any such test, inspection, or study
conducted by Tenant on the Premises without regard to the underlying cause or
causes of such claims, causes of action, damages or expenses. Such indemnity
shall survive the term of this Lease or any termination hereof. Landlord shall
furnish to Tenant copies of the results of any core samples which Landlord has
in its possession.
25. SURVEY:
Tenant may order a current certified topographical survey of the Land
by a licensed surveyor within thirty (30) days from the Effective Date.
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26. ENVIRONMENTAL MATTERS:
Landlord shall furnish to Tenant a copy of any phase one environmental
site assessment of the Land in Landlord's possession. Tenant shall have the
right to conduct an environmental audit of the Premises, at its cost, within
thirty (30) days after the Effective Date. Such audit shall be conducted
pursuant to standard quality control assurance procedures reasonably
satisfactory to Landlord and Tenant. Tenant shall have fifteen (15) days after
receipt of the audit to determine whether the audit discloses condition(s)
which, in Tenant's reasonable opinion, make the Premises unsuitable for its
purposes. If Tenant fails to advise Landlord that it is dissatisfied with the
condition of the Premises within such fifteen (15) day period, Tenant shall be
deemed to have approved the condition of the Premises. Notwithstanding anything
stated elsewhere in this Lease, if Tenant is not satisfied with the condition of
the Premises and so timely notifies Landlord as set forth hereinabove, this
Lease shall terminate and neither party shall have any further liability or
responsibility thereunder and, in such event, Landlord shall return to Tenant
all sums deposited by Tenant with Landlord pursuant to the terms of this Lease.
Tenant hereby indemnifies, defends, and holds Landlord harmless from any
damages, costs, losses, claims, or causes of action relating to or in any way
arising out of such environmental audits allowed by this paragraph. Tenant
hereby agrees that no activity will be conducted on the Premises that will
produce any environmentally hazardous or sensitive substances or which violate
any statute o fa governmental or quasi-governmental authority relating to
pollution or protection of the environment ("Hazardous Substance"). Tenant shall
be responsible for obtaining any required permits in paying any fees and
providing any testing required by any governmental agency and the Premises will
not be used in any manner for the storage of any Hazardous Substances except for
the storage of such materials that are used in the ordinary course of Tenant's
business and are stored in a manner and location meeting all applicable laws.
Tenant will not install any underground storage tanks of any type and will not
allow any surface or subsurface conditions to exist or come into existence that
constitute or with the passage of time may constitute a public or private
nuisance or a Hazardous Substance. If hazardous materials are brought onto or
found on the Property, same shall be immediately removed with proper disposal,
and all required cleanup procedures shall be diligently undertaken pursuant to
all applicable laws by Tenant. Landlord hereby agrees to indemnify and hold
Tenant harmless from any expense, cleanup costs, or other damage from any
Hazardous Substance or other condition on the Premises that violates any state
or federal statute or regulation and which Hazardous Substance or condition
existed prior to the date of this Lease due to an act or omission of Landlord.
Tenant hereby agrees to indemnify and hold harmless Landlord from any expense,
cleanup costs, or other damage from any Hazardous Substance or other existing
condition on the Premises that violates any state or federal statute or
regulation and which Hazardous Substance or condition was created on or
subsequent to the date of this Lease due to an act or omission of Tenant. The
terms of this paragraph 26 shall survive the expiration or termination of this
Lease.
27. NOTICES:
Notices or demand required to be given or served by either party to
this Lease by the other party shall be deemed to have duly given or served only
if in writing and either personally delivered or deposited in the U.S. Mail,
Certified Mail, return receipt requested, postage prepaid, addressed as follows:
To The Landlord At: MacArthur Partners, Ltd.
8235 Douglas Avenue, Suite 805
Dallas, Texas 75225
Attention: Richard E. LeBlanc
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With a copy to: Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Robert J. Banta
To The Tenant At: Naman, Howell, Smith & Lee, P.C.
P. O. Box 1470
Waco, Texas 76703
Attn: Rex S. Whitaker
Such addresses may be changed from time to time by either party by
serving notices as provided above. Notwithstanding anything herein to the
contrary, Landlord shall be under no obligation or duty to provide notices to
any mortgagee, Tenant, subtenant, or other party unless such party has provided
to Landlord in writing its name and address and statement of interest as it
pertains to this Lease.
28. ENTIRE AGREEMENTS: MODIFICATION; SEVERABILITY:
This Lease contains the entire agreement between the parties hereto and
no representations, inducements, promises or agreements, oral or otherwise,
entered into prior to the execution of this Lease, will alter the covenants,
agreements and undertakings herein set forth. This Lease shall not be modified
in any manner, except by an instrument in writing executed by the parties. If
any term or provision of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
29. NUMBER AND GENDER:
All of the terms and words used in this Lease, regardless of the number
and gender in which they were used, shall be deemed and construed to include any
other number (singular or neuter), as the context or sense of this Lease or any
paragraph or clause hereof may require, the same as if the words had been fully
and properly written in the number and gender.
30. APPLICABLE LAW:
This Lease shall be construed and interpreted in accordance with the
laws of the State of Texas, and venue for any actions in connection herewith
shall lie in Dallas County, Texas.
31. ADDITIONAL PROVISIONS:
1. Net Lease. Landlord shall not be required to make any expenditure, incur any
obligation (other than those expressly set forth in this Lease), or incur any
liability of any kind whatsoever in connection with this Lease or Tenant's
financing, ownership, construction, maintenance, operation or repair of the
Premises. It is expressly understood and agreed that this is a completely net
lease intended to assure Landlord the rent herein reserved on an absolute net
basis, excluding taxes on Landlord's income, if any, franchise taxes and the
like.
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2. Nonmerger of Fee and Leasehold Estates. Notwithstanding any other provision
of this Lease to the contrary, if both Landlord's and Tenant's estates in the
Premises or the improvements or both become vested in the same owner, this Lease
shall nevertheless not be, destroyed by application of the doctrine of merger or
any contrary provision of this Lease construable as requiring merger except at
the express written election of the owner.
3. Estoppel Certificate. At any time and from time to time, within thirty (30)
days after notice of request by Landlord or Tenant, the other party shall
execute, acknowledge and deliver to the other or to such recipient as the notice
shall direct, a statement certifying that this Lease is unmodified and in full
force and effect, or, if there have been modifications, that it is in full force
and effect as modified in the manner specified in the statement. The statement
shall also state the dates to which the rent and any other charges have been
paid in advance and that there are no defaults hereunder, or if there are,
specifying those defaults with particularity. The statement shall be such that
it can be relied on by any auditor, creditor, commercial banker and investment
banker and by any prospective purchaser or encumbrancer of the Premises or all
or any part or parts of Tenant's or Landlord's respective interests under this
Lease.
4. Exhibits. The following Exhibits A-D are incorporated herein for all
purposes:
Exhibit A - Description of Land
Exhibit B - Utilities Specifications
Exhibit C - Lease Memorandum
Exhibit D - Permitted Exceptions
Reference to "this Lease" includes matters incorporated by
reference.
Upon satisfaction of the Platting Condition, the description of the
Land according to the subdivision plat of the Land will be substituted
as Exhibit A to this Lease and as Exhibit A to the Lease Memorandum,
which shall then be re-executed, acknowledged, and filed for record.
5. No Partnership, Joint Venture or Principal-Agent Relationship. Nothing in
this Lease or any acts of the parties hereto shall be construed to create the
relationship of principal and agent, or of partnership, or of joint venture, or
of any association between the parties.
6. Time of Essence. Time is of the essence with respect to the performance of
each of the terms, provisions, covenants and conditions contained in this Lease.
7. Binding Effect. Subject to the limitation on Tenant's ability to assign this
Lease or sublet the Premises without Landlord's prior written consent, each and
all of the covenants and conditions of this Lease shall be binding on and shall
inure to the benefit of the heirs, successors, executors, administrators,
assigns and personal representatives of the respective partes.
8. Commissions. Landlord shall pay a commission to Mitchell Irwin Fenberg
pursuant to a separate agreement between Landlord and Mitchell Irwin Fenberg.
Except as provided in the preceding sentence, Landlord and Tenant represent and
warrant to each other that there are no brokers or finders fees or commissions
due in respect of the transaction entered into under this Lease. Landlord and
Tenant each indemnify and agree to hold the other harmless from any claims for
real estate, leasing commissions or finders fees in respect of the transaction
entered into under this Lease alleged to be due because of any act of the
indemnifying party and from any loss, liability, damage, cost or expense
(including attorney's fees) of defending or settling such claims.
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9. Execution in Counterparts. This Lease, or the memorandum of this Lease, or
both, may be executed in two or more counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument.
10. Attorneys' Fees. In the event that at any time during the term of this
Lease, either Landlord or Tenant shall institute any action or proceeding
against the other relating to the provisions of this Lease, or any default
hereunder, the unsuccessful party in such action or proceeding shall reimburse
the successful party for reasonable attorneys' fees and expenses incurred
therein. Such reimbursement obligation shall include all reasonable legal fees
and expenses incurred prior to trial, at trial and at all levels of appeal and
post-judgment proceedings.
11. Ingress and Egress and Parking Easements. Tenant shall not construct any
curb, fence, barrier or other improvement on the Premises, and Landlord shall
not construct any curb, fence, barrier or other improvement on Landlord's
adjacent property which would prevent vehicular ingress and egress to and from
the Premises from and to Landlord's adjacent property. Tenant and Landlord
hereby grant o each other and to their respective customers, tenants and
invitees over, along, and across the parking and driveway areas of the Premises
and Landlord's adjacent property, respectively, the non-exclusive right during
the term of this Lease for vehicular ingress and egress to and from the Premises
from and to Landlord's adjacent Property and for the parking of motor vehicles
in designated parking areas.
Landlord and Tenant intend that the right hereby granted to Tenant on
Landlord's adjacent property be sufficient for it to be an insured right or
estate pursuant to the leasehold title insurance policy obtained by Tenant in
accordance with Section 23. If required by the Title issuing agent, Landlord and
Tenant agree to amend this Lease for this purpose.
12. Landlord's Landscape Area. A twenty-foot strip of land along and adjacent to
MacArthur boulevard and Valley Ranch Pkwy. South shall be designated as
"Landlord's Landscape Area." Landlord shall, at its expense, install and
maintain landscaping in Landlord's Landscape Area in a neat and attractive
condition.
13. Tenant's Duty to Surrender: At the expiration or earlier termination of this
Lease, Tenant shall surrender to Landlord possession of the Premises, but
specifically excluding Tenant's trade fixtures and other personal property which
Tenant is permitted to remove pursuant to Paragraph 18. tenant shall leave the
surrendered Premises in good condition. All property that Tenant is not required
to surrender but that Tenant abandons shall, at Landlord's election, become
Landlord's property at termination of the Lease. If Tenant fails to surrender
the Premises at the expiration or earlier the expiration or earlier termination
of this Lease, Tenant shall defend and indemnify Landlord from all liability and
expense resulting from the delay or failure to surrender, including, without
limitation, claims made by any succeeding tenant founded on or resulting from
Tenant's failure to surrender.
14. Advance Payment of Rent: Upon the execution of this Lease, Tenant has
deposited with Landlord $3,625.00 as security for the faithful performance and
observance by Tenant of the terms, provisions, agreements, covenants and
conditions of this Lease and shall be considered an advance payment of the first
month's rent, to be applied as such, on the date specified within this Lease as
the rent commencement date (Article 2.a).
If this Lease is terminated by Landlord or Tenant pursuant to any
provision hereof allowing termination prior to the Rent Commencement Date, all
payments made by Tenant to Landlord shall be refunded to Tenant.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease to
become effective as of the date first written above.
LANDLORD: MacArthur Partners, Ltd., a
Texas limited partnership
By: Winsor/MacArthur Partners, Ltd., a
Texas limited partnership
General Partner
By: Hanover Development Company, a
Texas corporation
General Partner
By:
Name:
Title:
TENANT: Fresh 'N Lite, Inc.
By:
Name:
Title:
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[INSERT EXHIBIT "A"]
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[INSERT EXHIBIT "A-1"]
D
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EXHIBIT "B"
UTILITY SPECIFICATIONS
Water................................Two (2) inch line
Sanitary Sewer.....................Eight (8) inch line
Gas.................................Four (4) inch line
Electricity.................... Switch gear at MacArthur
& Valley Ranch Road
INITIALS:
Landlord:
Tenant:
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[INSERT EXHIBIT "C"]
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[INSERT EXHIBIT "D"]
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease to become
effective as of the date first written above.
LANDLORD: MacArthur Partners, Ltd., a
Texas limited partnership
By: Windsor/MacArthur Partners, Ltd., a
Texas limited partnership
By: Hanover Development Company, a
Texas corporation, its
General Partner
By:
Richard E. LeBlanc
President
TENANT: Fresh 'N Lite, Inc.
By:
Stan Swanson
President
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MEMORANDUM OF GROUND LEASE
THIS MEMORANDUM OF GROUND LEASE ("Memorandum") made as of the ___ day
of __________________________, 1996, by and between FRESH N' LITE, INC., a Texas
corporation ("Tenant"), and MacARTHUR PARTNERS, LTD. ("Landlord").
WITNESSETH:
1. Premises. Landlord and Tenant have entered into a Ground Lease (the
"Lease") dated ____________________, 1996 whereby Tenant has leased from
Landlord the parcel of land in Irving, Dallas County, Texas, containing
approximately ___ square feet, more particularly described in Exhibit A attached
hereto and made a part hereof. It is contemplated that Tenant will construct
improvements on such land and operate a business therein under the name "Fresh
N' Lite Cafe and Grill." Landlord has further granted to Tenant a non-exclusive
right during the term of the Lease for vehicular ingress and egress to and from
the Premises from and to Landlord's adjacent property described in Exhibit B
attached hereto and made a part hereof and for the parking of motor vehicles in
designated parking areas.
2. Term and Renewal options. The term of the Lease is for twenty (20)
years after the Rent Commencement Date (as defined in the Lease). When the exact
Rent Commencement Date is determined, the parties agree to execute a recordable
supplement to this Memorandum which will set forth such date. If the parties
fail to execute such a supplement, the Rent Commencement Date shall be as
specified in the Lease. If the Lease is still in full force and effect, and if
Tenant shall not be in default under the terms of the Lease, Tenant shall have
two (2) successive options to renew the term for five (5) years each, as
provided in the Lease.
3. Incorporation of Lease. This Memorandum is for informational
purposes only and nothing contained herein shall be deemed to in any way to
modify or otherwise affect any of the terms and conditions of the Lease, the
terms of which are incorporated herein by reference. This instrument is merely a
memorandum of the Lease and is subject to all of the terms, provisions and
conditions of the Lease. In the event of any inconsistency between the terms of
this Memorandum and the terms of the Lease, the terms of the Lease shall
prevail.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease
as of the day and year first above written.
TENANT:
FRESH N' LITE, INC., A Texas corporation
By: /s/ STAN SWANSON
Name: Stan Swanson, Fresh N' Lite, Inc.
Title: President
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EXHIBIT 6.6CE
GROUND LEASE AGREEMENT
THIS GROUND LEASE AGREEMENT (the "Lease"), is made as of the 11th day
of April, 1997 (the "Lease date"), by and between ROBERT M. FARRELL DEVELOPMENT,
LTD., a Texas limited partnership, whose address is 8235 Douglas Avenue, Suite
950, Dallas, Texas 75225 ("Lessor"), and FRESH N' LITE, INC., a Texas
corporation, whose address is 2804 Judson Road, Longview, Texas 75605
("Lessee").
In consideration of the covenants contained in this Lease, the parties
agree as follows:
I.
PROPERTY LEASED
1.1 DEMISE. Lessor leases to Lessee and Lessee leases from Lessor the following
property (the "Land") located in Shopping Center (hereinafter defined) together
with certain non-exclusive easements of ingress and egress and parking described
herein (collectively herein called the "premises" or the "leased premises").
Legal Description of Land: See Exhibit "A" attached hereto and made a
part hereof.
Commonly described as: Fresh'n Lite Cafe and Grill
The Colony, Texas
Legal Description of Shopping Center:
Lessor's property located in the City of The Colony, Denton County,
Texas, which property is described or shown on Exhibit "A-1" attached
to this Lease. With regard to Exhibit "A-1", the parties agree that the
exhibit is attached solely for the purpose of locating the Shopping
Center and the premises within the Shopping Center and that no
representation, warranty, or covenant is to be implied by any other
information shown on the exhibit (i.e., any information as to
buildings, tenants or prospective tenants), etc. is subject to change
at any time. Notwithstanding the foregoing, Lessor will not construct,
or allow any other party to construct, other buildings or improvements
in the "No Build Area" shown on Exhibit "A-1" of this Lease without
Lessee's approval, which approval shall not be unreasonably withheld.
The lease of the leased premises is subject to the easements,
conditions and restrictions of record affecting the Shopping Center and
the ingress/egress and parking easements set out in Exhibit "B" of this
Lease, including without limitation that certain Declaration of
Restrictions and Grant of Easements (the "Declaration").
With respect to the Declaration:
(a) The Declaration shall not be amended so as to
materially adversely affect the rights and privileges of
Lessee hereunder, nor shall Lessor give its consent to any
matter for which Lessor's consent is required under the
Declaration which matter would have such a material adverse
effect on the rights and privileges of Lessee hereunder,
without in each case Lessee's prior written consent.
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(b) Lessor does hereby grant, assign and convey unto
Lessee all of the cross easements and other rights to use the
common areas contained in and/or conveyed to Lessor pursuant
to the Declaration, with the same force and effect as if said
rights had been granted directly to Lessee.
(c) Lessor does hereby agree to enforce the cross
easement rights and other rights contained in the Declaration
on Lessee's behalf to the extent necessary for the Lessor to
comply with all of its obligations to Lessee under this Lease.
1.2 LEASE TERM COMMENCEMENT / RENTAL COMMENCEMENT. Commencement of the
term of this Lease shall be the Effective Date ("Lease Term Commencement").
Rental shall be due and payable (the "Rental Commencement Date") on the earlier
of (i) date the restaurant opens for business or (ii) ninety (90) days after
issuing of all permits but in no event shall commencement be later than October
15, 1997. The Rental Commencement Date shall be designated by the parties in a
form capable of being recorded among the public records of Denton County, Texas.
The building and other improvements are to be built in accordance with plans and
specifications prepared by Lessee in accordance with the requirements of the
Declaration and approved in writing by Lessor before construction commences. For
purposes hereof, construction shall be deemed to begin when Lessee obtains a
building permit for the building or any other improvements to be constructed by
Lessee on the Land pursuant to the terms hereof.
1.3 COVENANT OF QUIET ENJOYMENT. Lessor promises, subject to Lessee's
performance of all the terms and conditions of the Lease, that Lessee shall be
entitled to the quiet and peaceful enjoyment and undisturbed possession of the
premises for the term of the Lease.
1.4 PURCHASE OPTION. For and in consideration of the non-refundable sum of
$10.00 (the "Option Consideration"), receipt of which is hereby acknowledged,
and of Lessee's full compliance with all of the terms and conditions of this
Lease, Lessor hereby grants to Lessee the right to purchase the premises at any
time during, but not after, the first three (3) years of the initial term of
this Lease for a purchase price equal to the sum of $550,000.00 (which purchase
price is intended to be net to Lessor, with Lessee to be responsible for all
costs of closing, including without limitation, title policy premium, brokerage
commissions, and prepayment premiums, if any, on Lessor's financing applicable
to the premises. The purchase hereunder shall be subject to any easements,
restrictions, liens for real estate taxes not due and payable and other
encumbrances to which the premises are subject as of the date of this Lease and
any additional easements, restrictions and encumbrances thereafter placed on the
premises in connection with the development and/or operation thereof or of the
Shopping Center. such right must be exercised, if at all, by Lessee giving
ninety (90) days advance written notice (the "Exercise Notice") to Lessor in
accordance with the notice provisions of this Lease. The Exercise Notice must be
given on or before the expiration of the first three (3) years of the Lease
term.
The purchase price shall be paid in cash at closing, with closing to occur at
the office of Lessor on the date which is thirty (30) days after Lessor's
receipt of the Exercise Notice. Lessee agrees however to cooperate with Lessor,
upon request of Lessor at any time at or prior to closing, so that the
transaction might be closed as a tax deferred exchange pursuant to Section 1031
of the Internal Revenue Code of 1986, as amended, (or comparable section of any
subsequently enacted federal income tax). The closing may be extended for up to
180 days to accommodate such an exchange, provided however, that said exchange
shall be at no additional cost or liability to Lessee over that which Lessee
would incur in a sales transaction.
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At closing, Lessor shall furnish to Lessee, at Lessee's cost and expense, a
Texas Owner's Policy of Title Insurance on the standard form of policy
prescribed by the Texas State Board of Insurance with standard printed
exceptions and a special warranty deed on the Texas State Bar Form of deed
conveying title free of all encumbrances except as set forth above. Taxes,
operation expenses and rent under this Lease shall be prorated to the date of
closing and Lessee shall additionally pay to Lessor at closing all amounts due
or accrued under this Lease to the date of closing, plus the amount of any
prepayment premium applicable under Lessor's then first lien mortgage financing
covering the premises.
Lessee hereby indemnifies and agrees to hold Lessor harmless with respect to any
brokerage commissions claimed by a person asserting his entitlement thereto at
the alleged instigation of Lessee or otherwise applicable to such sale and
purchase.
This Purchase Option may not be assigned (whether by assignment of this Lease,
separate assignment, or otherwise) by Lessee and any purported assignment of
this Purchase Option shall terminate as of the date of any such purported
assignment. Moreover, upon any purported assignment of this Lease or subletting
of all or any part of the premises, this Purchase Option shall terminate and be
null and void. It is further understood and agreed that any default of Lessee in
the performance of its obligations under this Lease, whether or not waived or
excused by Lessor or cured by Lessee, shall render this Purchase Option null and
void.
1.5 CONDITION. Lessor shall have the right to terminate this Lease if Lessor is
unable to obtain the approval of Lessee's proposed site plan for the premises
from Albertson's, Inc. within thirty (30) days from the date hereof, by giving
Lessee written notice thereof on or before expiration of said 30-day period.
Upon any such termination, any amounts theretofore paid by Lessee to Lessor
shall be refunded and the parties shall have no further obligations or
liabilities to each other hereunder.
II.
TERM
2.1 TERM. The term of this Lease (the "term") shall commence on the date set out
in Section 1.2 above, and shall expire at midnight on the twentieth (20th)
anniversary of the Rental Commencement Date (the "term expiration date") unless
sooner terminated as provided in this Lease. Each twelve (12) month period of
the term is sometimes herein referred to as a "Lease Year." Any period of less
than a month from the Rent Commencement Date to the end of that month shall be
added to the first Lease Year.
2.2 RENEWALS. Lessee is granted the option to extend the term of this Lease for
two (2) consecutive extended terms of five (5) years each, provided (a) Lessee
is not in default at the time of exercise of the respective option, and (b)
lessee gives written notice of its exercise of the respective option at least
one hundred eighty (180) days prior to the expiration of the original term or
the expiration of the first renewal term, as the case may be. Each extension
term shall be upon the same terms, conditions and rentals, except (i) Lessee
shall have no further right of renewal after the second extension term
hereunder, and (ii) the monthly Base Annual Rental will be $67,540.00 for the
first extension period and $74,294.00 for the second extension period. Failure
to exercise the first extension option hereunder shall render the second
extension option null and void.
2.3 POSSESSION. Possession of the land shall be delivered to the Lessee on the
Effective Date.
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2.4 HOLDOVER. In the event Lessee remains in possession of the premises after
the expiration of this Lease and without the execution of a new lease, it shall
be deemed to be occupying said premises as a tenant from month to month at a
rental equal to the then most recently applicable rental under Section 3.1 plus
fifty percent of such amount plus any other charges or expenses to be paid by
Lessee and otherwise subject to al the conditions, provisions and obligations of
this Lease insofar as the same are applicable to a month-to-month tenancy.
2.5 END OF TERM. At the expiration or earlier termination of the Lease, the
building fixtures, as defined in Section 15.14 hereafter, located on the
premises shall become the property of the Lessor. If, at that time, Lessee is in
compliance with Lease terms and conditions, Lessor hereby waives any right to
claim any furniture, trade fixtures, signage, unattached kitchen equipment and
other unattached movable personal property (collectively the "personalty") owned
by Lessee located on the premises which pertain to the restaurant and its unique
equipment and fixturing. Notwithstanding anything herein to the contrary,
building fixtures and equipment such as HVAC systems, plumbing, attached kitchen
equipment, window and door systems, built-in cabinets that are a part of the
building, shall remain with the building and become the property of the Lessor.
Should Lessee remove any personalty, Lessee agrees to repair any damage caused
by such removal and return the premises to Lessor in good condition, normal wear
and tear excepted.
III.
CONSIDERATION
3.1 BASE ANNUAL RENTAL. Lessee agrees to pay and Lessor agrees to accept a Base
Annual Rental for each Lease Year (such being hereinafter referred to as
"guaranteed minimum annual rental") as set out below:
Lease Years Annual Rent Monthly Installment
1-5 $51,600.00 $4,300.00
6-10 $54,900.00 $4,575.00
11-15 $58,800.00 $4,900.00
16-20 $61,400.00 $5,116.67
The Base Annual Rental shall be payable in equal monthly installments in advance
by the first day of each calendar month during the term of this Lease commencing
on the Rental Commencement Date. If Rental Commencement Date or a lease
termination (other than for Lessee's default) occurs on date other than the
first day of a calendar month, the monthly installment of the Base Annual Rate
for the month in which commencement or termination occurs shall be prorated on a
daily basis. Notwithstanding the foregoing, upon the execution of this Lease,
Lessee has deposited with Lessor $4,300.00 as security for the faithful
performance and observance by Lessee of the terms, provisions, agreements,
covenants and conditions of this Lease and shall be considered an advance
payment of the first months rent of the initial term, to be applied as such.
3.2 ADDITIONAL CHARGES. Lessor agrees to furnish to Lessee, at Lessor's sole
cost and expense, within thirty (30) days after the date hereof, a current
boundary survey of the premises. Other, in all respects, Lessee and Lessor agree
that the rent accruing under this Lease shall be net to Lessor and that all
costs of platting the premises (as provided in Section 6.1), all costs of
development of the premises
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(as provided in Article XIII), including without limitation obtaining site plan
approval, specific use permit, if any, and taxes, costs, common area maintenance
fees for the premises, expenses and charges of every kind and nature except as
may herein be expressly provided ("additional charges") relating to the premises
(except the taxes of Lessor referred to in Section 6.3 and any payments for
interest or principal under any mortgage relating to Lessor's interest in the
premises) which may arise or become due during the term or any extension of this
Lease, shall be paid by Lessee. All additional charges which Lessee assumes
agrees to pay under any provisions of this Lease, together with all interest and
penalties that may accrue on these additional charges in the event Lessee fails
to pay them, as well as all other damages, costs and expenses, including,
without limitation, reasonable attorneys' fees and other legal and court costs
which Lessor may incur in enforcing this Lease, and any and all other sums which
may become due by reason of Lessee's default or failure to comply with its
obligations under this Lease, shall be deemed to be additional charges. In the
event of non-payment, Lessor shall have all the rights and remedies as provided
in the case of non-payment or rent.
3.3 LATE CHARGES. It is understood that the Base Annual Rental is payable on or
before the first day of each calendar month (in accordance with Section 3.1
above) without offset or deduction of any nature. In the event any rental is not
received within ten (10) days after its due date for any reason whatsoever, or
if any rental payment is by check which is returned for insufficient funds, then
in addition to the past due amount Lessee shall pay to the Lessor a late charge
in an amount equal to ten percent (10%) of the rental then due, in order to
compensate lessor for its administrative and other overhead expenses. Any such
late charge or interest payment shall be payable as additional charges under
this Lease and shall be payable immediately on demand. Notwithstanding the
foregoing, with respect to the first two (2) instances in any calendar year
where a late charge would be due in accordance with the foregoing, such late
charge shall not be due if payment is made within ten (10) day following written
notice from Lessor that the payment is past due.
IV.
INSURANCE
4.1 COVERAGE. During the term, Lessee, at its own cost and expense shall:
(a) Keep the premises and all leasehold improvement and the fixtures
and personalty thereon insured with an all risk insurance policy in an
amount equal to the greater of (i) one hundred percent (100%) of actual
value, or (ii) eighty percent (80%) of the cost of replacement thereof
(less the cost of excavations, foundations, footing and pilings) or
such higher percentage required to avoid application of any
co-insurance clauses in Lessee's policy. Replacement cost shall be
determined from time to time at the request of lessor, but not more
frequently than once in any twelve (12) consecutive calendar months.
Replacement cost shall be determined by one of the insurers or if the
stated replacement cost is not acceptable to Lessor as not reasonably
consistent with similar valuations, at the option of Lessor, by an
appraiser who is mutually and reasonably to lessor and Lessee, and whom
shall be retained and paid by Lessee if the appraiser requires an
increase in the stated replacement cost.
(b) Provide and keep in force comprehensive general liability insurance
against claims for personal injury, death or property damage occurring
on, in or about the premises or the adjoining streets and property, in
limit of not less than $1,000,000 per occurrence for bodily injury, not
less than $500,000 per occurrence for property damage, or in such other
amounts as Lessor may
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reasonably request and as are commonly carried by other restaurants of
a similar nature in the Dallas area.
(c) Provide and keep in force plate glass insurance.
4.2 POLICIES. All insurance required by Lessor and provided by Lessee shall be
carried in favor of lessor and Lessee, as their respective interests may appear,
and any underlying lessor, fee owner, affiliate corporation, trustee, mortgage
or other person designated by Lessor having an insurable interest. All insurance
shall be obtained from companies licensed to do business in Texas and which have
at lease a Class X rating by Best's Insurance Guide or are otherwise approved by
Lessor, such approval not to be unreasonably withheld. Lessee shall procure
policies for all insurance for a period of not less than one year and shall,
prior to commencement of any construction by Lessees deliver to Lessor all
policies or certificates of insurance with evidence of payment of all premiums.
Lessee shall procure renewals of these policies from time to time and deliver
evidence thereof to Lessor before their respective expiration dates. All
insurance policies shall be non-assessable and shall require thirty (30) days
notice by registered mail to Lessor of any cancellation or change affecting
lessor's coverage under the policies. All property damage and business
interruption policies of Lessee shall contain a waiver of any subrogation rights
which Lessee's insurers may have against Lessor, even if the loss suffered is
caused by the act, omission or negligence of Lessor.
4.3 JOINT EFFORTS. Lessee and Lessor shall cooperate in attempts to collect any
insurance proceed that may be due in the event of loss, and Lessee shall execute
and deliver to lessor such proofs of loss and other instruments which may be
required for the purpose of recovering these proceeds.
4.4 WAIVER OF SUBROGATION. Lessor and Lessee each hereby release the other from
any and all liability or responsibility to the other, or to any other party
claiming through or under them by way of subrogation or otherwise, for any loss
or damage to property caused by a casualty which is insurable under standard
fire and extended coverage insurance; provided, however, that this mutual waiver
shall be applicable only with respect to a loss or damage occurring during the
time when property insurance policies, which are readily available in the
marketplace, contain a clause or permit an endorsement to the effect that any
such release shall not adversely affect or impair the policy or the right of the
insured party to receive proceeds under the policy; provided, further, that this
release shall not be applicable to the portion of any damage which is not
reimbursed by the damaged party's insurer because of the "deductible" in the
damaged party's insurance coverage. The release specified in this Section 4.4 is
cumulative with any releases or exculpations which may be contained in other
provisions of this Lease.
4.5 CANCELLATION OF INSURANCE. If any insurance policy covering the premises or
any part of it is not provided by Lessee as herein required or is canceled or is
threatened by the insurer to be canceled, or if the coverage thereunder is
reduced in any way by the insurer for any reason, and if Lessee fails to remedy
the failure or the condition giving rise to cancellation, or reduction of
coverage within five (5) business days after notice thereof by lessor, Lessor
may, at its option, in addition to any other remedies, enter the premises and
remedy the condition giving rise to such cancellation, or reduction, and provide
the required insurance, and Lessee shall forthwith pay the cost thereof to
lessor (which cost may be collected by lessor as rent) and lessor shall not be
liable for any damage or injury caused to any property of Lessee or of others
located on the premises as a result of any such entry other than injury or
damage caused by Lessor's misconduct.
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4.6 LOSS AND DAMAGE. Lessor shall not be liable for any death or injury
occurring on the premises, nor for the loss of or damage to any of the
personalty or other property of Lessee or of others by theft or otherwise, from
any cause whatsoever unless such loss is the result of the negligent act or
omission of Lessor. Without limiting the generality of the foregoing, Lessor
shall not be liable for any injury or damage to persons or property resulting
from fire, explosion, falling plaster, steam, dampness, gas, electricity, water,
rain, snow, or leaks from any part of the premises or from the pipes, appliances
or plumbing works or from the roof, street or subsurface or from any other place
by any other cause whatsoever. Lessor shall not be liable for any such damage
caused by other persons or the public, or caused by operations in construction
of any private, public or quasi-public work. All of the personalty or any other
property of Lessee kept or stored on the premises shall be kept or stored at the
risk of Lessee.
V.
THE PREMISES
5.1 USE.
(a) Restaurant Operation. Lessee will open as a Fresh 'n Lite
restaurant business in the premises promptly upon completion of construction of
the building and shall continuously thereafter during the term and any
extensions thereof operate a restaurant on the premises serving prepared food
and all legal beverages together with incidental carry-out or delivery thereof.
After initially opening as a Fresh 'n Lite restaurant, Lessee may change to a
different restaurant use subject to Lessor's consent, not to be unreasonably
withheld or delayed and to be deemed approved if not objected to within thirty
(30) days). It shall be unreasonably for Lessor to withhold its consent to a
requested use change if (i) the proposed use is a restaurant use consistent with
uses at first-class retail centers in the greater Dallas area, (ii) the proposed
use does not violate any use restrictions or exclusive use rights then in effect
at the Shopping Center, and (iii) the proposed use does not compete with another
tenant then operating within the Shopping Center as determined by Lessor acting
in a commercially reasonable manner.
The premises will be used for no other purpose and under no trade name other
than "Fresh 'n Lite" (or the trade name of any other restaurant operations
permitted under Section 5.1) without Lessor's consent. Lessee shall not at any
time following the Rental Commencement Date leave the premises vacant, but shall
in good faith continuously throughout the term of this Lease conduct and carry
on in the entire premises, the type of business for which the premises is
leased. lessee shall, except during reasonable periods for repairing, cleaning
and decorating, keep the premises open to the public for business during the
periods required hereunder or if otherwise open with adequate personnel in
attendance on all days and during all hours established by Lessee from time to
time as typical business days and store hours for its restaurant operations,
provided that lessee shall not be required to pen before 11:00 a.m. and shall
have the right to close one day a week and on major holidays if consistent in
each case with Lessee's practices at its other restaurant operations. Lessee
agrees that it will not use in connection with the operation of or as additional
parking for its business on the premises any property-other than the premises
and the parking areas designated in the recorded cross easements with the
adjoining properties as available for common parking. Notwithstanding anything
in this Lease to the contrary, the Lessor's obligations under this Lease are
conditioned upon the faithful performance by Lessee of the Declaration and a
default in the terms of the Declaration shall be a default of this Lease. Except
as may be otherwise specifically provided by the terms of this Lease, Lessor
shall not be required to furnish to Lessee any facilities or services of any
kind whatsoever, such as, but not limited to water, sewer, steam, heat, gas
telephone service, sewerage service and other utilities furnished to the
premises. If any utilities furnished to the premises are
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interrupted due to the negligence of Lessor or Lessor's employees or contractors
for more than forty-eight (48) hours, Base Annual Rental shall thereafter
equitably abate in proportion to the extent of interference with Lessee's
business operations until such utilities are restored.
(b) Exclusive. The use of Parcels 1, 3, 4 and 7 of the Shopping Center
by lessor or any other owner or occupant shall be subject to the following
covenants and restrictions. As a material inducement for Lessee to enter into
this Lease, Lessor agrees that during the term and any extension terms, Parcels
1, 3, 4 and 7 of the Shopping Center shall not be used as, or sold or leased for
use as, a healthier dining concept restaurant or food service establishment,
such as Eureka's, Bless Your Heart, Preston's or the like; provided, however,
said Parcels 1, 3, 4 and/or 7 may be used as, or sold or leased for use as, a
restaurant or food service establishment which prepares, serves or sells healthy
dining products so long as such sales are incidental to the sale of its other
products. As used herein, the term "incidental" shall mean that any such owner,
tenant or occupant shall not derive more than thirty percent (30%) of its annual
gross sales from the sale of healthier dining concept products. This restrictive
covenant and exclusive use is subject to the following provisions:
(a) If a Fresh 'n Lite restaurant does not open for business
within 365 days after the Lease Term Commencement, then this
restrictive covenant and exclusive use shall automatically terminate as
to said Parcels 1, 3, 4 and 7 of the Shopping Center.
(b) If, after the opening of a Fresh 'n Lite restaurant, such
restaurant ceases to serve or sell primarily healthier dining concept
products, then this restrictive covenant and exclusive use shall
automatically terminate.
(c) Lessee's rights hereunder are subject to the rights of BC
Texas, Inc. under existing lease with Lessor covering a portion of
Parcel 1 (except that no assignee or sublessee of BC Texas, Inc. shall
be allowed to violate Lessee's exclusive hereunder).
5.2 REPAIRS AND MAINTENANCE.
(a) Common Area. Lessor will maintain (or cause to be maintained) in
good order, condition and repair all parking areas and other areas (exclusive of
the premises and of areas within the premises of any occupants of the Shopping
Center) used in common by tenants and occupants of the Shopping Center (the
"Common Area"), and Lessor hereby grants to Lessee, its agents, employees and
invitees, the nonexclusive right to use the Common Areas in common with Lessor
and the other tenants and occupants of the Shopping Center, and their respective
agents, employees and invitees, subject to the terms of the Declaration and the
reasonable written rules and regulations from time to time promulgated by Lessor
governing the use of the Common Areas.
(b) Premises. Subject to Section 5.2(a) of this Lease, lessee shall, at
all times during the term, at its own cost and expense, keep and maintain all
leasehold improvements, and all fixtures and personalty located thereon, and all
parking areas, driveways and landscaping thereon, in good order and condition,
ordinary wear and tear excepted (but in any event in compliance with the
requirements of the Declaration) and subject to all applicable terms of Sections
5.3 and 5.8, shall make all necessary and desirable repairs, restorations and
replacements thereof, interior and exterior, structural and nonstructural,
foreseen and unforeseen (hereinafter collectively called "repairs"), and shall
use all reasonable precaution to prevent
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waste, damage or injury. Without limiting the coverage of the previous sentence,
it is understood that Lessee's responsibilities therein include the repair and
replacement of all lighting, heating, air conditioning, plumbing and other
electrical, mechanical and electromotive installation, equipment and fixtures
and also include all utility repairs in ducts, conduits, pipes and wiring, and
any sewer stoppage located in, under and above the premises, regardless of when
or how the defect or other cause for repair or replacement occurred or became
apparent.
In the event that Lessee fails or neglects to make all necessary repairs or
fulfill its other obligations as set forth above within thirty (30) days after
written notice thereof from Lessor, Lessor or its agents may enter the premises
for the purpose of making such repairs or fulfilling those obligations. All
costs and expenses incurred as a consequence of Lessor's action shall be repaid
by lessee to Lessor within thirty (30) days after Lessee receives copies of
receipts showing payment by Lessor for such repairs or other obligations. These
receipts shall be prima facie evidence of the payment of the charges paid by
Lessor. In the case of emergency, Lessor shall only be required to give Lessee
such notice as is reasonable under the circumstances before taking any such
action.
5.3 ALTERATIONS. Lessee shall not at any time make any alteration, change,
addition or improvement (hereinafter collectively called alterations) in or to
the structural or exterior of the premises without the prior written consent of
Lessor, which consent shall not be unreasonably withheld or delayed. Without
Lessor's consent being required, Lessee may make such interior nonstructural
alterations as Lessee may deem appropriate, provided that where such alterations
are desired costing in excess of $20,000 in connection with any particular
remodeling, Lessee will furnish copies of the plans and specifications therefor
to Lessor prior to commencing such work. For purposes hereof, mechanical,
electrical and plumbing systems shall be deemed "structural." In any event:
(a) the alterations shall be performed in a first class
workmanlike manner at Lessee's sole expense, and shall not weaken or
impair the structural strength or lessen the value of the premises, and
shall be conducted in such manner as to cause a minimum of interference
with other construction in progress and with the transaction of
business in the Shopping Center. Lessee agrees to indemnify Lessor and
hold Lessor harmless against any loss, liability or damage resulting
from such work; not to be unreasonably withheld or delayed (and deemed
approved if not objected to by Lessor within fifteen (15) days after
Lessor's receipt thereof);
(b) the alterations shall be made according to plans and
specifications therefor, which shall be first submitted to and where
required, approved in writing by Lessor;
(c) before the commencement of work on any alterations, such
plan and specifications shall be approved by all governmental
authorities having jurisdiction and any public utility company having
an interest in the alterations; and
(d) before the commencement of any alterations, lessee shall
pay the amount of any increase in premiums on insurance policies for
endorsement covering the risk during work on the alterations, and
workmen's compensation insurance, if any, covering all persons employed
in connection with that work.
All alterations, improvements and fixtures (including, without limitation, all
floor coverings and all heating and air conditioning equipment but excluding
lessee's unattached, readily movable furniture and office
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equipment) which may be made or installed by either party upon the premises
shall remain upon and be surrendered with the premises and become the property
of Lessor at the termination of this Lease, in good condition, ordinary wear and
tear, casualty and condemnation excepted.
5.4 LIEN. Should Lessee cause any alterations or repairs to be made to the
premises, or cause any labor to be performed or material to be furnished,
neither Lessor nor the premises shall under any circumstances be liable for the
payment of any expense incurred, and all such alterations and repairs shall be
made and performed at Lessee's expense. If, because of any act or omission of
Lessee, any mechanic's or other lien, charge, claim or order for the payment of
money shall be filed against the premises or against Lessor, Lessee shall, at
its own cost and expense, cause it to be canceled and discharged of record or
bonded within fifteen (15) days after notice of filing thereof. In the event
that the lessee fails to cause any such mechanics' or other lien, charge or
order to be canceled and discharged or bonded, then, in addition to any other
right or remedy of the Lessor, the Lessor may, at its option, cancel or
discharge it by paying the amount claimed to be due into Court or directly to
any claimant and the amount so paid by lessor and all costs and expenses
including attorney's fees incurred for the cancellation or discharge of such
lien shall be due from the Lessee to the Lessor as an additional charge payable
on demand.
Notwithstanding anything herein to the contrary, except as set out in Section
11.3, the Lessee shall have no right, power or authority, in law or in equity,
to mortgage, encumber, or otherwise pledge or transfer the rights, if any, of
the Lessor under this Lease, and all liens, if any, created by the Lessee shall
apply only to the interest of Lessee under this Lease.
5.5 SIGNS. Lessee shall be permitted maximum signage allowed by the City of The
Colony, provided that Lessee shall only place approved Fresh 'n Lite signs or
symbols (or signs and symbols of any other restaurant operation permitted under
Section 5.1) on the premises and they shall be and remain the property of the
Lessee. All signs (including without limitation monument signs, if any) shall be
constructed and installed at Lessee's sole cost and expense, and must be in
conformity with the Declaration and all city, county and state rules,
regulations and laws. Lessor must approve all exterior signage of Lessee before
it is installed, not to be unreasonably withheld.
5.6 INSPECTION. Fee owner, Lessor or their representatives shall have the right
upon prior written notice (except in case of emergency) to enter the premises at
reasonable hours of any business day to ascertain if the premises are in proper
repair and condition or to show the premises to prospective purchasers or
lenders (or tenants during the final one hundred twenty (120) days of the Lease
term). Lessee will permit Lessor to place and maintain "For Rent" or "For Lease"
signs on the premises during the last ninety (90) days of the Lease term, as
same may be extended pursuant to Section 2.2.
5.7 LICENSES AND LAWS. The Lessee shall, at its own cost and expense, obtain all
necessary licenses and/or permits which may be required for the conduct of its
business and Lessee shall, at its own cost and expense, promptly observe and
comply with all applicable laws, ordinances, requirements, orders, directions,
rules and regulations (referred to generally as "regulations") of governmental
authorities having or claiming jurisdiction over the premises or the conduct of
Lessee's business. Lessee may contest in good faith, after notice to Lessor, by
appropriate proceedings conducted promptly at Lessee's own expense, in Lessee's
name (and/or whenever necessary and with Lessor's consent, in Lessor's name),
the validity or enforcement of any such regulation provided that (i) such
contest or any associated deferment of payment does not subject Lessor to a fine
or other criminal liability, or subject the premises to any encumbrance, (ii)
Lessee diligently prosecutes such contest to a final determination by the
governing
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authority, and (iii) Lessee furnished Lessor with any security that Lessor may
reasonably request in connection with such contest.
5.8 DAMAGE OR DESTRUCTION. If, during the term, the premises or the improvements
or fixtures thereon are destroyed or damaged in whole or in part by fire or
other cause, lessee shall give Lessor immediate notice, and Lessee, at its own
cost and expense, shall cause the prompt repair, replacement and rebuilding of
same ("restoration"), subject without limitation to Sections 5.2 and 5.3 of this
Lease. Lessor shall in no event be called upon to repair, replace or rebuild any
such buildings, fixtures or personalty, nor to pay any of the costs or expenses
thereof beyond or in excess of any insurance proceeds made available to Lessee
under this Lease.
All insurance proceeds on account of such damage or destruction shall be applied
to pay or reimburse Lessee for the payment of the cost of restoration of the
building and other leasehold improvements on the premises, including the cost of
temporary repairs or for the protection of the premises pending the completion
of permanent restoration. In the event of substantial damage (hereinafter
defined), Twenty Five Thousand Dollars ($25,000.00) of the insurance proceeds
shall be disbursed by the insurer directly into an escrow account with an
escrowee reasonably acceptable to Lessor and Lessee, with such sum to be
distributed to Lessee upon the furnishing of proof reasonably satisfactory to
Lessor of lien free completion of the restoration, but to be distributed to
lessor upon any default by Lessee with respect to the restoration (such escrow
amount in no way to limit Lessee's liability for any such default).
If the insurance proceeds and other funds deposited with Lessor or the
applicable mortgage, less the actual cost, fees and expenses, if any, incurred
in connection with the adjustment of the loss, are insufficient to pay the
entire cost of the restoration, Lessee will pay the deficiency. During
restoration, Lessee shall continue the operation of its business within the
premises to the extent practicable, this Lease shall terminate, nor shall rental
and other charges payable under this Lease be abated or affected in any manner.
Notwithstanding the foregoing in this Section 5.8, if the building and other
leasehold improvements on the premises shall be substantially damaged (fifty
percent (50%) or more of the insurable value of the building) or destroyed by
fire, windstorm, or otherwise, within the last year of the term of this Lease,
as same may be extended pursuant to Section 2.2, either party shall have the
right to terminate this Lease, provided that notice thereof is given to the
other party not later than sixty (60) days after such damage or destruction. If
said right of termination is exercised, this Lease and the term hereof shall
cease and come to an end as of the date of such damage or destruction and the
herein referenced insurance proceeds shall belong solely to Lessor.
5.9 WARRANTIES DISCLAIMER. The premises is being leased "AS IS," with Lessee
accepting all defects, if any, and Lessor makes no warranty of any kind, express
or implied, with respect to the premises (without limitation, Lessor makes no
warranty as to the habitability, fitness or suitability of the premises for a
particular purpose nor as to the absence of any toxic or other hazardous
substances). this section 5.9 is subject to any contrary requirements under
applicable law, however, in this regard, Lessee acknowledges that it has been
given the opportunity to inspect the premises and to have qualified experts
inspect the premises prior to the Lease Term Commencement. Lessee acknowledges
that neither Lessor nor its agents have made any representations or promises
with respect to the premises except as expressly set forth in this Lease, and no
rights, easements or licenses are acquired by Lessee by implication or otherwise
except as expressly set forth herein. The taking of possession of the premises
by Lessee shall be conclusive evidence that the Lessee has accepted the premises
"AS IS". Lessor agrees to reasonably
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cooperate with and assist Lessee, at no cost to Lessor, in asserting claims
against contractors or others providing work and/or services to the premises.
VI.
TAXES AND OTHER CHARGES
6.1 PAYMENT. From and after the Rent Commencement Date Lessee shall pay as they
become due and payable all real estate taxes (both real and personal),
assessments (both general and special) and other governmental impositions, but
only to the extent of charges lawfully created and assessed against the premises
or any part thereof after the Rent Commencement Date and prior to the expiration
of the term of this Lease. Any such tax, assessment, imposition or other similar
expense created, levied, or arising prior to the Rent Commencement Date, any
installment of any such charge created prior to the Rent Commencement Date or
any charge applicable to a period of time prior to the Rent commencement Date,
but assessed or otherwise imposed during the term hereof, shall be paid by
Lessor. Lessee shall deliver to Lessor, if requested, receipts or other
reasonably satisfactory evidence of payment of all such taxes, assessments and
governmental impositions so paid by Lessee Lessor shall have the right, but no
obligation, to take all necessary steps to replat the premises, but whether or
not the same is replatted Lessor shall make all reasonable efforts to have the
premises taxed as a separate parcel by the applicable governmental authorities,
and Lessee agrees to use its best efforts to cooperate with Lessor in such
process (it being understood and agreed that any costs of replatting the
premises as a separate lot shall be the responsibility of Lessee). In the event
the premises are not taxed or assessed as a parcel separate from a larger tax
parcel, Lessee will pay Lessor as additional rent, an amount equal to Lessee's
proportionate share of any such taxes or assessments based on values agreed to
between Lessor and Lessee using the services of a mutually acceptable tax
consultant compensated by Lessor. In such event Lessor shall pay such taxes
prior to delinquency and promptly furnish evidence of same to Lessee.
6.2 CONTESTS. It is agreed, however, that Lessee, at its sole cost and expense,
may dispute and contest the same (in its own name or in the name of Lessor, or
in the name of both, as it may deem appropriate), and in such cases the disputed
charge need not be paid until finally adjudged to be valid. At the conclusion of
such contest, Lessee shall pay the charge contested to the extent it is held
valid, together with all court costs, interest, penalties and other expenses
relating thereto. Nothing herein contained, however, shall be construed as to
allow such items to remain unpaid for such length of time as shall permit the
premises (or any part thereof) to be sold by governmental, city or municipal
authorities for the non-payment of the same.
VII.
INDEMNIFICATION
7.1 Lessee shall indemnify and save Lessor harmless from and against all costs,
expenses, liabilities, losses, damages, injunctions, suits, actions, fines,
penalties, claims and demands of every kind or nature, including reasonable
attorney's fees, by or on behalf of any person, party or governmental authority
whatsoever arising out of any matter relating to Lessee's occupation of the
premises and resulting from: (a) any failure by Lessee to perform any of its
obligation sunder this Lease, (b) any accident, injury or damage which occurs in
or about the premises, however occurring, (c) any matter arising out of the
condition, occupation, maintenance, alteration, repair, use or operation of the
premises or any part of it, and (of) the contest or challenge by Lessee of any
imposed tax, assessment or other charges, unless the
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indemnified loss is caused wholly or in part by Lessor's negligence, in which
event this indemnity shall not apply to the allocable share of such loss
resulting from Lessor's negligence.
VIII.
ENFORCEMENT
8.1 DEFAULT. Each of the following events is a default and a breach of
this Lease by Lessee:
(a) If Lessee ceases its restaurant operation sin or vacates or
abandons the premises or any substantial portion thereof or indicates
its intention to do so during the Lease term (it being understood and
agreed, however, that Lessee may cease operations in the premises for
reasonable periods of up to ninety (90) days in connection with bona
fide remodeling or repair and restoration in connection with a
permitted use change, an assignment or subletting, casualty or
condemnation without such cessation being a default hereunder), or at
any time prior to the last month of the Lease term shall remove or
attempt to remove, without the prior written consent of Lessor, all or
a substantial amount of Lessee's goods, wares, equipment, fixtures,
furniture, or other personal property without immediate replacement.
(b) If this Lease or the estate of Lessee hereunder is transferred to
another person or party, except in a manner permitted by the terms of
this Lease.
(c) If Lessee fails to pay Lessor any rent or other charge when it
becomes due and payable and fails to make such payment within ten (10)
days after written notice thereof by Lessor is received by Lessee
provided, however, that for each calendar year during which Lessor has
already given Lessee two (2) written notices of the failure to pay an
installment of rental, no further notice shall be required (i.e., the
event of default with automatically occur on the tenth day after the
date upon which the rental was due).
(d) If Lessee fails to perform any of its obligations under this Lease
(other than those above specified in this Section 8.1) and such
non-performance continues for a period of thirty (30) days after
written notice thereof by Lessor is received by Lessee or, if such
performance cannot be reasonably had within such thirty (30) day
period, Lessee has not in good faith commenced such performance within
such thirty day period or has not diligently proceeded therewith to
completion.
In the event of a default under subparagraphs (a) or (b) above, the term of this
Lease shall at Lessor's election automatically terminate without additional
notice to Lessee. Lessor shall have all other rights and remedies available, at
law or in equity, for such a breach. In the event a default under subparagraphs
(c) or (d), above, shall occur and be continuing after the notice period
provided, Lessor has the right, in addition to any other rights or remedies it
may have, to terminate this Lease without further notice to Lessee, and in such
event the term hereof shall expire in the same manner and with the same force
and effect, except as to Lessee's liability, as if the expiration of the time
fixed in such notice was the original term expiration date.
8.2 CURE BY LESSOR. To the extent reasonably susceptible to cure by Lessor,
after expiration of the applicable period of notice, or without notice in the
event of any emergency, Lessor at its option may, but shall not be obligated to,
make any payment required of Lessee or perform any obligation of Lessee, and the
amount Lessor pays, or the cost of its performance, together with interest
thereon at 12% per
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annum, shall be deemed to be an additional charge payable by Lessee on demand.
Lessor shall have the right to enter the premises for the purpose of correcting
or remedying any default susceptible to cure by Lessor, but neither any
expenditure nor any such performance by Lessor shall be deemed to waive or
release Lessee's default or the right of Lessor to take such action as may be
otherwise permissible in the case of default. The Lessor shall have no liability
to the Lessee for any loss or damages resulting from any such action by the
Lessor and entry by the Lessor under the provisions of Article V or VIII shall
not constitute breach of the covenant for quiet enjoyment or an eviction.
8.3 SURRENDER; REENTRY; RELETTING. In the event of cancellation or termination
of this Lease either by operation of law or otherwise, or in the event Lessor
gives notice to Lessee to vacate the premises pursuant to a default of this
Lease, Lessee agrees to immediately peacefully surrender the premises to Lessor,
and if Lessee refuses to do so, Lessor may, among other things, reenter and
repossess the premises, using such force for that purpose as may be necessary,
and whether or not this Lease is canceled or terminated Lessee shall
nevertheless remain and continue to be liable to Lessor in a sum equal to all
rent, additional rent and other charges payable under this Lease through the
then current term expiration date. If Lessor shall so reenter, Lessor may repair
and alter the premises in any manner as Lessor deems reasonably necessary or
advisable, and/or may, at its election, let or relet the premises or any part of
it for the whole or any part of the remainder of the term or for a longer
period, in Lessor's name or as the agent of Lessee, and out of any rent
collected or received from subtenants or as a result of such letting or
reletting, Lessor shall first pay to itself the cost and expense of retaking,
repairing and/or altering the premises, and the cost and expense of removing all
persons and property from the premises, second, pay to itself the cost and
expense sustained in securing any new tenant, and if Lessor maintains and
operates the premises, the cost and expense of operating and maintaining the
premises and, third, pay to itself any balance remaining on account of the
liability of Lessee for the sum equal to all rent, additional rent and other
charges due from Lessee through the then current term expiration date, provided
that Lessee shall not be entitled to receive any proceeds in excess of the
rental owed hereunder (other than as a credit as below specified). It is
expressly agreed that (without limitation) in determining "additional rent and
other charges due from Lessee," as that term is used above, there shall be added
to the Base Annual Rental a sum equal to the costs of maintenance of the
premises, all payments for taxes, charges and insurance payable by Lessee (as
specified in this Lease). Should Lessor, pursuant to this paragraph, not collect
rent which, after deductions is sufficient to fully pay to Lessor a sum equal to
all rent, additional rent and other charges payable through the original term
expiration date, the balance or deficiency shall, at the election Lessor, be
paid by Lessee on the first day of each month. Should Lessor collect rent which,
after deductions, shall exceed Lessee's then current obligations pursuant to
this Lease, such excess shall be credited to Lessee's on-going contingent lease
liability hereunder.
8.4 ACCELERATION. After occurrence of a default, whether or not Lessor relets
the premises, Lessor may whenever Lessor desires, demand a final settlement.
Upon demand for a final settlement, Lessor shall have a right to, and Lessee
hereby agrees to pay, the difference between the total of all monthly rentals
and other charges provided in this Lease for the remainder of the term and the
reasonable rental value of the premises for such period, such difference to be
discounted to present value at a rate equal to the rate of interest which is
allowed by law in the State of Texas when the parties to a contract have not
agreed on any particular rate of interest (or, in the absence of such law, at
the rate of six percent (6%) per annum).
8.5 SUITS. After occurrence of a default, suit or suits for the recovery of the
deficiency or damage or for any installment or installments of rent, additional
rent or any other charge due under this Lease may
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be brought by Lessor at any time or, at Lessor's election, from time to time,
and nothing in this Lease shall be deemed to require Lessor to wait until the
original term expiration date to bring suit.
8.6 WAIVER. After occurrence of a default, Lessee, except as set out in Section
8.1 hereof, hereby expressly waives service of any notice of intention to
reenter. Lessee hereby waives any and all rights to recover or to regain
possession of the premises or to reinstate or to redeem this Lease as permitted
or provided by any statute, law or decision now or hereafter in force and
effect. No receipt of moneys by Lessor from Lessee after the cancellation or
termination of the Lease shall reinstate, continue or extend the Lease, or
affect any prior notice given to Lessee or operate as a waiver of the right of
Lessor to enforce the payment of rent and additional rent then due or
subsequently falling due, or operate as a waiver of the right of Lessor to
recover possession of the premises by suit, action, proceeding or other remedy,
and any and all moneys so collected shall be deemed to be payments on account of
the use and occupancy of the premises, or at the election of the Lessor, on
account of Lessee's liability under this Lease.
8.7 PROOF OF CLAIM. Nothing in this Article shall limit or prejudice the right
of Lessor to prove and obtain as liquidated damages in any bankruptcy,
insolvency, receivership, reorganization or dissolution proceeding an amount
equal to the maximum allowed by any statute or rule of law governing such
proceeding, whether or not such amount is greater, equal to or less than the
amount of the damages referred to in any of the preceding sections.
8.8 INJUNCTION. In the event of a breach by Lessee of any of its Lease
obligations, Lessor shall have the right to enjoin and restrain the breach and
to invoke any remedy allowed by law or in equity in addition to other remedies
provided in this Lease.
8.9 INDEPENDENT RIGHTS. The rights and remedies of Lessor are distinct, separate
and cumulative, and no one of them, whether or not exercised by Lessor, shall be
deemed to be to the exclusion of any of the others.
8.10 NON-WAIVER. The failure of Lessor to insist upon strict performance of any
of Lessee's obligations under this Lease shall not be deemed a waiver of any
rights or remedies that Lessor may have and shall not be deemed a waiver of any
subsequent breach or default by Lessee.
8.11 WAIVER OF EXEMPTION FROM DISTRESS. Lessee agrees that notwithstanding
anything contained in any statute, enactment or other law of, the State of Texas
or of any other jurisdiction, none of the personalty located on the premises
shall be exempt from levy for distress for rent in arrears, and that if Lessee
makes any claim for such an exemption, this agreement may be pleaded as an
estoppel against Lessee in any appropriate action.
IX.
RENT ABATEMENT
9.1 Unless specifically provided in this Lease, no abatement, diminution, or
reduction of rent, additional rent, charges or other compensation shall be
claimed by or allowed to Lessee, or any persons claiming under Lessee, under any
circumstances, whether for inconvenience, discomfort, or interruption of
business.
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X.
CONDEMNATION
10.1 ENTIRE AWARD. In the event that the premises or any part of it is taken in
condemnation proceedings or by exercise of any right of eminent domain (or by
settlement agreement in lieu thereof between Lessor and those authorized to
exercise such right), Lessor shall be entitled to collect the entire amount of
any award made, without deduction for the value of the remaining primary term of
the estate vested in or owned by Lessee, subject only to Lessee's rights as set
forth in Section 10.4. Lessee agrees to execute any and all documents that may
be required to facilitate collection by Lessor of any and all such awards.
Lessee shall have no right to participate in any condemnation proceedings or
agreement except for the purposes described in Section 10.5.
10.2 SUBSTANTIAL TAKING. If at any time during the Lease Term, the whole or
substantially all of the premises is taken or condemned, this Lease shall
terminate and expire on the date on which title vests in the condemning
authority, upon which the rent provided to be paid by Lessee shall be
apportioned and paid to that date, and Lessee shall have no claim against Lessor
for the unexpired term of this Lease or for damage or for any other reason
whatsoever. For the purpose of this Section "Substantially all of the premises"
shall be deemed to have been taken if the portion of premises not taken cannot
be repaired or reconstructed in such a way that, by using only the amount of the
net award available from the taking, there remains a complete, rentable
structure capable of producing performance in a proportionately fair and
reasonable net annual income after payment of all operating expenses, rent,
additional rent and all other charges payable by Lessee, and after performance
by the Lessee of all its obligations under this Lease. This Lease shall not
terminate, and Section 10.3 of this Lease shall be applicable, if Lessee gives
Lessor written notice within thirty (30) days after physical possession is taken
by the condemning authority that Lessee elects to pay all costs of restoration
in excess of said net award.
10.3 PARTIAL TAKING. In the event of a partial taking (any taking which is not
"substantial"), this Lease shall not terminate, and Lessee shall promptly
proceed to restore the remainder of the building on the Land (if affected by the
taking) to a complete, independent and self-contained architectural unit, usable
for the purposes contemplated by this Lease. Lessor shall pay to Lessee, subject
to the same provisions and limitations specified herein with respect to
insurance proceeds, the cost of restoration in excess of any award made to
Lessee hereunder, which payment by Lessor shall in no event exceed a sum equal
to the amount of any separate award paid to Lessor for such restoration. Any
award to Lessee under Section 10.5 below shall first be applied against such
restoration costs, and after Lessor's payment of obligation hereunder, any
deficiency will be paid by Lessee. Such restoration shall be subject to and
shall be performed in accordance with the provisions of Section 5.3.
If this Lease does not terminate as provided in Section 10.2, the new guaranteed
minimum annual rental (but not percentage rental) payable hereunder during the
unexpired portion of this Lease shall be reduced in proportion to the area of
the building taken, effective on the date physical possession is taken by the
condemning authority.
10.4 LESSEE'S INDEPENDENT AWARD. Nothing in this article shall preclude Lessee
from pursuing any independent action permitted by law or from participating in
the same condemnation proceeding with Lessor but only for the purpose for
securing an independent condemnation proceedings award fro the Unamortized
Costs, loss of business or damage to personalty. Lessor shall receive the
balance of the
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award with respect to said improvements and the entire award with respect to the
Land shall belong to Lessor.
XI.
SUBORDINATION AND MORTGAGEE'S RIGHTS
11.1 SUBORDINATION. Lessee accepts this Lease subject to any mortgage, deed of
trust or other lien presently existing or hereafter placed upon the Shopping
Center or any portion of the Shopping Center which includes the premises, and to
any renewals and extensions thereof. Lessee agrees that any mortgagee shall have
the right at any time to subordinate its mortgage, deed of trust or other lien
to this Lease provided, however, notwithstanding that this Lease may be (or made
to be) superior to a mortgage, deed of trust or other lien, and the mortgagee
shall not be liable for prepaid rentals, security deposits and claims accruing
during Lessor's ownership. Lessee agrees upon demand to execute such further
instruments as Lessor may request to subordinate this Lease to any mortgage,
deed of trust or other lien hereafter placed upon the premises or the Shopping
Center as a whole, provided such mortgagee simultaneously executes and delivers
to Lessee a written agreement in form reasonably acceptable to Lessor and Lessee
that after a foreclosure (ro a deed in lieu of foreclosure) the rights of Lessee
shall remain in full force and effect during the term of this Lease so long as
Lessee shall continue to recognize and perform all of the covenants and
conditions of this Lease and providing for attornment on the part of Lessee and
further provided that Lessee shall not be required to execute any promissory
notes or other evidences of indebtedness which would create any personal
liability on behalf of Lessee.
11.2 NOTICE TO MORTGAGEE. At any time when the holder of an outstanding
mortgage, deed of trust or other lien covering Lessor's interest in the premises
has given Lessee written notice of its interest in this Lease, Lessee may not
exercise any remedies for default by Lessor hereunder unless and until the
holder of the indebtedness secured by such mortgage, deed of trust or other lien
shall have received written notice of such default and a reasonable time (not
less than 30 days) shall thereafter have elapsed without the default having been
cured.
11.3 MORTGAGING OF LEASEHOLD ESTATE. Upon prior notice to Lessor of its intent
to do so, Lessee shall have the right to mortgage and pledge this Lease to any
institutional Lender or financial entity subject, however, to the limitations
herein contained. Any such mortgage or pledge shall be subject and subordinate
to the rights of the Lessor hereunder and the holder of any mortgage or deed of
trust of the fee in and/or upon which the premises is located (hereinafter
called "Mortgagee"). No holder of a mortgage on this Lease (hereinafter called
"Leasehold Mortgage and/or Leasehold Mortgagee"). No holder of a mortgage on
this Lease (hereinafter called "Leasehold Mortgage and/or Leasehold Mortgagee")
shall have the rights or benefits mentioned in this Section 11.3, nor shall the
Lessor or its mortgagee be bound by this Section unless and until an executed
counterpart of such Leasehold Mortgage and of each assignment thereof or a duly
authenticated copy shall have been delivered to Lessor and its mortgagee. The
Leasehold Mortgagee shall permit all casualty insurance proceeds and
condemnation awards to be applied to the costs of restoration as specified in
this Lease.
In the event of any termination of this Lease in connection with any casualty or
condemnation the maximum amount of insurance proceeds or condemnation award to
which Lessee (or the Leasehold Mortgagee) is entitled to receive, regardless of
the then actual outstanding balance of any Leasehold Mortgage, shall be the
Unamortized Costs, with Lessor to receive the balance of the insurance proceeds
or condemnation award, as the case may be. Otherwise, neither Lessor nor the
premises or leasehold
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improvements at any time thereon be subject to any claim, lien or charge in
favor of any Leasehold Mortgagee if the Lease is terminated in accordance with
its terms prior to payment in full by Lessee of any Leasehold Mortgagee, in
which event such leasehold improvements shall become the sole property of Lessor
without compensation to Lessee or any Leasehold Mortgagee.
If Lessee shall mortgage this Lease in compliance herewith, then so
long as any such mortgage shall remain unsatisfied of record, the following
provisions shall apply:
(a) Lessor, shall serve a copy of any notice of default sent to Lessee
upon the holder of such Leasehold Mortgage at the last address of which Lessor
is given by said Leasehold Mortgagee.
(b) The holder of the Leasehold Mortgage shall, within the same period
and otherwise as herein provided, have the right to remedy such default, or
cause the same to be remedied. Lessor shall accept such performance by or at the
instance of such holder as if the same had been made by Lessee.
(c) No event of default shall be deemed to exist under the terms of
this Lease in the performance of work required to be performed, of acts to be
done, or of conditions to be remedied, if steps shall, diligently and in good
faith, have been commenced and completed by or for the Leasehold Mortgagee
within the time permitted to do so with diligence and continuity as provided in
this Lease.
(d) In the event of the termination of this Lease prior to the
expiration of the term, except by eminent domain, damage or destruction as
herein provided, Lessor shall serve notice to the Leasehold Mortgagee that the
Lease has been terminated. Such notice shall include a statement of any and all
sums which would at that time have been due under this Lease but for such
termination. The Leasehold Mortgagee shall thereupon have the option to obtain a
new Lease in accordance with and upon the following:
(i) Such options must be exercised by written notice to Lessor
given within thirty (30) days following receipt by the Leasehold Mortgagee of
Lessor's notice of Lease termination, failing which, such option shall be null
and void. The new Lease shall be effective as of the date of termination of this
Lease, and shall be for the remainder of the term of this Lease and at the rent
and upon all of the original agreements, terms, covenants and conditions hereof,
including any rights of renewal. Such new Lease shall require the Leasehold
Mortgagee to perform any unfulfilled obligation of Lessee under this Lease.
Failure of the Leasehold Mortgagee to execute and deliver the new Lease to
Lessor within ten (10) days after Lessor delivers same to Leasehold Mortgagee
shall render the Leasehold Mortgagee's rights hereunder null and void.
(ii) Upon the execution of such new Lease, the Lessee named
therein shall pay any and all sums which would at the time of the execution
thereof be due under this Lease but for such termination and shall pay all
expenses including, but not limited to, reasonable counsel fees, court costs and
disbursements incurred by Lessor in connection with any default and termination,
the recovery of possession of said premises, and the preparation, execution and
delivery of the new Lease.
(e) Any notice or other communication which Lessor shall desire or is
required to give to or serve upon the holder of a Leasehold Mortgage on this
Lease shall be in writing and shall be served in the same manner as upon Lessee
as provided in Section 15.2, addressed to such holder at his address as
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set forth in such Leasehold Mortgage or in the last assignment thereof delivered
to Lessor or at such other address as shall be designated by such holder by
notice in writing given to Lessor.
(f) The union of the interests of Lessor and Lessee herein shall not
result in a merger of this Lease into the fee interest.
If any Leasehold Mortgagee shall acquire title to Lessee's interest in
this Lease, by foreclosure of a Leasehold Mortgage thereon or by assignment in
lieu of foreclosure or by an assignment from a designee or wholly owned
subsidiary corporation of such Leasehold Mortgagee, or under a new Lease
pursuant to this Article, then such Leasehold Mortgagee shall be otherwise bound
by this Lease, but may assign such Lease in accordance with the provisions of
Section 12.2 herein and shall thereupon be released from any and all liability
for the performance or observance of the covenants and conditions in such Lease
contained on Lessee's part to be performed and observed from and after the date
of such assignment, provided that Lessor shall have received an executed
counterpart of said assignment, together with the name and address of the
assignee and further provided that Lessor also be sent an assumption by the
assignee, all in recordable form.
XII.
ASSIGNMENT
12.1 BY LESSOR. This Lease shall be fully assignable by the Lessor or its
assigns. In the event of the transfer and assignment by Lessor of its interest
in this Lease and in the building constituting a part of premises to a person
expressly assuming Lessor's obligations under this Lease, Lessor shall thereby
be released from any further obligations hereunder, and Lessee agrees to look
solely to such successor in interest of the Lessor for performance of such
obligations. Any security given by Lessee to secure performance of Lessee's
obligations hereunder may be assigned and transferred by Lessor to such
successor in interest and Lessor shall thereby be discharged of any further
obligation relating thereto.
12.2 BY LESSEE. Except as otherwise provided in this Section 12.2, Lessee may
not assign this Lease or sublease the premises, in whole or in part, without the
express written consent of Lessor, which consent shall not be unreasonably
withheld. Lessor shall consent or withhold such consent by written notice to
Lessee within thirty (30) days of Lessee's written request for Lessor's consent
which request shall include the identity and financial statements for the
current and two (2) preceding fiscal years of the proposed transferee, the
proposed use, and the proposed assignment or sublease document. If Lessor fails
to respond to Lessee's request within such 30-day period, Lessor shall be deemed
to have consented to such assignment or subletting. It shall be unreasonable for
Lessor to withhold its consent to an assignment or a subletting if (i) the
proposed use by the transferee is a restaurant use consistent with uses at
first-class retail centers in the greater Dallas area, (ii) the proposed use by
the transferee does not violate any use restrictions or exclusive use rights
then in effect at the Shopping Center, (iii) the proposed use by the transferee
does not compete with another tenant then operating within the Shopping Center
as determined by Lessor acting in a commercially reasonable manner, and (iv) the
proposed assignee or subtenant is then operating at least ten (10) other similar
facilities to the facility proposed to be operated by it in the premises and is
of such financial standing and operational responsibility as to give reasonable
assurance of the payment of all rental and other amounts reserved in this Lease
and compliance with all of the terms, covenants, provisions and conditions of
this Lease. Consent by Lessor to one or more assignments or subletting shall not
operate as a waiver of Lessor's rights as to any subsequent assignments or
subletting.
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Notwithstanding anything to the contrary set forth above, in the event of a
proposed assignment of this Lease or a proposed sublet of more than one-half
(1/2) of the floor area of the premises (other than an assignment or subletting
as permitted below without Lessor's consent being required), then Lessor shall
be entitled to terminate this Lease at any time during the thirty (30) day
period described above by delivering to Lessee written notice thereof, whereupon
this Lease shall terminate and be of no further force or effect on the sixtieth
(60th) day after the delivery of said notice of termination; provided, however,
in the event of such termination and as a condition to the effectiveness of such
termination, Lessor shall pay to Lessee an amount equal to the Unamortized
Costs, such amount to be paid in three (3) equal annual installments, the first
such installment being due and payable one (1) year following such termination,
and the remaining installments at twelve (12) month intervals thereafter. If
Lessor fails to so terminate this Lease, the proposed subletting or assignment
shall remain subject to Lessor's said approval right.
Notwithstanding the foregoing, no consent of Lessor shall be required for the
assignment of this Lease or the subletting of any portion (or the whole) of the
premises to any company now or hereafter affiliated with Lessee (including a
subsidiary, affiliate or controlling corporation then meeting the requirement of
the Securities Act of 1933 as to "control" in all of said instances) or to any
company which may result from a merger or consolidation by or with Lessee, or to
any company to which Lessee is selling all or substantially all of its operating
assets. Any such assignment or subletting shall be subject to the use
restrictions specified in Section 5.1. No such assignment or subletting shall
release Lessee from any of its obligations with respect to this Lease. However,
any such proposed assignee shall, promptly after securing the leasehold estate,
deliver to Lessor an instrument whereby such company assumes all of the
obligations of Lessee named herein.
Notwithstanding any assignment or subletting, except as hereinafter expressly
provided, Lessee shall at all times remain fully responsible and liable for the
payment of rent herein specified and for compliance with all of its other
obligations under this Lease (even if future assignments and subletting occurs
subsequent to the assignment or subletting by Lessee and regardless of whether
or not Lessee's approval has been obtained for such future assignments and
subletting). Moreover, in the event that the rental due and payable by a
sublessee (or a combination of the rental payable under such sublease plus any
bonus or other consideration therefor or incident thereto) other than a
sublessee affiliated to Lessee as set out in the preceding paragraph exceeds the
rental payable under this Lease, or if with respect to a permitted assignment,
permitted license or other transfer by Lessee permitted by Lessor, the
consideration payable to Lessee by the assignee, licensee or other transferee
exceeds the rental payable under this Lease, then Lessor shall have the option
(exercisable within the thirty (30) day period specified in Section 12.2 above)
to require Lessee to pay Lessor all such excess rental and other excess
consideration within ten (10) days following receipt thereof by Lessee from such
sublessee, assignee, licensee or other transferee, as the case may be; provided,
however, if Lessor exercises such option as to any assignment by Lessee as to
which such option is applicable hereunder, Lessee shall be released from
liabilities arising under this Lease after the end of the then current term of
this Lease (whether the initial or a renewal) during which the assignment
occurs. Finally, in the event of an assignment or subletting, it is understood
and agreed that all rentals paid to Lessee by an assignee or sublessee shall be
received by Lessee in trust for Lessor, to be forwarded immediately to Lessor
without offset or reduction of any kind and upon election by Lessor such rentals
shall be paid directly to Lessor (to be applied as a credit and offset to Lessee
rental obligation). Notwithstanding the foregoing, to the extent consideration
received by Lessee in connection with an assignment or subletting represents
payment to Lessee for its equipment or unamortized cost of leasehold
improvements, as fairly and reasonably allocated between such items and the
value of the assignment or subletting, such consideration shall be retained by
Lessee for its own account.
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12.3 ASSUMPTION BY ASSIGNEE. An assignment made with Lessor's consent or as
otherwise permitted shall not be effective until Lessee delivers to Lessor an
executed counterpart of such assignment containing an agreement, in recordable
form, executed by the assignor and the proposed assignee, in which the assignee
assumes the performance of the obligations of the assignor under this Lease.
XIII.
CONSTRUCTION
13.1 RESTAURANT FACILITY. Lessee shall, at Lessee's sole cost, risk and expense,
construct, erect and diligently pursue completion of the restaurant facility on
the premises, including without limitation, the restaurant building (with
drive-through) not to exceed 5,000 square feet, including mechanical and
electrical facilities therein, parking areas, driveways and curbs, sidewalks,
lighting, service area screening around the building paid, signage, landscaping
and all other facilities and improvements on the premises. Lessee's work shall
also include all site work necessary to provide a buildable pad for the building
which is of a compaction which meets generally accepted architectural and
engineering standards and building codes of the City of The Colony, any ground
work necessary to permit the pouring of the foundation of the building, such
work as is necessary to extend utilities from the boundary of the premises, such
work necessary to correct any elevation and soil fill requirements and compact
with correct moisture content, and erosion control as required, all as to be
more particularly described int he plans and specifications. The restaurant
facility shall be constructed in a good and workmanlike manner, subject to
Sections 2.3 and 2.4 of the Declaration and in accordance with plans and
specifications approved by Lessor as hereinafter provided and in accordance with
all applicable laws, regulations, ordinances, rules, standards and guidelines of
any governmental authority having jurisdiction over construction of improvements
on the premises.
13.2 PLANS AND SPECIFICATIONS. Prior to the commencement of construction, Lessor
shall have the right to approve Lessee's plans and specifications for all
improvements and any subsequent alterations to the premises, which approval
shall not be unreasonably withhold. Lessee's plans and specifications shall
include plans and specifications for any buildings or structures to be
constructed on the premises, site plans showing parking areas and driveways and
plans and specifications for any exterior signage and landscaping. Lessee's
plans and specifications will be fashioned similarly to the existing prototype
store at Valley Ranch, with the exception of materials necessary for uniformity
per requirements of the Declaration. If Lessor fails to respond to Lessee's
written request for approval within thirty (30) days after receipt of Lessee's
final construction plans and specifications, Lessor's approval shall be deemed
granted. Lessee shall, when Lessee's work is substantially completed, furnish
Lessor with an accurate "as-built" plan of the improvements as constructed,
initialed by Lessee's architect and/or all contractors and subcontractors
performing the work, which plans shall be incorporated into this Lease by this
reference for all intents and purposes.
13.3 Lessee's Responsibility for All Costs of Performing Lessee's Work. Lessee
shall be responsible, at Lessee's sole cost and expense, for the full cost of
performance of Lessee's work. Lessee shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind the interest of Lessor in the premises
or to charge the rentals payable hereunder for any claim in favor of any person
dealing with Lessee, including those who may furnish materials or perform labor
for any construction or repairs. Rather, each such claim shall affect and each
such lien shall attach to, if at all, only the leasehold interest granted to
Lessee by this Lease and shall be inferior and subject to the rights, title and
interests of Lessor. Any right or authority given
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hereunder to Lessee in accordance with any of the provisions of this instrument
to erect or cause to be erected, the buildings and improvements on the premises,
or to make any alterations or repairs to said buildings and improvements, shall
not constitute an express or implied agency in Lessee to bind Lessor's interest
in any way, any relationship between the parties hereto, except that of Lessor
and lessee, being expressly negatived. Lessee covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed on the premises on which any lien is or can validly and legally
be asserted against its leasehold interest in the premises or the improvements
and that it will save Lessor harmless from any claim, lien, or encumbrance
against the rights, title and interest of Lessor in the premises arising with
respect to Lessee's work.
XIV.
DIRECTION OF TENANTS ENERGIES
14.1 Lessee acknowledges that Lessee's monetary contribution to Lessor (in the
form of rentals) and Lessee's general contribution to commerce within the
Shopping Center (also important in Lessor's determination to execute this Lease
with Lessee) will be substantially reduced if during the term of this Lease,
either Lessee or any person, firm or corporation, directly or indirectly
controlling, controlled by or under common control with Lessee shall directly or
indirectly operate, manage, conduct or have any interest in a competing
restaurant establishment within commercial proximity of the Shopping Center.
Accordingly, Lessee agrees that if during the term of this Lease, either Lessee
or any person, firm or corporation, directly or indirectly controlling,
controlled by or under common control with Lessee (and also, in the event Lessee
is a corporation, if any officer or director thereof or shareholder owning more
than ten percent (10%) of the outstanding stock thereof, or parent, subsidiary
or related or affiliated corporation) either directly or indirectly commences
operation of a Fresh 'N Lite restaurant or any other particular restaurant
operation from time to time conducted in the premises as provided in compliance
with Section 5.1 or Section 12.2 during the period of any such particular
operation, within a straight line radius of one (1) mile of the Shopping Center
which Lessee acknowledges is a reasonable area for the purpose of this
provision, then in such event, the Basic Annual Rental shall be one hundred ten
percent (110%) of the amount stipulated in Section 3.1 of this Lease.
The above adjustment in rental reflects the estimate of the parties as to the
damages which Lessor would be likely to incur by reason of the diversion of
business and customer traffic from the premises and Shopping Center to such
other store within such radius, as a proximate result of the establishment of
such other store. This provision shall not apply to any existing store presently
being operated by Lessee as of the date hereof or to any store existing at the
time of any change of use of the premises under Section 5.1 or Section 12.2,
provided there is no increase in the size, merchandise mix or trade name of such
commercial establishment. Finally, Lessee agrees that Lessor may waive, for any
reason whatsoever, all rights granted to Lessor pursuant to this Section 14.1,
and may sever this section from the remainder of this Lease (thereby keeping the
remainder of this Lease unmodified and in full force and effect).
XV.
MISCELLANEOUS
15.1 INDEPENDENT OBLIGATIONS. Except as may be expressly provided in this Lease,
Lessee shall not for any reason withhold or reduce Lessee's required payments of
rentals and other charges provided in this Lease, it being agreed that the
obligations of Lessor under this Lease are independent of Lessee's obligations
except as may be otherwise expressly provided. The immediately preceding
sentence
d
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shall not be deemed to deny Lessee the ability of pursuing all rights granted it
under this Lease or at law however, at the direction of Lessor, Lessee's claims
in this regard shall be litigated in proceedings different form any litigation
involving rental claims or other claims by Lessor against Lessee (i.e. each
party may proceed to a separate judgment without consideration, counterclaim or
offset as to the claims asserted by the other party).
15.2 NOTICES. All notices, demands and communications provided herein shall be
served by registered or certified United States mail, available express mail
carrier (such as Federal Express, Emery, Airborne, etc.) return receipt
requested or by facsimile (with subsequent mail or express delivery) transmitted
to the following address or number or to such other address(es) or number as
Lessor and Lessee may advise each other in writing.
LESSOR: Robert M. Farrell Development, Ltd.
8235 Douglas Avenue, Suite 950
Dallas, Texas 75225
Facsimile No. 214-360-1716
COPY TO: Charles D. Tuttle, Esq.
5968 W. Northwest Highway, Suite 1532
Dallas, Texas 75225
Facsimile No. 214-891-9696
LESSEE: Fresh 'n Lite, Inc.
2804 Judson Road
Longview, Texas 75605
Attn: Stanley L. Swanson
Facsimile No. 903-663-5525
COPY TO: Curtis Swanson
3218 Page Road
Longview, Texas 75605
Facsimile No. 903-234-8399
15.3 CONSTRUCTION. In an event that any of the provisions of this Lease shall by
court order be held invalid or in contravention of any of the laws of the United
States or of any state barring jurisdiction over the subject matter or of any
dispute arising under it, such invalidation shall not serve to affect the
remaining portion of this Lease. This Lease shall be governed by and construed
in accordance with the laws of the State of Texas.
15.4 SUCCESSORS. This contract shall bind Lessor and Lessee and their
successors, heirs, assigns, administrators, and legal representatives, as the
case may be, except as otherwise herein expressly provided.
15.5 RECORDING. Upon request of either party, the parties shall execute a short
form of this Lease on a written document witnessed and acknowledged in a form
capable of being recorded in the public
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records of Bexar County, Texas. Lessee shall not record this Lease without prior
written consent of Lessor.
15.6 COUNTERPARTS. This agreement is being executed simultaneously in
counterparts, any one of which shall be deemed an original.
15.7 NO AGENCY. The parties hereto agree that the business relationship created
by this Lease is solely that of Lessor and Lessee. Nothing contained in this
Lease shall make Lessee an agent, legal representative, partner, subsidiary,
joint venturer, or employee of Lessor. Lessee shall have no right or power to,
and shall not bind or obligate Lessor in any way, manner or thing whatsoever,
nor represent that it has any right to do so.
15.8 TIME OF THE ESSENCE. Time shall be of the essence in every part of this
Lease.
15.9 BINDING EFFECT. This agreement shall become immediately binding on the
parties to this Lease on the date the last party signs it, notwithstanding that
the terms of this Lease shall commence upon a future date.
15.10 HEADINGS. The headings of the paragraphs and subparagraphs are inserted
solely for the convenience of reference and shall not constitute a part of this
Lease, nor limit, define or describe the scope or intent of this Lease.
15.11 JOINT AND SEVERAL LIABILITY. If Lessee or Lessor are more than one person,
each individual's liability under this Lease shall be joint and several.
15.12 CONSENTS. In all circumstances under this Lease where the prior consent of
one party (the "consenting party"), whether it be Lessor or Lessee, is required
before the other party (the "requesting party)" is authorized to take any
particular type of action, such consent shall not be withheld in a wholly
unreasonable and arbitrary manner however, the requesting party agrees that its
exclusive remedy if it believes that consent has been withheld improperly shall
be to institute litigation either for a declaratory judgment or for a mandatory
injunction requiring that such consent be given (with the requesting party
hereby waiving any claim for damages, attorneys, attorneys fees or any other
remedy unless the consenting party refuses to comply with the court order or
judgment requiring it to grant its consent).
15.13 LIABILITY OF LESSOR. The liability of Lessor to Lessee for any default
under the terms of this Lease shall be limited to the interest of Lessor in the
premises and Lessor shall not be personally liable for any deficiency. This
clause shall note be deemed to limit or deny any remedies which Lessee may have
in the event of default by Lessor hereunder which do not involve the personal
liability of Lessor.
15.14 DEFINITIONS.
(a) The term "Lessor" as used in this Lease shall mean the owner in fee
of the premises for the time being, or the owner of the leaseholder
estate created by any underlying lease, or mortgagee of the fee or of
such underlying lease in possession for the time being, so that in the
event of any sale or sales of the premises, or of the making of any
such underlying lease and the leasehold estate created by it, the
seller, lessor, transferor or assignor shall be and is hereby
d
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entirely freed and relieved of all agreements, covenants and
obligations of Lessor herein and it shall be deemed and construed
without further agreement between the parties or their successors in
interest or between the parties and the purchase, lessee, transferee or
assignee has assumed and agreed to carry out any and all agreements,
covenants and obligations of Lessor under this Lease.
(b) The term "Lessee" shall mean the Lessee named in this Lease, and
from and after any valid assignment or sublease of Lessee's interest in
this Lease pursuant to its provisions, the assignee or sublease of this
Lease.
(c) The term "building fixture" as used in the Lease means all
equipment used in conjunction with the building, including, without
limitation, heating, ventilating and air conditioning systems, water
heaters or softeners and items of similar nature, but does not include
Lessee's furniture, signage, trade fixtures, unattached kitchen
equipment or other unattached, movable personalty.
(d) The term "Effective Date" shall mean the date of execution of this
Lease by both Lessor and Lessee (i.e., the latest of such dates of
execution as noted below).
(e) The term "Unamortized Cost" shall mean the unamortized hard costs
of the initial construction of Lessee's restaurant building pursuant to
Article XIII hereof (based on twenty-year straight-line depreciation),
and including the cost of any additional improvements installed on the
premises by Lessee (but specifically excluding (i) the cost of any
repair and maintenance items which are typically treated as expenses
for financial accounting purposes, (ii) the cost of Lessee's furniture,
trade fixtures and inventory), and (iii) site improvements costs such
as, but not limited to, parking areas, landscaping and other
improvements outside of the building structure.
15.15 ESTOPPEL CERTIFICATES. Lessee and Lessor each agree within ten (10) days
after written request to execute and deliver to the other estoppel certificates
reasonably requested by Lessor or Lessor's mortgages or Lessee and Lessee's
mortgages as to the status of this Lease, including without limitation whether
any defaults exist, the date to which rental was last paid and similar matters.
15.16 COMMISSIONS. Lessor agrees to pay all commissions due in connection with
the execution of this Lease. Lessee and Lessor represent and warrant to each
other that such party has not had any dealings with any realtor, broker or agent
in connection with this Lease or the negotiation hereof, other than Tricor
International Realty Corp. and Lynn Dowdle of Trammell Crow Company, and each
party agrees to defend, indemnify and hold the other party harmless from any
cost, expense or liability, including reasonable attorney's fees, for any breach
in this representation.
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The Lessor and Lessee have respectively signed this Lease on the dates indicated
below.
LESSOR:
ROBERT M. FARRELL DEVELOPMENT, LTD.,
a Texas limited partnership
By:
Name: Robert M. Farrell
Title: President
Date:
LESSEE:
FRESH'N LITE, INC.,
a Texas Corporation
By:
Name: Robert M. Farrell
Title: President
Date:
SCHEDULE OF EXHIBITS
Exhibit "A" - Legal Description of Land
Exhibit "A-1" "A-2" - Legal Description/Site Plan of Shopping Center
Exhibit "B" - Easements, Conditions and Restrictions
Exhibit "C" - Easements
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Exhibit "A" GF-Number 97R00830
BEING a tract of land situated in the T. WILSON SURVEY ABSTRACT NO. 1352, Denton
County, Texas and being a portion of Lot 3, Block 1 of COLONY PLAZA ADDITION, an
addition to the City of The Colony, according to the plat recorded in Cabinet L,
Page 388 of the Plat Records of Denton County, Texas (PRDCT) and being more
particularly described as follows:
BEGINNING at a 5/8 inch iron rod found in the northerly right-of-way line of
STATE HIGHWAY 121 (variable width right-of-way), said iron rod being the most
easterly southeast corner of said Lot 3;
THENCE along the northerly right-of-way line of said STATE HIGHWAY 121 and the
southerly line of said LOT 3, South 61 degrees 20 minutes 23 seconds West a
distance of 125.00 feet to a 1/2 inch rod set for corner;
THENCE departing the northerly right-of-way line of said STATE HIGHWAY 121 and
the southerly line of said LOT 3, North 28 degrees 32 minutes 47 seconds West a
distance of 320.92 feet to an "X" in concrete set in the common line of said Lot
3 and Lot 7, of said Block I;
THENCE along the common line of said LOT 3 of said LOT 7 as follows:
North 61 degrees 27 minutes 13 seconds East a distance of 93.00 feet to an "X"
in concrete set for the most southerly southwest corner of LOT 8 of said BLOCK
1;
North 28 degrees 32 minutes 48 seconds West a distance of 140.80 feet to an "X"
in concrete set for the most southerly southwest corner of LOT 8 of said BLOCK
1;
THENCE along the common line of said LOT 3 of said LOT 8 North 61 degrees 27
minutes 12 seconds East a distance of 32.00 feet to a 1/2 inch iron rod set in
the Easterly line of said BLOCK 1;
THENCE along the easterly line of said LOT 3 and the easterly line of said BLOCK
1, South 28 degrees 32 minutes 47 seconds East a distance of 461.47 feet to the
POINT OF BEGINNING.
CONTAINING within these metes and bounds 1.024 acres or 44,605 square feet of
land more or less.
A - 1
<PAGE>
[GRAPH]
d-539341.1
A - 2
<PAGE>
[GRAPH]
d-539341.1
A - 3
<PAGE>
EXHIBIT "B"
TITLE EXCEPTIONS
1. Restrictive covenants recorded in Volume 2375, page 676 as amended in
Volume 2748, Page 784 and under County Clerk's File no. 93-R0078765 and
in Volume 2418, Page 220 and under Clerk's File Nos. 95-R0077858 and
95-R0077859 of the Deed Records of Denton County, Texas.
2. Easement for electric transmission and/or distribution line granted to
Texas Power & Light Company and Denton County Electric Cooperative, by
Centex Development Company, by instrument dated 5/4/90, filed 7/25/90,
recorded in Volume 2820, Page 457 of the Deed Records of Denton County,
Texas, and as shown on survey prepared by B.J. Elsam, RPLS No. 4581,
dated 11/14/95.
3. Terms, conditions and stipulations of that certain Easement Agreement
by and between Centex Development Company, L.P., and The City of The
Colony, dated 12/4/95, filed 12/14/95, recorded under Clerk's File No.
95-R0077860 of the Deed Records of Denton County, Texas.
4. Terms, conditions and stipulations of that certain Reciprocal Access
Easements Agreement by and between Colony Blair Oaks, Ltd., and J&J
Beverage Co., Inc., dated 12/7/95, filed 12/14/95, recorded under
Clerk's File No. 95-R0077857 of the Deed Records of Denton County,
Texas.
5. Deed of Trust and Security Agreement dated January 4, 1996 recorded in
Deed Records, Denton County, Texas, securing payment of $3,930,000
Promissory Note payable to Bank One, Texas, National Association.
B-1
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EXHIBIT "C"
III. EASEMENTS
3.1 Ingress, Egress and Parking: Each Owner, as grantor, hereby grants
to the other Owners, their respective tenants, contractors, employees, agents,
customers, licensees and invitees of such tenants, for the benefit of each
Parcel belonging to the other Owners, as grantees, a nonexclusive easement for
ingress and egress by vehicular and pedestrian traffic and vehicular parking
upon, over and across that portion of the Common Area located on the grantor's
Parcel(s), except for those areas devoted to Service Facilities or drive up or
drive through customer service facilities. The reciprocal rights of ingress and
egress set forth in this Section 3.1 shall apply to the Common Area for each
Parcel as such area shall be increased pursuant to Section 2.2 above.
C-1
EXHIBIT 6.7CE
LEASE AGREEMENT
STATE OF TEXAS )
COUNTY OF SMITH )
This Lease Agreement made and entered into on this the 7th day of
November, 1990, by and between HAROLD WILDER, a resident of Tyler, Smith County,
Texas (hereinafter, "Lessor"), and BOSCO'S, INC., a Delaware Corporation, with
headquarters in Marshall, Texas, and STAN SWANSON, a resident of Tyler, Smith
County, Texas hereinafter individually and collectively referred to as
"Lessee"):
W I T N E S S E T H :
Lessor does by these presents hereby lease, let and demise unto Lessee
the following described property, situated in Smith County, Texas, to-wit:
BEING a part of the A. Neighbors Survey, and being a part of the
35.35-acre tract which was conveyed to Thomas G. Pollard by the
Citizens National Bank of Tyler, Texas, by deed recorded in Volume 321,
page 238 of the Deed Records of Smith County, Texas, and also a part of
Lot 8 of New City Block 658 of said City of Tyler, the tract of land
hereby conveyed being more particularly described as follows:
BEGINNING at a point in the east line of South Beckham Avenue, said
point being 31.85 feet from the intersection of the projected south
line of East Second Street and the projected east line of South Beckham
Avenue, a point for corner;
THENCE South 10 deg. 08' 40" East with the east line of South Beckham
Avenue a distance of 127.00 feet, a point for corner;
THENCE North 79 deg. 51' 20" East a distance of 100.00 feet, a pointfor
corner;
THENCE North 10 deg. 08' 40" West a distance of 134.38 feet to the
south line of East Second Street, a point for corner;
THENCE North 86 deg. 24' 00" West with the south line of East Second
Street a distance of 71.10 feet to a point for corner at the beginning
of a curve to the left which has a radius of 25 feet and a central
angle of 103 deg. 44' 40";
THENCE following the right-of way line with said curve to the left a
distance of 45.27 feet to the end of said curve and to the PLACE OF
BEGINNING, and containing 14,430 square feet.
As described in that certain deed dated August 17, 1956, by and between
Safeway Stores, Incorporated, Grantor, and Humble Oil & Refining
Company, Grantee.
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for the term of three (3) years beginning on the first day of March, 1991, and
ending on the last day of February, 1994 at Midnight, upon the following terms,
conditions and covenants:
(1) Lessee, as rental for the said premises, has agreed to pay Lessor,
in addition to any and all further sums as set forth herein, in Tyler, Smith
County, Texas, the sum of $54,000.00, payable as follows, to-wit:
Lessee shall pay Lessor the sum of $1,500.00 on or before the first day
March, 1991, representing the first month's rent of the three year term
provided above, and further sum of $l,500.00 on or before the first day
of each month thereafter.
(2) As further consideration of the leasing aforesaid, Lessee covenants
and agrees to bear, pay and discharge (in addition to the rents aforesaid), all
property, city, school, county, college and all other taxes, assessments and
levies of every name, nature and kind which may be taxed, charged or assessed by
any authority with jurisdiction against the demised premises and any and all
buildings, improvements and personal property situated thereon. Lessor shall
during the term of the lease make payment of taxes directly to the taxing
authority, and shall charge Lessee for the reimbursement of the same as follows:
Lessor shall estimate the taxes due upon said property (buildings and
improvements) (based upon the annual tax roles for the previous year), and after
dividing such estimated annual amount by twelve, shall add such amount to the
monthly rental charged to and payable by Lessee. Lessee agrees to pay such
amounts as are billed in this regard and manner. At the end of each tax year,
Lessor shall notify Lessee of any deficiency between the estimated amounts and
the actual taxes due, which amount Lessee agrees to promptly pay upon being
billed by Lessor for same. Lessee shall have the right to protest any ad valorem
tax valuation as agent for Lessor.
(3) Lessor carries a $150,000.00 building insurance policy on the
premises, and intends to continue to do same throughout the term of this lease.
In connection herewith, Lessor shall pay the premiums for the same upon the same
being due directly to the carrier. During the term of this lease, including any
extension periods, Lessor shall charge Lessee for the reimbursement of same.
Reimbursement shall be made according to the same procedure and formula
established for tax reimbursement in paragraph two (2) above.
(4) Lessor and Lessor's agents and representatives shall have the right
to enter and inspect the demised premises at any time for the purpose of
ascertaining the condition of the demised premises or in order to make such
repairs as may be required to be made under the terms of this lease.
(5) Lessee shall purchase a property damage and personal liability
insurance policy to insure against injuries to persons or property while on the
said premises. Such policy shall provide personal liability coverage of at least
$500,000 per person and $1,000,000 per occurrence and shall name Lessor as
additional insured. Lessee shall furnish Lessor with certificates of insurance
evidencing the coverages herein required, and shall keep them current evidencing
the maintenance of such coverages. The insurance company issuing the policies
must be advised by Lessee (and such certificates should reflect) that the
insurer will not cancel such coverage without ten (10) days prior written notice
to Lessor. Should Lessee fail to purchase any such insurance coverage, Lessor
may purchase same and seek reimbursement from Lessee, which remittance Lessee
agrees to make within ten (10) days of the request of Lessor. Notwithstanding
the existence of any insurance coverage, Lessor shall not be liable to Lessee or
to the Lessee's employees, patrons or visitors for any damage or loss to the
person of property caused or occurring on the aforesaid premises, and Lessee
agrees to indemnify and hold Lessor harmless from any and all causes of action
or liability claimed or asserted in connection therewith.
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(6) Lessee shall make no alterations, renovations or other remodeling
of the premises or the building located thereon, and shall erect no additional
structures, without the express written consent of Lessor, which consent will
not be unreasonably withheld. Any request by Lessee for such consent shall
include and provide Lessor with copies of floor plans, building plans, color
schemes, and any other information which Lessor may reasonably request, in order
that Lessor has adequate information upon which to consider such request. Lessee
shall meet all the requirements of such construction as may be provided by the
City of Tyler, Texas, at its own cost and expense.
(7) It is understood and agreed that should any building or
improvements be destroyed or damaged by fire or otherwise, including the
building now situated on the said premises, Lessor shall look solely to the
insurance policy referred to in paragraph three (3) hereof for recovery from
such casualty. Upon such recovery, Lessor agrees to rebuild or repair the said
building as promptly as possible, upon the same general plans and dimensions as
before said fire or casualty, subject to the construction requirements of the
City of Tyler, Texas.
(8) Lessee acknowledges that it has examined and knows the condition of
the premises, and possession and occupancy of same will be assumed by Lessee
upon the execution hereof, in its current condition. Lessee shall, at its own
cost and expense, throughout the term of this lease and so long as it remains in
possession of the said premises, keep and maintain in good repair all the
buildings and improvements located upon the demised premises including the
plumbing and electrical work, air conditioning, pipes and fixtures, walls, roof,
floors and foundations, parking lots, drives and curbs, and all other fixtures
belonging thereto.
(9) Lessee agrees that it will promptly execute and fulfill all
ordinances and regulations of the State, County, City and other governmental
agencies with jurisdiction over the demised premises, and all ordinances imposed
by the Board of Health, Sanitary and Police Departments, for the correction,
prevention and abatement of nuisances in or upon or connected with the demised
premises during the term of this lease, at Lessee's sole cost and expense and
without liability to Lessor.
(10) Lessee shall not assign or transfer this lease or sublet the whole
or any part of said leased premises for any purpose without the prior written
consent of Lessor, which consent will not be unreasonably withheld. Regardless
of any such permitted assignment or sublease, Lessee shall remain primarily
liable to Lessor at all times for the full payment of all rents, taxes,
insurance and other consideration due under the terms of this lease, and shall
remain liable for the performance of all the other covenants, provisions,
obligations and agreements herein required to be performed by the Lessee.
Lessor, in addition to any other remedies herein or by law provided, may at his
option collect directly from such assignee or subtenant all rents becoming due
to Lessee under any assignment or sublease agreement and apply such sums against
any sums due Lessor by Lessee hereunder. No direct collection by Lessor from any
assignee or subtenant shall be construed as a novation or a release of Lessee
from the further performance of its obligations hereunder.
(11) Lessor shall not be liable to Lessee or to the Lessee's employees,
patrons or visitors for any damage to the person or property caused or occurring
on the aforesaid premises, and Lessee agrees to indemnify and hold Lessor,
Lessor's agents, representatives, successors and assigns, harmless from any and
all claims and causes of action caused by the acts and/or the negligence of
Lessee, Lessee's employees, patrons or visitors to the leased premises.
(12) If the Lessee shall default in the payment of any installment of
rent for ten (10) days after the same becomes due or if Lessee shall be declared
bankrupt according to law or if any assignment shall be attempted to be made of
said property for the benefit of creditors or should the premises be placed in
the possession of a receiver, then and in such event the entire rent shall, at
the sole option of Lessor, at once
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become due and payable, as if by the term of this lease it were all payable in
advance; or at Lessor's sole option, this lease may become null and void without
further notice.
(13) It is understood and agreed that any equipment, fixtures and
personal property placed upon the demised premises by the Lessee may be removed
by the Lessee at the termination of this lease or any extension thereof,
provided (a) Lessee shall not be in default in the performance of any agreement,
condition, covenant or term hereof, and (b) that no property or fixture which is
permanently attached shall be removed by Lessee if such removal should
permanently injure or dismantle such building, unless the Lessee shall restore
and rebuild the same in the same condition as said building existed prior to the
removal of such equipment, fixture or personal property, and provided further
that such removal shall be erected within thirty (30) days after the expiration
of said term or extension hereof, and such building is completely restored
within thirty (30) days thereof.
(14) It is agreed that Lessee shall, at the expiration or termination
of this lease agreement, either willfully by Lessee, by expiration of term, by
removal of Lessee by Lessor, or any other circumstances effecting surrender,
expiration or termination of this agreement, peacefully yield up unto Lessor,
all and singular the said premises and any such improvements, buildings or
additions thereto, in good tenantable repair in all respects, reasonable use and
wear thereof excepted.
(15) In addition to the statutory landlord's lien, Lessor shall have at
all times a valid contractual lien for rents, taxes and insurance and other sums
of money becoming due hereunder from Lessee, upon all goods, wares, equipment,
fixtures, furniture and other personal property of Lessee situated upon the
leased premises, and such property shall not be removed therefrom without the
consent of Lessor until all such sums of money due and payable hereunder shall
first have been paid and discharged. Upon the occurrence of a default by Lessee,
Lessor may, in addition to any other remedies provided herein or by law, enter
upon the demised premises and take possession, without liability for trespass or
conversion, and sell the same with or without notice at public or private sale,
with or without having such property at the sale, at which Lessor or its assigns
may purchase, and apply the proceeds from the sale of same (less expenses
connected with the taking of possession and sale of property) as a credit
against such sums due by Lessee to Lessor. Any surplus shall be paid to Lessee,
and Lessee agrees to pay any deficiency forthwith.
(16) Provided Lessee has not defaulted in any terms, conditions and
provisions hereof, Lessee shall have the privilege of renewing and extending the
term hereof for a period of seven (7) years beginning on the first day of March,
1994, and terminating on the last day of February, 2001, at Midnight, upon the
same terms, conditions and provisions hereof, provided however, that the Lessee
shall pay to Lessor in Tyler, Smith County, Texas, the sum of $126,000.00,
payable in monthly installments of $1500.00 each, payment of the first monthly
rental to be made on or before the first day of March, 1994, and one monthly
rental to be paid in advance on or before the first day of each month thereafter
until such rental has been paid in full. It is further provided that in order
for the Lessee to exercise option hereunder, it shall and must give Lessor, his
heirs or assigns, written notice by United States mail, registered, return
receipt requested, of its intention to exercise such option as herein provided,
no later than 90 days prior to the effective date of said option.
(17) This Lease Agreement shall be contingent upon Lessee receiving the
necessary municipal approval which should be obtained by the 10th day of
December, 1990. Lessee agrees to commence construction within ten (10) days of
municipal approval. Lessee shall commence paying rent on the first day the
business opens for operation, but no later than eighty (80) days from December
10, 1990. In the event municipal approval is not received on or before the 7th
day of December, 1990, this lease agreement shall be deemed null and void.
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(18) Lessee shall have access to and the right to start renovations of
the property on 10th day of December, 1990.
(19) This Lease Agreement shall be contingent upon Lessor completing a
successful lease buy-out agreement with Car Quest Automotive.
(20) Each Provision of this instrument or of any applicable government
law, ordinance, regulation, or other requirement, with reference to the sending,
mailing or delivery of any notice or with reference to the making of any payment
by Lessee to Lessor, shall be deemed to be complied with when and if the
following steps are taken:
A. All rent and other payments required to be made by Lessee
to Lessor hereunder shall be payable to the Lessor at the address of
Lessor hereinbelow set forth or at such other address as Lessor may
specify from time to time by written notice delivered in accordance
herewith;
B. Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when deposited in the United States mails, Postage
Prepaid, return receipt requested, addressed to the parties hereto at
their respective addresses set out opposite their names below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LESSOR: Harold Wilder LESSEE: Bosco's, Inc.
P. O. Box 7036 500 E. Houston
515 WSW Loop 323 Marshall, TX 75670
Suite 105
Tyler, TX 75711
LESSEE: Stan Swanson
500 E. Houston
Marshall, TX 75670
(21) Lessee has first right of refusal on any Purchase Opportunity that
is acceptable to Lessor. If this right is exercised, the Lessee has 30 days to
accept and close on a sale. In the event Lessee does not exercise its right of
first refusal on any Purchase opportunity, the conveyance by Lessor to any third
party shall be subject to the terms and conditions of this Lease Agreement.
(22) It is further agreed that all covenants, Promises, undertakings,
agreements, obligations, liabilities, grants, rights or powers, entered into,
made, assumed or undertaken by either party hereto, in and by this lease
agreement, shall bind, be applicable to, and inure to the benefit of the heirs,
executors, administrators and assigns of each party hereto respectively, whether
so particularly provided herein or otherwise. This lease represents the entire
agreement between the parties hereto.
(23) This agreement and all the terms hereof shall be interpreted in
accordance with the laws of the State of Texas. In all respects, jurisdiction is
established in Tyler, Smith County, Texas.
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LESSEE LESSOR
BOSKO'S, INC.
- ------------------------------------- --------------------------------
By: Stan Swanson, President Harold Wilder, Lessor
- -------------------------------------
Stan Swanson, Lessee
CORPORATE ACKNOWLEDGMENT
THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me on the 7th day of November,
1990, by Stan Swanson, President, of BOSKO'S, INC., a Delaware corporation, on
behalf of said corporation.
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
-----------------
COMMISSION EXPIRES:
---------
163
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ACKNOWLEDGMENTS
THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me by STAN SWANSON on the 7th
day of November, 1990.
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
-------------------------
COMMISSION EXPIRES:
--------------------
164
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THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me by HAROLD WILDER on the 7th
day of November, 1990.
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
-------------------------
COMMISSION EXPIRES:
--------------------
165
EXHIBIT 6.8CE
FRESH'N LITE, INC.
1997 INCENTIVE STOCK OPTION PLAN
I. Purpose
Fresh'n Lite, Inc. 1997 Incentive Stock Option Plan (the "Plan") is
intended to provide a means whereby key employees of Fresh'n Lite, Inc., a Texas
corporation (together with any "parent" or "subsidiary" as defined in Section
424 of the Code, the "Company"), may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
shareholders. Accordingly, the Company may grant to key employees ("Optionees")
the option (the "Option") to purchase shares of Common Stock without par value
(the "Stock"), of Fresh'n Lite, Inc., as hereinafter set forth. It is intended
that Options granted under the Plan will qualify as "incentive stock options" as
defined under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). No stock options other than incentive stock options may be granted
under the Plan.
II. Administration
The Plan shall be administered by the Board of Directors of the Company
or such committee of members of the Board as the Board may appoint (the
"Committee"); however, if the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934 ("1934 Act"), the members of
the Committee shall be "disinterested persons" within the meaning of paragraph
(d)(8) of Rule 16b-3 which has been adopted by the Securities and Exchange
Commission under the 1934 Act, as such Rule or its equivalent is then in effect.
Committee members may resign at any time by delivering written notice to the
Board of Directors. Vacancies in the Committee however caused, shall be filled
by the Board of Directors. The Committee shall have sole authority to select the
persons who are to be granted Options from among those eligible hereunder and to
establish the number of shares which may be issued under each Option. The
Committee is authorized to interpret the Plan and may from time to time adopt
such rules and regulations, not inconsistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. The Committee shall act by a
majority of its members in office and the Committee may act either by vote at a
telephonic or other meeting or by a memorandum or other written instrument
signed by all of the members of the Committee. All decisions made by the
Committee in selecting the persons to whom Options shall be granted, in
establishing the number of shares which may be issued under each Option, and in
constituting the provisions of the Plan shall be final. In its absolute
discretion the Board of Directors may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan.
The day-to-day administration of the Plan may be carried out by such
officers and employees of the Company as shall be designated from time to time
by the Committee. Members of the Committee shall not receive compensation for
their services as members, but all expenses and liabilities they incur in
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connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, the Board, the Company and the
officers and employees of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. The interpretation and construction
by the Committee of any provisions of the Plan or of any grant under the Plan
and any determination by the Committee under any provision of the Plan or any
such grant shall be final and conclusive for all purposes. Neither the Committee
nor any member thereof shall be liable for any act, omission, interpretation,
construction, or determination made in connection with the Plan in good faith,
and the members of the Committee shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including counsel fees) arising therefrom to the full extent permitted by law.
The members of the Committee shall be named as insureds under any directors and
officers liability insurance coverage that may be in effect from time to time.
II. Eligibility of Optionee
(a) Options may be granted only to individual who are key
employees (including officers who are also key employees) and directors
of the Company (collectively referred to herein as "employee") at the
time the Option is granted. Options may be granted to the same
individual on more than one occasions. In no event shall any employee
or his legal representatives, heirs, legatees, distributees or
successors have any right to participate in the Plan except to such
extent, any, as the Committee shall determine.
(b) No employee shall be eligible to receive any Option if, on
the Grant Date, such employee owns (including ownership through the
attribution provisions of Section 424 of the Code), in excess ,of ten
percent (10%) of the outstanding voting stock of the Company (or of its
parent or subsidiary as defined in Section 424 of the Code) unless the
following two conditions are met:
(i) the option price for the shares of Stock subject
to the Option is at least 110% of the fair market value of the
shares of Stock on the date the Option is granted (the "Grant
Date"); and
(ii) the Option Agreement (defined below) provides
that the term of the Option does not exceed five (5) years.
(c) No employee shall be eligible to receive Options under
this Plan (and all other option plans of the Company) that are
exercisable for the first time by such Optionee in any calendar year
with respect to stock with an aggregate fair market value (determined
at the Grant Date) in excess of $100,000.
d-
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IV. Shares Subject to the Plan
The aggregate number of shares of Stock which may be issued under
Options granted under the Plan shall not exceed 200,000 shares. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
of Stock reacquired by the Company. any of such shares which remain unissued and
which are not subject to outstanding options at the termination of the Plan
shall cease to be subject to the Plan, but until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should any Option hereunder expire or terminate
prior to its exercise in full, the shares theretofore subject to such Option may
again be subject to an Option granted under the Plan. . The aggregate number of
shares which may be issued under Options granted under the Plan shall be subject
to adjustment as provided in Paragraph VIII hereof. Exercise of an Option in any
manner, or cancellation of an Option as provided in Paragraph V hereof (except
the last paragraph of said Paragraph V), shall result in a decrease in the
number of shares of Stock which may thereafter be available for purposes of the
Plan by the number of shares as to which the Option is exercised or canceled.
V. Option Agreements
Each Option shall be evidenced by a written agreement (an "'Option
Agreement") executed by the Optionee and an authorized officer of the Company,
which shall contain such terms, conditions and restrictions, and may be
exercisable at such times and for such periods, as may be approved by the
Committee, provided, however, that no option may be exercised to any extent
after, and every Option shall expire no later than, the tenth anniversary of the
Grant Date. Options that are granted shall be evidenced by Option Agreements in
the form approved by the Board. The terms, conditions and restrictions of
separate Option Agreements need not be identical. Specifically, an Option
Agreement (i) may provide for the cancellation at any time by the Company in its
sole discretion of the right to purchase all or part of the shares under the
Option in return for a payment in cash or shares of Stock or a combination of
cash and shares of Stock equivalent in value to the excess (if any of the fair
market value of the shares with respect to which the right to purchase is
canceled over the option price therefor, i.e., the "spread," and/or (ii) may
provide that upon exercise of the Option, such exercise may be treated by the
Company as a cancellation of the Option with respect to those shares by the
payment to the Optionee of the spread, all on such terms and conditions as the
Committee in its sole discretion may prescribe. Moreover, an Option Agreement
may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such option price.
The purchase price per share of stock issued under each Option shall be
determined by the Committee and shall not be less than the fair market value of
a share of Stock on the Grant Date or 110% of such value in the case of 10% of
the Stock of the Company. For the purposes of the Plan and any Option Agreement,
the determination of the fair market value of a share of Stock on any particular
date shall be made in good faith by the Committee and such determination shall
be binding for all purposes
The Committee may accelerate the exercisabilily of any Option in its
sole discretion and also may modify an outstanding Option, including reducing
the exercise price of the Option, or cancel an outstanding Option in exchange
for the grant of a new Option with such terms and conditions as are in
accordance with the Plan at the time of such grant; provided that any Option, as
so amended, or any such new Option, will qualify as an incentive stock option
under Section 422 of the Code.
d-
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VI. Exercise of Options
During the lifetime of the Optionee, only the Optionee (or if
incapacitated, his duly authorized representative) may exercise an Option
granted to him, or any portion thereof. After the death of Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable pursuant to Paragraph V or the Option Agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof expires or becomes
unexercisable pursuant to Paragraph V or the Option Agreement, such exercisable
Option or exercisable portion thereof may be exercised in whole or in part;
provided, however that the Company shall not be required to issue tractional
shares and the Committee may, in the Option Agreement, require any partial
exercise to be made with respect to a specified minimum number of shares.
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company of all of the
following prior to the time when such Option becomes unexercisable.
(a) notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion thereof, stating that
such Option or portion thereof is exercised;
(b) full payment of the option price (in cash or by check,
bank draft or money order payable to the Company for the shares of
Stock with respect to which such Option or portion thereof is thereby
exercised), together with payment or arrangement for payment of any
federal, state or other tax required to be withheld by the Company with
respect to such exercise;
(c) such representations and documents as the Committee
reasonably deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, and any other
federal, state or foreign securities laws or regulations; the
Committee, in its absolute discretion, also may take whatever
additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(d) in the event that the Option or portion thereof shall be
exercised pursuant to this Paragraph VI by any person or persons other
than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option or portion thereof.
VII. Transferability of Options and Stock
No Option or interest or right therein shall be subject to disposition
by transfer, alienation, anticipation, pledge, encumbrance, assignment, or any
other means, whether such disposition be voluntary or involuntary or by
operation of law or by judgment, levy attachment, garnishment, or any other
legal or equitable proceeding (including bankruptcy) and any attempted
disposition thereof shall be null and void and of no effect; provided, however,
that nothing in this Paragraph VII shall prevent transfers by will or by the
applicable laws of descent and distribution.
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The Committee in its absolute discretion, may impose such restrictions
on the transferability of the shares of Stock purchasable upon the exercise of
an Option as it deems appropriate, including without limitation (i) the right to
exercise a right of first refusal if the event of an offer to purchase the Stock
from the Optionee or any transferee of the Optionee, (ii) the right of the
Company to repurchase the shares of Stock from the Optionee or any transferee of
the Optionee and (iii) the right to require an escrow of the certificates
evidencing the shares of Stock. Any such restriction shall be set forth or
incorporated by reference in the respective Option Agreement and may be referred
to on the certificates evidencing such Stock.
VIII.. Recapitalization, Reorganization or Change in Control
(a) The existence of the Plan and the Options granted
hereunder shall not affect in any way the right or power of the Board
of Directors or the shareholders of the Company to make or authorize
any adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities
ahead of or affecting Stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding.
(b) The share with respect to which Options may be granted are
shares of stock as presently constituted, but if, and whenever, prior
to the termination of the Plan or the expiration of an Option
theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on
Stock without receipt of consideration by the Company, the remaining
shares of Stock available under the Plan and the number of shares of
Stock with respect to which any Option may thereafter be exercised (i)
in the event of an increase in the number of outstanding shares, shall
be proportionately increased, and the purchase price per share under an
outstanding Option shall be proportionately reduced, arid (ii) in the
event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share under an
outstanding Option shall be proportionately increased.
(c) Except as may otherwise be expressly provided in the Plan,
the issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of stock subject to Options theretofore
granted or the purchase price per share.
(d) if the Company effects a recapitalization or otherwise
materially changes its capital structure (both of the foregoing are
herein referred to as a "Fundamental Change") then thereafter upon any
exercise of an Option theretofore granted the Optionee shall be
entitled to purchase under such Option, in lieu of the number of shares
of Stock as to which such Option shall then be exercisable, the number
and class of shares of stock and securities to which the Optionee would
have been entitled pursuant to the terms of the Fundamental Change, if
immediately prior to such Fundamental Change, the Optionee had been the
holder of record of the number of shares of Stock as to which such
Option is then exercisable.
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(e) If (i) the Company shall not be the surviving entity in
any merger or consolidation (or survives only as a subsidiary of
another entity), (ii) the Company sells all or substantially all of its
assets to any other person or entity (other than a wholly owned
subsidiary), (iii) any person or entity (including a "group" - as
contemplated by Section 13(d)(3) of the 1934 Act) after the date hereof
acquires or gains ownership or control of (including, without
limitation, power to vote) more than 50% of the outstanding shares of
Stock, (iv) the Company is to be dissolved and liquidated, or (v) as a
result of or in conjunction with a contested election of directors, the
persons who were directors of the Company before such election shall
cease to constitute a majority of the Board (each such event in clauses
(i) through (v) above is referred to herein as a "Corporate Change"),
then, effective as of a date selected by the Committee, which date
shall be (a) in the event of the occurrence of a Corporate Change
specified in clause (i), (ii) or (iv) above, no later than a date
determined by the Committee to be far enough in advance of the date of
such Corporate Change to permit each Optionee to exercise such
Optionee's Option to purchase shares of Stock and participate in such
Corporate Change or (b) in the event of the occurrence of a Corporate
Change specified in clause (iii) or (v) above no later than thirty days
after such Corporate Change, the Committee (which for purposes of the
Corporate Changes described in (iii) and (v) above shall be either the
Committee as constituted prior to the occurrence of such Corporate
Change or, if no Committee had been appointed, the Board of Directors
as constitute prior to the occurrence of such Corporate Change) acting
in its sole discretion without the consent or approval of any Optionee,
shall affect one or more of the following alternatives or combination
of alternatives with respect to all outstanding Options (which
alternatives may be made conditional on the occurrence of any of the
Corporate Changes specified in clause (i) through (v) above and which
may vary among individual Optionees): (1) in the case of a Corporate
Change specified in clauses (i), (ii) or (iv), accelerate the time at
which Options then outstanding may be exercised so that such Options
may be exercised in full for a limited period of time on or before a
specific date fixed by the Committee, after which specified date all
unexercised Options and all rights of Optionees thereunder shall
terminate, (2) accelerate the time at which Options then outstanding
may be exercised so that such Options may be exercised in full for the
then remaining term or (3) require the mandatory surrender to the
Company of outstanding Options held by such Optionees (irrespective of
whether such Options are then exercisable under the provisions of the
Plan) as of a date, before or not later than sixty days after such
Corporate Change, specified by the Committee, and in such event the
Committee shall thereupon cancel such Options and the Company shall pay
to each Optionee an amount of cash equal to the excess of the fair
market value of the aggregate shares of Stock subject to such Option,
determined as of the date such Corporate Change is effective, over the
aggregate option price of such share; provided, however, the Committee
shall not elect an alternative (unless consented to by the Optionee)
such that, if an Optionee exercised his accelerated Option pursuant to
alternative 1 or 2 and participated in a transaction specified in
clause (i), (ii) or (iv) or received cash pursuant to alternative 3,
the alternative would result in the Optionee's owing any money by
virtue of operation of Section 16(b) of the 1934 Act. If all such
alternatives have such a result, the Committee shall take such action
which is hereby authorized to put such Optionees in as Close to the
same position as such Optionee would have been in had alternative 1, 2,
or 3 been selected but without resulting in any payment by such
Optionee pursuant to Section 16(b) of the 1934 Act. Notwithstanding the
foregoing, (I) with the consent of the Optionee, the Committee may in
lieu of the foregoing make such provision with respect to any Corporate
Change as it deems appropriate, and (II) in the event that a Corporate
Change described in clauses (i), (ii) or (iii) occurs, but such
Corporate Change does not result in, any effective change in ownership
or control of the Company, the committee
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shall make such adjustments in the designation and number of
unpurchased shares subject to the Plan, the number of shares subject to
Optionee outstanding under this Plan, the exercise price specified its
Options outstanding under the Plan, and such other terms and provisions
of the Options outstanding under this Plan as the Committee any
determine to be appropriate and equitable.
(f) Any adjustment provided for above shall be subject to any
shareholder action required by applicable Texas corporate law.
IX. Optionee Rights Limited
Nothing in this Plan or in any Option Agreement hereunder shall confer
upon any Optionee any right to continue in the employ of the Company or shall
interfere with or restrict in any way the rights of the Company, which are
hereby expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without just cause.
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect to any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
X. Term of Plan
The Plan shall be effective upon the date specified by the Board of
Directors in its adoption of the Plan. Except with respect to Options then
outstanding, if not sooner terminated under the other provisions hereof, the
Plan shall terminate upon and no further Options shall be granted after the
expiration of ten years from the date of its adoption by the Board of Directors.
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for Company or any subsidiary. Nothing in this Plan shall be
construed to limit the Right of the Company or any subsidiary to grant or assume
options otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business stock or assets of any corporation,
firm or association.
XI. Amendment or Termination of the Plan
The Board of Directors in its discretion may terminate the Plan at any
time with respect to any shares for which Options have not theretofore been
granted The Board of Directors shall have the right to alter or amend the Plan
or any part thereof from time to time; provided, that no change in any Option
theretofore granted may be made which would impair the rights of the Optionee
without the consent of such Optionee; and provided, further, that the Board of
Directors or the Committee may not make any alterations or amendments which
would materially increase the benefits accruing to Optionees under the Plan,
increase the aggregate number of shares which may be issued pursuant to the
provisions of the Plan, change the class of employees eligible to receive
Options under the Plan or extend the term of the Plan,
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without the approval of the holders of a majority of the outstanding shares of
capital stock of the Company voting or acting separately as a class.
173
TABLE OF CONTENTS
-----------------
Section Page
--------- ----
INTRODUCTION.............................................................. 1
1. GRANT OF FRANCHISE ............................................... 2
------------------
1.1 Grant of Right ............................................... 2
1.2 Initial Term ................................................. 2
1.3 Scope of Franchise ........................................... 2
1.4 Limited Exclusivity .......................................... 3
2. FRANCHISE FEE .................................................... 3
-------------
3. RESTAURANT CONSTRUCTION .......................................... 3
-----------------------
3.1 Construction ................................................. 3
3.2 Compliance With Standard Plans ............................... 4
3.3 Relocations .................................................. 4
3.4 Leased Site .................................................. 4
4. OPERATION AND MANAGEMENT ......................................... 5
------------------------
4.1 Continuous Operation ......................................... 5
4.2 Compliance With Confidential Manual .......................... 5
4.3 Maintenance of Confidential Manual ........................... 5
4.4 Menu and Service ............................................. 5
4.5 Promotional Material ......................................... 6
4.6 Pricing ...................................................... 6
4.7 Manager ...................................................... 6
4.8 Operating Partner ............................................ 6
4.9 Hours of Operation ........................................... 6
4.10 Uniforms .................................................... 7
4.11 Maintenance and Repair ...................................... 7
4.12 Signs ....................................................... 7
4.13 Equipment ................................................... 7
4.14 Vending Machines, Etc ....................................... 7
4.15 Interference with Employment Relations of Others ............ 8
4.16 Franchisor's Right to Enter ................................. 8
5. EXCLUSIVE USE AS RESTAURANT ...................................... 8
---------------------------
6. RIGHT ENTRY AND INSPECTION ....................................... 8
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7. DUTIES OF FRANCHISOR ............................................. 8
--------------------
7.1 Site Selection ............................................... 8
7.2 Plans and Specifications ..................................... 9
7.3 Training ..................................................... 9
7.4 Opening Team ................................................. 9
7.5 Promotional Assistance ....................................... 9
7.6 Bulletins .................................................... 9
7.7 Confidential Manual .......................................... 9
7.8 Report Forms ................................................. 10
7.9 Additional Assistance ........................................ 10
7.10 Standards of Operation ...................................... 10
8. TRAINING PROGRAMS ................................................ 10
-----------------
8.1 Initial Training Program ..................................... 10
8.2 Additional Training .......................................... 11
8.3 Franchisee's Training Expenses ............................... 11
9. ROYALTY, ANNUAL STATEMENT And INTEREST ........................... 11
9.1 Royalties .................................................... 11
9.2 Monthly Payment .............................................. 12
9.3 Annual Statement of Accounts ................................. 12
9.4 Use of Payments .............................................. 12
9.5 Interest ..................................................... 12
10. ACCOUNTING AND RECORDS OF OPERATIONS ............................. 12
------------------------------------
10.1 Maintenance of Records ...................................... 12
10.2 Tax Returns ................................................. 13
10.3 Other Financial Information ................................. 13
10.4 Inspection and Audit ........................................ 13
11. ADVERTISING ...................................................... 13
-----------
11.1 Advertising Program ..........................................13
11.2 Local, Regional and Other National Advertising .............. 14
11.3 Advertising Prior to Advertising Program .................... 14
11.4 Use of Photographs .......................................... 15
11.5 Conditions Precedent ........................................ 15
11.6 Uncollected Funds ........................................... 15
12. USE OF PROPRIETARY MARKS BY FRANCHISEE ........................... 15
--------------------------------------
12.1 Trademarks, Trade Names, Service Marks and Trade Secrets .... 15
12.2 Change in Proprietary Mark and Trade Dress .................. 15
12.3 Indemnification of Franchisee ............................... 16
12.4 No Contest of Franchisor's Interest ......................... 16
12.5 Actions on Termination or Expiration ........................ 16
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13. CONFIDENTIALITY .................................................. 16
---------------
13.1 Confidential Information .................................... 16
13.2 Irreparable Harm ............................................ 17
14. INSURANCE ........................................................ 17
15. RENEWAL OF FRANCHISE ............................................. 18
15.1 Right to Renew .............................................. 18
15.2 Notice of RenewaVNon-Renewal ................................ 19
15.3 Conditions of Renewal ....................................... 19
16. TRANSFERABILITY OF INTEREST ...................................... 21
16.1 Transfer by Franchisor ...................................... 21
16.2 Transfer by Franchisee ...................................... 21
16.3 Conditions of Transfer ...................................... 21
16.4 Franchisor's Right of First Refusal ......................... 23
16.5 RestActions on Transfer of Corporate Stock .................. 23
16.6 Transfer Upon Death or Mental Incompetency .................. 24
16.7 Definition of Control ....................................... 24
16.8 Definition of Transfer ...................................... 25
16.9 Non-Waiver of Claims ........................................ 25
16.10 Subfranchising.............................................. 25
17. DEFAULT .......................................................... 25
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18. TERMINATION....................................................... 27
-----------
18.1 Termination by Franchisee ................................... 27
18.2 Immediate Termination by Franchisor ......................... 27
18.3 Termination by Franchisor After Notice ...................... 28
18.4 Franchisor's Obligations Upon Termination or Expiration ..... 28
18.5 Franchisee's Obligations Upon Termination or Expiration ..... 28
19. COVENANTS......................................................... 30
---------
19.1 Competitive Conduct ......................................... 30
19.2 Use of Restaurant Premises .................................. 31
19.3 Termination of Relationship With Franchisee ................. 31
19.4 Subsections Not to Apply .................................... 31
19.5 Reduction in Scope of Covenant .............................. 31
19.6 Claims Not a Defense ........................................ 31
20. TAXES, PERMITS AND INDEBTEDNESS .................................. 31
-------------------------------
20.1 Payment ..................................................... 31
20.2 Dispute as to Tax ........................................... 32
20.3 Compliance With Laws ........................................ 32
20.4 Notice of Action ............................................ 32
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21. INDEPENDENT CONTRACTOR AND INDEMNIFICATION ....................... 32
21.1 Independent Contractor ...................................... 32
21.2 Representation of Status .................................... 32
21.3 Authority and Indemnity ..................................... 32
22. APPROVALS AND WAIVERS ............................................ 33
---------------------
22.1 Written Request ............................................. 33
22.2 Lack of Warranties and Liabilities .......................... 33
22.3 Actions Not Constituting Waiver ............................. 33
22.4 No Assumption of Liability .................................. 33
23. NOTICES .......................................................... 33
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24. ENTIRE AGREEMENT ................................................. 34
----------------
25. CONSTRUCTION ..................................................... 34
------------
25.1 Rights In Parties ........................................... 34
25.2 Captions .................................................... 34
25.3 Gender ...................................................... 34
25.4 Counterparts ................................................ 34
25.5 Effect of Termination ....................................... 34
25.6 Liability of Multiple Franchisees ........................... 34
26. ENFORCEMENT....................................................... 35
-----------
27. ACKNOWLEDGMENTS .................................................. 38
---------------
EXHIBIT A - Restaurant Site
EXHIBIT B - Required Lease Language
EXHIBIT C - Confidentiality and Non-Competition Agreement by Officers,
Directors and Owners of Franchisee
EXHIBIT D - Assumption of Personal Liability
177
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FRESH'N LITE, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made this 1ST day of October,
1995, by and between Fresh'n Lite, Inc., a Delaware corporation (hereinafter
referred to as "Franchisor"), and FNL Investments, LLC, (hereinafter referred to
as "Franchisee"), with a principal place of business at 900 Six Flags Dr.
Arlington, TX 76001.
INTRODUCTION:
A. Franchisor believes it has developed a restaurant format which features
the sale of high quality hamburgers, french fries, soft drinks and related items
of a distinctive variety, and has expended considerable time, skill, effort and
money in the creation and development of restaurants using the mark Fresh'n Lite
Deli Grill and operating under the trade name "Fresh'n Lite" (the restaurant
type developed by Franchisor as described herein, whether owned or franchised,
is referred to herein as the "Restaurant").
B. Franchisor employs or may employ certain other distinctive and
identifying marks, trade names, trademarks, service marks, copyrights, logos,
emblems, sign designs and advertising or promotional slogans.
C. All of the foregoing trademarks or service marks, and such other
trademarks or service marks as may be designated or adopted in the future by
Franchisor for use in connection with the Restaurants, shall hereinafter be
collectively referred to as the "Proprietary Marks".
D. Franchisor believes it employs, and continues to develop and implement,
certain distinguishing and identifying restaurant layout and design features,
including building design, decor, accessories and fixtures and other identifying
trade dress in the interior and exterior of its Restaurants, which features as
now or hereafter designated or adopted by Franchisor are collectively referred
to herein as the "Trade Dress".
E. Franchisor believes it employs, and continues to develop and implement,
identifying combinations of specified equipment and equipment layout; recipes;
food preparation methods and food products; operating standards and food
beverage and equipment specifications; operational, management and
record-keeping procedures; advertising and marketing techniques; trade secrets
and confidential information; all of which in combination with its Proprietary
Marks and Trade Dress, and as hereafter may be designated or adopted by
Franchisor for a Restaurant, is sometimes collectively referred to in this
Agreement as the "System".
F. Franchisor believes by reason of its maintenance of high standards of
quality for food and beverages sold at Restaurants operated by Franchisor or
under its supervision,
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and by reason of its maintenance of high standards of service rendered by such
Restaurants, that it has created goodwill and a demand for restaurants operated
using the System, and for the foods served therein.
G. Franchisee recognizes the benefits that may be derived from being
identified with and licensed by Franchisor and from being able to utilize the
System and the Proprietary Marks which Franchisor makes available to its
franchisees.
H. Franchisee acknowledges that the above-described System should provide a
firm foundation for a franchise operation featuring high standards of management
training, supervision, merchandising and quality food products.
I. Franchisee desires, upon the terms and conditions herein set forth, to
enter into the business of operating a Restaurant at the premises herein
described using the System, under the supervision of and in accordance with the
standards of service adopted and promulgated by Franchisor.
J. Franchisor is ready and willing to grant a franchise to Franchisee for
the operation of a Restaurant upon the terms and conditions set forth below.
Franchisor and Franchisee, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, acknowledged by each of
them to be satisfactory and adequate, do hereby agree as follows:
1. GRANT OF FRANCHISE.
------------------
1.1 Grant of Right. Upon the terms and conditions set forth in this
Agreement, Franchisor hereby grants to Franchisee the right (often referred to
herein as the "franchise"), to be non-exclusive except as hereinafter provided,
to use the System, including the Propri etary Marks, in the operation of a
Restaurant at the site described in Exhibit A (the "Site); such Restaurant and
Site are often referred to herein as the "Franchised Restaurant."
1.2 Initial Term. The franchise is for a term of twenty (20) years
commencing on the date hereof (the "Initial Term"), subject, however, to earlier
termination as provided in Section 18. If this Agreement is not renewed as
provided in Section 15, then upon the expiration of the Initial Term, Franchisee
shall comply with all of the obligations in Section 18.5.
1.3 Scope of Franchise. The franchise permits Franchisee to represent
itself to the public as a franchisee of Franchisor, and may only be enjoyed or
used by Franchisee as provided in this Agreement in connection with the
advertising, marketing, promotion and sale of such food products and services as
are designated from time to time by Franchisor to Franchisee.
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1.4 Limited Exclusivity. The franchise granted to Franchisee is exclusive
only within a one and one-half (1%) mile radius surrounding the Franchised
Restaurant (referred to herein as the "Exclusive Area"). During the Term of this
Agreement (as defined in Section 15.1), and unless Franchisee's rights under
this Agreement are terminated, Franchisor may not establish or authorize another
person to establish a Fresh'n Lite Restaurant within the Exclusive Area.
Notwithstanding the foregoing or anything herein to the contrary, Franchisee
expressly acknowledges that Franchisor and/or its affiliates shall have the
right to own, operate, franchise, license and develop other restaurant types,
including, but not limited to, quick service and/or other hamburger restaurant
concepts or types, provided such restaurants do not utilize the name or service
mark Fresh'n Lite or the Proprietary Marks, Trade Dress or System associated
with the Fresh'n Lite Restaurants.
2. FRANCHISE FEE.
-------------
Upon execution of this Agreement, Franchisee shall pay Franchisor a
lump-sum initial franchise fee (the "Franchise Fee") of Fifty Thousand Dollars
($50,000.00) for the right to operate the Franchised Restaurant. The Franchise
Fee shall be due and payable upon the execution of this Agreement by Franchisee.
In consideration for expenses incurred by Franchisor in evaluating Franchisee,
in furnishing assistance and services to Franchisee and for Franchisor's lost or
deferred opportunity to sell a franchise to others, the Franchise Peen shall be
deemed fully earned and non-refundable upon payment.
3. RESTAURANT CONSTRUCTION.
-----------------------
3.1 Construction. Franchisee shall construct the Franchised Restaurant,
including the building, fixtures and appurtenant improvements such as parking
areas, sidewalks and landscaping, if any (all of which are referred to herein as
the Franchised Restaurant) on the Site promptly after execution of this
Agreement. Franchisee shall complete and open the Franchised Restaurant to the
public as soon as reasonably practical under the circumstances, which in no
event shall be longer than one (1) year after execution of this Agreement. All
labor and materials employed in the construction of the Franchised Restaurant
shall be furnished by Franchisee at Franchisee's expense. Franchisee shall
notify Franchisor when the construction of the Franchised Restaurant has been
completed, a Certificate of Occupancy from the appropriate governmental
authorities has been issued for the Franchised Restaurant, and all required
equipment is installed and operational.
(A) Franchisor Inspection. Upon receipt of the notice of
completion of the Franchise Restaurant from Franchisee, Franchisor
shall have the right to make a final inspection of the Franchised
Restaurant and installed equipment, and the opening of the Franchised
Restaurant shall be conditioned upon the completion of such
construction and installation of such equipment in a good and
workmanlike manner and in compliance with the plans and specifications
approved in writing by Franchisor. The Franchised Restaurant may not
be opened for business without Franchisor's prior final approval,
which will not be unreasonably withheld. Durng the Term of this
Agreement,
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the Franchised Restaurant and its equipment shall not be altered or
modified in any material way without the written approval of
Franchisor.
(B) Pre-Opening Period. The Franchised Restaurant shall not
be opened to the general public for at least seven (7) days after
receipt of such final approval, unless Franchisor consents to a
shorter period, in order to allow for the final training of all
non-managerial employees, the performance by Franchisor's Opening
Team of its pre-opening responsibilities and such pre-opening private
promotions as may be deemed appropriate.
3.2 Compliance With Standard Plans. The Franchised Restaurant (including,
without limitation, landscaping, exterior design, building structure, floor
plan, signs, decorations, furnishings, equipment and fixtures) shall at all
times conform to specifications issued by Franchisor from time to time. Any
modifications of these specifications for non-standard buildings, whether
required by local zoning or building laws or otherwise, must be approved in
writing by Franchisor and are to be paid for by Franchisee. Franchisee must
receive Franchisor's approval of its plans prior to the start of construction.
The appearance of the Franchised Restaurant building and premises shall not be
altered except in such manner as Franchisor may approve in writing. Franchisee
shall maintain the franchise Restaurant building and premises in good condition.
Franchisee shall also make all improvements and alterations to the Franchised
Restaurant as Franchisor may determine to be reasonably necessary to present an
acceptable Restaurant image. Franchisee shall undertake and complete such
repairs, improvements and alterations as Franchisor may request within the
reasonable time specified by Franchisor.
3.3 Relocations. Franchisee may relocate the Franchised Restaurant only
with the prior approval of Franchisor, which approval shall not be unreasonably
withheld. Franchisee's obligations under this Agreement with respect to the
relocation of the Site shall be the same as if no Site had been previously
located and approved. Franchisor may charge Franchisee for its reasonable
expenses of any inspection trips to review proposed relocation sites and, unlike
Section 7.1, Franchisee shall not be entitled to any relocation inspection trips
at no charge. Accordingly, Franchisee shall bear the reasonable travel, food,
lodging and wages of Franchisor or any of its agents or representatives incurred
in connection with any inspection of any proposed relocation site. In addition,
Franchisee shall pay Franchisor a One Thousand Dollar ($1,000) relocation fee at
the time Franchisor approves a relocation as a condition to such approval, and
additionally shall be obligated to reimburse Franchisor for reasonable
attorney's fees incurred by Franchisor and occasioned by such request.
3.4 Leased Site. If the Site or any improvements constructed thereon is to
be leased by Franchisee from a third party, all lease agreements relating to
such Site or improvements (often referred to in this Section as the "Lease" or
"Leases") shall contain a provision (substantially in the form attached hereto
as Exhibit B) which shall (a) acknowledge the existence of this Agreement and
the rights and duties herein created, (b) expressly provide for the right of
Franchisor or its representatives to enter the Franchised Restaurant in the
event of default under or termination of either this Agreement or any of
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the Leases for the purpose of removing Proprietary Marks from any items, signs
or equipment displaying the Proprietary Marks in such a manner that the items,
signs or equipment are not materially damaged, and (c) provide for the
assignment of each said Lease to Franchisor in the event of default by
Franchisee or any sublessor of Franchisee under either this Agreement or any of
such Leases, said assignment to be at the sole option of Franchisor and subject
to Franchisor's assumption of the duties and unaccrued liabilities under any of
such Leases, but not the then-existing, debts and obligations of the lessee
under any such Lease. Any proposed Lease shall be submitted to Franchisor prior
to execution for a determination by Franchisor that it complies with the terms
hereof. Franchisor shall notify Franchisee of such determination within five (5)
business days of receipt of the proposed Lease. The failure of a proposed site
lease to satisfy the aforesaid requirements shall constitute bona fide reason
for Franchisor's rejection of the proposed site.
4. OPERATION AND MANAGEMENT.
------------------------
4.1 Continuous Operation. Promptly following the opening of the Franchised
Restaurant and throughout the Term of this Agreement, Franchisee shall
continuously operate the Franchised Restaurant at the Site, as may be relocated
pursuant to Section 3.3 (except if prevented by fire, Act of God or other
casualty or cause beyond the control of Franchisee), or shall secure
Franchisor's prior approval, which shall not be unreasonably withheld, for any
interruption of operations lasting for more than five (5) days. Franchisee shall
use its best efforts, skills and diligence in the conduct of the Franchised
Restaurant, and shall regulate Franchisee's employees so that they will be
courteous and helpful to the public.
4.2 Compliance With Confidential Manual. Franchisee shall operate the
Franchised Restaurant in strict conformity with the Confidential Manual (as
defined in Section 7.7). Franchisor shall have the right from time to time to
modify (including substantial additions or deletions) such Confidential Manual
whenever it deems that such modification is reasonably necessary to protect the
System or the Proprietary Marks, or to improve or maintain the standards of
quality, service, repair or maintenance of the Franchised Restaurant.
4.3 Maintenance of Confidential Manual. Franchisee shall at all times keep
its COW of the Confidential Manual current and up-to-date, and in the event of
any dispute as to the contents of the Confidential Manual, the terms of the
master copies of the Confidential Manual maintained by Franchisor at its
corporate offices shall be controlling. In the event of any uncertainty or
confusion as to the procedure to be followed in the operation of the Franchised
Restaurant, Franchisee shall first consult the Confidential Manual, and if the
uncertainty or confusion persists, Franchisee shall promptly contact Franchisor
in writing or by telephone.
4.4 Menu and Service. Franchisee shall serve all menu items which
Franchisor may deem appropriate to take maximum advantage of the potential
market and achieve standardization in the System. Franchisee shal1 not serve any
item which is not set forth in
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the Confidential Manual or otherwise authorized and approved by Franchisor in
writing. Franchisee shall adhere to all specifications contained in the
Confidential Manual or as otherwise prescribed by Franchisor as to ingredients,
methods of preparation and service, weight and dimensions of products served,
and standards of cleanliness, health and sanitation. All food, drink and other
items will be served and sold in packaging that meets Franchisor's
specifications.
4.5 Promotional Material. Notwithstanding the above, Franchisee shall
exhibit, promote the sale of, sell and distribute Franchisor's products,
including coupons, novelties, promotional literature, materials and souvenirs in
the manner and to the extent requested by Franchisor from time to time.
4.6 Pricing. Franchisee shall establish the prices to be charged customers
for all products and services (both regular menu items and promotional
materials) offered by the Franchised Restaurant.
4.7 Manager. Except as otherwise approved in writing by Franchisor,
Franchisee agrees as follows:
(A) If Franchisee is an individual, Franchisee shall devote
his or her full time, energy and best efforts to the management and
operation of the Franchised Restaurant, or shall employ a manager who
has been approved in writing by Franchisor and who has successfully
completed the initial operations training program described in Section
8 and who shall devote his or her full energy and best efforts to the
management and operation of the Franchised Restaurant.
(B) If Franchisee is a corporation or partnership, such
corporation or partnership shall employ a manager approved in writing
by Franchisor who has successfully completed the initial operations
training program described in Section 8 and who shall devote his or
her full time, energy and best efforts to the management and operation
of the Franchised Restaurant.
Notwithstanding the above, Franchisee will be required at all times and on
a full time basis to employ at the Franchised Restaurant a combination of
Restaurant Managers or Assistant Managers, who shall have successfully completed
Franchisor's training programs in accordance with Section 8, as Franchisor
requires for the size Restaurant at issue.
4.8 Operating Partner. If Franchisee is a corporation with more than one
(I) shareholder or a partnership, or otherwise consists of more than one
individual, Franchisee must designate an individual as operating officer or
partner (the "Operating Partner") who shall be responsible for the day-to-day
operation of the Franchised Restaurant and who shall have the further
responsibility of reporting to Franchisor on behalf of Franchisee concerning the
operation of the Franchised Restaurant.
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4.9 Hours of Operation. Unless otherwise authorized or directed by
Franchisor in writing, the Franchised Restaurant shall be open for business a
minimum of 11:00 a.m. to 11:00 p.m., seven (7) days a week, three hundred
sixty-three (363) days per year. Franchisee may only close the Franchised
Restaurant on Thanksgiving Day and Christmas Day and other days which Franchisor
may from time to time allow in writing.
4.10 Uniforms. All employees shall wear uniforms of such design and color
as Franchisor may designate from time to time, whether through the Confidential
Manual or otherwise.
4.11 Maintenance and Repair. From tune to time as reasonably appropriate
Franchisee shall repair and paint the exterior and interior of the building of
the Franchised Restaurant. Franchisee shall at all times maintain the interior
and exterior of such building and the area around such building in a clean,
orderly and sanitary condition satisfactory to Franchisor, and maintain all
structures, furnishings, fixtures, equipment and decorations in good condition
and repair satisfactory to Franchisor. In the event the Franchised Restaurant
shall be damaged by fire or other casualty, or be required to be repaired or
reconstructed by any governmental authority, Franchisee, at its own expense,
shall repair or reconstruct the building within a reasonable time under the
circumstances. The minimum acceptable appearance for the restored building will
be that which existed just prior to the casualty or order; however, every effort
should be made to have the restored building reflect the then current image,
design and specifications of a Restaurant. If the building is substantially
destroyed by fire or other casualty, Franchisee may, subject to Franchisor's
consent, terminate this Agreement in lieu of Franchisee reconstructing the
building.
4.12 Signs. Franchisee shall display the Proprietary Marks only in the
manner and at such locations as Franchisor has authorized. Franchisee agrees to
maintain and display signs reflecting the current image of the Restaurants in
conformity with specifications issued by Franchisor from time to time and shall
not place additional signs or posters on the premises without the prior written
consent of Franchisor. Franchisee shall discontinue the use of and destroy such
signs as are declared obsolete by Franchisor within the reasonable time
specified by Franchisor.
4.13 Equipment. Franchisee shall only use equipment in the Franchised
Restaurant which Franchisor has approved as meeting its specifications and
performance standards. Franchisee shall maintain the equipment in a condition
that meets the operational standards specified in the Confidential Manual. As
equipment becomes obsolete or inoperable, Franchisee shall replace such items
with the types and kinds of equipment as are then being installed in new
Restaurants at the time of replacement. If Franchisor determines that additional
or substitute equipment is needed because of a change in menu items or methods
of preparation and service, Franchisee will install the new equipment within the
reasonable time specified by Franchisor.
4.14 Vending Machines Etc. Franchisee shall not install telephone booths,
newspaper racks, juke boxes, cigarette, gum or candy machines, video or pinball
games,
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rides, or any other vending machines on the premises of the Franchised
Restaurant or other franchised Restaurants without the prior written approval of
Franchisor.
4.15 Interference with Employment Relations of Others. Neither Franchisor
nor Franchisee will attempt, directly or indirectly, to entice or induce, or
attempt to entice or induce any employee of the other or of another franchisee
to leave such employment, nor to employ such employee within six (6) months
after his or her termination of employment with such employer, except with the
prior written consent of such employer.
4.16 Franchisor's Right to Enter. If Franchisee fails to substantially
perform any of its obligations under this Section 4 after being given seven (7)
days prior notice and opportunity to cure, any persons authorized by Franchisor
may enter the Franchised Restaurant at any time during regular business hours
and perform any act deemed necessary by Franchisor to remedy such failure
without liability to Franchisor. Franchisee shall immediately reimburse
Franchisor for any costs incurred by Franchisor incidental thereto and agrees to
indemnify and hold harmless Franchisor and such persons against any cause of
action arising out of or related to such action and for any loss occasioned by
such action.
5. EXCLUSIVE USE AS RESTAURANT.
---------------------------
During the Term of this Agreement, Franchisee shall use the
Franchised Restaurant exclusively for the service of food and beverages as
described herein or as otherwise approved by Franchisor in writing. Franchisee
shall not allow the Franchised Restaurant or any part thereof to be used for
any immoral or illegal purpose, or for any purpose, business, activity or use
not specifically identified in this Agreement to which Franchisor reasonably
objects.
6. RIGHT OF ENTRY AND INSPECTION.
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To ensure compliance with this Agreement, Franchisor or its designated
representative shall have the unrestricted right to enter the Franchised
Restaurant to conduct such activities as it or they deem necessary to ascertain
compliance with this Agreement. The inspections may be conducted without prior
notice at any time when Franchisee or one of its employees is at the Franchised
Restaurant. The inspections will be performed in a manner which minimizes
interference with the operation of the Franchised Restaurant.
7. DUTIES OF FRANCHISOR.
--------------------
7.1 Site Selection. In the unusual event that the Site has not been
selected by Franchisee and approved by Franchisor prior to execution of this
Agreement, Franchisee shall provide Franchisor with written notice of proposed
sites promptly following the location of such sites. Franchisor shall then
reasonably assist Franchisee in selecting the site for the Franchised
Restaurant; however, such assistance shall be limited to supplying Franchisee
with information as to what are believed to be desirable geographic and
demographic characteristics for a site, and of inspecting proposed sites.
Franchisor shall have no duty,
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however, to assist in actually locating available sites. Franchisor has the
right to reject sites proposed by Franchisee on as many occasions and for as
many stated bona fide reasons as Franchisor, in the exercise of reasonable
discretion and good business judgement, shall deem necessary. Franchisee shall
have no right to rescind this Agreement because Franchisor has rejected any site
or sites, but shall proceed with a good faith effort to find an alternative and
suitable site location following such rejection. If necessary, and except as
provided in Section 3.3, Franchisor will make up to two (2) inspection trips to
review Franchisee's proposed sites at no cost to Franchisee other than the
payment of the Franchise Fee. If additional inspection trips are required,
Franchisor may require Franchisee to pay the reasonable travel expenses, room,
board and wages of Franchisor and its representatives incurred during such
additional inspections.
Franchisor shall provide Franchisee with written notice of its acceptance
or rejection of a proposed site within thirty (30) days after receipt of
notification of the proposed site. Failure by Franchisor to reject a site within
such time frame shall constitute acceptance of the site by Franchisor. Approval
of a site by Franchisor does not constitute any representation or guarantee by
Franchisor that the Franchised Restaurant will be successful at such site.
7.2 Plans and Specifications. Franchisor shall make available standard
plans and specifications for exterior and interior design and layout, fixtures,
furnishings, signs and equipment, at such time as Franchisee has obtained final
site approval, which Franchisee shall adapt as provided in Section 3.2.
7.3 Training. Franchisor shall provide an initial operations training
program as provided in Section 8.
7.4 Opening Team. Franchisor shal1 provide the services of one (1) or more
experienced persons (sometimes referred to herein as the "Opening Team"), for up
to three (3) days prior to the opening of the Franchised Restaurant, and for up
to three (3) days after the opening of such Restaurant to assist in training
non-managerial employees, and to ensure that all Franchisor-prescribed
procedures, recipes and job functions are properly implemented and routinely
incorporated into Franchisee's Restaurant operations.
7.5 Promotional Assistance. Franchisor shall provide such reasonable
assistance to Franchisee, as Franchisor deems advisable, to promote the opening
of the Franchised Restaurant, including assistance in obtaining and coordinating
opening advertising. Such promotion and advertising shall be provided for at
Franchisee's sole expense.
7.6 Bulletins. Franchisor may from time to time offer to Franchisee, at no
charge, bulletins which will include information relating to Restaurant
operations, such as sales and marketing development techniques, special recipe
and food preparation techniques, new restaurant services and other operational
developments.
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7.7 Confidential Manual. For the Term of this Agreement, Franchisor shall
loan Franchisee one copy of Franchisor's Confidential Policies and Procedures
Manual (the ~ Confidential Manual"), which may be modified by Franchisor from
time to time. Franchisee acknowledges and agrees that adherence to Franchisor's
restaurant design and color schemes, signs, interior decor and equipment systems
requirements, menu and service format and the provisions of the Confidential
Manual are reasonable, necessary and essential to the image and success of the
Franchised Restaurant and the System. The Confidential Manual contains the
official restaurant operating standards, specifications and procedures
prescribed from time to time by Franchisor for the operation of a Restaurant.
The Confidential Manual, and any other Confidential Information (as defined in
Section 13.1), hereafter supplied to Franchisee by Franchisor are not to be
copied or reproduced, in whole or in part, without the prior written consent of
Franchisor. The Confidential Manual and other Confidential Information shall at
all times remain the sole property of Franchisor and shall be returned to
Franchisor immediately upon termination or expiration of this Agreement.
7.8 Report Forms. Franchisor shall provide Franchisee with certain forms or
methods for financial analysis or reports to be prepared or used based on the
regular accounting reports which Franchisee is required to prepare and submit to
Franchisor pursuant to Section 10.
7.9 Additional Assistance. Franchisor, in its sole discretion and at its
expense, may provide consultation and advice to Franchisee up to four (4) times
annually on such terms as Franchisor deems appropriate. At Franchisee's request,
Franchisor shall provide additional consultation and advisory assistance
provided that Franchisee pays all reasonable expenses incurred by Franchisor and
its representatives in connection with such assistance, including, without
limitation, the reasonable cost of travel, room, board and wages.
7.10 Standards of Operation. Franchisor shall determine standards of
quality for all goods and menu items used or sold by the Franchised Restaurant,
standards of service in connection with their sale, standards of quality and
utility for all furnishings and fixtures of the Franchised Restaurant, and
standards of repair and maintenance of the Franchised Restaurant. These
standards may, in some cases, include recommended manufacturers of certain foods
or beverages. Such standards shall be primarily those set forth in the
Confidential Manual, but such additional written instructions or standards as
are received from time to time by Franchisee from Franchisor shall be no less
binding, whether or not incorporated in the Confidential Manual. Franchisee
shall strictly conform to such standards and operate such Franchised Restaurant
so as to sustain the goodwill and reputation of the System and the Proprietary
Marks. If Franchisee shall in any way fail to materially and substantially
comply with the standards of quality or service established by Franchisor,
Franchisor shall have the right to require managerial employees to undergo
additional training pursuant to Section 8, or to assign to such Franchised
Restaurant such person or persons as it deems necessary for the purpose of
training Franchisee's employees and ensuring that such standards of quality and
service are maintained. Franchisee shall pay Franchisor the reasonable cost of
travel, room, board and wages of such person or persons
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for the period of time necessary in Franchisor's opinion to satisfactorily train
or retrain Franchisee's employees or otherwise correct Franchisee's
noncompliance.
8. TRAINING PROGRAMS.
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8.1 Initial Training Program. Prior to the opening of the Franchised
Restaurant for business, the person(s) to be employed on a full time basis in
the operation of the Franchised Restaurant as Restaurant Managers or Assistant
Managers of Franchisee shall be required to attend and complete to Franchisor's
satisfaction the initial operations training program to be conducted by
Franchisor or its designated representative. This initial training will be at
Franchisor's cost and expense; however, Franchisee must pay its own expenses as
required in Section 8.3.
8.2 Additional Training. If it becomes necessary to retrain any person who
has completed a training program, or if any additional person is employed to act
as Restaurant Manager or Assistant Manager who has not completed an appropriate
training program, Franchisor shall be entitled to be reimbursed by Franchisee
for Franchisor's estimated direct and indirect costs with respect to the
training of any such person.
8.3 Franchisee's Training Expenses. Franchisee shall pay all expenses
incurred by Franchisee and its employees in connection with all initial or
additional training programs, including, without limitation, the reasonable cost
of travel, room, board and wages. Franchisee agrees to defend and hold
Franchisor or its designated representative harmless against any cause of action
arising out of or related to the training program(s) conducted by Franchisor or
its designated representative.
9. ROYALTY, ANNUAL STATEMENT AND INTEREST.
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9.1 Rovalties. Franchisee agrees to pay Franchisor a royalty of five
percent (5%) of Gross Receipts (as defined below) for the use of the System and
the Proprietary Marks in connection with the Franchised Restaurant and the
franchise.
Franchisee may, at its option, pay Franchisor a royalty of two percent (2%)
for the first six (6) months that the Franchised Restaurant is open for business
and four percent (4%) thereafter; provided the difference of two percent (2%) is
spent by Franchisee for advertising, marketing and promotion. If Franchisee
chooses to exercise this option, Franchisee must submit the following to
Franchisor: 1) prior to opening, notice in writing of Franchisee's intent to
exercise this option, 2) prior to opening, an outline of intended expenditures
for advertising and marketing for the first six (6) month period, and 3)
accompanying each monthly royalty payment for the entire six (6) month period,
invoices for advertising and marketing expenses. Such expenditures shall be at
least equal to two percent (2%) of Gross Receipts for the six (6) month period.
The term "Gross Receipts" as used in this Agreement includes the aggregate
amount of all sales of food, beverage, goods, articles, and any other
merchandise, and the aggregate
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of all charges for any services performed, whether for cash, on credit or
otherwise, made and rendered in, about or in connection with the Franchised
Restaurant, unless specifically exempted by Franchisor in writing. The sale of
Restaurant related products away from the Franchised Restaurant shall be
included within the definition of Gross Receipts. Gross Receipts excludes (i)
any federal, state, county or city tax, excise tax, or other similar taxes based
on sales which Franchisee collects from customers; (ii) employee discounts; and
(iii) cash register over-rings. Gross Receipts also excludes cash received as
payment in credit transactions where the extension of credit itself has already
been included in the figure upon which royalty and advertising contributions are
computed.
9.2 Monthly Payment. Franchisee shall pay royalties monthly to Franchisor
based upon the Gross Receipts for the preceding calendar month. Payments shall
be calculated by multiplying the Gross Receipts of the Franchised Restaurant
during the preceding calendar month by the applicable royalty percentage
("Royalty Payment"). All Royalty Payments are to be made at Franchisor's
corporate offices as shown in Section 23 of this Agreement. All Royalty Payments
must be either (a) by check dated and postmarked on or before the tenth (lOth)
day of the month or (b) by wire transfer received by Franchisor on or before the
tenth (lOth) day of the month. In the event a Royalty Payment by check is
postmarked, or if by wire transfer is received, after the tenth (lOth) day of
any month, Franchisee shall pay Franchisor a One Hundred Dollar ($100) late fee
in addition to the overdue Royalty Payment. In the event a Royalty Payment by
check is postmarked, or if by wire transfer is received, after the twentieth
(20th) day of any month, Franchisee shall pay Franchisor the One Hundred Dollar
($100) late fee and the overdue Royalty Payment plus interest on the Royalty
Payment from the date such payment was due (ie. the tenth (lOth)) as provided in
Section 9.5.
9.3 Annual Statement of_Accounts. Within seventy-five (75) days after the
end of each calendar year during the Term of this Agreement, Franchisee shall
prepare and deliver to Franchisor a statement of accounts and financial
statements, including a statement of income, balance sheet and statement of cash
flow, reviewed by an independent Certified Public Accountant at Franchisee's
expense, showing all monthly Gross Receipts and the corresponding monthly
Royalty Payments made and the annual Gross Receipts.
If Franchisee fails to submit to Franchisor the statements required by this
Section within thirty (30) days of receiving notice that they are overdue,
Franchisor may have an audit conducted of the Franchised Restaurant's financial
records and accounts for the applicable period by a Certified Public Accountant
selected by Franchisor, at Franchisee's sole expense. The fees and expenses of
such Certified Public Accountant incurred by Franchisor shall be paid by
Franchisee to Franchisor within fifteen (1S) days of Franchisee's receipt of a
statement therefor.
9.4 Use of Payments. Franchisor shall be entitled to deposit each monthly
Royalty 1 Payment in its general funds account or to such other accounts as it
elects and may make use of such payments freely and without conditions for any
and all purposes and no obligation or debt of Franchisor to Franchisee, or
constructive trust or other legal
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encumbrance, shall be deemed to exist or be imposed on or with respect to any
funds paid to Franchisor as royalties.
9.5 Interest. Interest will be charged on the amount of any unpaid royalty,
advertising fund contribution, relocation, transfer or other fee from the date
such fee was due and payable at the rate of eighteen percent (18%) per annum or
the maximum rate permitted by law, whichever is lower.
10. ACCOUNTING AND RECORDS OF OPERATIONS.
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10.1 Maintenance of Records. During the Term of this Agreement, Franchisee
shall maintain and preserve, for at least three (3) years from the dates of
their preparation, full, complete and accurate books, records and accounts in
accordance with the standard accounting system prescribed in the Confidential
Manual or as otherwise reasonably prescribed by Franchisor.
10.2 Tax Returns. At the time of filing any and all federal income tax and
state sales or income tax returns applicable to the Franchised Restaurant with
the appropriate taxing authority, Franchisee shall submit a copy of same to
Franchisor, certified by Franchisee or an executive officer thereof.
10.3 Other Financial Information. Franchisee shall submit to Franchisor
current financial statements and such other forms, income tax returns, reports,
records, information and data as Franchisor may reasonably designate, in the
format and at the times and places reasonably required by Franchisor, either
upon request or as specified from time to time in the Confidential Manual.
10.4 Inspection and Audit. Franchisor or its designated independent
accountants shall have the right at all reasonable times to examine and copy, at
Franchisor's expense, all financial records and accounts relating to the
Franchised Restaurant. Franchisor shall also have the right, at any time, to
cause an audit to be conducted of the Franchised Restaurant's financial records
and accounts by an independent Certified Public Accountant. If such audit should
reveal that Royalty Payments due Franchisor have been understated by Franchisee
by three percent (3%) or more in any report to Franchisor, then Franchisor may
charge Franchisee for all expenses incurred by Franchisor in connection with the
audit (including, without limitation, reasonable accounting and attorneys'
fees). Such expenses shall be paid by Franchisee to Franchisor within fifteen
(15) days of Franchisee's receipt of a statement therefor. Within fifteen (15)
days of Franchisee's receipt of the results of such audit, Franchisee shall pay
Franchisor the amount by which such Royalty Payment(s) were understated plus
interest from the date each such payment should have been made.
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11. ADVERTISING.
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11.1 Advertising Program.
(A) Franchisor, at its option, may establish a Public
Relations and Advertising Program ("Advertising Program") at such
time as there are, in Franchisor's sole judgment, a sufficient number
of Restaurants in operation. The Advertising Program shall be funded
with contributions from each franchisee and Franchisor operated
Restaurant. All contributions to the Advertising Program shall be
used solely and exclusively for national, regional or local
advertising, development of sales and advertising tools, and public
relations for the System and related matters for the mutual benefits
of Franchisor and all franchises. However, if a national program is
established, Franchisor by doing so will not be assuming either
responsibility for or coordination of local advertising programs for
individual franchisees.
(B) Franchisee shall contribute to the Advertising Program
an amount to be determined by Franchisor, not to exceed two percent
(2%) of Franchisee's Gross Receipts during the preceding month. If
the Advertising Program is not established on or before the date of
this Agreement, Franchisee shall begin making contributions to the
Advertising Progrnm when it is established by Franchisor.
(C) Upon commencement of the Advertising Program, Franchisor
shall establish an account which shall be known as the "Advertising
Fund", and all contributions to the Advertising Program shall become
a part of the Advertising Fund. Franchisor shal1 account for the
Advertising Fund separately from its other funds and shall not use
any proceeds of the Advertising Fund for any of the general operating
expenses of Franchisor, except for such reasonable expenses
(including salaries) as Franchisor may incur in activities reasonably
related to the administration or direction of the Advertising Fund
and its programs (including, without limitation, conducting market
research, preparing advertising materials and collection and
accounting for contributions to the Advertising Fund). Franchisor
shall not gain or profit from the administration of the Advertising
Program. Franchisor may, in its sole and unfettered discretion,
determine all aspects of the advertising to be conducted under the
Advertising Program, including, without limitation, choice of media
and nature and location of advertising. Franchisor's determination as
to such matters shall be final and binding. Franchisor shall, upon
request, furnish Franchisee with an annual accounting of the funds
received and disbursed under the Advertising Program.
11.2 LocaL Regional and other National Advertising. Franchisee shall
participate, at Franchisee's expense, in such prize contests and other local,
regional or national programs relating to sales promotions as Franchisor may
from time to time establish. If a local or
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regional advertising cooperative is established during the Term of this
Agreement in the market coverage area in which the Franchised Restaurant is
located, then Franchisee shall become a member of the cooperative and shall
abide by the bylaws and rules of the cooperative, so long as the cooperative is
in existence. ALL LOCAL ADVERTISING AND PROMOTION SHALL BE SUBJECT TO
FRANCHISOR'S PRIOR APPROVAL AND SHALL BE DESIGNED AND PRODUCED IN SUCH A WAY AND
IN ACCORDANCE WITH FRANCHISOR'S PROCEDURES TO PROTECT FRANCHISOR'S INTEREST IN
THE PROPRIETARY MARKS AND THE SYSTEM.
11.3 Advertising Prior to Advertising Program. Until and unless Franchisor
implements the Advertising Program(s) described above, Franchisee shall conduct
its own local or regional marketing and advertising programs. Prior to the
distribution, dissemination, circulation, publication or other communication of
any marketing or advertising, Franchisee shall first submit its marketing and
advertising program to Franchisor for approval which approval or disapproval
shall be given within ten (10) days following receipt thereof and shall not be
unreasonably withheld. Any such marketing or advertising program submitted to
Franchisor and not otherwise disapproved within said ten (10) days shall be
deemed approved.
11.4 Use of Photographs. Franchisor shall have the right to photograph both
the exterior and interior of the Franchised Restaurant, and the various foods
served therein, and to use any such photographs in its publicity or advertising,
and Franchisee shall cooperate in securing such photographs and the consent of
persons pictured.
11.5 Conditions Precedent. Franchisee shall only be required to make the
contribution as may be required under Section 11.1 in the event (a) Franchisor
requires such payment and (b) Franchisor makes equal percentage contributions to
the Advertising Fund in such amounts as shall be required of Franchisee for
Restaurants owned and operated by Franchisor.
11.6 Uncollected Funds. Franchisor shall not be liable to Franchisee with
respect to Franchisor's failure to collect Advertising Fund contributions
assessed by Franchisor against other Restaurant franchisees.
12. USE OF PROPRIETARY MARKS BY FRANCHISEE.
--------------------------------------
12.1 Trademarks Trade Names. Service Marks and Trade Secrets. Franchisee
acknowledges that ownership of all rights, title and interest in and to the
System, Proprietary Marks, Trade Dress, and the design, decor and image of the
Franchised Restaurant is and shall remain vested solely in Franchisor and
Franchisee disclaims any right or interest therein or the goodwill derived
therefrom. In addition, Franchisee agrees as follows:
(A) Franchisee shall use only the Proprietary Marks and such
other proprietary marks as are required and approved by Franchisor
for Franchisee's use, and shall use them only in the manner
authorized, required and permitted under this Agreement or otherwise
by Franchisor in writing.
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(B) Franchisee shall use the Proprietary Marks and Trade
Dress only in connection with the operation of the Franchised
Restaurant, except to the extent Franchisee obtains similar rights by
the execution of additional Franchise Agreements.
(C) Franchisee shall post a notice at the location of the
Franchised Restaurant, in the form and manner shown in the
Confidential Manual, indicating that Franchisee is a "Franchised
Operator" of the Franchised Restaurant and that the Proprietary Marks
are used by Franchisee under license from Franchisor.
(D) Franchisee shall not use any Proprietary Mark to secure
or incur any obligation or indebtedness.
(E) Franchisee shall not use the Proprietary Marks, or any
part thereof, as part of its corporate or other legal business name.
(F) Franchisee shall comply with Franchisor's instructions in
filing and maintaining requisite trade name or assumed name
registrations, and shall execute any documents deemed necessary by
Franchisor or its counsel to obtain protection for the Proprietary
Marks or to maintain their continued validity and enforceability.
(G) If Franchisee has reason to believe that an unauthorized
third party is using or infringing upon any Proprietary Mark, or using
a trade dress which is confusingly similar to Franchisor's Trade
Dress, Franchisee shall immediately notify Franchisor and cooperate
with Franchisor in defending or settling any litigation arising
therefrom. Franchisor will have sole discretion to take such action,
if any, it deems reasonably necessary or proper in the circumstances.
12.2 Change in Proprietarv Mark and Trade Dress. If it becomes advisable at
any time in the sole discretion of Franchisor to modify or discontinue use of
any Proprietary Mark or Trade Dress, or to use one or more additional or
substitute names or marks, Franchisee is obligated to do so and the sole
obligation of Franchisor in any such event will be to reimburse Franchisee for
its tangible costs resulting from such modifications or discontinuance of any
Proprietary Mark (such as changing signs) of complying with this obligation.
12.3 Indemnification of Franchisee. While Franchisor is not required by
this Agreement to defend Franchisee against any infringement, unfair
competition, or other claim respecting Franchisee's use of the Proprietary Marks
or any name or mark, Franchisor agrees to indemnify Franchisee against, and
reimburse Franchisee for, all damages for which Franchisee is held liable in any
proceeding; provided that this indemnification shall only apply to damages
arising out of the use of any Proprietary Mark in a manner expressly authorized
by Franchisor.
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12.4 No Contest of Franchisor's Interests. Franchisee shall not contest,
directly or indirectly, Franchisor's ownership, title, right or interest in, or
the validity of the System or any component thereof, and agrees not to contest
Franchisor's sole right to register, use or license others to use such System or
any component thereof.
12.5 Actions on Termination or Expiration. Upon the termination or
expiration of this Agreement, Franchisee shall execute such documents and
perform such acts as Franchisor may deem reasonably necessary or desirable to
evidence Franchisee's disassociation from Franchisor, and the fact that
Franchisee has ceased using the Proprietary Marks and Trade Dress and has no
further interest or right therein whatsoever, including, without limitation, the
obligations in Section 18.5.
13. CONFIDENTIALITY.
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13.1 Confidential Information. Franchisee shall not, during the Term of
this Agreement or any time thereafter, communicate to, divulge to, or use for
the benefit of any other person, persons, partnership, association, corporation
or other entity any "Confidential Information" including, without limitation,
the following:
(A) The contents of any Confidential Manual.
(B) Any information or know-how concerning the methods of
operation of the business franchised hereunder which may be
communicated to Franchisee or of which Franchisee may learn by virtue
of Franchisee's operation of the Franchised Restaurant or
relationship with Franchisor under this Agreement;
(C) Any information or know-how including, without
limitation, drawings, materials, equipment, specifications,
techniques, recipes, customer lists and supplier lists and other
data, which Franchisor designates as, or which Franchisee reasonably
knows is, confidential; provided that information or know-how which
Franchisee can demonstrate came to its attention prior to disclosure
thereof by Franchisor, or which, after disclosure to Franchisee by
Franchisor, becomes a part of the public domain through publication
or communications by others shall not be deemed to be Confidential
Information.
13.2 Irreparable Harm. Franchisee acknowledges that any failure by
Franchisee or its owners, agents, employees, or affiliates, as the case may be,
to comply with the requirements of Sections 13 and 19 of this Agreement will
cause Franchisor irreparable injury, and Franchisee agrees to pay Franchisor all
costs and reasonable attorneys' fees incurred by Franchisor in obtaining
specific performance of, or any injunction or restraining order against
violation of, the requirements of such sections. Franchisee shall divulge such
Confidential Information only to such persons as must have access to it in order
to operate the Franchised Restaurant. Franchisee shall obtain from such of its
employees or class of employees as Franchisor may designate, as a condition of
employment, executed copies of
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a "Confidential Information Disclosure Agreement," in a form to be prescribed by
Franchisor, requiring a similar observance and protection of the confidentiality
of such information on their part and naming Franchisor as a third party
beneficiary.
14. INSURANCE.
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Franchisee will procure, prior to commencing construction (and upon
completion of construction) of the Franchised Restaurant, and maintain in full
force and effect throughout the Ter_ of this Agreement, an insurance policy or
policies protecting Franchisee, Franchisor and its affiliates, and their
respective officers, directors, partners and employees against any loss,
liability, personal injury, property damage or expense whatsoever arising or
occurring upon or t/ in connection with the construction and operation of the
Franchised Restaurant. Franchisor shall be an additional named insured on those
coverages specified in subsections (A), (B) and (D) below. All policies required
herein shall be written by a responsible insurance company or companies
satisfactory to Franchisor with an A.M. Best Company financial rating of not
less than "A-" and shall provide at least the following minimum amounts of
coverage under the following categories:
(A) Comprehensive general liability insurance for property
damage and personal injury, including death, and including products
liability, with minimum limits of One Million Dollars ($1,000,000)
per occurrence and Two Million Dollars ($2,000,000) annual aggregate;
(B) Property damage insurance in the amount of at least
full replacement value insuring the Franchised Restaurant, and its
equipment, inventory, furnishings and fixtures, and any additions
thereto, in accordance with standard fire and extended coverage
insurance then in effect for similar businesses; and
(C) Workmen's Compensation and employer's liability
insurance as may be required by any applicable state or federal
agency regulating such coverage. Workmen's compensation policies, if
any, shall include waivers of subrogation in favor of Franchisor.
(D) If alcoholic beverages are ever served at the Franchised
Restau-rant, liability insurance policy with minimum limits of at
least One Million Dollars ($1,000,000) with endorsements insuring
against liability imposed by statutes commonly known as "Dram Shop
Acts," or by other laws, upon retailers of alcoholic substances, if
such coverage cannot be obtained under the policy or policies in (A)
above.
Additional coverage or higher policy limits, within reasonable limits for
the restaurant industry, may be required of Franchisee by Franchisor from time
to time. Upon Franchisee's receipt of notification of such modification from
Franchisor, it shall take prompt action to secure the additional coverage or
higher policy limits. As a condition to Franchisor's approval to permit
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Franchisee to open the Franchised Restaurant for business, certificates of
insurance showing compliance with all of the foregoing requirements shall be
furnished directly by the insurance agent of Franchisee to Franchisor for
approval. Said certificates shall state that the policy or policies will not be
cancelled or altered without at least thirty (30) days prior notice to
Franchisor. Similar certificates shall be submitted to Franchisor on each policy
renewal date thereafter and, upon request, Franchisee shall submit to Franchisor
copies of all or any policy or amendments thereto. Maintenance of such insurance
and the performance by Franchisee of its obligations under this paragraph shall
not relieve Franchisee of liability under the indemnity provisions set forth in
this Agreement.
15. RENEWAL OF FRANCHISE.
--------------------
15.1 Right to Renew. Unless the franchise has been terminated prior to the
expiration of its Initial Term, or Franchisor has given Franchisee notice of its
intention not to renew the franchise as permitted under Section 15.2, the
franchise may be renewed at the option of Franchisee for two (2) additional
periods of ten (10) years beyond the Initial Term (the "First Renewal Term" and
"Second Renewal Term," respectively; the Initial Term, First Renewal Term and
Second Renewal Term are collectively referred to herein as the "Term" of this
Agreement), provided that at the end of the Initial Term, and the end of the
First Renewal Term, if applicable, Franchisee shall have complied with the
conditions set forth in Section 15.3 (hereinafter the "Conditions of Renewal").
If renewed, the First Renewal Term will commence on the day immediately
following the last day of the Initial Term and the Second Renewal Term, if
applicable, will commence on the day immediately following the last day of the
First Renewal Term.
15.2 Notice of RenewaVNon-Renewal. Franchisor shall give notice to
Franchisee, not less than one hundred eighty (180) days pr or to the scheduled
expiration of the Initial Term, and, if applicable, the First Renewal Term, of
either (a) its intention not to renew the franchise and of at least one
"adequate reason" for such refusal to renew, or (b) its acknowledgment that
Franchisee is entitled to renew this franchise at Franchisee's option subject to
Franchisee's compliance with the Conditions of Renewal in Section 15.3. Upon the
expiration of the Initial Term and First Renewal Term, if applicable, if this
Agreement is not renewed, and upon the expiration of the Second Renewal Term,
Franchisee shall comply with the obligations in Section 18.5.
"Adequate reason" to refuse to renew shall mean any unremedied and existing
default by Franchisee under this Agreement, the Confidential Manual or any other
agreement between Franchisee and Franchisor relating to the Franchised
Restaurant, including without limitation, any course of conduct by Franchisee
during the Initial Term or First Renewal Term which constituted a default and
would have entitled Franchisor to then terminate this Agreement after notice and
the expiration of any applicable cure period, even though Franchisor's right to
terminate this Agreement was not exercised.
15.3 Conditions of Renewal. Unless each of the following Conditions of
Renewal is satisfied at the end of the Initial Term and First Renewal Term,
Franchisee shall have no
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right to renew this Agreement for the First Renewal Term and Second Renewal
Term, respectively:
(A) Franchisee must have given Franchisor notice of its
election to renew not less than ninety (90) nor more than one hundred
eighty (180) days prior to the scheduled expiration date of the
Initial Term and First Renewal Term, if applicable. If Franchisee
shall fail to timely submit such notice of its intention to renew,
Franchisee shall be deemed to have elected not to renew this
Agreement.
(B) At the time Franchisee elects to renew and at the time
of renewal, Franchisee is not in default of and must have complied
with or remedied any defaults under (a) this Agreement, (b) the
Confidential Manual, and (c) any other agreement between Franchisee
and Franchisor relating to the Franchised Restaurant.
(C) Franchisee replaces such equipment, furnishings, decor
and signs which are not in good working order or which are obsolete
or otherwise not in conformity with Franchisor's then current
standards and decorates or remodels the building and the site to
conform to Franchisor's then current standards.
(D) Franchisee must have presented evidence satisfactory to
Franchisor that Franchisee has the right to remain in possession of
the Franchised Restaurant for the First Renewal Term and Second
Renewal Term, as applicable, or Franchisee must have commenced
business operations with respect to the Franchised Restaurant prior to
the expiration of the Initial Term or First Renewal Term at an
alternative location acceptable to Franchisor and located within the
Exclusive Area.
(E) Franchisee enters into Franchisor's then-current form of
Renewal Franchise Agreement (the "Renewal Agreement") for the First
Renewal Term or Second Renewal Term, if applicable. The Renewal
Agreement shall supersede this Agreement in all respects and shall not
differ substantially from Franchisor's then-current standard Franchise
Agreement, except that neither Franchisee nor Franchisee's managerial
employees shall be required to undergo or attend any of the initial
training programs usually offered by Franchisor, unless otherwise
deemed necessary by Franchisor.
(F) Franchisee must have paid a lump-sum, non-refundable
renewal fee to Franchisor, pursuant to each Renewal Agreement (ie. for
the First Renewal Term and the Second Renewal Term), which shall be
the lesser of Five Thousand Dollars ($5,000) or fifty percent (50%) of
the then-current franchise fee.
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(G) Franchisee must have executed a general release, in a
form prescribed by Franchisor, of any and all claims against
Franchisor and its affiliates and its or their respective officers,
directors, shareholders, agents and employees, in their corporate and
individual capacities, including, without limitation, claims under
federal, state and local laws, rules and ordinances arising from the
negotiation, execution or performance of this Agreement, except for
such claims as are expressly identified and reserved by Franchisee in
a notice submitted to Franchisor simultaneously with Franchisee's
notice of its election to renew, or within ten (10) days after the
claim arises, if that is later. Such notice shall specify in detail
the nature of such claims and the nature and amount of any relief or
damages demanded, or to be demanded, of Franchisor.
(H) Franchisee must have complied with Franchisor's
then-current qualification and training requirements.
(I) Franchisee must have undertaken and satisfactorily
accomplished any reasonable remedial actions and curative measures
recommended by Franchisor during the Initial Term and First Renewal
Term to correct deficiencies in Franchisee's sales, marketing and
operational procedures.
Franchisor may refuse to renew or extend this Agreement, even after giving
Franchisee notice of Franchisee's right to renew under Section 15.2, if any one
of the above Conditions of Renewal is not met at the expiration of the Initial
Term or First Renewal Term. Consent by Franchisor to renewal for the First
Renewal Term shall in no way be deemed or considered approval for renewal to the
Second Renewal Term and all of the conditions and obligations of this Section 15
must again be met at the end of such First Renewal Term.
16. TRANSFERABILITY OF INTEREST.
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16.1 Transfer bv Franchisor. Franchisor shall have the right to transfer
all or any part of its rights or obligations herein to any person or legal
entity. Such transfer shall be effected so as to recognize the pre-existing
rights of Franchisee under this Agreement.
16.2 Transfer by Franchisee. The rights and obligations set forth in this
Agreement are personal to Franchisee and the owners of Franchisee, if
applicable, and Franchisor has granted this franchise in reliance upon
Franchisee's business skill, financial capacity and personal character.
(A) Accordingly, neither Franchisee nor any immediate or
remote successor to any part of Franchisee's interest in this
Agreement, nor any individual, partnership, corporation, association
or other legal entity which directly or indirectly has an interest in
Franchisee, shall, without the prior written consent of Franchisor,
transfer (i) any rights or obligations of
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Franchisee under this Agreement, (ii) any general partnership
interest in a Franchisee which is a partnership, or (iii) any
interest in a corporate Franchisee which, alone or together with
other previous, simultaneous or contemplated transfers, would, or
could by operation of law, result in a loss of control of Franchisee
by the "Continuity Group" (as defined in Exhibit C, which is
incorporated by reference herein). Franchisor will not unreasonably
withhold its consent to any transfer described in this subsection;
provided Franchisee complies with all Conditions of Transfer provided
in Section 16.3; and
(B) Any purported transfer, by operation of law or
otherwise, not having the prior consent of Franchisor as required by
this Section 16, shall be null and void and shall constitute a
default by Franchisee under this Agreement.
16.3 Conditions of Transfer. If Franchisor does not exercise its right of
first refusal pursuant to Section 16.4, Franchisor may, in its sole discretion
and as a condition to giving its consent to any transfer requiring such consent
under this Section 16, require that all of the following conditions of transfer
("Conditions of Transfer") be met:
(A) Franchisee shall not be in default of any provision
relating to the payment of money to Franchisee, or of any other
material provision of this Agreement or any other agreement between
Franchisee and Franchisor;
(B) Franchisee must have executed a general release, in a
form prescribed by Franchisor, of any and all claims against
Franchisor and its affiliates and their respective officers,
directors, shareholders, agents and employees, in their corporate and
individual capacities, including, without limitation, claims under
federal, state and local laws, rules and ordinances arising from the
negotiation, execution or performance of this Agreement, except for
such claims as are expressly identified and reserved by Franchisee in
a notice submitted to Franchisor simultaneously with Franchisee's
request for Franchisor's consent to any proposed transfer, or within
ten (10) days after the claim arises, if that is later. Such notice
shall specify in detail the nature of such claims and the nature and
amount of any relief or damages demanded, or to be demanded, of
Franchisor;
(C) The person or persons to whom a transfer, which requires
Franchisor's consent under this Section 16, is desired (which person
or persons is referred to as the "transferee") shall complete
Franchisor's then applicable form of franchise application and shall
demonstrate to Franchisor's satisfaction that the transferee meets
all of the qualifications and standards then required of franchisees
under a newly executed Franchise Agreement, including but not limited
to the fact that the prospective transferee meets Franchisor's
educational, managerial and business standards; possesses a good
moral
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character, business reputation and credit rating; and has the
aptitude, ability, financial resources and capital to properly
maintain and operate the Franchised Restaurant;
(D) The transferee and its affiliates shall enter into a
written agreement with Franchisor, in a form satisfactory to
Franchisor, assuming all of Franchisee's obligations under this
Agreement, or transferee and its affiliates shall execute the then
standard form of the Franchise Agreement submitted by Franchisor to
transferee, as well as such other ancillary agreements as Franchisor
may reasonably require. Such Franchise Agreement shall in addition to
other requirements, provide that the transferee must satisfactorily
complete the then current training for a Restaurant;
(E) A non-refundable transfer fee of up to Five Thousand
Dollars ($5,000), which fee shall be determined by Franchisor in its
sole-discretion, shall have been paid to Franchisor by transferee or
other interested person or persons designated by Franchisor to cover
Franchisor's administrative and other expenses in connection with the
transfer;
(F) The transfer shall be accomplished within ninety (90)
days from the date Franchisor elects or is deemed to have elected not
to exercise its right of first refusal; and
(G) Upon submission of a statement therefor, Franchisee
shall pay Franchisor, the amount of reasonable attorneys fees and
expenses incurred by Franchisor with respect to legal services
rendered to Franchisor in connection with any requested transfer,
regardless of whether such transfer is ever effected.
16.4 Franchisor's Right of First Refusal.
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(A) In the event Franchisee receives a bona fide offer from
a third party to purchase the Franchised Restaurant, including any
Lease associated with the Franchised Restaurant, or to purchase any
or all of Franchisee's interests and rights under this Agreement
whether directly, or indirectly by purchasing fifty percent (50%) or
more of the ownership of Franchisee, Franchisee shall give Franchisor
written notice setting forth the name and address of the prospective
purchaser, the price and terms of the offer, together with a
franchise application completed by the prospective purchaser, a copy
of the sale contract and such other information as Franchisor may
request to evaluate the offer. Franchisor shall then have the prior
option to purchase Franchisee's interest covered by such offer at the
price and upon the terms of such offer. If the consideration is not
money, the purchase price shall be cash equal to the fair market
value of the consideration.
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(B) Franchisor shall have twenty (20) business days
(excluding weekends and holidays), after receipt of Franchisee's
notice of offer and the furnishing of all requested information
within which to notify Franchisee of its intent to accept or reject
the offer. Silence on the part of Franchisor shall constitute
rejection of the option. If the proposed purchase or sale includes
assets or rights of Franchisee not related to this Agreement or the
operation of Franchised Restaurant, Franchisor may purchase only the
assets related to this Agreement or the operation of Franchised
Restaurant or may also purchase the other assets and an equitable
purchase price shall be allocated to each asset included in the
proposed sale as the case may be.
(C) The election by Franchisor not to exercise its right of
first refusal as to any offer shall not affect its right of first
refusal as to any subsequent offer.
(D) Any sale or attempted sale effected without first giving
Franchisor the right of first refusal described above shall be null
and void and of no force and effect.
(E) If Franchisor does not exercise its right of first
refusal, Franchisee may conclude the sale on the same terms as those
presented to Franchisor, provided Franchisor consents to such sale or
transfer as provided in Section 16.3.
16.5 Restrictions on Transfer of Corporate Stock. If Franchisee hereunder
is a corporation, its officers, directors and shareholders, as necessary, shall
(a) cause the Articles of Incorporation and Bylaws (or similar corporate
documents) to reflect that the transfer of shares is restricted by this
Agreement, (b) maintain stop transfer instructions against any transfer on its
records of any of its equity securities, and (c) cause to appear conspicuously
on any certificate representing such equity securities the following printed
legend:
"THE TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND CONDITIONS OF
A MASTER DEVELOPMENT AGREEMENT DATED AND RESTAURANT FRANCHISE
AGREEMENT BETWEEN FRESH'N LITE, INC., A DELAWARE CORPORATION, AND
[ ]. REFERENCE IS MADE TO THE PROVISIONS OF SAID
AGREEMENTS AND TO THE ARTICLES OF INCORPORATION AND BYLAWS OF THIS
CORPORATION FOR FURTHER INFORMATION WITH RESPECT THERETO."
If the above-referenced legend is set forth on the reverse side of any
share certificate, an appropriate legend on the face of such certificate shall
refer to the legend and transfer restrictions contained on the reverse side of
the certificate. Franchisee shall ensure that such legend meets the requirements
of applicable state law.
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The requirements of this Section 16.5 shall not, however, apply if the
corporation has a class of securities which are listed on any registered stock
exchange or quoted on NASDAQ.
16.6 Transfer Upon Death or Mental Incompetency. Upon the death or the
appointment of a guardian by reason of mental incompetency of (i) any individual
Franchisee, or if applicable, (ii) any person with a general partnership or
controlling interest in Franchisee, or (iii) any person the transfer of whose
interest in Franchisee could result in a loss of control by the Continuity
Group, the executor, administrator, personal representative, trustee or guardian
(together referred to as the "Personal Representative") of such person may only
transfer such person's interest in this Agreement, the Franchised Restaurant or
in Franchisee who is a party to this Agreement subject to the provisions of this
Section 16. If the direct or indirect interest of any deceased or mentally
incompetent person described in the preceding sentence is not transferred within
six (6) months from the date of death, or the determination of incompetence and
the appointment of a guardian, all rights under this Agreement shall terminate
effective as of such time following the end of said six (6) month period as
Franchisor may designate by notice to the personal representative, or if no
personal representative has been appointed, to any heir or devisee of such
person; provided that where there remains any surviving and mentally competent
individual Franchisee or Franchisees who have entered into this Agreement, and
who will have a controlling interest as defined under Section 16.7 after giving
effect to the termination of the rights of the deceased or mentally incompetent
Franchisee under this Agreement, then only the rights of the deceased or
mentally incompetent person under this Agreement shall terminate as of the time
specified above.
16.7 Definition of Control. "Control" and a "controlling interest" as used
herein mean direct ownership representing at least fifty-one percent (51 %) of
the voting power of all classes of ownership interest and fifty-one percent (51
%) of the voting power of each separate class of ownership interest entitled to
a vote as to Franchisee's affairs; provided, however, that if Franchisee, or a
corporation to which the rights of Franchisee under this Agreement have been
properly assigned, shall issue stock in a public offering pursuant to a
registration under the Securities Act of 1933 and shall be registered under
section 12(g) of the Securities Exchange Act of 1934, and if at least one member
of the Continuity Group shall for the two (2) years thereafter remain as an
executive officer of such corporation, then "control" and a "controlling
interest" shall be herein defined as direct stock ownership representing at
least twenty-five percent (25 %) of the voting power of all classes of stock and
at least twenty-five percent (25 %) of the voting power of each separate class
of stock of the corporation over which control must be retained during the Term
of this Agreement. Two (2) years after the effective date of the latest of such
registrations, the "Continuity Group" shall be redefined to be said publicly
held corporation and the transfer of stock in such corporation thereafter by the
individual Franchisees named herein shall not be further restricted or treated
as a transfer of controlling interest for the purposes of this Agreement.
16.8 Definition of Transfer. For the purposes of this Agreement, the term
"transfer" shall include, but not be limited to, any sale, conveyance,
assignment, disposition,
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donation, pledge or act of encumbrance, or any transfer by devise, inheritance
or by operation of law or otherwise, whether voluntarily or involuntarily,
including without limitation, any merger, consolidation, business combination,
transaction, joint venture or partnership whereby any person or persons acquires
directly or indirectly franchise rights granted by Franchisor herein or in any
Franchise Agreement to Franchisee.
16.9 Non-Waiver of Claims. Franchisor's consent to a transfer of any
interest in the franchise granted herein or in Franchisee shall not constitute a
waiver of any claims it may have against the transferring party, nor shall it be
deemed a waiver of Franchisor's right to demand compliance by the transferee
with any of the provisions of this Agreement.
16.10 Subfranchising. Notwithstanding anything in this Agreement to the
contrary, Franchisee may not, whether directly or indirectly, act as a
subfranchisor with respect to the rights granted in this Agreement. It is not
intended that Franchisor will allow or permit Franchisee to subdivide his
interests in this Franchise Agreement or allow other persons or entities to
share the economic benefits and/or risks of owning this franchise, even though
this Agreement or any franchise granted hereunder is not formally assigned or
transferred and remains with Franchisee. An example would be Franchisee
hereunder forming a separate limited partnership for a franchised Restaurant and
serving as the general partner of such limited partnership.
17. DEFAULT.
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Franchisee shall be deemed to be in default of this Agreement and to have
materially breached this Agreement upon the occurrence of any of the following:
(A) If (i) Franchisee or any owner of Franchisee is
adjudicated bankrupt or insolvent or shall make a general assignment
for the benefit of creditors, (ii) a petition in bankruptcy is filed
by Franchisee, or such a petition is filed against Franchisee and is
not successfully opposed by Franchisee, (iii) a bill in equity or
other proceeding for the appointment of a receiver of Franchisee or
other custodian for Franchisee's business or assets is filed and is
not successfully opposed by Franchisee, or (iv) Franchisee is unable
to pay his debts and obligations as they become due;
(B) Franchisee abandons the franchise by failing to operate
the business for five (5) consecutive days during which Franchisee is
required to operate the business under the terms of this Agreement or
a Confidential Manual, or any shorter period after which it is not
unreasonable under the facts and circumstances for Franchisor to
conclude that Franchisee does not intend to continue to operate the
franchise, unless such failure to operate is due to fire, flood,
earthquake or other similar causes beyond Franchisee's control;
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(C) Franchisee makes any material misrepresentations
relating to the acquisition of the franchise business or Franchisee
engages in conduct which reflects materially and unfavorable upon the
operation and reputation of the franchise business or System;
(D) Franchisee fails, for a period of ten (10) days after
notification of noncompliance, to comply with any federal, state or
local law or regulation applicable to the operation of the franchise;
(E) Franchisee, after curing any default for which
Franchisee was given notice pursuant to Section 18.3, engages in the
same noncompliance whether or not such noncompliance is corrected
after notice;
(F) Franchisee repeatedly fails to comply with one or more
requirements of the franchise, whether or not corrected after notice;
(G) The Franchised Restaurant or business premises of the
franchise are seized, taken over or foreclosed by a government
official in the exercise of his duties, or seized, taken over, or
foreclosed by a creditor, lienholder or lessor, or a final judgment
against Franchisee remains unsatisfied for thirty (30) days (unless a
supersedeas or other appeal bond has been filed); or a levy of
execution has been made upon the franchise granted by this Agreement
or upon any property used in the franchised business, and it is not
discharged within five (S) days of such levy;
(H) Franchisee is convicted of or pleads nolo contendere to
a felony charge or any other criminal misconduct which is relevant to
the operation of the franchise;
(I) Franchisee fails to pay any franchise fees or other
amounts due to Franchisor or its affiliates within five (5) days
after receiving written notice that such fees are overdue;
(J) Franchisor makes a reasonable determination that
continued operation of the franchise by Franchisee will result in
imminent danger to public health or safety;
(K) Franchisee discloses or divulges any portion of the
contents of the Confidential Manual or other Confidential
Information;
(L) Franchisee, directly or indirectly, commences any
business operation, or markets any product or service, under any name
or mark or employing trade dress which, in Franchisor's sole opinion,
is confusingly similar to the Proprietary Marks or Trade Dress
described herein;
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(M) Franchisee fails or refuses to submit any report or
document required herein by the date it is due, or to obtain
Franchisor's prior written approval or consent as required by this
Agreement; or
(N) Franchisee fails to comply with any other material
provisions of this Agreement or any other agreement between
Franchisor and Franchisee relating to the Franchised Restaurant;
provided, a default under any Master Development Agreement between
Franchisee and Franchisor shall not affect the rights and obligations
of Franchisee and Franchisor hereunder.
18. TERMINATION.
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18.1 Termination by Franchisee. In general, Franchisee has no right to
terminate this Agreement, except such rights as it may have under common law by
reason of a material breach of Franchisor's obligations hereunder. As a
condition precedent to such right of termination, Franchisee shall give
Franchisor thirty (30) days notice of the alleged default and opportunity to
cure. If Franchisor has not cured any such default within thirty (30) days of
receiving notice of such default, then Franchisee shall send a notice of
termination to Franchisor and this Agreement and the franchise granted hereunder
will terminate ten (10) days after Franchisor receives such termination letter.
In the event Franchisee terminates this Agreement, all of the obligations upon
termination in Sections 18.4 and 18.5 shall apply. Franchisee acknowledges that
ar y attempted termination by Franchisee other than for a material breach by
Franchisor shall be deemed a default by Franchisee.
18.2 Immediate Termination bv Franchisor. Upon the occurrence of any
default described under subsection 17(A) through and including subsection 17(K)
of this Agreement, Franchisor may, at its option, terminate Franchisee's rights
under this Agreement effective immediately upon the giving of notice to
Franchisee by Franchisor of the reasons for such termination; provided that such
termination will not in any event be effective until the end of such longer
period as may be specified in the notice or required by applicable governmental
law or regulation. All of the obligations upon termination in Sections 18.4 and
18.5 shall apply upon such termination.
18.3 Termination bv Franchisor After Notice. Upon the occurrence of any
default described under subsection 17(L) through and including subsection 17(N)
of this Agreement, Franchisor may, at its option, terminate Franchisee's rights
under this Agreement if such default shall not have been remedied to
Franchisor's satisfaction within thirty (30) days after written notice thereof
has been given Franchisee or such reasonably shorter period as is specified in
such notice if such shorter period affords Franchisee a reasonable opportunity
to cure the default given the nature thereof; provided that such termination
will not in any event be effective until the end of such longer period as may be
specified in the notice or required by applicable governmental law or
regulation. All of the obligations upon termination in Sections 18.4 and 18.5
shall apply upon such termination.
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18.4 Franchisor's Obligations Upon Termination or Expiration. Upon the
termination or expiration of Franchisee's rights under this Agreement, the
obligations of Franchisor to Franchisee under this Agreement shall terminate,
except where it is specifically provided herein that any obligation of
Franchisor will survive such termination or expiration.
18.5 Franchisee's Obligations Upon Termination or Expiration. Upon
termination or expiration of the rights granted hereunder to Franchisee (whether
by Franchisor or Franchisee), Franchisee shall comply with each of the following
provisions:
(A) Cease Operations. Franchisee shall immediately cease
operating the Franchised Restaurant, and shall not thereafter,
directly or indirectly, represent itself to the public or hold itself
out as a franchisee of Franchisor.
(B) Cease Use of System. Etc. Franchisee shall immediately
and permanently cease to use, in any manner whatsoever (i) any
Confidential Information, (ii) any methods, procedures and techniques
associated with the System, (iii) Franchisor's trade name, the
Proprietary Marks, distinctive forms, slogans, signs, symbols or logos
or devices associated with the System, and (iv) any Trade Dress
feature which could reasonably be expected to cause the public to
believe that such former Franchisee is doing business at or with a
restaurant which is owned, operated or franchised by Franchisor.
(C) Other Businesses. Franchisee shall not, in the operation
of any other business, use any reproduction, counterfeit, copy or
colorable irnitation of the Proprietary Marks or Trade Dress, either
in connection with such other business or the promotion thereof which
infringes upon Franchisor's rights in and to the Proprietary Marks or
Trade Dress, and shall not utilize any designation of origin or
description or representation which falsely suggests or represents an
association or connection with Franchisor.
(D) Changes Upon Termination or Expiration. Franchisee shall
make such modifications or alterations to the Franchised Restaurant
(including, without limitation, changing the telephone number)
immediately upon termination or expiration of its rights under this
Agreement as may be necessary to prevent the operation of any business
thereon by itself or others in derogation of Section and shall make
such specific additional changes thereto as Franchisor may reasonably
request for that purpose.
(E) Pavment of Indebtedness. Franchisee shall promptly pay
all sums owing to Franchisor. In the event of termination for any
default of Franchisee, such sums shall include all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Franchisor
as a result of the default.
(F) Payment of Expenses. Promptly following receipt of a
statement therefor, Franchisee shall pay to Franchisor all damages,
costs and expenses,
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including reasonable attorneys' fees, incurred by Franchisor subsequent to the
termination or expiration of the franchise herein granted in obtaining
injunctive or other relief in the enforcement of any provisions of this Section.
(G) Return of Confidential Information. Franchisee shall
immediately turn over to Franchisor all copies of the Confidential
Manual and all instructions, correspondence, brochures, Confidential
Information and other materials in Franchisee's possession bearing the
Proprietary Marks and all copies thereof (all of which are
acknowledged to be Franchisor's property) and shall retain no copy or
record of the foregoing, except only Franchisee's copy of this
Agreement and of any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with any
provision of law. Franchisee shall additionally turn over to
Franchisor a copy of all records, files, correspondence, receipts and
other materials relating to the operation of the Franchised Restaurant
in Franchisee's-possession.
(H) Right to Purchase. Franchisor shall have the right, but
not the duty, exercised by notice of intent to do so within thirty
(30) days after termination or expiration of this Agreement, to
purchase for cash any equipment, supplies, inventory, signs,
advertising materials, or items bearing the Proprietary Marks, which
are situated on the Franchised Restaurant at the time of termination
or expiration, at the lesser of Franchisee's cost or the fair market
value (determined by an independent appraiser) of the item or items to
be purchased. If Franchisor elects to exercise any option to purchase
herein provided, it shall have the right to set off all amounts due
from Franchisee against any payment therefor. All payments and the
transfer of property under this subsection shall be made promptly
following the determination of the purchase price. Following the
receipt of notice of termination or expiration from Franchisor,
Franchisee shall not, without the prior written consent of Franchisor,
remove from the Franchised Restaurant, consume or transfer ownership
of any equipment, supplies, inventory, signs, advertising materials,
or items bearing Proprietary Marks, except in the ordinary course of
conducting a restaurant business, until after the thirtieth (30th) day
following termination or expiration of the rights granted to
Franchisee hereunder.
(I) Telephone Number. Franchisee shall assign to Franchisor
or its designee all of Franchisee's right, title and interest in and
to Franchisee's telephone numbers relating to the Franchised
Restaurant. Franchisee authorizes Franchisor to request the telephone
company to transfer Franchisee's telephone in accordance with
Franchisor's instructions, and Franchisee hereby agrees to hold the
telephone company harmless from any and all claims or demands arising
out of or in connection with any action taken by Franchisor to
terminate or transfer Franchisee's telephone service.
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(J) Continued Compliance. Franchisee shall continue to comply
with all provisions of this Agreement which by their terms are
intended to survive the termination or expiration of Franchisee's
rights hereunder, including, without limitation, the confidentiality
restrictions contained in Section 13 and those applicable covenants
contained in Section 19.
19. COVENANTS.
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19.1 Competitive Conduct. Franchisee specifically acknowledges that,
pursuant to this Agreement, Franchisee will receive valuable training and
Confidential Information, including, without limitation, information regarding
the promotional, operational, management and marketing methods and techniques of
Franchisor and its System that will give to Franchisee a competitive business
advantage. Accordingly, except as otherwise approved in writing by Franchisor,
Franchisee and any of its affiliates, owners, officers, directors, ten percent
(10%) shareholders or partners, as applicable, shall not, during the Term of
this Agreement and for a period of two (2) years after the termination,
expiration or transfer of its rights under this Agreement, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons, partnership, corporation, entity or association:
(A) Except as expressly disclosed to and agreed to by
Franchisor, own, maintain, engage in, advise, help in, make loans to,
or have any interest in any restaurant, catering service, food
service operation or similar business (other than any Franchised
Restaurant under an agreement between Franchisee and Franchisor)
which is the same as or similar to the business conducted under the
System within a five (5) mile radius of any Fresh'n Lite Restaurant
whether franchised or owned by Franchisor;
(B) Materially divert or attempt to divert any business or
customer of any Restaurant whether franchised or owned by Franchisor
to any competitor by direct or indirect inducement or otherwise, or
perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with the System, including the
Proprietary Marks; or
(C) Employ or seek to employ any person who is at that time
employed by Franchisor or by any other franchisee of Franchisor, or
otherwise directly or indirectly induce or seek to induce such person
to leave his or her employment, without the prior consent of
Franchisor.
19.2 Use of Restaurant Premises. Franchisee shall not, for a period of two
(2) years after the termination or expiration of its rights under this
Agreement, operate a restaurant or food service business which is similar to the
System, upon the Franchised Restaurant premises or within five (5) miles
thereof, nor, in such event, shall Franchisee transfer or lease the Site or
Franchised Restaurant, or any interest therein, to any person, persons,
partnership, corporation, association or other entity which it knows or has
reason to know intends to operate a restaurant or other food service business
similar to the System
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upon said Site; and Franchisee, by the terms of any conveyance transferring its
interest in said Site or any Restaurant, shall include such restrictive
covenants as are necessary to ensure that a restaurant or food service business
similar to the System is not operated upon such Site or for the above two (2)
year period, and Franchisee shall take all steps necessary to ensure that such
restrictive covenant becomes a matter of public record.
19.3 Termination of Relationship with Franchisee. If any officer, director,
general partner or person who holds a ten percent (10%) or greater legal or
beneficial interest in Franchisee terminates his or her relationship with
Franchisee, then with respect to that person, the provisions of this Section 19
shall apply and shall run from the date of such termination. If requested by
Franchisor, Franchisee shall obtain a written agreement, in a form prescribed by
Franchisor, of such persons to comply with this Section 19, naming Franchisor as
a third-party beneficiary or with Franchisor as a party.
19.4 Subsections Not to Applv. This Section 19 shall not apply to ownership
by Franchisee of less than a five percent (5%) legal or beneficial interest in
the outstanding equity securities of any corporation which are registered under
the Securities Exchange Act of 1934.
19.5 Reduction in Scope of Covenant. Franchisee acknowledges that
Franchisor shall have the right, in its sole discretion, to reduce the scope of
any covenant or portion thereof in this Agreement binding upon Franchisee,
without Franchisee's consent, effective immediately upon receipt by Franchisee
of notice thereof, and Franchisee agrees that it shall comply forthwith with any
covenant so modified, which shall be fully enforceable notwithstanding the
provisions of Section 24.
19.6 Claims Not a Defense. Franchisee expressly agrees that the existence
of any claim it may have against Franchisor, whether or not arising from this
Agreement, shall not constitute a defense to the enforcement by Franchisor of
the covenants in this Section.
20. TAXES, PERMITS AND INDEBTEDNESS.
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20.1 Payment. Franchisee shall promptly pay when due all taxes levied or
assessed, including, without limitation, unemployment and sales taxes, and all
accounts and other indebtedness of every kind incurred by Franchisee in
conducting the business of the Franchised Restaurant.
20.2 Dispute as to Tax. In the event of any bona fide dispute as to
liability for taxes assessed or other indebtedness, Franchisee may contest the
validity or the amount of the tax or indebtedness in accordance with procedures
of the taxing authority or applicable law; however, in no event shall Franchisee
permit a tax sale, or seizure by levy or execution, or similar writ or warrant,
or attachment by a taxing authority or a creditor, to occur against the
Franchised Restaurant (including the Site), or any material portion of the
equipment, supplies or inventory of the Franchised Restaurant.
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20.3 Compliance with Laws. Franchisee shall, at Franchisee's expense,
comply with all federal, state and local laws, rules and regulations, and shall
timely obtain, and shall keep in force as required throughout the Term of this
Agreement all permits and certificates necessary for the full and proper conduct
of the Franchised Restaurant, including, without limitation, any building and
other required construction permits, franchises to do business, assumed name
registrations, sales tax permits, health and sanitation permits and ratings, and
fire clearance.
20.4 Notice of Action. Franchisee shall notify Franchisor in writing within
five (5) days of the commencement of any action, suit or proceeding, and of the
issuance of an order, writ, injunction, award or decree of any court, agency or
other governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Restaurant.
21. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.
------------------------------------------
21.1 Independent Contractor. This Agreement does not create a fiduciary
relationship between the parties hereto, and Franchisee shall be deemed to be an
independent contractor of Franchisor. Nothing in this Agreement is intended to
constitute either party as an agent, legal representative, subsidiary, joint
venturer, partner, employee or servant of the other for any purpose whatsoever.
21.2 Representation of Status. In all public records, in Franchisee's
relationship with other persons, and on stationery, business forms and checks,
Franchisee shall indicate Franchisee's independent ownership of the Franchised
Restaurant and status as a franchisee of Franchisor. Franchisee shall exhibit on
the premises, in such place as Franchisor may designate, a notification that the
Franchised Restaurant is operated by an independent operator and not by
Franchisor.
21.3 Authority and Indemnity. Nothing in this Agreement authorizes
Franchisee to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name, and Franchisor shall in no event assume liability for, or be deemed liable
hereunder as a result of any such action, or by reason of any act or omission of
Franchisee in its conduct of the business of the Franchised Restaurant or any
claim or judgment arising therefrom. Franchisee shall indemnify and hold
Franchisor harmless against any and all claims of third parties arising,
directly or indirectly, from, as a result of, or in connection with Franchisee's
operation of the Franchised Restaurant, as well as the costs, including
attorney's fees, of defending against them, regardless of whether Franchisor is
or is claimed to be solely or concurrently at fault and/or negligent.
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22. APPROVALS AND WAIVERS.
---------------------
22.1 Written Request. Whenever this Agreement requires. the prior approval
or consent of Franchisor, Franchisee shall make a timely written request to
Franchisor therefor, and such approval or consent shall be obtained in writing.
22.2 Lack of Warranties and Liabilities. Franchisor makes no warranties or
guaranties upon which Franchisee may rely, and assumes no liability or
obligation to Franchisee, by providing any waiver, approval, consent or
suggestion to Franchisee in connection with this Agreement, or by reason of any
neglect, delay or denial of any request therefor.
22.3 Actions Not Constituting Waiver. No failure of Franchisor to exercise
any power reserved to it by this Agreement or to insist upon strict compliance
by Franchisee with any obligation or condition hereunder, and no custom or
practice of the parties at variance with the terms hereo$ shall constitute a
waiver of Franchisor's right to demand exact compliance with any of the terms
herein. Waiver by Franchisor of any particular default by Franchisee shall not
(except with respect to matters specifically covered in writing by such waiver)
affect or impair Franchisor's right to exercise any or all of its rights and
powers herein, nor shall such constitute a waiver by Franchisor of any right
hereunder, or of its right upon any subsequent breach or default to terminate
Franchisee's rights under this Agreement prior to the expiration of the Term of
this Agreement. Subsequent acceptance by Franchisor of any payments due it
hereunder shall not be deemed to be a waiver by Franchisor of any preceding
breach by Franchisee of any terms, covenants or conditions of this Agreement.
22.4 No Assumption of Liability. Franchisor shall not, by virtue of any
approvals, advice or services provided to Franchisee, assume responsibility or
liability to Franchisee or to any third parties to which Franchisor would not
otherwise be subject.
23. NOTICES.
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All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given on the earlier of actual receipt whether
by personal delivery, messenger, courier, telecopy, telex or similar form of
rapid transmission or three (3) days after being mailed if mailed by certified
mail, return receipt requested, postage prepaid to the addresses set forth below
or to such other addresses of which a party has given the parties written
notice.
(a) If to Franchisor: Fresh'n Lite, Inc.
2804 Judson Road
Longview, Texas 75601
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(b) If to Franchisee:
24. ENTIRE AGREEMENT.
----------------
This Agreement and the agreements referenced herein constitute the complete
understanding and agreement between Franchisor and Franchisee concerning the
subject matter hereof. There are no other oral or written understandings or
agreements between Franchisor and Franchisee or any affiliates of either
relating to the subject matter of this Agreement, and all prior and
contemporaneous agreements, understandings, conditions, warranties,
negotiations, conversations, and representations of each of the parties and
their representatives concerning the subject matter hereof are hereby superseded
and merged herein. No statement, representation or other act, event or
communication, except as set forth herein, is binding on Franchisor in
connection with the subject matter of this Agreement or the grant of a franchise
hereunder. This Agreement may only be amended by a written document duly
executed by both parties.
25. CONSTRUCTION.
------------
25.1 Rights In Parties. This Agreement is binding upon the parties hereto
and their respective executors, administrators, heirs, and their permitted
assigns and successors in interest. Nothing in this Agreement is intended or
shall be deemed to confer upon any person or legal entity other than Franchisor
and Franchisee, and such of their respective successors and assigns as may be
permitted hereunder, any rights or remedies under or by reason of this
Agreement.
25.2 Captions. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provisions hereof.
25.3 Gender. All references herein to the masculine, neuter or singular
shall be construed to include the masculine, feminine, neuter or plural, where
applicable.
25.4 Counterparts. This Agreement may be executed in two or more
counterparts, and each copy so executed shall be deemed an original.
25.5 Effect of Termination. Franchisee's obligations to Franchisor
contained in this Agreement shall not be effected by termination, cancellation
or expiration of this Agreement.
25.6 Liability of Multiple Franchisees. If Franchisee consists of more than
one (1) person, each principal of Franchisee shall join in this Agreement as a
party hereto, and shall jointly and severally guarantee the performance of all
of Franchisee's obligations hereunder.
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26. ENFORCEMENT.
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26.1 GOVERNING LAW. THIS AGREEMENT AND THE OFFER AND SALE OF FRANCHISE
RIGHTS SUBJECT TO THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED UNDER THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS. IN THE EVENT OF ANY
CONFLICT OF LAW, THE LAWS OF TEXAS SHALL PREVAIL, WITHOUT REGARD TO THE
APPLICATION OF THE CONFLICT OF LAW RULES OF THE STATE OF TEXAS. IF, HOWEVER, ANY
PROVISION OF THIS AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF TEXAS,
AND IF ANY PART OF A DEVELOPMENT AREA (AS DEFINED IN ANY APPLICABLE MASTER
DEVELOPMENT AGREEMENT) OR ANY FRANCHISED RESTAURANT THEREUNDER OR HEREUNDER IS
LOCATED OUTSIDE OF TEXAS AND SUCH PROVISION WOULD BE ENFORCEABLE UNDER THE LAWS
OF ANY STATE WHERE SUCH DEVELOPMENT AREA OR ANY FRANCHISED RESTAURANT THEREIN OR
HEREIN IS LOCATED, THEN SUCH PROVISION SHALL BE INTERPRETED AND CONSTRUED UNDER
THE LAWS OF SUCH STATE. NOTHING IN THIS PARAGRAPH IS INTENDED TO INVOKE THE
APPLICATION OF ANY FRANCHISE OR SIMILAR LAW, RULE OR REGULATION OF THE STATE OF
TEXAS OR THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT WHICH WOULD
NOT OTHERWISE APPLY.
26.2 WAIVER OF JURY WAIVER OF PUNITIVE AND CONSEQUENTIAL DAMAGES. TIME
LIMITATION FOR ACTIONS. BOTH FRANCHISOR AND FRANCHISEE AGREE THAT NEITHER SHALL
BE ENTITLED TO NOR SHALL EITHER DEMAND A JURY TRIAL IN THE EVENT OF LITIGATION.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, NEll HER FRANCHISOR NOR
FRANCHISEE IS ENTITLED TO ANY COMPENSATION OR REIMBURSEMENT FOR LOSS OF
PROSPECTIVE PROFITS, ANTICIPATED SALES OR CONSEQUENTIAL DAMAGES OCCASIONED BY
THE BREACH, CANCELLATION OR TERMINATION OF THIS AGREEMENT. BOTH FRANCHISOR AND
FRANCHISEE SPECIFICALLY AGREE THAT NEITHER SHALL BE LIABLE TO THE OTHER FOR
PUNITIVE, EXEMPLARY OR ENHANCED DAMAGES OF ANY NATURE FOR ANY BREACH,
CANCELLATION OR TERMINATION OF THIS AGREEMENT OR THE NEGOTIATION HEREOF OR THE
RELATIONSHIP AND DEALINGS BETWEEN THE PARTIES IN ANY WAY RELATING TO THIS
AGREEMENT. ANY AND ALL CLAIMS AND ACTIONS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE RELATIONSHIP OF FRANCHISEE AND FRANCHISOR, FRANCHISOR'S
MANAGEMENT OF THE SYSTEM, OR FRANCHISEE'S DEVELOPMENT AND OPERATION OF ANY
FRANCHISED RESTAURANT, BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER, SHALL BE
COMMENCED WITHIN ONE (1) YEAR FROM THE OCCURRENCE OF THE FACTS GIVING RISE TO
SUCH CLAIM OR ACTION. FRANCHISEE AGREES THAT ANY ACTION AGAINST FRANCHISOR
HEREUNDER SHALL BE BROUGHT ON AN INDIVIDUAL BASIS AND NOT CONSOLIDATED ON A
CLASS WIDE OR OTHER BASIS UNLESS FRANCHISOR CONSENTS THERETO.
26.3 JURISDICTION AND VENUE. FRANCHISOR AND FRANCHISEE ACKNOWLEDGE THAT
FRANCHISOR IS A TEXAS CORPORATION, THIS AGREEMENT AND THE DEVELOPMENT AND
FRANCHISE RIGHTS RELATED HERETO WERE OFFERED FROM GREGG COUNTY, TEXAS, THIS
AGREEMENT WAS NEGOTIATED, IN WHOLE OR IN PART, IN GREGG COUNTY, TEXAS, THE
PRINCIPAL PLACE OF BUSINESS AND CORPORATE HEADQUARTERS OF FRANCHISOR ARE IN
GREGG COUNTY, TEXAS, AND THAT FRANCHISEE HAS AND WILL CONTINUE TO DEVELOP A
SUBSTANTIAL AND CONTINUING RELATIONSHIP WITH THE FRANCHISOR AT ITS PRINCIPAL
OFFICES IN GREGG COUNTY, TEXAS, WHERE THE FRANCHISOR'S DECISION MAKING AUTHORITY
IS VESTED AND FRANCHISE OPERATIONS ARE CONDUCTED AND SUPERVISED. ACCORDINGLY,
FRANCHISEE AND FRANCHISOR AGREE THAT ANY LEGAL ACTION ARISING OUT OF OR RELATING
TO THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE OFFER AND SALE OF THE
FRANCHISE RIGHTS)
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SHALL BE INSTITUTED AND MAINTAINED IN ANY STATE OR FEDERAL COURT IN GREGG
COUNTY, TEXAS. FRANCHISEE IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS
AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF SUCH
COURTS.
26.4 Severability and Substitution of Valid Provisions.
(A) Except as expressly provided to the contrary herein, each
section, paragraph, term and provision of this Agreement, and any
portion thereof, shall be considered severable and if, for any reason,
any such portion of this Agreement is held to be invalid, contrary to,
or in conflict with any applicable present or future law or regulation
in a final, unappealable ruling issued by any court, agency or
tribunal with competent jurisdiction in a proceeding to which
Franchisor is a party, that ruling shall not impair the operation of,
or have any other effect upon, such other portions of this Agreement
as may remain otherwise intelligible, which shall continue to be given
full force and effect and bind the parties hereto, although any
portion held to be invalid shall be deemed not to be: a part of this
Agreement from the date the time for appeal expires, if Franchisee is
a party thereto, otherwise upon Franchisee's receipt of a notice of
nonenforcement thereof from Franchisor.
(B) If any applicable and binding law of any jurisdiction
requires a greater prior notice of the termination of this Agreement
than is required hereunder, or the taking of some other action not
required hereunder, or if under any applicable and binding law or rule
of any jurisdiction any provision of this Agreement is invalid or
unenforceable, the prior notice and/or other action required by such
law or rule shall be substituted for the comparable provisions hereof,
and the Franchisor shall have the right, in its sole discretion, to
modify such invalid or unenforceable provision to the extent required
to be valid and enforceable. Franchisee agrees to be bound by any
provision or term required by law as though it were separately
articulated in and made a part of this Agreement, that may result from
striking from any of the provisions hereof, any portion or portions
which a court may hold to be unenforceable in a final decision to
which the Franchisor is a party, or from reducing the scope of any
provision or term to the extent required to comply with applicable
law. Such modifications to this Agreement shall be effective only in
such jurisdiction, unless Franchisor elects to give them greater
applicability, and this Agreement shall be enforced as originally made
and entered into in all other jurisdictions.
(C) Franchisor and Franchisee agree that if any provision of
this Agreement may be construed in two ways, one of which would render
the provision illegal or otherwise voidable or unenforceable and the
other of which would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and
enforceable. The language of
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each provision of this Agreement shall be construed according to its
fair meaning and not strictly against Franchisor or Franchisee.
26.5 Specific Performance/Injunctive Relief. Nothing herein contained shall
bar Franchisor's right to obtain specific performance of the provisions of this
Agreement and injunctive relief against threatened conduct that will cause it
loss or damage, under customary equity rules, including applicable rules for
obtaining restraining orders and preliminary injunctions. Franchisee agrees that
Franchisor may have such injunctive relief, without bond, but upon due notice,
in addition to such further and other relief as may be available at equity or
law, and the sole remedy of Franchisee, in the event of the entry of such
injunction, shall be the dissolution of such injunction, if warranted, upon
hearing duly had (all claims for damages by reason of the wrongful issuance of
any such injunction being expressly waived hereby).
26.6 Mediation. It is the intention of the parties to attempt to resolve
all disputes arising under or in connection with this Agreement in a
commercially reasonable manner so as to maintain a commercial relationship, if
possible. In the event of any litigation between Franchisor and Franchisee,
either party may, at its option, provide notice to the other that it desires
attempted mediation of the dispute between the parties. Such notice shall be in
writing and shall be sufficiently in advance of any trial on the merits to avoid
delay. Each party shall present written briefs, oral arguments, evidence and
testimony at the mediation proceeding which shall be conducted as a mini-trial
type proceeding involving a senior representative of each party having full
settlement authority and a mutually agreed upon mediator, or one selected by the
American Arbitration Association. The mediator shall be a licensed attorney with
judicial experience as a state or federal court judge. Prior to any mediation,
each party shall have had the opportunity to undertake reasonable discovery. In
the event settlement is not reached during mediation, the mediator shall
promptly prepare a written report detailing his proposed resolution of the
matter including factual findings and legal conclusions. The mediation
proceedings shall be non-binding upon the parties and the decision and/or report
of the mediator shall be confidential and the parties shall enter into a
confidentiality agreement for all aspects of the mediation effort. In the event
of mediation, the parties agree that no written or oral statements or legal
positions or any evidence presented at or in connection with the mediation or
any aspect of the mediation proceedings whatsoever may be used in any legal
proceeding. All fees and expenses of the mediator shall be split between the
parties. Any mediation proceeding shall be conducted in Houston, Texas. In no
event shall mediation delay or impair the right of specific performance set
forth in Section 14.5. Any party who refuses to be subject to mediation, or who
does not undertake good faith mediation efforts (as determined by the mediator
in writing), shall be responsible for the costs and expenses of the other party,
including attorney's fees, which are in any way connected with the mediation
effort, including reasonable discovery expenses incurred prior thereto. For
purposes of awarding a party costs and expenses pursuant to the foregoing
sentence, a court of competent jurisdiction may consider the written report of
the mediator which addresses that issue (which shall be separate from the report
containing the mediator's proposed resolution of the matter, factual findings
and legal conclusions). Any
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court of competent jurisdiction as determined in accordance with Section 14.3
shall have the power to order the parties to mediation.
26.7 Rights of Parties Are Cumulative. The rights of Franchisor and
Franchisee hereunder are cumulative and no exercise or enforcement by the
Franchisor or Franchisee of any right or remedy hereunder shall preclude the
exercise or enforcement by Franchisor or Franchisee of any other rights or
remedy hereunder or which Franchisor or Franchisee is entitled by law to
enforce.
27. ACKNOWLEDGMENTS.
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27.1 Franchisee's Investigation. Franchisee acknowledges that it has
conducted an independent investigation of the business franchised hereunder, and
recognizes that the business venture contemplated by this Agreement involves
material business risks, and that its success will be largely dependent
primarily upon the ability of Franchisee as an independent businessman.
Franchisor expressly disclaims the making of, and Franchisee acknowledges that
it has not received, any warranty or guarantee, express or implied, as to the
potential revenues, profits or likelihood of success of the business venture
contemplated by this Agreement, other than such representations as are deemed
inferable under the Federal Trade Commission Rule from the interim or audited
annual financial statements of Franchisor or its affiliates, for its existing
wholly-owned Restaurants. Franchisee acknowledges that there have been no
representations by Franchisor or its officers, directors; agents or any
affiliate of any of same other than those contained in or consistent with the
provisions of this Agreement.
27.2 Litigation. Franchisee acknowledges that he is aware of and has
received such information as it has requested concerning all lawsuits filed in
the United States.
27.3 Franchisee's Time to Review. Franchisee acknowledges that it has
received, read and understood this Agreement, including exhibits, any applicable
Master Development Agreement and Franchisors Offering Circular; that Franchisor
has fully and adequately explained each provision to Franchisee's satisfaction;
and that Franchisor has accorded Franchisee ample time and opportunity to
consult with advisors of its own choosing about the potential benefits and risks
of entering into this Agreement. Franchisee acknowledges that Franchisor
encourages Franchisee, and hereby does so recommend to Franchisee, that
Franchisee use an attorney to assist in the review of this Agreement.
27.4 Franchisee's Receipt of Copv. FRANCHISEE ACKNOWLEDGES THAT IT HAS
RECEIVED A COPY OF THIS AGREEMENT AND THE EXHIBITS REFERRED TO HEREIN, AND
AGREEMENTS RELATING HERETO, IF ANY, AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE
DATE ON WHICH THIS AGREEMENT WAS EXECUTED. FRANCHISEE FURTHER ACKNOWLEDGES THAT
IT HAS RECEIVED FROM FRANCHISOR THE DISCLOSURE DOCUMENT REQUIRED BY THE FEDERAL
TRADE COMMISSION'S REGULATION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" BY AT LEAST THE
EARLIER OF (I) THE FIRST PERSONAL MEETING WITH FRANCHISOR'S REPRESENTATIVES TO
DISCUSS THE SALK OR POSSIBLE SALE
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OF A FRANCHISE; (II) TEN (10) BUSINESS DAYS PRIOR TO THE EXECUTION OF ANY
BINDING AGREEMENT; OR (III) TEN (10) BUSINESS DAYS BEFORE ANY CONSIDERATION WAS
PAID TO THE FRANCHISOR.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
FRANCHISOR:
FRESH'N LITE, INC.
BY: /s/ Stan Swanson
--------------------
Its President
----------------
FRANCHISEE:
[If a corporation or other entity]
FNL Investments, LLC
------------------------
BY: /s/ illegible
-------------------
Its Manager
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EXHIBIT 6.10CE
STATE OF TEXAS )
) ss
COUNTY OF BOWIE )
LEASE WITH OPTION TO PURCHASE
This lease with option to purchase is made and executed in duplicate in the City
of Texarkana, County of Bowie, State of Texas, between Connor Patman, Steve and
Ann M. Raffaelli, (herein called Lessor) and Fresh N' Lite, Inc., A Delaware
Corp. (herein called Lessee).
1. DESCRIPTION OF PREMISES
Lessor leases to Lessee that certain commercial tract of land, herein referred
to as the premises situated at 3500 Summerhill Road, Texarkana, Texas (see
attached Exhibit "A") the address of the premises.
2. RENT
Lessee agrees to pay rent during the entire term of this lease as follows:
Years 1-3
Monthly payments shall be $1,547.43
Years 4-8
Monthly payments shall be $1,949.36
Years 9-13
Monthly payments shall be $2,258.17
Years 14-20
Monthly payments shall be $2,615.23
Lessee shall, at its option, purchase the property on or before the end of the
third year of this lease for the amount of $200,000.
Seller shall provide title policy, warranty deed, and tax certificates at the
time of sale.
The first monthly payment shall be due on the first day of February, 1994 or
upon completion of improvements (restaurant) which ever shall occur first, and
thereafter on the first day of each month during the entire term of this lease.
The rent under this lease shall be paid by placing the same in the United States
Mail addressed to the Lessor's at its administrative office, 4646 Summerhill
Road, Texarkana, Texas 75503. The rent is deemed to be timely paid if the
envelope containing the rent is postmarked on or before the first day of each
month and the rent is received by Lessor on or before the tenth (10th) day of
each month. If the first day
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of the month falls on a Sunday or legal holiday, then the envelope containing
the rent must be postmarked the preceding day.
The Lessor has the right to assess and collect from the Lessee a five percent
(5%) late penalty on the monthly rental if it is not received by Lessor on or
before the tenth (10th) day of each month.
3. TERM
The term of this lease shall be for a period of twenty (20) years and shall
commence on the first (1st) day of February, 1994 and terminate on the last day
of January, 2014.
4. OCCUPANCY AND ACCEPTANCE OF PREMISES
By entering into and occupying the premises, the Lessee shall be deemed to
acknowledge that the premises is in good condition. Tenant acknowledges
acceptance of the premises in an "as is" condition. Lessee may begin occupancy
and construction of improvements upon execution of this lease.
5. USE OF PREMISES
a. Purpose. Lessee shall use the premises for the purposes of
conducting thereon general retail food sales, and no part of the premises shall
be used for any other purpose without the prior written consent of Lessor.
b. Business Hours. Lessee will operate the demised premises and have
the same fully open and available for business hours which the Lessee shall
determine in that are legal under pertaining law, except on said Sundays and
holidays as Lessee may determine not to be open for business.
c. Maintenance of Premises. The Lessee shall at all times maintain all
of the premises herein in a clean, neat, and orderly condition.
d. Garbage Disposal. The Lessee shall not burn or incinerate any
rubbish, garbage, or debris at, in, or about the demised premises, and shall
cause all containers, rubbish, garbage, and debris accumulated therein to be
stored within the demised premises, to be hauled away therefrom for disposal
prior to the accumulation of any substantial quantity.
e. Public Regulations. In the conduct of its business in and about the
demised premises, Lessee shall observe and promptly comply with all laws,
ordinances, and regulations of public authorities.
6. SIGNS - EXTERIOR LIGHTING - FIXTURES
Lessee shall have the exclusive right to erect and maintain upon the demised
premises at its own expense, all signs necessary or appropriate to the conduct
of the business of Lessee provided, however, the Lessee shall not have the right
to erect or maintain in or upon the demised premises any sign, the erection,
maintenance, or removal of which will cause to decrease the value of said
demised premises, without the Lessor's prior consent in writing. Any signs
erected or placed in or upon said demised premises by Lessee must be so removed
upon such expiration or termination, and all damage caused by the erection,
maintenance, or removal of any and all such signs shall be fully repaired at the
cost and expense of
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Lessee. All existing signs shall be removed from the property within thirty (30)
days of execution of this lease.
7. IMPROVEMENTS, ALTERATIONS, CHANGES AND ADDITIONS
The Lessee may, at its discretion, erect on the property any buildings, and or
structures, deemed necessary to operate a general retail food business. All such
improvements must meet applicable state and city laws and building codes. All
plans and specifications must be approved by appropriate agencies within thirty
(30) days of execution of lease. Lessor is to be notified in writing within
thirty (30) days if plans and specifications are rejected by appropriate
agencies. All improvements are to be maintained during the term of this lease
and at the termination of this lease, all improvements are to remain with the
property and will be in good condition at the expiration of the term of this
lease.
8. CASUALTY DAMAGE - REPAIRS - ABATEMENT OF RENT
Wherever as strike, act of God, or cause beyond the power of the party affected
to control causes delay, the period of such delay so caused shall be added to
the period limited in this lease for the completion of such work,
reconstruction, or replacement. Under no circumstances will the abatement period
exceed 180 days.
No rent shall be payable while the demised store is wholly unoccupied pending
the repair of casualty damage.
a. Repair or Replacement of Fixtures. Lessee shall, as soon as
reasonable possible, replace all fixtures and/or improvements which may be
damaged or destroyed by fire or any other cause whatsoever.
b. Fire Insurance. Lessee agrees to maintain in force, at all times
during the term of this lease adequate insurance to repair and/or replace any
improvement on the property.
9. REPAIRS
Lessee shall be responsible for any and all repairs to any improvements
including but not limited to paving, landscaping, etc.
10. UTILITIES
Lessee agrees to pay before delinquency all charges for water, gas, heat or
electricity, power, or other similar charges incurred by Lessee with respect to
and during its occupancy of the demised premises.
11. TAXES
Lessee will pay all ad valorem taxes during the term of this lease.
If at any time after tax assessment has become due or payable, the Lessee, or
his legal representative, neglects to pay such tax assessment, Lessor shall be
entitled to pay the same at any time thereafter and
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such amount so paid by Lessor shall be deemed to be additional rent for the
lease premises, due and payable by the Lessee.
12. LESSEE TO CARRY LIABILITY INSURANCE
Lessee agrees to procure and maintain in force during the term of this lease and
any extension thereof, at its expense, public liability insurance in companies
and through brokers approved by Lessor, adequate to protect against liability
for damaged claimed through public use of or arising out of accidents occurring
in or around the leased premises, in a minimum amount of One Hundred Thousand
Dollars ($100,000.00) for each person injured, Two Hundred Thousand Dollars
($200,000.00) for any one accident, and Ten Thousand Dollars ($10,000.00) for
property damage. Such insurance policies shall provide coverage for Lessor's
contingent liability on such claims or losses, and shall name Lessor as a named
insured. The policies or certificates thereof shall be delivered to Lessor for
keeping. Lessee agrees that, if such policies are not kept in force during the
entire term of this lease, and any extension thereof, Lessor may procure the
necessary insurance, pay the premium therefore, and that such premium shall be
repaid to Lessor as an additional rent installment for the month following the
date of which such premiums are paid.
13. TRANSFER OR PLEDGE OF LEASEHOLD INTEREST
Lessee shall not assign this lease or any interest therein, or sublet the
demised premises or any part thereof, or license the use of all or any portion
of the demised premises or business conducted therein or thereon, or encumber or
hypothecate this lease, without first obtaining written consent of Lessor; and
any assignment, subletting, licensing, encumbering, or hypothecating of this
lease without such prior written consent shall, at the option of the Lessor,
terminate this lease.
14. SURRENDER OF PREMISES
Lessee shall, at the termination of this lease, vacate the demised premises in
as good condition as they are in at the time of entry thereon by Lessee, except
for reasonable use and wear thereof, acts of God, or damage by casualty beyond
the control Lessee, and upon vacating shall leave the demised premise free and
clear of all rubbish and debris.
15. SUBORDINATION AGREEMENT
Lessee covenants and agrees to execute any instrument or instruments permitting
a first mortgage of trust deed to be placed on the demised premises or any part
thereof as security for an indebtedness and subordinating this lease to said
first mortgage or trust deed, if required to do so by the lending agency.
16. LESSOR'S RIGHT OF INSPECTION
Lessor shall have access to the demised premises, and each and every part
thereof, during the Lessee's regular business hours for the purpose of
inspecting the same, making repairs, and posting notices which Lessor may deem
to be for the protection of Lessor or the demised premises.
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17. DEFAULT
If the rent as set in this lease is not timely paid, as described above, and
shall remain unpaid for a period of ten (10) days after written notice of such
delinquency, or if lessee for a period of thirty (30) days after written notice
from Lessor, or should any person other than Lessee secure possession of the
premises or any part thereof, by reason of any receivership, bankruptcy
proceedings, or other operation of law in any manner whatsoever, or if Lessee
breaches any obligation under this lease which cannot be cured, or if Lessee
abandons the demised premises, then Lessor at its option, with proper notice to
Lessee, shall terminate this lease or in the alternative, Lessor may reenter and
take possession of said premises, without being deemed guilty of any manner of
trespass, and relet the premises, for all or any part of the remainder of said
term, to a tenant satisfactory to Lessor, at such monthly rental as Lessor may
with reasonable diligence be able to secure.
18. EXPENSES OR ENFORCEMENT
If either party incurs any legal expense in enforcing any covenants of this
lease, the party found to be in default shall pay to the other, all expenses so
incurred, including reasonable attorney's fees.
19. TIME OF ESSENCE
Time is of the essence of each and every provision, covenant, and condition
herein contained and on the part of the Lessee or Lessor to be done and
performed.
20. AMENDMENTS TO BE IN WRITING
This lease may be modified or amended only by writing duly authorized and
executed by both Lessor and Lessee. It may not be amended or modified by oral
agreements or understandings between the parties unless the same shall be
reduced to writing duly authorized and executed by both Lessor and Lessee.
21. PARTIES BOUND
Each and every provision of this lease shall bind and shall inure to the benefit
of the parties hereto and their legal representatives. The term "legal
representatives" is used in this lease in its broadcast possible meaning and
includes, in addition to executors and administrators, every person,
partnership, corporation, or association succeeding to the interest or to any
part of the interest in or to this lease or in or to the leased premises, of
either the Lessor or Lessee herein, whether such succession results from the act
of party in interest, occurs by operation of law, or is the effect of the
operation of law together with the act of such party. Each and every covenant,
agreement, and conditions of this lease to be performed shall be binding upon
all assignees, subtenants, concessionaires, and/or licensees of Lessee.
22. NOTICES
All notices of any kind which Lessor may be required or may desire to serve on
Lessee under the terms may be served upon Lessee by leaving a copy of such
demand or notice or by mailing a copy thereof to Lessee at the demised premises.
Any and all notices or demands from Lessee to Lessor may be served upon Lessor
by mailing a copy thereof to 4646 Summerhill Road, Texarkana, Texas 75503.
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23. LESSEE"S CORPORATE SEAL REQUIRED
If the lease is a corporate entity, Lessee hereby agrees to furnish Lessor upon
the execution of this lease a copy of the Notice of Director's Meeting and the
Corporate Authorization Resolution authorizing the execution of this lease by
the President and Secretary of the corporation and authorizing them to affix the
corporate seal of said corporation to this lease.
DATED the 15th day of October , 1993.
LESSOR: LESSEE:
- --------------------------- ---------------------------
Connor Patman Fresh N' Lite
Address:
011 West Loop 281, Suite 4
ongview, Texas 75604
- --------------------------- 903) 297-5502
Steve Raffaelli
- --------------------------
Ann Raffaelli
223
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EXHIBIT AND ADDENDUM
224
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EXHIBIT "A"
A-1
<PAGE>
ADDENDUM #1
The following shall be an Addendum to the Lease With Option to Purchase
between Connor Patman, Steve and Ann Raffaelli as Lessors and Fresh N' Lite,
Inc., Lessee:
1. Checks for monthly rent shall be made to Patman and SAC Investments
and net to be divided by Patman according to ownership interests.
2. Lessors shall have five (5) working days after execution of this
Lease to remove any personal property from building located on the premises.
3. Lessee shall have the right of possession upon execution of this
Lease (except Paragraph 2 above) with the right to remove building at its
expense and prepare site for construction and to construct desired improvements.
4. Lease is amended to begin on May 1, 1994 or sixty (60) days after
completion of improvements, which ever comes first, and end on April 30, 2014.
------------
Initial Here
DATED this 5th day of October, 1993.
LESSOR: LESSEE:
- ------------------------- -------------------------------
Connor Patman Fresh N' Lite, Inc.
Address:
1011 West Loop 281, Suite 4
- ------------------------- Longview, Texas 75604
Steve Raffaelli (903) 297-5502
- -------------------------
Ann Raffaelli
A-2
EXHIBIT 6.11.CE
SUBLEASE AGREEMENT
This Sublease Agreement is made and entered into as of the 25th day of
May, 1998, by and between JASON SUKIENNIK, JENNIFER SUKIENNIK, and PETE
SUKIENNIK (hereinafter called "Sublessee" whether one or more); FRESH'N LITE,
INC., a Texas corporation (hereinafter called "Sublessor"), as follows:
I.
Premises
Sublessor hereby leases to Sublessee and Sublessee hereby leases from
Sublessor the following described real property located in the City of Tyler,
Smith County, Texas, to-wit:
The land and building being a part of the A. Neighbors Survey,
more particularly described in Exhibit "A" attached hereto and
made a part hereof, having a street address of 1400 S.
Beckham, Tyler, Texas (the "Premises").
II.
Term
This Lease shall commence on the 1st day of March, 1998 and end July
31, 1999, at 12:00 P.M. to be continuously used and occupied during the term of
this Sublease by Sublessee for the purpose of operating a restaurant, or such
other legal purpose as Sublessee shall designate.
III.
Rental
Sublessee agrees to pay Sublessor, at such place as Sublessor shall
designate in Gregg County, the sum of $1,793.00 per month for and during the
term of this lease and any renewal thereof. The monthly rental shall be payable
in advance on the first (1st) day of each month during the term of this Lease.
Additionally, Sublessee agrees to assume Sublessor's lease on a dishwasher with
Kirby Restaurant Supply, account #2367, and shall execute such agreements with
Kirby Restaurant Supply as shall be necessary to complete this assumption.
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IV.
Repairs and Maintenance
Sublessee shall throughout the term of this Lease take good care of and
maintain the Premises in good condition and keep the Premises free from waste or
nuisance of any kind. Sublessee shall at all times keep the Premises in a clean
and sanitary condition in compliance with all applicable federal or state or
local laws, rules and regulations. Sublessee shall be responsible for all
repairs and maintenance on the Premises.
V.
Hours of Operation
It is understood that Sublessee may operate its business twenty-four
(24) hours a day, seven (7) days a week, and will have access to the Premises
continuously during such periods of operation.
VI.
Hazard Insurance
Sublessee shall pay all insurance charges as described in Paragraph 3
of Richard McKellar's lease with Lessor, a copy of which is attached hereto as
Exhibit "B" (the "Lease").
VII.
Liability Insurance
Sublessee shall keep in force liability insurance as required of
Sublessor in Paragraph 5 of the Lease.
VIII.
Waiver of Subrogation Rights
Each party hereby waives any and all claims which may arise in its
favor and against the other party for any and all loss of, or damage to the
other party or entity claiming throughout the other party, to the extent that
such loss or damage is recoverable under insurance policies. Each party agrees
to have said insurance policies properly endorsed.
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IX.
Alterations
Sublessee shall comply with the alterations requirements of Paragraph 6
of the Lease.
X.
Damage by Fire or Other Casualties
In the event the Premises shall be damaged by fire or other casualty,
then the damages shall be repaired or restored by Lessor to the extent of
available insurance proceeds. Sublessee shall receive an abatement of rent
proportionate to the damage to the Premises; and in the event that the damage
should be so extensive as to render the Premises untenantable, the rent shall
cease until such time as the Premises have been restored; provided, however, in
the event of substantial damage to the Premises which cannot be repaired or
restored within a period of sixty (60) days, then in such event Sublessee shall
have the right and option to terminate this Sublease upon written notice to the
Sublessor within fifteen (15) days of the occurrence of the casualty.
XI.
Condemnation
If the whole of the Premises, or such portion thereof as to make the
Premises unusable for the purposes herein leased, be condemned by any legally
constituted authority for any public use or purpose, then in either of said
events the term hereby granted shall cease from the time when possession thereof
is taken by public authorities, and rentals shall be accounted for as between
Sublessor and Sublessee as of that date. Such termination, however, shall be
without prejudice to the right of either Sublessor or Sublessee to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Sublessee nor Sublessor shall have any
rights in any award made to the other by any condemnation authority.
XII.
Assignment or Sublease
The Sublessee shall not assign, sublet, mortgage or pledge this Lease,
nor let the whole or any part of the Premises without the written consent of
Sublessor and Harold Wilder.
227
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XIII.
Default
In the event that the Sublessee shall default in the prompt payment of
rent when the same is due, or shall violate or omit to perform any of the
provisions of this Lease herein contained, or in the event that the Sublessee
shall abandon the business or the Premises or leave them vacant, Sublessor may,
if he so elects, send written notice of such default, violation or omission to
the Sublessee, by mail or otherwise, at the Premises, and unless Sublessee shall
have completely cured or removed said default within fifteen (15) days after the
sending of such notice by Sublessor, Sublessor may thereupon re-enter the
Premises, by summary proceedings or by force or otherwise without being liable
for prosecution therefor, take possession of said Premises and remove all
persons and property therefrom, and may elect to either cancel this Lease or
relet the Premises as agent for the Sublessee or otherwise, and receive the rent
therefor, applying the same first to the payment of such reasonable expenses as
the Sublessor may incur in entering and letting; and then to the payment of the
rent payable under this Lease and the fulfillment of the Sublessee's covenants
hereunder, the balance (if any) to be paid to the Sublessee who shall remain
liable for any deficiency. The foregoing remedies are not exclusive, and
Sublessor shall be entitled to exercise any other legal or equitable remedies
available pursuant to applicable laws.
XIV.
Bankruptcy
In the event that the Sublessee shall become bankrupt, voluntary or
involuntary, or shall make a voluntary assignment for the benefit of creditors,
or in the event that a receiver for the Sublessee shall be appointed, then, at
the option of the Sublessor and upon thirty (30) days notice to the Sublessee or
Sublease's representatives, of the exercise of such notice, this Lease shall
terminate.
XV.
Quiet Enjoyment
Sublessor and Lessor covenant, represent and warrant that Sublessor and
Lessor have the full right and power to execute and perform this Lease and to
grant the estate demised herein, and that Sublessee, upon payment of the rents
provided for herein and performance of the terms, conditions, covenants and
agreement herein contained, shall peaceably and quietly have, hold and enjoy the
Premises during the full term of this Lease. Sublessee accepts this subject to
the terms and conditions of the Lease.
228
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XVI.
Notices
Notices to Sublessor or Sublessee shall be in writing and shall be
deemed given on the date of personal delivery or on the date sent by certified
or registered mail, return receipt requested, and deposited with the United
States in a stamped envelope addressed to the parties as follows:
If to Sublessor: 1705 E. Whaley
Longview, Texas 75601
If to Sublessee: 1306 Belmont
Tyler, Texas 75701
Either party shall have the right to change the address to which notice may be
given by written notice to the other party in the manner set forth above.
XVII.
Severability
In the event of litigation relating to this Lease and should one or
more clauses be found invalid, all other provisions of the Lease are to stand as
written.
XVIII.
Binding Upon Parties
The covenants and agreements herein contained shall inure to the
benefit of and be binding upon the parties hereto, their respective heirs, legal
representatives, successors and assigns.
XIX.
Consent by Landlord
Harold Wilder, as Lessor under an existing Lease to Sublessor, joins
herein for the purpose of consenting to and approving of this Sublease.
229
<PAGE>
IN WITNESS WHEREOF, this Sublease has been duly executed by the parties
hereto as of the date aud year first written above.
SUBLESSEE:
Jason Sukiennik
Jennifer Sukiennik
Pete Sukiennik
230
<PAGE>
SUBLESSOR:
FRESH'N LITE, INC.,
a Texas corporation
By:
------------------
Stanley Swanson
CEO
231
<PAGE>
EXHIBIT "A"
-----------
BEING a part of the A. Neighbors Survey, and being a part of the 35.535-acre
tract which was conveyed to Thomas G. Pollard by the Citizens National Bank of
Tyler, by deed recorded in Volume 321, Page 238 of the Deed Records of Smith
County, Texas, and also a part of Lot 8 of New City Block 658 of said City of
Tyler, the tract of land hereby conveyed being more particularly described as
follows:
BEGINNING at a point in the east line of South Beckham Avenue, said point being
31.85 feet from the intersection of the projected south line of East Second
Street and the projected east line of South Beckham Avenue, a point for corner;
THENCE South 10 deg 08' 40" East with the east line of South Beckham Avenue a
distance of 127.00 feet, a point for corner;
THENCE North 79 deg. 51' 20" East a distance of
100.00 feet, a point for corner;
THENCE North 10 deg. 08' 40" West a distance of
134.38 feet to the south line of East Second
Street, a point for corner;
THENCE North 86 deg. 24' 00" West with the south line of East Second Street a
distance of 71.10 feet to a point for corner at the beginning of a curve to the
left which has a radius of 25 feet and a central angle of 103 deg. 44' 40";
THENCE following the right-of-way line with said curve to the left a distance of
45.27 feet to the end of said curve and the PLACE OF BEGINNING, and containing
14,430 square feet.
As described in that certain deed dated August 17, 1956, by and between Safeway
Stores, Incorporated, Grantor, and Humble Oil & Refining Company, Grantee.
A-1
<PAGE>
EXHIBIT "B"
LEASE AGREEMENT
STATE OF TEXAS )
COUNTY OF SMITH )
This Lease Agreement made and entered into on this the 7th day of
November, 1990, by and between HAROLD WILDER, a resident of Tyler, Smith County,
Texas (hereinafter, "Lessor"), and BOSCO'S, INC., a Delaware Corporation, with
headquarters in Marshall, Texas, and STAN SWANSON, a resident of Tyler, Smith
County, Texas hereinafter individually and collectively referred to as
"Lessee"):
W I T N E S S E T H :
Lessor does by these presents hereby lease, let and demise unto Lessee
the following described property, situated in Smith County, Texas, to-wit:
BEING a part of the A. Neighbors Survey, and being a part of the 35.35-acre
tract which was conveyed to Thomas G. Pollard by the Citizens National Bank of
Tyler, Texas, by deed recorded in Volume 321, page 238 of the Deed Records of
Smith County, Texas, and also a part of Lot 8 of New City Block 658 of said City
of Tyler, the tract of land hereby conveyed being more particularly described as
follows:
BEGINNING at a point in the east line of South Beckham Avenue, said point being
31.85 feet from the intersection of the projected south line of East Second
Street and the projected east line of South Beckham Avenue, a point for corner;
THENCE South 10 deg. 08' 40" East with the east line of South Beckham Avenue a
distance of 127.00 feet, a point for corner;
THENCE North 79 deg. 51' 20" East a distance of 100.00 feet,
a point for corner;
THENCE North 10 deg. 08' 40" West a distance of 134.38 feet
to the south line of East Second Street, a point for corner;
THENCE North 86 deg. 24' 00" West with the south line of East Second Street a
distance of 71.10 feet to a point for corner at the beginning of a curve to the
left which has a radius of 25 feet and a central angle of 103 deg. 44'40";
THENCE following the right-of way line with said curve to the left a distance of
45.27 feet to the end of said curve and to the PLACE OF BEGINNING, and
containing 14,430 square feet.
As described in that certain deed dated August 17, 1956, by and between Safeway
Stores, Incorporated, Grantor, and Humble
Oil & Refining Company, Grantee.
B-1
<PAGE>
for the term of three (3) years beginning on the first day of March, 1991, and
ending on the last day of February, 1994 at Midnight, upon the following terms,
conditions and covenants:
(1) Lessee, as rental for the said premises, has agreed to pay Lessor,
in addition to any and all further sums as set forth herein, in Tyler, Smith
County, Texas, the sum of $54,000.00, payable as follows, to-wit:
Lessee shall pay Lessor the sum of $1,500.00 on or before the first day
March, 1991, representing the first month's rent of the three year term
provided above, and further sum of $l,500.00 on or before the first day
of each month thereafter.
(2) As further consideration of the leasing aforesaid, Lessee covenants
and agrees to bear, pay and discharge (in addition to the rents aforesaid), all
property, city, school, county, college and all other taxes, assessments and
levies of every name, nature and kind which may be taxed, charged or assessed by
any authority with jurisdiction against the demised premises and any and all
buildings, improvements and personal property situated thereon. Lessor shall
during the term of the lease make payment of taxes directly to the taxing
authority, and shall charge Lessee for the reimbursement of the same as follows:
Lessor shall estimate the taxes due upon said property (buildings and
improvements) (based upon the annual tax roles for the previous year), and after
dividing such estimated annual amount by twelve, shall add such amount to the
monthly rental charged to and payable by Lessee. Lessee agrees to pay such
amounts as are billed in this regard and manner. At the end of each tax year,
Lessor shall notify Lessee of any deficiency between the estimated amounts and
the actual taxes due, which amount Lessee agrees to promptly pay upon being
billed by Lessor for same. Lessee shall have the right to protest any ad valorem
tax valuation as agent for Lessor.
(3) Lessor carries a $150,000.00 building insurance policy on the
premises, and intends to continue to do same throughout the term of this lease.
In connection herewith, Lessor shall pay the premiums for the same upon the same
being due directly to the carrier. During the term of this lease, including any
extension periods, Lessor shall charge Lessee for the reimbursement of same.
Reimbursement shall be made according to the same procedure and formula
established for tax reimbursement in paragraph two (2) above.
(4) Lessor and Lessor's agents and representatives shall have the right
to enter and inspect the demised premises at any time for the purpose of
ascertaining the condition of the demised premises or in order to make such
repairs as may be required to be made under the terms of this lease.
(5) Lessee shall purchase a property damage and personal liability
insurance policy to insure against injuries to persons or property while on the
said premises. Such policy shall provide personal liability coverage of at least
$500,000 per person and $1,000,000 per occurrence and shall name Lessor as
additional insured. Lessee shall furnish Lessor with certificates of insurance
evidencing the coverages herein required, and shall keep them current evidencing
the maintenance of such coverages. The insurance company issuing the policies
must be advised by Lessee (and such certificates should reflect) that the
insurer will not cancel such coverage without ten (10) days prior written notice
to Lessor. Should Lessee fail to purchase any such insurance coverage, Lessor
may purchase same and seek reimbursement from Lessee, which remittance Lessee
agrees to make within ten (10) days of the request of Lessor. Notwithstanding
the existence of any insurance coverage, Lessor shall not be liable to Lessee or
to the Lessee's employees, patrons or visitors for any damage or loss to the
person of property caused or occurring on the aforesaid premises, and Lessee
agrees to indemnify and hold Lessor harmless from any and all causes of action
or liability claimed or asserted in connection therewith.
B-2
<PAGE>
(6) Lessee shall make no alterations, renovations or other remodeling
of the premises or the building located thereon, and shall erect no additional
structures, without the express written consent of Lessor, which consent will
not be unreasonably withheld. Any request by Lessee for such consent shall
include and provide Lessor with copies of floor plans, building plans, color
schemes, and any other information which Lessor may reasonably request, in order
that Lessor has adequate information upon which to consider such request. Lessee
shall meet all the requirements of such construction as may be provided by the
City of Tyler, Texas, at its own cost and expense.
(7) It is understood and agreed that should any building or
improvements be destroyed or damaged by fire or otherwise, including the
building now situated on the said premises, Lessor shall look solely to the
insurance policy referred to in paragraph three (3) hereof for recovery from
such casualty. Upon such recovery, Lessor agrees to rebuild or repair the said
building as promptly as possible, upon the same general plans and dimensions as
before said fire or casualty, subject to the construction requirements of the
City of Tyler, Texas.
(8) Lessee acknowledges that it has examined and knows the condition of
the premises, and possession and occupancy of same will be assumed by Lessee
upon the execution hereof, in its current condition. Lessee shall, at its own
cost and expense, throughout the term of this lease and so long as it remains in
possession of the said premises, keep and maintain in good repair all the
buildings and improvements located upon the demised premises including the
plumbing and electrical work, air conditioning, pipes and fixtures, walls, roof,
floors and foundations, parking lots, drives and curbs, and all other fixtures
belonging thereto.
(9) Lessee agrees that it will promptly execute and fulfill all
ordinances and regulations of the State, County, City and other governmental
agencies with jurisdiction over the demised premises, and all ordinances imposed
by the Board of Health, Sanitary and Police Departments, for the correction,
prevention and abatement of nuisances in or upon or connected with the demised
premises during the term of this lease, at Lessee's sole cost and expense and
without liability to Lessor.
(10) Lessee shall not assign or transfer this lease or sublet the whole
or any part of said leased premises for any purpose without the prior written
consent of Lessor, which consent will not be unreasonably withheld. Regardless
of any such permitted assignment or sublease, Lessee shall remain primarily
liable to Lessor at all times for the full payment of all rents, taxes,
insurance and other consideration due under the terms of this lease, and shall
remain liable for the performance of all the other covenants, provisions,
obligations and agreements herein required to be performed by the Lessee.
Lessor, in addition to any other remedies herein or by law provided, may at his
option collect directly from such assignee or subtenant all rents becoming due
to Lessee under any assignment or sublease agreement and apply such sums against
any sums due Lessor by Lessee hereunder. No direct collection by Lessor from any
assignee or subtenant shall be construed as a novation or a release of Lessee
from the further performance of its obligations hereunder.
(11) Lessor shall not be liable to Lessee or to the Lessee's employees,
patrons or visitors for any damage to the person or property caused or occurring
on the aforesaid premises, and Lessee agrees to indemnify and hold Lessor,
Lessor's agents, representatives, successors and assigns, harmless from any and
all claims and causes of action caused by the acts and/or the negligence of
Lessee, Lessee's employees, patrons or visitors to the leased premises.
B-3
<PAGE>
(12) If the Lessee shall default in the payment of any installment of
rent for ten (10) days after the same becomes due or if Lessee shall be declared
bankrupt according to law or if any assignment shall be attempted to be made of
said property for the benefit of creditors or should the premises be placed in
the possession of a receiver, then and in such event the entire rent shall, at
the sole option of Lessor, at once become due and payable, as if by the term of
this lease it were all payable in advance; or at Lessor's sole option, this
lease may become null and void without further notice.
(13) It is understood and agreed that any equipment, fixtures and
personal property placed upon the demised premises by the Lessee may be removed
by the Lessee at the termination of this lease or any extension thereof,
provided (a) Lessee shall not be in default in the performance of any agreement,
condition, covenant or term hereof, and (b) that no property or fixture which is
permanently attached shall be removed by Lessee if such removal should
permanently injure or dismantle such building, unless the Lessee shall restore
and rebuild the same in the same condition as said building existed prior to the
removal of such equipment, fixture or personal property, and provided further
that such removal shall be erected within thirty (30) days after the expiration
of said term or extension hereof, and such building is completely restored
within thirty (30) days thereof.
(14) It is agreed that Lessee shall, at the expiration or termination
of this lease agreement, either willfully by Lessee, by expiration of term, by
removal of Lessee by Lessor, or any other circumstances effecting surrender,
expiration or termination of this agreement, peacefully yield up unto Lessor,
all and singular the said premises and any such improvements, buildings or
additions thereto, in good tenantable repair in all respects, reasonable use and
wear thereof excepted.
(15) In addition to the statutory landlord's lien, Lessor shall have at
all times a valid contractual lien for rents, taxes and insurance and other sums
of money becoming due hereunder from Lessee, upon all goods, wares, equipment,
fixtures, furniture and other personal property of Lessee situated upon the
leased premises, and such property shall not be removed therefrom without the
consent of Lessor until all such sums of money due and payable hereunder shall
first have been paid and discharged. Upon the occurrence of a default by Lessee,
Lessor may, in addition to any other remedies provided herein or by law, enter
upon the demised premises and take possession, without liability for trespass or
conversion, and sell the same with or without notice at public or private sale,
with or without having such property at the sale, at which Lessor or its assigns
may purchase, and apply the proceeds from the sale of same (less expenses
connected with the taking of possession and sale of property) as a credit
against such sums due by Lessee to Lessor. Any surplus shall be paid to Lessee,
and Lessee agrees to pay any deficiency forthwith.
(16) Provided Lessee has not defaulted in any terms, conditions and
provisions hereof, Lessee shall have the privilege of renewing and extending the
term hereof for a period of seven (7) years beginning on the first day of March,
1994, and terminating on the last day of February, 2001, at Midnight, upon the
same terms, conditions and provisions hereof, provided however, that the Lessee
shall pay to Lessor in Tyler, Smith County, Texas, the sum of $126,000.00,
payable in monthly installments of $1500.00 each, payment of the first monthly
rental to be made on or before the first day of March, 1994, and one monthly
rental to be paid in advance on or before the first day of each month thereafter
until such rental has been paid in full. It is further provided that in order
for the Lessee to exercise option hereunder, it shall and must give Lessor, his
heirs or assigns, written notice by United States mail, registered, return
receipt requested, of its intention to exercise such option as herein provided,
no later than 90 days prior to the effective date of said option.
(17) This Lease Agreement shall be contingent upon Lessee receiving the
necessary municipal approval which should be obtained by the 10th day of
December, 1990. Lessee agrees to commence construction within ten (10) days of
municipal approval. Lessee shall commence paying rent on the first day the
business opens for operation, but no later than eighty (80) days from December
10, 1990. In the event municipal approval is not received on or before the 7th
day of December, 1990, this lease agreement shall be deemed null and void.
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<PAGE>
(18) Lessee shall have access to and the right to start renovations of
the property on 10th day of December, 1990.
(19) This Lease Agreement shall be contingent upon Lessor completing a
successful lease buy-out agreement with Car Quest Automotive.
(20) Each Provision of this instrument or of any applicable government
law, ordinance, regulation, or other requirement, with reference to the sending,
mailing or delivery of any notice or with reference to the making of any payment
by Lessee to Lessor, shall be deemed to be complied with when and if the
following steps are taken:
A. All rent and other payments required to be made by Lessee
to Lessor hereunder shall be payable to the Lessor at the address of
Lessor hereinbelow set forth or at such other address as Lessor may
specify from time to time by written notice delivered in accordance
herewith;
B. Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when deposited in the United States mails, Postage
Prepaid, return receipt requested, addressed to the parties hereto at
their respective addresses set out opposite their names below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LESSOR: Harold Wilder LESSEE: Bosco's, Inc.
P. O. Box 7036 500 E. Houston
515 WSW Loop 323 Marshall, TX 75670
Suite 105
Tyler, TX 75711
LESSEE: Stan Swanson
500 E. Houston
Marshall, TX 75670
(21) Lessee has first right of refusal on any Purchase Opportunity that
is acceptable to Lessor. If this right is exercised, the Lessee has 30 days to
accept and close on a sale. In the event Lessee does not exercise its right of
first refusal on any Purchase opportunity, the conveyance by Lessor to any third
party shall be subject to the terms and conditions of this Lease Agreement.
(22) It is further agreed that all covenants, Promises, undertakings,
agreements, obligations, liabilities, grants, rights or powers, entered into,
made, assumed or undertaken by either party hereto, in and by this lease
agreement, shall bind, be applicable to, and inure to the benefit of the heirs,
executors, administrators and assigns of each party hereto respectively, whether
so particularly provided herein or otherwise. This lease represents the entire
agreement between the parties hereto.
(23) This agreement and all the terms hereof shall be interpreted in
accordance with the laws of the State of Texas. In all respects, jurisdiction is
established in Tyler, Smith County, Texas.
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<PAGE>
LESSEE LESSOR
BOSKO'S, INC.
- ----------------------------------- ------------------------------
By: Stan Swanson, President Harold Wilder, Lessor
- -----------------------------------
Stan Swanson, Lessee
CORPORATE ACKNOWLEDGMENT
THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me on the 7th day of November,
1990, by Stan Swanson, President, of BOSKO'S, INC., a Delaware corporation, on
behalf of said corporation.
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NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
------------------------------
COMMISSION EXPIRES:
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<PAGE>
ACKNOWLEDGMENTS
THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me by STAN SWANSON on the 7th
day of November, 1990.
----------------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
--------------------------------
COMMISSION EXPIRES:
--------------------------
THE STATE OF TEXAS )
COUNTY OF SMITH )
This instrument was acknowledged before me by HAROLD WILDER on the 7th
day of November, 1990.
----------------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
PRINTED NAME:
--------------------------------
COMMISSION EXPIRES:
--------------------------
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