UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 0-24502
ROCK BOTTOM RESTAURANTS, INC.
(Exact name of the registrant as specified in its charter)
Delaware 84-1265838
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
248 Centennial Parkway, Suite #100
Louisville,Colorado 80027
(Address of principal executive offices) (Zip Code)
(303) 664-4000
(Registrant's telephone number
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of November 10, 1997 the Registrant had outstanding 8,113,967 shares of
common stock, par value $.01 per share.
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets-
September 28, 1997 and December 29, 1996 3-4
Condensed Consolidated Statements of Operations-
Three Months and Nine Months Ended
September 28, 1997 and September 29, 1996 5
Condensed Consolidated Statements of Cash Flows-
Nine Months Ended
September 28, 1997 and September 29, 1996 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-17
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
Signature page 19
</TABLE>
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 28, December 29,
ASSETS 1997 1996
------ ---------------- ----------
(unaudited)
<S> <C> <C>
Cash and cash equivalents $ 512,716 $ -
Accounts receivable 1,033,580 747,762
Accounts receivable--affiliates 127,787 101,342
Preopening costs, net 2,511,278 2,552,185
Inventories 2,630,620 2,206,139
Prepaids and other current assets 1,677,598 1,253,124
------------ ------------
Total current assets 8,493,579 6,860,552
------------ ------------
PROPERTY AND EQUIPMENT:
Land 5,885,711 5,021,927
Buildings 3,653,660 3,653,660
Leasehold and building improvements 57,293,747 38,380,894
Furniture, fixtures and equipment 37,844,294 30,460,508
Construction-in-progress 1,162,584 4,700,360
Accumulated depreciation and amortization (15,345,083) (9,942,059)
----------- ------------
Total property and equipment, net 90,494,913 72,275,290
----------- ------------
INVESTMENT IN JOINT VENTURE, net 5,488,172 5,348,729
------------ ------------
DEFERRED INCOME TAXES 2,356,177 -
------------- ------------
OTHER ASSETS 634,175 463,368
------------ -------------
TOTAL ASSETS $ 107,467,016 $ 84,947,939
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 28, December 29,
LIABILITIES 1997 1996
----------- ---------------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable-
Trade $ 3,081,828 $ 1,680,714
Construction projects 2,342,655 516,357
Affiliates - 9,483
Accrued payroll and payroll taxes 3,562,616 1,605,980
Accrued taxes other than income tax 1,263,804 1,027,920
Other accrued expenses 1,309,610 963,413
Current deferred income taxes 969,328 515,232
Current portion of long-term debt 108,478 575,199
Current portion of obligations
under capital leases 589,926 697,992
------------- ------------
Total current liabilities 13,228,245 7,592,290
REVOLVING LINE OF CREDIT 24,300,000 8,500,000
LONG-TERM DEBT 2,408,478 2,488,420
OBLIGATIONS UNDER CAPITAL LEASES 2,333,799 673,987
DEFERRED INCOME TAXES - 356,510
--------------- ------------
Total liabilities 42,270,522 19,611,207
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value, 5,000,000 shares
authorized, none issued and outstanding - -
Common stock - $.01 par value, 15,000,000 shares
authorized, 8,113,300 and 7,905,451 issued
and outstanding 79,421 79,055
Additional paid-in capital 57,071,435 56,774,747
Retained earnings 8,045,638 8,482,930
------------ -----------
Total stockholders' equity 65,196,494 65,336,732
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,467,016 $ 84,947,939
=========== ==========
</TABLE>
See accompanying notes.
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- -------------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Old Chicago restaurants $ 19,886,204 $ 15,413,309 $ 54,544,241 $ 42,598,584
Rock Bottom Restaurant & Brewery
restaurants 20,844,770 13,551,356 56,310,583 36,292,183
---------- ---------- ------------ ----------
Total revenues 40,730,974 28,964,665 110,854,824 78,890,767
---------- ---------- ----------- ----------
OPERATING EXPENSES:
Cost of sales 10,098,182 7,267,487 27,461,339 19,572,139
Restaurant salaries and benefits 14,058,229 9,313,272 37,816,241 25,857,933
Operating expenses 8,064,369 6,225,263 22,209,029 16,839,296
Selling expenses 1,398,715 1,130,372 4,041,730 3,083,389
General and administrative 1,775,585 1,378,562 5,479,026 4,321,580
Depreciation and amortization 3,270,684 2,044,204 8,743,122 5,552,823
Restructuring charge 5,165,685 - 5,165,685 -
----------- ----------- ----------- -----------
Total operating expenses 43,831,449 27,359,160 110,916,172 75,227,160
---------- ---------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS (3,100,475) 1,605,505 (61,348) 3,663,607
Equity in joint venture earnings 90,000 112,941 240,000 112,941
Interest expense (480,290) (67,341) (1,133,302) (201,488)
Interest income 1,607 8,449 8,709 208,328
Other income (expense) 4 (273) 16 (1,041)
------------- ------------- -------------- ------------
INCOME (LOSS) BEFORE TAXES (3,489,154) 1,659,281 (945,925) 3,782,347
INCOME TAX PROVISION (BENEFIT) (1,249,837) 369,522 (508,633) 1,027,664
------------- ------------ -------------- -----------
NET INCOME (LOSS) $ (2,239,317) $ 1,289,759 $ (437,292) $ 2,754,683
============= ============ ============== ===========
NET INCOME (LOSS) PER SHARE $(.28) $.16 $(.05) $.36
==== === ==== ===
WEIGHTED AVERAGE
SHARES OUTSTANDING 8,135,000 7,995,000 8,124,000 7,667,000
========= ========= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (437,292) $ 2,754,683
Adjustments to reconcile net income to net cash
provided by operating activities-
Equity in joint venture earnings (240,000) (112,941)
Depreciation and amortization 8,743,122 5,552,823
Deferred income tax benefit (2,258,591) (125,000)
Non-cash portion of restructuring charge 4,869,009 -
Increase in accounts receivable (285,818) (115,390)
Increase in inventories (534,345) (550,128)
Increase in prepaids and other assets (1,203,972) (297,905)
Expenditures for preopening costs (3,128,667) (2,480,420)
Increase in accounts payable 3,227,412 1,661,323
Increase in accrued expenses 2,538,718 1,273,318
------------- -------------
Net cash provided by operating activities 11,289,576 7,560,363
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (27,843,068) (20,124,745)
Sale of property 1,975,307 -
Advances to officers and affiliates, net (35,928) (3,733)
Investment in joint venture - (155,045)
(Purchase) sale of short-term investments, net - 7,790,442
----------- -------------
Net cash used in investing activities (25,903,689) (12,493,081)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net 15,800,000 2,500,000
Proceeds from long-term debt - 2,500,000
Repayments of long-term debt (546,663) (45,632)
Repayments of capital lease obligations (423,562) (481,309)
Issuance of common stock 297,054 860,340
------------ ------------
Net cash provided by financing activities 15,126,829 5,333,399
------------ -------------
INCREASE IN CASH AND CASH EQUIVALENTS 512,716 400,681
CASH AND CASH EQUIVALENTS, beginning of period - 3,555,341
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 512,716 $ 3,956,022
============= =============
</TABLE>
See accompanying notes.
<PAGE>
ROCK BOTTOM RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
(Unaudited)
(1) UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes
that the disclosures included herein are adequate to make the
information presented not misleading. A description of the Company's
accounting policies and other financial information is included in the
audited consolidated financial statements as filed with the Securities
and Exchange Commission in the Company's Form 10-K for the year ended
December 29, 1996.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of September
28, 1997, and the results of operations and cash flows for the periods
presented. All such adjustments, other than the restructuring charge,
are of a normal recurring nature. The results of operations for the
three and nine months ended September 28, 1997, are not necessarily
indicative of the results that may be achieved for a full fiscal year
and cannot be used to indicate financial performance for the entire
year.
(2) REVOLVING LINE OF CREDIT
During July, 1997, the Company amended its bank revolving credit
facility (the "Credit Facility") for a second time to increase maximum
borrowings available from $25 million to $40 million. Additional
changes to the Credit Facility included modification of certain
financial covenants and ratios, extension of the revolving credit
period from July 2, 1998 to July 28, 1999, elimination of the provision
to automatically convert the Credit Facility into a three year fully
amortizing term loan at the end of the revolving credit period, and
inclusion of a sliding interest rate schedule based on the Company's
ratio of total debt to cash flow. Interest accrues under the revised
agreement at either prime to prime plus .5%, or at the Company's
election, at LIBOR plus 1.5% to LIBOR plus 2.5%. The total amount
outstanding under the Credit Facility as of September 28, 1997, was
$24.3 million.
<PAGE>
(3) INVESTMENT IN JOINT VENTURE
In July 1996, the Company acquired an indirect 50% equity interest in
Trolley Barn Brewery, Inc. ("Trolley Barn") in exchange for 452,073
shares of the Company's common stock. Trolley Barn currently operates six
brewery restaurants in the southeastern United States; four under the
name Big River Grille & Brewing Works and two under the name Rock Bottom
Restaurant & Brewery, one of which opened subsequent to September 28,
1997. The Company's investment in Trolley Barn is accounted for under the
equity method. At closing, the investment in joint venture carrying
amount exceeded the Company's equity in Trolley Barn's underlying net
assets by approximately $4.5 million. This amount represents goodwill at
the date of the acquisition and is being amortized over 35 years.
Accumulated amortization at September 28, 1997 of $166,897 is netted
against the investment.
(4) RESTRUCTURING CHARGE
During July 1997, the Company announced a strategic plan for 1998 to open
six Rock Bottom Restaurant & Brewery restaurants (as compared to seven in
1997), and to curtail Old Chicago restaurant openings. In connection with
the implementation of this strategy, the Company incurred a pre-tax
restructuring charge in the third quarter of 1997 of approximately $5.2
million (of which approximately $4.9 million was non-cash) related to
write-downs of certain assets to their net realizable value, including an
impairment charge for underperforming restaurant assets of $3.8 million,
and costs associated with decreasing corporate office overhead.
(5) INCOME TAXES
The benefit for income taxes for the three months ended September 28,
1997 includes a cumulative adjustment for the first six months of fiscal
1997 to reflect a reduction in the Company's estimated annual effective
tax rate from 31% to 9.5%. This decrease is due primarily to the
restructuring charge recorded in the three months ended September 28,
1997 (see Note 4). Additionally, the income tax effect of the Company's
estimated FICA tax credit available during 1997 is now being recognized
in income tax expense as a discrete event. The following table reconciles
the federal statutory income tax rate to the Company's estimated annual
effective rates:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
Sept. 28, 1997 Sept. 28, 1997
-------------- --------------
<S> <C> <C>
(Benefit) for income taxes at federal statutory rate (34.0)% (34.0)%
Effect of permanent differences 25.6 25.6
True-up of taxes provided in previous quarters (22.4) 0.0
State income taxes, net of federal benefit (1.0) (1.1)
------- ------
Effective income tax rate before tax credits (31.8) (9.5)
FICA tax credit (4.0) (44.3)
------- ------
Effective income tax rate (35.8)% (53.8)%
===== ======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cautionary Statement under the "Safe Harbor" Provision of the Private
Securities Litigation Reform Act of 1995
Certain statements contained in this report are not historical facts, and
are forward-looking statements that involve known and unknown risks and
uncertainties which may cause actual results or performance of the Company to
differ materially from such forward-looking statements. Such statements include,
among others, statements regarding:
- Timing and success of efforts to improve overall execution in Old
Chicago restaurants by improving average weekly sales in certain
restaurants while achieving more consistent profitability within
the concept;
- Reductions in expenses for cost of sales, labor and general
and administrative expenses as a percentage of revenues;
- Estimated costs to construct and open brewery restaurants on
anticipated dates;
- Ability to mitigate increased wage rates through menu price
increases;
- Ability to recover investment costs by completing sale/leaseback
transactions for purchased real estate;
- Achievement of operating efficiencies by new restaurants as
anticipated;
- Estimated capital expenditures;
- Ability to generate sufficient cash from operations;
- Ability to compete effectively within the restaurant industry;
Factors that could cause actual results to differ materially include, among
others: availability of suitable restaurant locations; increasing costs
associated with new restaurant construction, or developing a significant number
of new restaurants over a relatively short period of time; delays in opening new
restaurants; ability to hire and train increasing numbers of restaurant
management, staff and other personnel for new restaurants; ability of Trolley
Barn to open restaurants or conduct operations as anticipated; acceptance in new
markets; fluctuations in consumer demand and tastes including a decrease in
consumers' preference for higher quality, more flavorful beer; competitive
conditions in the Company's markets; general economic conditions; adverse
weather conditions; operating restrictions and costs associated with
governmental regulations; regulatory limitations regarding common ownership of
breweries and restaurants in certain states; and other risks detailed in the
Company's reports and other filings under the Securities Exchange Act of 1934.
In light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved. In addition, the Company
disclaims any intent or obligation to update publicly these forward-looking
statements, whether as a result of new information, future events, or otherwise.
Overview
As of September 28, 1997, the Company operated 21 Rock Bottom Restaurant &
Brewery restaurants and 42 Old Chicago restaurants, an increase of 14
restaurants from the end of the preceding fiscal year. The Company completed its
1997 restaurant expansion during the third quarter with total openings of seven
Old Chicago restaurants and seven Rock Bottom Restaurant & Brewery restaurants
as follows:
<PAGE>
New Restaurant Opening Schedule
<TABLE>
<CAPTION>
Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Total
3/30/97 6/29/97 9/28/97 12/28/97 1997
------- ------- ------- -------- ----
<S> <C> <C> <C> <C> <C>
Old Chicago restaurants 2 4 1 - 7
Rock Bottom Restaurant & Brewery restaurants 2 3 2 - 7
-- - - - ---
Total restaurants 4 7 3 - 14
= == = = ==
</TABLE>
Third quarter restaurant openings include one Old Chicago restaurant in
Hillsboro, Ore., and two Rock Bottom Restaurant & Brewery restaurants in
Englewood, Colorado and Des Moines, Iowa. The Company has historically leased
its restaurant facilities and plans to lease sites for a majority of future
locations. There can be no assurance, however, that the Company will be able to
identify suitable restaurant sites, purchase sites or obtain leases on
acceptable terms, or open new restaurants on anticipated dates.
During July, 1997, the Company announced a strategic plan to reduce its
future restaurant expansion by opening six Rock Bottom Restaurant & Brewery
restaurants and no Old Chicago restaurants during fiscal 1998 (see
"Restructuring Charge"). Although a majority of the Old Chicago restaurants
currently operate at levels that meet management's sales and profits
expectations, the Company will focus on correcting uneven performance in both
sales and profitability before continuing to expand the Old Chicago concept.
During July 1996, the Company acquired an indirect 50% equity interest in
Trolley Barn in exchange for 452,073 shares of the Company's common stock.
Trolley Barn currently operates six brewery restaurants in the southeastern
United States; four under the name Big River Grille & Brewing Works, and two
under the Rock Bottom Restaurant & Brewery name, one of which opened in
Charlotte, North Carolina during October 1997. Trolley Barn's current expansion
plans for 1998 include three additional brewery restaurants. Failure of Trolley
Barn to open restaurants or conduct operations as anticipated could adversely
affect the Company's earnings and could hinder the Company's expansion.
The Company's new restaurants typically incur certain increased costs in
the process of achieving operational efficiencies during the first several
months of operation. Additionally, operating results may be adversely affected
by costs associated with developing a significant number of new restaurants over
a relatively short period of time. As of September 28, 1997, the Company had
completed its 14 planned restaurant openings for 1997. This rapid expansion,
particularly of the brewery restaurants which increased from 14 restaurants at
the end of 1996 to 21 restaurants currently, resulted in higher operating costs
during the first nine months of 1997. Preopening costs, which are incurred prior
to opening a new restaurant but amortized over the first 12 months after
opening, and restaurant salaries and benefits are two examples of these
increased costs.
Additionally, the Company operates in an extremely competitive environment.
Competitive factors include price-value, service, location, quality, selection
and atmosphere. Many competitors of the Company are well established and have
substantially greater financial and other resources than does the Company. Also,
the restaurant industry generally, and the Company in particular, is affected by
changes in consumer tastes, national, regional or local economic conditions,
weather conditions, demographic trends and traffic patterns.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage
relationship to restaurant revenues of certain income statement data, and
certain restaurant data:
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------------------------------
Three Months Ended Nine Months Ended
------------------ ------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Old Chicago restaurants.................................. 48.8% 53.2% 49.2% 54.0%
Rock Bottom Restaurant & Brewery restaurants............. 51.2 46.8 50.8 46.0
----- ----- ----- ----
Total revenues...................................... 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating Expenses:
Cost of sales............................................ 24.8 25.1 24.8 24.8
Restaurant salaries and benefits......................... 34.5 32.2 34.1 32.8
Operating expenses....................................... 19.8 21.5 20.0 21.4
Selling expenses......................................... 3.4 3.9 3.6 3.9
General and administrative expenses...................... 4.4 4.8 4.9 5.5
Depreciation and amortization............................ 8.0 7.0 7.9 7.0
Restructuring charge..................................... 12.7 - 4.7 -
---- --- --- ---
Total operating expenses............................ 107.6 94.5 100.0 95.4
----- ----- ----- ----
Income (Loss) From Operations............................... (7.6) 5.5 - 4.6
Equity in joint venture earnings............................ 0.2 0.4 0.2 0.1
Interest expense............................................ (1.2) (0.2) (1.0) (0.2)
Interest income............................................. - - - 0.3
Other income (expense), net................................. - - - -
--- --- --- ---
Income (Loss) Before Taxes.................................. (8.6) 5.7 (0.8) 4.8
Income tax provision (benefit).............................. (3.1) 1.2 (0.4) 1.3
----- ---- ----- ---
Net Income (Loss)........................................... (5.5)% 4.5% (0.4)% 3.5%
======= === ===== ===
Restaurant Data:
Restaurant operating weeks:
Old Chicago restaurants.................................. 544 396 1,512 1,099
Rock Bottom Restaurant & Brewery restaurants............. 259 154 676 416
--- --- ----- ---
Total............................................... 803 550 2,188 1,515
=== === ===== =====
Restaurants open (end of period):
Old Chicago restaurants.................................. 42 32
Rock Bottom Restaurant & Brewery restaurants............. 21 13
-- ---
Total............................................ 63 45
== ==
</TABLE>
<PAGE>
Revenues
Revenues increased $11.8 million (40.6%) to $40.7 million in the quarter
ended September 28, 1997 from $29.0 million for the comparable quarter in 1996.
For the nine months ended September 28, 1997, revenues increased $32.0 million
(40.5%) to $110.9 million from $78.9 million for the comparable period in 1996.
These increases are due primarily to revenues generated by the ten new Old
Chicago restaurants and eight new Rock Bottom Restaurant & Brewery restaurants
that have opened since the end of the third quarter of 1996. These increases
were offset somewhat by a decrease in comparable restaurant sales of 2.2% for
the third quarter, and approximately 1% for the year to date. Restaurants open
for at least six full quarters are used for computing comparable restaurant
sales.
Revenues from the Company's Rock Bottom Restaurant & Brewery restaurants,
as a percentage of total revenues, increased to 51.2% for the quarter ended
September 28, 1997 as compared to 46.8% in the comparable period of 1996, and
for the nine months ended September 28, 1997 increased to 50.8% from 46.0% in
the first nine months of 1996. Although the Company opened only eight Rock
Bottom Restaurant & Brewery restaurants during the last 12 months as compared to
ten Old Chicago restaurants, the brewery restaurants generated greater average
weekly sales ("AWS") resulting in the increase to this percentage.
AWS for the Old Chicago restaurants during the third quarter of 1997 were
$36,556 as compared to $38,922 during the third quarter of 1996 (a decrease of
6%), and $36,074 for the first nine months of 1997 as compared to $38,761 for
the comparable period in 1996 (a decrease of 7%). Comparable restaurant sales
for Old Chicago were down 3.0% during the third quarter of 1997 and 3.7% for the
first nine months of 1997. These decreasing trends in AWS and comparable
restaurant sales for the Old Chicago restaurants continue to reflect the
ever-increasing competitive nature of the restaurant industry. Management also
believes that the uneven sales performance among its Old Chicago restaurants,
which have third quarter 1997 AWS currently ranging from $55,000 to $20,000,
indicates inconsistent execution of the concept at certain locations. During the
third quarter of 1997, the Company began implementing an extensive analysis of
its Old Chicago restaurants to direct management's efforts towards improving
overall execution in each restaurant by increasing AWS in certain restaurants
while achieving more consistent profitability. Such analysis covers all aspects
of operations including hiring and training of new staff, restaurant maintenance
and cleanliness, local restaurant marketing promotions, menu merchandising,
service standards and food quality and consistency. The Company has begun to see
some benefits from focusing on these areas including improved AWS and comparable
restaurant sales trends during the third quarter of 1997 as compared to the
second quarter of 1997. However, management expects that complete implementation
of this program will not occur system wide until early to mid 1998.
AWS for the Rock Bottom Restaurant & Brewery restaurants during the third
quarter of 1997 were $80,482 as compared to $87,996 during the third quarter of
1996 (a decrease of 8.5%), and $83,300 for the first nine months of 1997 as
compared to $87,241 for the comparable period in 1996 (a decrease of 4.5%).
Comparable restaurant sales for the brewery restaurants were down approximately
1% during the third quarter, and up nearly 2% for the first nine months of 1997.
The Company anticipated this decrease in AWS as most of the brewery restaurants
opened during 1997 were designed to operate at a slightly lower capacity than
certain of the Company's previous restaurants. AWS during the third quarter of
1997 for this group of restaurants were $75,025 as compared to $85,225 for the
14 restaurants opened prior to 1997. As the Company will continue to design
certain of its new brewery restaurants with this lower capacity, decreases in
AWS are expected to continue in the future.
<PAGE>
Cost of Sales
Cost of sales, which consists of food, beverage, and merchandise costs,
increased $2.8 million (39.0%) to $10.1 million in the third quarter of 1997
from $7.3 million in the third quarter of 1996, and as a percentage of revenues
decreased slightly to 24.8% from 25.1% in the comparable period of 1996. For the
nine months ended September 28, 1997, cost of sales increased $7.9 million
(40.3%) to $27.5 million from $19.6 million in the comparable period of 1996,
and remained flat as a percentage of revenues at 24.8% .
The decrease in cost of sales as a percentage of revenues during the third
quarter of 1997 is due primarily to greater purchasing efficiencies than in the
third quarter of 1996, including certain non-recurring benefits. Such
efficiencies were offset somewhat by greater than expected food costs for the
seven brewery restaurants opened during the first nine months of 1997. New
brewery restaurants typically incur significantly higher food costs during their
first several months of operation due to complexity of the menu items. As new
brewery restaurants begin to achieve operational efficiencies, the Company
expects that cost of sales as a percentage of revenues may decrease slightly
over time.
Restaurant Salaries and Benefits
Restaurant salaries and benefits, which consist of restaurant management
and hourly employee wages, payroll taxes, and group health insurance, increased
$4.7 million (50.9%) to $14.1 million in the third quarter of 1997 from $9.3
million in the third quarter of 1996. For the nine months ended September 28,
1997 salaries and benefits increased $12.0 million (46.2%) to $37.8 million from
$25.9 million in the comparable period of 1996. Restaurant salaries and benefits
as a percentage of revenues increased in both periods to 34.5% in the third
quarter of 1997 as compared to 32.2% in the third quarter of 1996, and to 34.1%
for the nine month period ended September 28, 1997 from 32.8% for the comparable
period of 1996. The increase in labor costs as a percentage of revenues for both
the three and nine month periods ended September, 28 1997 is primarily
attributed to two factors: significantly higher labor costs associated with the
seven new brewery restaurants opened during 1997, and decreases in AWS for the
Old Chicago restaurants.
Although labor costs as a percentage of revenues for brewery restaurants
opened prior to 1997 actually decreased in both the three and nine month periods
ended September 28, 1997 as compared to the same periods in 1996, labor costs in
the new brewery restaurants, most of which operate in high labor markets, more
than offset this savings. Similar to cost of sales, the Company expects that
labor costs in new brewery restaurants will begin to decline over the next three
to six months as these restaurants start to achieve operational efficiency.
Additional increases in labor costs are due to higher management and kitchen
labor in the Old Chicago restaurants. As the majority of these labor costs are
fixed, the decrease in AWS resulted in an increase to these costs as a
percentage of revenues.
Federal legislation effective September 1, 1997 increased the minimum wage
rate $.40 per hour to $5.15 per hour. This legislation also provided for an
additional increase to the Federal tip credit by the same amount, so that the
federal minimum wage paid to tipped employees did not increase. Additionally,
certain states passed minimum wage legislation to increase rates to amounts in
excess of the Federal minimum wage. Although a majority of the Company's
restaurants operate in states which have wage laws consistent with the Federal
minimum wage laws, the Company implemented an approximately 2% menu price
increase in both restaurant concepts late during the third quarter of 1997 to
help mitigate the anticipated impact of such legislation.
Operating Expenses
Operating expenses, which include occupancy costs, utilities, repairs,
maintenance and linen, increased $1.8 million (29.5%) to $8.1 million in the
third quarter of 1997 from $6.2 million for the same period in 1996. For the
nine months ended September 28, 1997, operating expenses increased $5.4 million
(31.9%) to $22.2 million from $16.8 million in the comparable period of 1996. As
a percentage of revenues, such expenses decreased to 19.8% in the third quarter
of 1997 from 21.4% for the same period in 1996, and to 20.0% for the nine month
period ended September 28, 1997 from 21.3% for the comparable period in 1996.
These decreases were principally due to a reduction in 1997 insurance premium
rates, particularly workmen's compensation insurance, as well as a continued
emphasis on cost control measures in numerous areas of restaurant operations.
Selling Expenses
Selling expenses increased $268,343 (23.7%) to $1.4 million in the third
quarter of 1997 compared to $1.1 million in the third quarter of 1996, and
increased $1 million (31.1%) to $4.0 million in the nine months ended September
28, 1997 as compared to the same period in 1996. As a percentage of revenues,
such expenses decreased to 3.4% in the third quarter of 1997 from 3.9% for the
same period in 1996, and to 3.6% for the nine month period ended September 28,
1997 from 3.9% for the comparable period in 1996. The decreases in both periods
were primarily due to a reduction in the amount of food and beverages discounted
to customers. Although such discounting is one of the Company's primary forms of
word-of-mouth advertising, it has been modified by increased staff training and
education to avoid overuse, and has also been supplemented with more efficient
spending on local in-restaurant promotions.
General and Administrative ("G&A")
G&A expense increased $.4 million (28.8%) to $1.8 million in the third
quarter of 1997 compared to $1.4 million in the third quarter of 1996, and
increased $1.2 million (26.8%) to $5.5 million for the nine month period ending
September 28, 1997 from $4.3 million for the comparable period in 1996. As a
percentage of revenues, such expenses decreased to 4.4% in the third quarter of
1997 from 4.8% for the same period of 1996, and to 4.9% for the nine months
ended September 28, 1997 from 5.5% for the comparable period in 1996. The
increase in amount primarily reflects personnel additions in the areas of
marketing, training, information systems, supervision, accounting, finance and
senior management due to the Company's expansion program. The decrease in G&A
expense as a percentage of revenues is due primarily to efficiencies gained in
administering a larger number of restaurants. Additionally, personnel reductions
made early in the third quarter of 1997 in anticipation of the Company's change
in future growth plans (see "Restructuring Charge") are beginning to have an
impact on reducing G&A costs as a percentage of revenues.
Depreciation and Amortization ("D&A")
D&A, including amortization of preopening expenses, increased $1.2 million
(60.0%) to $3.3 million in the third quarter of 1997 from $2.0 million for the
comparable period in 1996, and increased $3.2 million (57.5%) to $8.7 million
for the nine month period ending September 28, 1997 from $5.6 million for the
comparable period in 1996. As a percentage of revenues, depreciation expense and
amortization of intangible assets, other than preopening costs, was 4.9% during
the third quarter of 1997 as compared to 4.3% in the comparable period of 1996,
and 5.0% for the nine month period ending September 28, 1997 as compared to 4.2%
for the comparable period in 1996. Preopening expense amortization was 3.1% as a
percentage of revenues in the third quarter of 1997 as compared to 2.7% in the
comparable period of 1996, and 2.9% for the nine month period ending September
28, 1997 as compared to 2.8% for the comparable period in 1996.
The increase in depreciation expense and amortization of intangible assets
as a percentage of revenues is due primarily to decreases in AWS for both
concepts, increased depreciation expense associated with a greater number of
corporate assets resulting from the Company's continued expansion program, and
increased amortization of intangible assets including goodwill associated with
the investment in joint venture. Amortization of preopening expense as a
percentage of revenues fluctuates with the number and type of restaurant (Old
Chicago or Rock Bottom Restaurant & Brewery) opened in any given period. During
the third quarter of 1997, preopening expense was being amortized for a much
larger base of Rock Bottom Restaurant & Brewery restaurants than in the third
quarter of 1996, resulting in the increase to preopening expense amortization as
a percentage of revenues.
Restructuring Charge
The Company incurred a pre-tax restructuring charge in the third quarter of
1997 of approximately $5.2 million related primarily to write-downs of certain
assets to their net realizable value, and costs associated with decreasing
corporate office overhead. See Note 4 of Notes to Condensed Consolidated
Financial Statements.
Equity in Joint Venture Earnings
The 1997 equity in joint venture earnings represents the Company's 50%
equity interest in net after-tax earnings of Trolley Barn. See Note 3 of Notes
to Condensed Consolidated Financial Statements.
Interest Expense / Interest Income
Interest expense for the third quarter of 1997 increased $412,949 from
the third quarter of 1996, and for the first nine months of 1997 increased
$931,814 from the comparable period of 1996. Additionally, interest expense of
approximately $101,000 and $334,000 was capitalized to construction costs in the
third quarter and nine months ended September 28, 1997, respectively. The
increase in interest expense is primarily attributable to an increase in
long-term debt from the end of the second quarter of 1996, principally
additional borrowings under the Company's Credit Facility of $21.8 million.
Interest income during the first nine months of 1996 primarily represents
amounts earned from the temporary investment of cash proceeds from the Company's
follow-on offering in the first quarter of 1995.
<PAGE>
Net Income (Loss) and Net Income (Loss) Per Share
Operating results before the restructuring charge for the three and nine
month periods ended September 28, 1997 and September 29, 1996 are summarized as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pre-tax income before restructuring charge $ 1,677 $ 1,659 $ 4,220 $ 3,782
Income taxes before restructuring charge 299 369 820 1,027
----- ------ ----- -----
Net income before restructuring charge $ 1,378 $ 1,290 $ 3,400 $ 2,755
===== ===== ===== =====
Net income per share before restructuring charge $.17 $.16 $.42 $.36
</TABLE>
Liquidity and Capital Resources
The Company requires capital principally for the development and
construction of new restaurants and for capital expenditures at existing
restaurants. The Company has financed its expansion over the last three years
principally through cash flow from operations, proceeds from public offerings,
borrowings on long-term debt and capital lease obligations. The following table
presents a summary of the Company's cash flows for the nine months ended
September 28, 1997, and September 29, 1996:
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 11,289,576 $ 7,560,363
Net cash used in investing activities (25,903,689) (12,493,081)
Net cash provided by financing activities 15,126,829 5,333,399
Increase in cash and cash equivalents 512,716 400,681
Cash and cash equivalents, end of period 512,716 3,956,022
</TABLE>
Net cash used in investing activities during the first nine months of 1997
and 1996 included net capital expenditures of $27.8 million and $20.1 million,
respectively. This variance is primarily due to the number and type of
restaurants opened in each nine-month period. Although the Company opened two
less Old Chicago restaurants in the first nine months of 1997 than in 1996, it
opened four additional Rock Bottom Restaurant & Brewery restaurants. Because
Rock Bottom Restaurant & Brewery restaurants have a greater investment cost than
Old Chicago restaurants, total capital expenditures increased significantly in
1997. Additionally, investing activities for the first nine months of 1996
included a $7.8 million source of cash for short-term investments liquidated
during that period.
Net cash provided by financing activities increased during the first nine
months of 1997 primarily due to borrowings under the Company's Credit Facility
of $15.8 million as compared to $2.5 million in the first nine months of 1996.
During July 1997, the Company amended its Credit Facility for a second time to
increase the maximum borrowings available from $25 million to $40 million and to
amend certain other terms and covenants (see Note 2 of Notes to Condensed
Consolidated Financial Statements). As of September 28, 1997, the Company had
$24.3 million outstanding and $15.7 million available under the amended Credit
Facility.
Although the Company has historically leased its facilities, during the
first nine months of 1997, the Company purchased undeveloped land for two Rock
Bottom Restaurant & Brewery restaurants. Such land was utilized to construct
build-to-suit locations in Englewood, Colorado and Des Moines, Iowa using the
Company's newly introduced design prototype. During September 1997, the Company
completed a sale-leaseback transaction for the Englewood location, resulting in
a recovery of approximately $2 million in investment costs. This transaction is
reflected in investing activities in the accompanying Condensed Consolidated
Cash Flow Statement. The Company also expects to complete a similar transaction
for the Des Moines location later this year or in early 1998. The Company
estimates that the future cost to construct and open a brewery restaurant
prototype, assuming completion of a sale-leaseback transaction, will be
approximately $1.7 million to $1.9 million, as compared to the estimated $2.6 to
$3.0 million to construct and open a brewery restaurant converted from an
existing property. There can be no assurance, however, that suitable locations
for prototype brewery restaurants will be identified, that sale leaseback
transactions can be entered into on acceptable terms, or that the costs of
acquiring sites and opening new restaurants will not increase in the future.
<PAGE>
The Company estimates that total capital expenditures for 1997, excluding
preopening costs and net of proceeds from sale / leaseback transactions, will be
approximately $27 million, of which the cost of new restaurants will be
approximately $22 million. The remaining $5 million is the amount estimated for
routine capital expenditures and remodels of existing restaurants, and capital
expenditures for the corporate office. There can be no assurance that these
estimated capital expenditures will be sufficient for completion of current
development plans or that they will not increase in the future.
The Company believes that its existing cash balances, cash flow generated
from operations and funds available under the amended Credit Facility will be
sufficient to satisfy its currently anticipated cash needs through fiscal 1998.
However, results of operations could be negatively affected by changes in
consumer tastes, national, regional or local economic conditions, demographic
trends and traffic patterns, decreased interest income and increased interest
expense, among other factors. In the event the impact of such factors is
significant, the Company may require additional sources of external financing.
As is common in the restaurant industry, the Company has generally operated
with negative working capital, particularly the past few quarters as cash
proceeds from public offerings have been reinvested into new restaurants. The
Company does not have significant receivables or inventory and receives trade
credit based upon negotiated terms in purchasing food and supplies.
Seasonality and Quarterly Results
The Company's sales and earnings fluctuate seasonally. Historically, the
Company's highest earnings have occurred in the second and third quarters, and
are more susceptible to weather conditions in the first and fourth quarters. In
addition, quarterly results have been and, in the future are likely to be,
substantially affected by the timing of new restaurant openings. Specifically,
results of operations from new restaurants opening in the first or fourth
quarters will experience lower margins initially than new restaurants opening in
the second and third quarters. Because of the seasonality of the Company's
business and the impact of new restaurant openings, results in any quarter are
not necessarily indicative of the results that may be achieved for a full fiscal
year and cannot be used to indicate financial performance for the entire year.
Impact of Inflation
Although the Company does not believe inflation has materially affected
operating results during the past three years, inflationary pressures could
result in substantial increases in costs and expenses, particularly food,
supplies, labor and operating expenses. Additionally, increasing minimum wage
rates have the potential to impact all aspects of the Company's business due to
higher labor rates experienced by its suppliers and vendors. These labor rates
could translate into higher costs for goods and services purchased by the
Company. All such increases in costs and expenses could have a significant
impact on the Company's operating results to the extent that such increases
cannot be passed along to customers.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
10.1 Second Amendment to Loan Agreement for $40,000,000 Revolving Line
of Credit from Norwest Bank Colorado, National Association, First
Security Bank, N.A., U.S. Bank and Suntrust Bank, Central Florida, N.A.
to Rock Bottom Restaurants, Inc., dated July 28, 1997.
10.2 Lease Agreement dated September 26, 1997, between Rock Bottom Restaurants,
Inc. and Zymotic, LLC.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROCK BOTTOM RESTAURANTS, INC.
(Registrant)
November 10, 1997 By: /s/ WILLIAM S. HOPPE
----------------------
William S. Hoppe
Chief Financial Officer and
Executive Vice President
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Second Amendment to Loan Agreement for $40,000,000 Revolving Line
of Credit from Norwest Bank Colorado, National Association, First
Security Bank, N.A., U.S. Bank and Suntrust Bank, Central Florida, N.A.
to Rock Bottom Restaurants, Inc., dated July 28, 1997
10.2 Lease Agreement dated September 26, 1997, between Rock Bottom Restaurants, Inc.
and Zymotic, LLC
27 Financial Data Schedule
</TABLE>
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") executed
July 28, 1997 is among ROCK BOTTOM RESTAURANTS, INC, a Delaware corporation
("Borrower"), the LENDERS (as such term is defined in the Loan Agreement
described below and amended hereby) and NORWEST BANK COLORADO, NATIONAL
ASSOCIATION, a national banking association, as agent for the Lenders ("Agent").
RECITALS
A. Borrower, the Lenders and the Agent are parties to the Loan
Agreement, dated as of July 2, 1996, and amended by the Amendment to Loan
Agreement dated February 24, 1997 (as amended, and as it may hereafter be
amended, restated or supplemented from time to time, the "Loan Agreement"),
providing for a revolving line of credit Loan from the Lenders to the Borrower
in the amended maximum amount of $25,000,000. Capitalized terms that are used
but not defined herein have the meanings set forth in the Loan Agreement.
B. Borrower has requested and the Lenders have agreed to increase the
Maximum Loan Amount to $40,000,000, subject to the terms and conditions set
forth herein.
C. Additionally, the parties desire to add SunTrust Bank, Central
Florida, N.A.("SunTrust") and UMB Bank, N.A.("UMB") as additional Lenders to the
definition of Lenders, and to make certain other changes in connection
therewith.
D. The parties desire to enter into this Amendment to reflect the
changes described above.
AGREEMENT
IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower, the Lenders and the Agent agree as follows:
1. Amendments to Loan Agreement.
a. The following definitions in Section 1.1 of the Loan
Agreement are hereby amended and restated in their entirety to read as
follows:
i. "Base Rate" means a per-annum interest
rate equal to the Prime Rate plus a percentage ("Base
Rate Spread"), which shall be adjusted on the first
day of each Quarter and determined by reference to
the following table based on Borrower's ratio of
Funded Debt to Operating Cash Flow for the applicable
Determination Period:
<PAGE>
<TABLE>
<CAPTION>
Ratio of Funded Debt to
Operating Cash Flow Base Rate Spread
<S> <C>
Less than 1.50 to 1 0.00%
1.50 to 1 up to and
including 2.0 to 1 0.25%
Greater than 2.0 to 1 0.50%
</TABLE>
The Base Rate shall be adjustable the day of any
change in the Prime Rate, regardless of whether
Borrower has notice of such change. The Base Rate
Spread shall be automatically adjusted by either
increasing or decreasing to another percentage, as
appropriate, on the first day of each Quarter based
on the applicable Determination Period. For purposes
of determining the Base Rate Spread, the Ratio of
Funded Debt to Operating Cash Flow for the
Determination Period shall be based on the
calculations set forth in the Compliance Certificate,
subject to confirmation and adjustment by the Agent.
ii. "Consolidated" means the consolidation
of any Person, in accordance with GAAP, with its
properly consolidated Subsidiaries. References herein
to Borrower's financial statements, financial
position, financial condition, liabilities, etc.
refer to the consolidated financial statements,
position, condition, liabilities, etc. of Borrower
and its properly consolidated Subsidiaries. For the
purpose of defining Consolidated, and for no other
purpose, Big River shall be included in the
definition of Consolidated Subsidiaries.
iii. "Lenders" means Norwest Bank Colorado,
National Association ("Norwest"), First Security
Bank, N.A., a national banking association (f/k/a
First Security Bank of Idaho, N.A.) ("First
Security"), U.S. Bank (f/k/a U.S. Bank of Idaho)
("U.S. Bank"), SunTrust Bank, Central Florida, N.A.,
a national banking association ("SunTrust"), and UMB
Bank, N.A., a national banking association ("UMB"),
together with any other party that acquires an
interest in the Loan and is designated as a Lender
pursuant to an amendment to this Agreement. Further,
any reference to West One in the Loan Agreement or
any other Loan Document shall hereinafter refer to
U.S.
Bank.
iv. "LIBOR Rate" means, with respect to each
Interest Period, a per-annum rate equal to the
Eurodollar Rate (as defined in the Notes), plus a
percentage ("LIBOR Spread"), which shall be adjusted
on the first day of each Quarter and determined by
reference to the following table based on Borrower's
ratio of Funded Debt to Operating Cash Flow for the
Applicable Determination Period:
<TABLE>
<CAPTION>
Ratio of Funded Debt to
Operating Cash Flow LIBOR Spread
<S> <C>
Less than 1.50 to 1 1.50%
1.50 to one up to and
including 2.0 to one 2.00%
Greater than 2.0 to one 2.50%
</TABLE>
<PAGE>
The LIBOR Spread shall be automatically adjusted by
either increasing or decreasing to another
percentage, as appropriate, on the first day of each
Quarter based on the applicable Determination Period.
For purposes of determining the LIBOR Spread, the
Ratio of Funded Debt to Operating Cash Flow for the
Determination Period shall be based on the
calculations set forth in the Compliance Certificate,
subject to confirmation and adjustment by the Agent.
v. "Maturity Date" means the earlier of (i)
acceleration, or (ii) July 28, 1999, subject to a one
time extension in accordance with the provisions of
Section 2.1(i) below.
vi. "Maximum Loan Amount" means $40,000,000.
vii. "Notes" means the promissory notes made
by Borrower and evidencing the Loan, as they may be
amended, restated, extended or supplemented from time
to time and all notes given in substitution therefor,
including, without limitation: (a) the Promissory
Note from Borrower payable to Norwest dated July 2,
1996, as amended by the Amendment to Promissory Note
dated February 24, 1997, and as further amended by
the Second Amendment to Promissory Note dated July
28, 1997, in the amended principal amount of
$10,000,000, evidencing Norwest's Percentage Interest
of the Loan, (b) the Promissory Note from Borrower
payable to First Security Dated July 2, 1996, as
amended by the Amendment to Promissory Note dated
February 24, 1997, and as further amended by the
Second Amendment to Promissory Noted dated July 28,
1997 in the amended amount of $10,000,000, evidencing
First Security's Percentage Interest of the Loan, (c)
the Promissory Note from Borrower payable to U.S.
Bank dated July 2, 1996 as amended by the Amendment
to Promissory Note dated February 24, 1997 and
further amended by the Second Amendment to Promissory
Noted dated July 28, 1997 in the amended principal
amount of $10,000,000, evidencing U.S. Bank's
Percentage Interest of the Loan, (d) the Promissory
Note from Borrower payable to SunTrust dated July 28,
1997 in the principal amount of $5,000,000,
evidencing SunTrust's Percentage Interest of the
Loan, and (e) the Promissory Note from Borrower
payable to UMB dated July 28, 1997 in the principal
amount of $5,000,000, evidencing UMB's Percentage
Interest of the Loan and any promissory note give to
any other Person that becomes a Lender after the date
hereof, together with any and all renewals,
extensions, amendments and changes of, or
substitutions for such notes.
viii. "Percentage Interest" means, with
respect to each of the Lenders, subject to the
provisions of Section 10.10 below, the percentage
interest set forth below:
<TABLE>
<CAPTION>
Lender Percentage Interest
<S> <C>
Norwest 25%
First Security 25%
U.S. Bank 25%
SunTrust 12.50%
UMB 12.50%
</TABLE>
<PAGE>
b. Section 1.1 of the Loan Agreement is further amended by
deleting the definitions for "Revolving Loan Period" and "Term Loan
Period" in their entirety. Additionally, all references to "Revolving
Loan Period" or "Term Loan Period" in the Loan Agreement are hereby
deleted.
c. Section 1.1 of the Loan Agreement is further amended by
adding a definition for "Determination Period" to read as follows:
"Determination Period" means, at any given time, the four
consecutive Fiscal Quarters ending immediately prior to the
Fiscal Quarter immediately preceding the time at which the
subject calculation or determination and adjustment is made.
For example, the Determination Period for an adjustment in the
LIBOR Rate to be effective on October 1, 1997, is the
four-Fiscal Quarter period commencing on or about July 1, 1996
and ending on or about June 30, 1997.
d. Section 2.1(a) of the Loan Agreement is amended and
restated in its entirety to read as follows:
a. Subject to the terms and conditions of this
Agreement (including without limitation, the
conditions stated in Section 3.1 below), each Lender
severally but not jointly, agrees to make future
Advances to Borrower from time to time, in an
aggregate principal amount not to exceed its
Percentage Interest of the Loan; on the condition
that at no time shall the outstanding amount of the
Loan ever exceed the Maximum Loan Amount. So long as
an Event of Default or an Unmatured Event of Default
has not occurred, Borrower may borrow, repay and
reborrow under the Notes in accordance with the terms
of this Agreement.
e. Section 2.1(f)(ii) of the Loan Agreement is amended and
restated in its entirety to read as follows:
(ii) The entire principal balance of the Loan
together with all accrued but unpaid interest thereon
and all other amounts due the Lenders pursuant to the
Loan Documents are due and payable in full on the
Maturity Date.
f. Section 2.1(h) of the Loan Agreement is hereby deleted.
g. Section 2.1(i) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
<PAGE>
(i) Extension of Maturity Date. Upon request of the
Borrower, which request shall be made no less than 90
days and no more than 150 days prior to the Maturity
Date, the Lenders may, but shall be under no
obligation to, extend the Maturity Date by one year
(referred to herein as an "Extension"). An Extension
shall be in the sole and absolute discretion of the
Lenders and shall require the unanimous approval of
all Lenders. Without limiting the generality of the
foregoing, an Extension shall be subject to the
following terms and conditions and such other terms
and conditions as the Agent may reasonably require:
(i) Borrower shall provide Agent a written notice
requesting the Extension; (ii) there shall not exist,
either on the date the Extension is requested by the
Borrower or on the date the Extension becomes
effective any Event of Default or Unmatured Event of
Default; (iii) all of the representations and
warranties contained in the Loan Documents shall be
true and correct on the date the Borrower requests
the Extension and on the date the Extension becomes
effective; (iv) there has been no significant
material adverse change in the financial condition of
Borrower; (v) Borrower shall execute all documents
reasonably requested by Agent in connection with the
Extension; (vi) Borrower shall pay to Agent, for the
benefit of each Lender in accordance with its
Percentage Interest, concurrent with the Extension,
an extension fee of $40,000 together with all
reasonable fees and expenses incurred by Agent in
connection with the Extension, and (vii) the Agent
and the Lenders shall have agreed in writing to the
Extension. The foregoing list of conditions to the
Extension is illustrative only and shall not in any
way restrict the right of the Lenders to impose
additional conditions nor shall the Lenders be under
any obligation to agree to the Extension even if all
of the foregoing conditions have been complied with.
Borrower specifically acknowledges and agrees that
the Extension shall be in the sole and absolute
discretion of the Lenders and that the Lenders are
under no obligation to grant the Extension. In the
event that the Lenders agree to the Extension, the
Maturity Date shall each be extended by a period of
one year.
g. Section 2.4 of the Loan Agreement is hereby amended by
deleting the phrase "During the Revolving Loan Period" in the first
sentence of the Section.
h. Sections 6.11(a), (b) and (c) are hereby amended and
restated in their entirety to read as follows:
(a) Funded Debt to Operating Cash Flow. Borrower
shall maintain a ratio of Funded Debt to Operating
Cash Flow (determined on a Consolidated basis) of
less than or equal to 2.5 to 1, calculated at the end
of each Fiscal Quarter and based on such Fiscal
Quarter and the three immediately preceding Fiscal
Quarters.
(b) Fixed Charge Coverage Ratio. Borrower shall
maintain a Fixed Charge Coverage Ratio (determined on
a Consolidated basis) of not less than 2.25 to 1 for
the period in which the applicable Fiscal Quarter
ends, calculated at the end of each Fiscal Quarter
and based on such Fiscal Quarter and the three
immediately preceding Fiscal Quarters.
<PAGE>
(c) Total Liabilities to Tangible Net Worth. The
ratio of Borrower's Total Liabilities to Tangible Net
Worth calculated at the end of each Fiscal Quarter
shall not exceed .75 to 1 at any time during the term
of the Loan.
i. Notices. The address for notice to Lenders pursuant to
Section 12.2 of the Loan Agreement is hereby amended to include the
following additional addresses:
If to SunTrust to:
SunTrust Bank, Central Florida, N.A.
200 So. Orange Avenue, O-1043
Orlando, Florida 32801
Attention: Mr. Fritz Schutte
Facsimile: (407) 237-6894
If to UMB to:
UMB Bank, N.A.
1010 Grand Boulevard
Kansas City, Missouri 64106
Attention: Mr. Terry Dierks
Facsimile: 816-860-7143
j. Exhibit D to the Loan Agreement is hereby replaced with
Exhibit D attached hereto and Exhibit D attached hereto is substituted
in place of Exhibit D to the Loan Agreement as locations where the
Collateral is located. Borrower hereby represents, warrants and
certifies that (a) each Subsidiary set forth on Exhibit D (as amended
by this Amendment) conducts operations only at the locations set forth
below such Subsidiary's name on Exhibit D (as amended by this
Amendment) and Borrower or such Subsidiary own all of the Collateral
located at such location, (b) the Collateral is not located in any
location, and neither Borrower nor any Subsidiary conducts any
operations in any location other than those listed on Exhibit D of the
Loan Agreement (as amended by this Amendment) and (c) Borrower leases
and does not own, directly or indirectly, any of the locations
described on Exhibit D other than the Fee Properties.
k. Exhibit F to the Loan Agreement is hereby replaced with
Exhibit F attached hereto and Exhibit F attached hereto is substituted
in place of Exhibit F to the Loan Agreement.
2. Additional Lenders.
a. From and after the date hereof, SunTrust and UMB shall be
Lenders pursuant to the Loan Documents, shall be entitled to all of the
rights and privileges granted to Lenders and agree to perform and abide
by all the terms and conditions of the Loan Documents applicable to
Lenders.
<PAGE>
b. On the date of the execution hereof, each of SunTrust and
UMB and, to the extent necessary, First Security and U.S. Bank, shall
wire transfer to Agent their Percentage Interest of the entire
outstanding amount of the Loan. Upon receipt of such amounts from
SunTrust and UMB, Norwest shall wire to each of the other Lenders the
payment required in order to cause each Lender to have advanced and
outstanding its Percentage Interest of the entire outstanding amount of
the Loan.
3. Conditions Precedent. All of Lenders' obligations under this Amendment are
conditioned upon and subject to satisfaction of all of the following conditions
precedent in a manner acceptable to Agent on or before July 29, 1997:
a. Borrower shall pay to Agent, as agent for Lenders,
a restructure fee in the amount of $40,000. Such restructure fee shall
be distributed between the Lenders in the following manner: Norwest:
$20,000, First Security: $5,000, U.S. Bank: $5,000, SunTrust: $5,000,
and UMB: $5,000.
b. Borrower or the Subsidiaries, as the case may be, shall
have executed and delivered this Amendment, and any and all amendments
to the Note and the other Loan Documents or any other documents
required by Lenders, to give effect to the amendments effected by this
Amendment, including, without limitation, those documents set forth on
Schedule 1 attached hereto and incorporated herein by this reference;
c. Borrower shall have delivered to Agent, as agent for the
Lenders, an opinion of counsel with respect to the loan modifications
effected by this Amendment and the amendments executed concurrent
herewith, which opinion must be acceptable in form and substance to
Agent, in Agent's reasonable discretion;
d. Borrower shall pay all Loan Expenses incurred by the Agent
in connection with the transactions contemplated by this Amendment; and
e. As of the date of this Amendment, there was and is no Event
of Default or Unmatured Event of Default.
f. Borrower shall cause Stewart Title Company or North
American Title Company (as the case may be) to deliver to Lender
endorsements to each of the title insurance policies issued in
connection with the original closing of the Loan and the amendment of
the Loan in February, 1997 (other than for the property located in the
State of Texas), which title insurance endorsements shall insure that
there has been no adverse change in the status of title to any real
property securing the Loan (other than for the property located in the
State of Texas) since February 24, 1997, and shall insure that the
Deeds of Trust, as modified by the Amendments to Deeds of Trust being
delivered simultaneously herewith, remain in effect as first priority
liens against each of the parcels of real property encumbered by such
Deeds of Trust (subject to Permitted Liens).
<PAGE>
4. Further Assurances. Borrower shall execute all documents and instruments and
take all actions or cause any other party to execute all documents and
instruments and take all actions as the Agent may reasonably require to effect
the transactions contemplated by this Amendment.
5. Representations and Warranties. Borrower hereby certifies to the Lenders that
as of the date of this Amendment (taking into consideration the transactions
contemplated by this Amendment), all of Borrower's representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects, and no Event of Default or Unmatured Event of Default has
occurred under any Loan Document (as amended concurrent herewith). Without
limiting the generality of the foregoing, Borrower represents and warrants to
the Lenders that the execution and delivery of this Amendment has been
authorized by all necessary action on the part of Borrower, that each person
executing this Amendment on behalf of Borrower is duly authorized to do so, and
that this Amendment constitutes the legal, valid, binding and enforceable
obligation of Borrower (subject to the same limitations of enforceability as set
forth in the Loan Agreement).
6. Loan Documents.
a. The Lenders, the Agent, and the Borrower agree that all of
the Loan Documents shall be amended to reflect the amendments set forth
herein.
b. All references in any document to the Loan Agreement
hereafter refer to the Loan Agreement as amended pursuant to this
Amendment.
c. All references in the Loan Agreement to the Loan Documents,
or any particular Loan Document, hereby refer to such Loan Documents as
amended pursuant to the amendments executed concurrent herewith.
7. Continuation of the Loan Agreement Except as specified in this Amendment, the
provisions of the Loan Agreement remain in full force and effect, and if there
is a conflict between the terms of this Amendment and those of the Loan
Agreement, the terms of this Amendment control.
<PAGE>
8. Miscellaneous.
a. This Amendment shall be governed by and construed under the
laws of the State of Colorado and shall be binding upon and inure to
the benefit of the parties hereto and their successors and permissible
assigns.
b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together
shall constitute one instrument.
c. This Amendment and all documents to be executed and
delivered hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed document.
d. Time is of the essence hereof with respect to the dates,
terms and conditions of this Amendment and the documents to be
delivered pursuant hereto.
e. This Amendment constitutes the entire agreement between
Borrower, the Agent, and the Lenders concerning the subject matter of
this Amendment. This Amendment may not be amended or modified orally,
but only by a written agreement executed by Borrower, the Agent and the
Lenders and designated as an amendment or modification of the Loan
Agreement.
f. If any provision of this Amendment is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Amendment shall not be impaired
thereby.
g. The section headings herein are for convenience only and
shall not affect the construction hereof.
h. Execution of this Amendment is not intended to and shall
not constitute a waiver by the Lenders of any Event of Default or
Unmatured Event of Default.
EXECUTED as of the date first set forth above.
LENDERS: NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
a national banking association
By: /s/KAREN I. HARDY
---------------------------
Karen I. Hardy
Vice President
<PAGE>
FIRST SECURITY BANK, N.A., a
national banking association
(f/k/a First Security Bank of Idaho, N.A.)
By:/s/ MARY MONROE
--------------------------
Mary Monroe
Vice President
U.S. BANK (f/k/a U.S. Bank of Idaho)
By:/s/ JAMES HENKEN
--------------------------
James Henken
Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:/s/
--------------------------
Name:
Title:
UMB BANK, N.A.
By:/s/
--------------------------
Name:
Title:
AGENT: NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
a national banking association
By:/s/ KAREN I. HARDY
--------------------------
Karen I. Hardy
Vice President
<PAGE>
BORROWER: ROCK BOTTOM RESTAURANTS, INC., a
Delaware corporation
By:/s/ WILLIAM S. HOPPE
---------------------------
William S. Hoppe
Executive Vice President and
Chief Financial Officer
RESTAURANT LEASE
----------------
9227 E. County Line Road
------------------------
Englewood, CO 80112
-------------------
ZYMOTIC, LLC
------------
as Landlord,
and
WALNUT BREWERY, INC.,
---------------------
a Colorado corporation, d/b/a Walnut Brewery,
as Tenant.
<PAGE>
TABLE OF CONTENTS
ARTICLE TITLE OF ARTICLE PAGE NO
- --------------------------------------------------------------------------------
ARTICLE 1 Summary Fundamental Lease Provisions............1
ARTICLE 2 Grant, Term and Options to Extend...............3
ARTICLE 3 Rent............................................4
ARTICLE 4 Condition of Premises at Lease Commencement.....5
ARTICLE 5 Conduct of Business by Tenant...................6
ARTICLE 6 Common Areas....................................6
ARTICLE 7 Signs, Alterations, and Additions...............7
ARTICLE 8 Maintenance of Leased Premises, Surrender
and Rules.......................................8
ARTICLE 9 Insurance and Indemnity.........................8
ARTICLE 10 Utilities......................................10
ARTICLE 11 Assignment and Subletting......................10
ARTICLE 12 Governmental Regulations.......................11
ARTICLE 13 Destruction of Leased Premises.................12
ARTICLE 14 Eminent Domain.................................13
ARTICLE 15 Default of Tenant..............................14
ARTICLE 16 Access by Landlord.............................16
ARTICLE 17 Tenant's Property..............................16
ARTICLE 18 Notice Provisions..............................17
ARTICLE 19 Subordination, Nondisturbance, Estoppel, etc...18
<PAGE>
ARTICLE 20 Miscellaneous..................................20
-Accord and Satisfaction )
-Applicable Law ) 20
-Captions and Section Numbers )
-Covenants )
-Counterparts )
-Entire Agreement )
-Exhibits ) 21
-Facsimile Signatures )
-Force Majeure )
-Guarantor )
-Hazardous Materials )
-No Partnership or Other Association )
-Notice To Landlord of Default ) 22
-Partial Invalidity )
-Preliminary Negotiations )
-Quiet Enjoyment )
-Real Estate Commissions )
-Recording )
-Tenant's Assertion of Landlord's Rights ) 23
-Waste )
-No Waiver )
ARTICLE 21 Holding Over...................................24
<PAGE>
ARTICLE 1
SUMMARY OF FUNDAMENTAL LEASE TERMS
The following is intended as a summary of the fundamental terms of the
Lease. In the event of any conflict between this summary and the terms of the
Lease, the terms of the Lease shall control:
1.01 TENANT'S NAME: Walnut Brewery, Inc.,
a Colorado corporation,
d/b/a Walnut Brewery
1.02 LEASED PREMISES:
-Address 9227 E. County Line Road
Englewood, CO 80112,
1.03 TENANT'S NAME AS IT
APPEARS ON LEASE,
ADDRESS AND PHONE: Walnut Brewery, Inc., a Colorado
corporation, d/b/a Walnut Brewery
9227 E. County Line Road
Englewood, CO 80112
Phone: (___) __________
Fax: (___) __________
1.04 LANDLORD'S NAME
ADDRESS, PHONE &
FAX Zymotic, LLC,
a Colorado limited liability company
c/o David E. Carpenter
1115 N. Elm Street
P.O. Box 216
West Liberty, Iowa 52776
Phone: (319) 627-4101
Fax: (319) 627-4403
1.05 AGENT/MANAGER
(Name, address, phone
and Fax) Same name, phone and address as no. 1.04
1.06 SQUARE FOOTAGE
LEASED: Approximately __________(_____) square feet.
1.07 DATE LEASE SIGNED: __________, 1997
1.08 LEASE COMMENCEMENT
DATE: Upon closing of the sale of the Property and
Premises to Landlord as set forth in
the Purchase and Sale Agreement
between Landlord and Rock Bottom
Restaurants, Inc., dated June ___,
1997.
1.09 DATE RENT COMMENCES: On the day of the closing as set forth in
paragraph 1.08, above.
1.10 INITIAL LEASE TERM: Fifteen (15) years.
1.11 INITIAL TERM ENDS: On the last day
of the one hundred eightieth (180th)
full month after the Lease
Commencement Date.
1.12 BASE RENT: Years 1-5 $230,775
6-10 $261,353
11-15 $295,982
Options 16-20 $335,200
21-25 $379,614
26-30 $429,913
31-35 $486,876
1.13 ADDITIONAL RENT: (Check applicable item(s), if any:
___X___ Tenant's Common Area Maintenance,
per paragraph 8 of the Declaration
governing the Property.
___X___ Real Estate Taxes
___X___ Insurance
1.14 UTILITIES: Paid by Landlord: None
Paid by Tenant: As applicable to the Leased
Premises, heat, water, gas, steam,
telephone, sewer and electricity consumed on
the Premises.
<PAGE>
1.15 MAINTENANCE RESPONSIBILITIES: Tenant shall be responsible for all
maintenance and repairs.
1.16 INSURANCE COVERAGE REQUIRED:
By Tenant: As required by the Declaration covering the
Property, but in no event less than $2,000,000 combined single
limit of liability for bodily injury and property damage with
an annual aggregate of $2,000,000, together with all risk
property insurance (hereinafter "Tenant's Property Insurance")
covering fire and extended coverage, vandalism and malicious
mischief, sprinkler leakage and all other perils included in a
standard Special Causes of Loss or All Risk form for no less
than eighty percent (80%) of the replacement value of all of
Tenant's property located on or within the Premises, together
with the same insurance for replacement of the Premises
themselves, for not less than one hundred percent of the
replacement value of the Premises, excluding footings and
foundation, with Tenant's customary deductibles.
By Landlord: Such insurance as Landlord's deems appropriate
to insure itself for claims for bodily injury and property
damage liability.
1.17 RENEWAL OPTIONS: Four (4) Terms of sixty (60) months each.
1.18 PARKING: Included within the Leased Premises.
1.19 DOCUMENTS TO
WHICH PROPERTY IS SUBJECT: Declarations of Easements, Covenants,
Conditions and Restrictions for Centennial
Promenade which is dated as of April 23, 1996,
and recorded on September 24, 1996, as reception
number A6123145, as amended (the "Declaration")
Development and Restrictions Agreement dated as of
January 29, 1997 and recorded on __________, 1997,
as reception number ___________
(the "Restrictions Agreement")
ARTICLE 2
GRANT , TERM and OPTIONS TO EXTEND
2.01 LEASED PREMISES. Landlord demises and leases to Tenant, and Tenant leases
from Landlord, the Building outlined in red on Exhibit A and referred to as 9227
E. County Line Road, Englewood, CO 80112 (the "Leased Premises" or the
"Premises"), which is located on the real property whose legal description is
set forth in Exhibit B attached hereto (said real property and the buildings and
improvements located thereon are from time to time herein called the
"Property"). The Leased Premises consist of approximately_________(____________)
square feet within the Building and a total of_____ (___) square feet of
real property within the boundary lines of Exhibit B.
Tenant shall be entitled to occupy and use such portion of the Property to
construct and operate a patio or sidewalk cafe for the service of food and
beverages to guests. There shall be no additional Rent or Additional Rent
charged for the Patio area, but the same shall be included in the definition of
Leased Premises for purposes of insurance, Tenant maintenance and liability
matters under this Lease. 2.02 GRANT OF USE OF COMMON AREAS. The use and
occupation by Tenant of the Leased Premises shall include the use, in common
with others entitled thereto, of the common areas of the Centennial Promenade
Shopping Center as applicable, including, without limitation, employees' parking
areas, service roads, loading facilities, sidewalks, and customer vehicle
parking areas, elevators, corridors, stairways, and such other facilities as may
be designated from time to time by Landlord, subject, however, to the terms and
conditions of this Lease.
2.03 POSSESSION/COMMENCEMENT DATE. Landlord shall deliver possession of the
Premises to Tenant in accordance with the terms of the Purchase and Sale
Agreement between Landlord and Rock Bottom Restaurants, Inc., dated June ___,
1997. The date of delivery of possession shall herein be referred to as the
Lease Commencement Date.
2.04 COMMENCEMENT OF RENTAL. Tenant's obligation to pay rent shall commence on
the Lease Commencement Date.
2.05 TERM OF LEASE. The term of this Lease shall be one hundred eighty (180)
months, commencing with the Lease Commencement Date determined in accordance
with the terms of paragraph 2.03, above. If the Lease Commencement Date is other
than the first day of the month, the first year of the Lease Term shall be
deemed to be extended to include such partial month and the following twelve
months, so as to end on the last day of the month.
2.06 OPTIONS TO RENEW. Provided Tenant shall not then be in material default
hereunder, Tenant shall have the option to extend the term of the Lease for four
(4) additional terms of sixty (60) months each upon the same terms and
conditions herein contained. To exercise its option(s) hereunder, Tenant shall
deliver notice of said election to Landlord at least Ninety (90) days prior to
the expiration of the then existing term hereof. The Rent during such
extension(s) shall be as set forth in paragraph 1.12, above.
<PAGE>
ARTICLE 3
RENT
3.01 ANNUAL RENTAL. Annual rental hereunder shall be payable in advance in equal
monthly installments on the first day of each and every month throughout the
Lease term at the office of Landlord as set forth in paragraph 1.04 hereof, or
at such other place as Landlord shall designate to Tenant in writing, without
prior demand. Rental for any fractional month shall be prorated and likewise
payable in advance.
3.02 TAX AND INSURANCE ADJUSTMENT. Tenant shall, for each Lease Year, pay to
Landlord as additional rent real estate taxes and assessments and all insurance
for the Property. Landlord shall notify Tenant of the amount of such assessment
and Tenant shall pay Landlord such amounts within thirty (30) days from the date
of notice to it by Landlord. Additionally, with respect to taxes:
(a) Right to Contest Assessments. Tenant may, at its expense, contest any
and all such real estate taxes in the name of and on behalf of the Landlord.
(b) Municipal, County, State or Federal Taxes. Tenant shall pay, before
delinquency, all municipal, county and state or federal taxes assessed against
any leasehold interest of Tenant or any fixtures, furnishings, equipment,
stock-in-trade or other personal property of any kind owned, installed or used
in or on the Property.
(c) Rental Taxes. Tenant shall not be responsible for any income,
inheritance or estate taxes imposed on Landlord or the income of Landlord.
ARTICLE 4
CONDITION OF PREMISES AT COMMENCEMENT OF LEASE
4.01 LANDLORD'S AND TENANT'S WORK. Intentionally omitted.
4.02 ACCEPTANCE OF LEASED PREMISES. Tenant's taking possession of the Premises
at the Lease Commencement Date shall be deemed to be an acceptance of the Leased
Premises.
4.03 WARRANTIES. In connection with this Lease, except as specifically set
forth in this Lease, Landlord makes no warranties or representations concerning
the condition of the Premises at the Lease Commencement Date. The Premises were
constructed by Rock Bottom Restaurants, Inc., and sold to Landlord on a
sale/leaseback transaction. The warranties with respect to the Property and
Premises are contained within the Purchase and Sale Agreement between the
Landlord and Rock Bottom Restaurants, Inc., dated June ___, 1997, and in
Landlord's warranty and covenant of quiet and peaceable possession hereinafter
set forth.
ARTICLE 5
USE OF PREMISES
AND
CONDUCT OF BUSINESS BY TENANT
5.01 USE OF PREMISES. Tenant shall use the Leased Premises for the purpose of a
brewpub and/or sit down restaurant with full service bar and entertainment,
including live and/or background music, and for any other purpose or use allowed
by state and local laws, ordinances or regulations. During the term of this
Lease and any extensions hereof, so long as Tenant operates a restaurant as
described above, neither Landlord nor its affiliates shall lease space in the
Property or in any property or premise within ten (10) miles of the Property to
any other bar and/or restaurant which operates in a similar manner specifically,
but not limited to, a "brewpub" or "brewery/restaurant" that involves the
brewing of beer on or adjacent to the property or premise in question.
5.02 CONDUCT OF BUSINESS BY TENANT. Tenant shall operate the business in the
Premises in accordance with all applicable codes, regulations, statutes and
ordinances applicable to the Premises and Tenant's business, and in accordance
with all covenants, declarations and restrictions imposed on the Premises by the
Shopping Center of which the Premises are a part, and shall indemnify Landlord
against any costs or damages which Landlord may incur which are a result of
Tenant having failed to so operate its business in the Premises..
ARTICLE 6
COMMON AREAS
6.01 CONTROL OF COMMON AREAS BY LANDLORD. Intentionally omitted.
ARTICLE 7
ALTERATIONS, ADDITIONS, , AWNINGS, BILLIARD TABLES,
GAMING DEVICES, LIENS AND SIGNAGE
7.01 ALTERATIONS AND ADDITIONS. After completion of the initial construction
project by Rock Bottom Restaurants, Inc.,(Tenant's parent corporation), Tenant
shall not, without Landlord's prior written consent, either make or cause to be
made any alterations, additions, or improvements to the Property or to any
exterior signs, shades or awnings which in any one instance involve a cost in
excess of $50,000. Landlord's consent shall not be unreasonably withheld so long
as such alterations do not diminish the value of the Property, it being the
understanding and agreement of the parties that alterations or modifications
which are consistent with a commercial use of the Property or the Premises will
not be deemed to reduce the value of the Property. In the event Landlord's
consent is required under this paragraph 7.01, Tenant shall present to Landlord
plans and specifications for such work at the time approval is sought, and prior
to commencement of construction. Any plans and specifications not expressly
disapproved by Landlord, in writing, stating all reasons for such disapproval,
on or before the fifteenth (15th) day after submission by Tenant shall be deemed
approved. In any event, Landlord's consent shall not be unreasonably withheld,
conditioned or delayed so long as such alterations do not diminish the value of
the Property, it being the understanding and agreement of the parties that
alterations or modifications which are consistent with a commercial use of the
Property or the Premises will not be deemed to reduce the value of the
Property.. Tenant shall appoint its own designer, architect and contractor for
the any work to be performed on the Premises or the Building by Tenant.
As a further condition to Landlord's consent to alterations, additions,
or improvements, Tenant shall, as required or permitted by Colorado law, advise
all subcontractors, suppliers, materialmen, and laborers that they shall not
have the right to file a Mechanic's Lien against the Property owned by the
Landlord. The Tenant hereby agrees to hold the Landlord harmless from any and
all liabilities of every kind and description which may arise out of or be
connected in any way with said alterations, additions, or improvements. Before
commencing any work in connection with alterations, additions, or improvements,
the Tenant, if requested by Landlord, and only in those instances when
Landlord's consent is required hereunder, shall furnish the Landlord with
certificates of insurance from all contractors performing labor or furnishing
materials insuring the Landlord against liabilities which are customarily
covered by such insurance and which may arise out of or be connected in any way
with said additions, alterations, or improvements, except such liabilities as
may arise from the negligent act or failure to act of Landlord, its agents,
representatives, employees or servants.
7.02 AWNINGS, CANOPIES, BILLIARD TABLES, SILOS, SATELLITE DISHES AND SIGNS
A. SIGNS, AWNINGS, SILOS & CANOPIES: All signs, awnings, canopies,
decorations, lettering, advertising matter, or other items installed by Tenant
shall at all times be maintained by Tenant, at its expense, in good condition
and repair. Tenant shall be allowed, but is not required, to install awnings on
the exterior of the Premises. Tenant shall be allowed, but is not required, to
install a silo on or near the Premises.
B. BILLIARD TABLES/GAMING DEVICES: Landlord has no objection to the use
of billiard/pool tables, or such gaming devices or arrangements as are permitted
by law, in the Leased Premises. Tenant shall provide such support as is
necessary for billiard/pool tables to prevent any structural damage to the
Premises from said tables.
C. SATELLITE DISHES: Landlord has no objection to the placement of
satellite reception dish(es) and equipment on the roof of the Property. Tenant
shall be responsible for the repair of any damage to the roof resulting from the
installation, maintenance, repair and/or removal of the dish(es). If the roof of
the Premises is subject to a warranty, any item installed on the roof by Tenant
shall be installed, maintained and removed in accordance with such reasonable
requirements as Landlord and/or Landlord's roofing contractor shall require so
as to maintain such warranty in full force and effect.
7.03 MECHANICS' LIENS. Tenant shall promptly pay its contractors and materialmen
for all work done and performed for Tenant, so as to prevent the assertion or
imposition of liens upon or against the Leased Premises, and should any such
lien be asserted or filed, Tenant shall bond against or discharge the same
within thirty (30) business days after receipt by Tenant of written request by
Landlord. The Tenant hereby agrees to hold the Landlord harmless from any and
all liabilities of every kind and description which may arise out of or be
connected in any way with said alterations, additions, or improvements. Tenant
is authorized, but not required, to post the property, if permissible under
local or state law, so as to prevent the assertion of liens against the
Premises. Landlord will cooperate with Tenant if Tenant elects to post the
Premises. Nothing in this paragraph 7.03 shall be construed to prohibit Tenant
from contesting any lien or amount claimed thereunder which Tenant deems
objectionable.
ARTICLE 8
MAINTENANCE OF LEASED PREMISES AND SURRENDER
8.01 MAINTENANCE, REPAIR, AND REPLACEMENT BY TENANT. Tenant shall, at its
expense, at all times repair, maintain, and replace the Building and the
Premises, and maintain the same in conformity with governmental regulations in
good order, condition, and repair, including, without limitation (a) the roof,
walls, foundation, and all structural parts; (b) the interior of the Property,
together with exterior entrances, all glass, and all window moldings, (c) all
fixtures, partitions, interior ceilings, floor coverings, and utility lines
within the Leased Premises; (d) all doors, door openers, trade equipment and
machinery, appliances, signs, and appurtenances thereof; and, (e) landscaping,
outside lighting, and parking lot, in conformity with governmental regulations
in good order, condition and repair, with Tenant failing to do so constituting a
default hereunder. The within obligations shall also include, without
limitation, Tenant's obligation to comply with and perform the requirements of
paragraphs 3 d and 6 of the Declaration governing the Property of which the
Premises are a part. If Tenant refuses or neglects to commence or complete
repairs, maintenance or replacements promptly and adequately, Landlord may make
or complete said repairs, maintenance or replacements and Tenant shall pay the
cost hereof to Landlord upon demand.
8.02 MAINTENANCE BY LANDLORD. Intentionally omitted.
8.03 SURRENDER OF PREMISES. At the expiration of the tenancy hereby created,
Tenant shall peaceably surrender the Leased Premises, including all alterations,
additions, improvements, and repairs made thereto (but excluding, without
limitation, all trade fixtures, decorations, hoods, furniture, equipment, signs,
and other personal property, installed by Tenant), broom clean and in good
condition and repair, reasonable wear and tear, and damage by casualty,
excepted. Tenant shall remove all its trade fixtures and any of its other
property not required to be surrendered to Landlord before surrendering the
Premises as aforesaid, and shall repair any damage to the Leased Premises caused
by such removal. Any personal property remaining in the premises thirty (30)
days after the expiration of the Lease period shall be deemed abandoned by
Tenant and Landlord may claim the same and shall in no circumstances have any
liability to Tenant therefor.
ARTICLE 9
INSURANCE AND INDEMNITY
9.01 CASUALTY INSURANCE.
A. Tenant shall, at its cost and expense, at all times during the Term
of this Lease and any extensions hereof, maintain bodily injury and property
damage liability insurance covering the Building and the Premises for any
customarily insurable act or omission of Tenant, its employees, agents,
representatives, assigns, guests, invitees, persons in privity with Tenant, or
licensees.. Such insurance policy shall be written for not less than $2,000,000
combined single limit of liability for bodily injury and property damage with an
annual aggregate of $2,000,000, and shall include Landlord as an Additional
Insured. Tenant shall deliver to Landlord a certificate of such insurance which
shall also contain a 30-day prior written notice of cancellation provision.
B. Tenant shall also carry during the Term of this Lease and any
extensions hereof, all risk property insurance (herein "Tenant's Property
Insurance") covering fire and extended coverage, vandalism and malicious
mischief, sprinkler leakage and all other perils included in a standard Special
Causes of Loss or All Risk form for at least one hundred percent (100%) of the
replacement value of the Building (less footings and foundations) and of all of
Tenant's property located on or within the Premises, with Tenant's customary
deductibles. Tenant shall deliver to Tenant a certificate of such insurance
which shall also contain a 30-day prior written notice of cancellation
provision. Landlord and Landlord's lender shall be named as Additional Insureds,
as their interests may appear, with respect to such insurance. Landlord agrees
it shall not have any right, title or interest in and to Tenant's Property
Insurance or any proceeds therefrom to the extent such insurance insures
Tenant's personal property.
C. The limits on such insurance shall be re-indexed no more frequently
than once every five (5) years so as to conform to the industry standard and to
the limits carried by other brewpub/restaurants operated by Tenant. Such
insurance shall be provided by a company or companies with an A.M. Best rating
of not less than A X, and authorized to do business in the state of Colorado.
D. Tenant shall also maintain such liquor liability or "dram shop"
insurance as is required by law.
E. If the requirements of the Declaration governing the Property
require insurance of a greater amount and/or having more coverage than
prescribed herein, the requirements of the Declaration shall control.
9.02 INDEMNIFICATION CLAUSE.
Each party hereto will indemnify, defend and hold the other party harmless from
and against any and all claims, losses, expenses, costs, judgments, and/or
demands arising from the conduct of the other party with regard to the
possession by Tenant of the Premises and/or on account of any operation or
action by Landlord or Tenant and/or from and against all claims arising from any
breach or default on the part of the other party, or any act of negligence on
behalf of the other party, its agents, contractors, servants, employees,
licensees, or invitees, or any accident, injury, or death of any person or
damage to any property in or about the Premises. Tenant acknowledges it is
responsible for the performance of the requirements of paragraph 7 d of the
Declaration.
9.03 WAIVER OF SUBROGATION.
Landlord and Tenant agree that if the interest or item on which they are
required to obtain insurance in connection with the transaction contemplated
hereby shall be damaged or destroyed during the term or any extension of this
Lease by a peril insurable under this Lease, and whether or not such damage or
destruction was caused by the neglect of the other party, neither party shall
have liability to the other or to any insurer of the other for, or in respect
of, such damage or destruction to the extent covered by such insurance. The
waiver of subrogation hereby set forth shall extend only to the risks insured by
the insurance policies required hereby. The foregoing language notwithstanding,
in the event property of one party is damaged or destroyed by the negligent act
or negligent failure to act of the other party, the party at fault shall be
liable to the damaged party for the "deductible" or retainage amount applicable
to the insurance policy of the damaged party.
9.04 ADDITIONAL RENT. If Tenant shall not comply with its covenants made in this
Article 9, Landlord may cause insurance as aforesaid to be issued, in such event
Tenant agrees to pay as additional rent, the premium for such insurance upon
Landlord's demand.
ARTICLE 10
UTILITIES
10.01 UTILITY CHARGES. Tenant shall be solely responsible for and promptly pay
all charges, including any deposits required by a third-party provider, for
water, gas, steam, sewer, electricity, or any other utility or service used or
consumed on the Leased Premises.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
11.01 CONSENT NOT REQUIRED. Tenant may voluntarily, or by operation of law,
assign this Lease in whole or in part, and may sublet all or any part of the
Leased Premises without the prior written consent of Landlord.
11.02 TRANSFERS PERMITTED. In the event that Tenant wishes to sublet the
premises or assign this Lease, in whole or in part, Tenant shall forthwith
notify Landlord in writing of Tenant's desire to sublet the Premises or assign
this Lease, including a summary of the proposed terms, or a copy of any offer,
as the case may be. Landlord shall have fifteen (15) days within which to accept
or reject said assignment or sublease. Any proposed sublease or assignment not
specifically disapproved by Landlord, in writing and specifying all reasons for
such disapproval and delivered to Tenant within said fifteen (15) days, shall be
deemed approved. The foregoing limitation notwithstanding, Landlord acknowledges
that Tenant is a wholly-owned subsidiary of Rock Bottom Restaurants, Inc., the
shares of which are publicly-traded. Sales of stock via public trading shall not
be deemed a "sale, transfer or other disposition" within the meaning of this
Article 11. Further, Tenant may sublet all or any portion of the Leased
Premises, or assign this Lease, to any corporation or other entity which is a
subsidiary of, or fifty percent (50%) or more of whose shares are owned by
Tenant or Rock Bottom Restaurants, Inc., without the consent of Landlord. In the
event of such a transfer, Tenant will notify Landlord of the name, address and
phone number of the sublessee or assignee. In addition, in the event of such a
transfer, Tenant and Guarantor shall remain liable to Landlord under the terms
of this Lease for the performance by the sublessee or assignee. Any assignment,
subletting, mortgaging or hypothecation permitted hereunder or to which the
Landlord has consented shall be by written instrument under which the assignee,
or sublessee shall agree for the benefit of Landlord to be bound by and to
perform this Lease.
11.03 TRANSFERS BY LANDLORD. Landlord shall have the right to sell, convey,
transfer or assign all or any part of its interest in the real property and the
buildings of which the Leased Premises are a part or its interest in this Lease.
All covenants and obligations of Landlord under this Lease, except those already
in existence on the date of conveyance, shall cease as to Landlord upon the
execution of such conveyance, transfer or assignment, but such covenants and
obligations shall run with the land and shall be binding upon the subsequent
owner or owners thereof or of this Lease. All obligations incurred or in
existence prior to the date of transfer shall survive said transfer and remain
the obligation of Landlord.
11.04 NO RELEASE OF GUARANTOR. Any wording or implication herein to the contrary
notwithstanding, any assignment or subletting under this Article 11 shall not
operate to release or waive the obligations of Tenant or any Guarantor under
this Lease.
ARTICLE 12
GOVERNMENT REGULATIONS
12.01 GOVERNMENTAL REGULATIONS. Tenant shall, at its sole cost and expense,
comply with all of the requirements pertaining to the operation of its business
as imposed by county, municipal, state, federal and other governmental
authorities which have jurisdiction over the Premises or Tenant, now in force or
which may hereafter be in force; provided, however, requirements imposed on the
Property in general or the Leased Premises in general, and not required because
of the nature of Tenant's business, shall be complied with at the cost of
Landlord. The foregoing language notwithstanding, Tenant agrees that any
requirements of the Americans with Disabilities Act shall be met at Tenant's
expense; likewise, a requirement imposed on the Property in general or the
Leased Premises in general, and not imposed because of the nature of Tenant's
business, but compliance with which is triggered by a request by Tenant to
remodel or otherwise change the Property, and such request requires a building
permit, shall be met at the expense of Tenant.
<PAGE>
ARTICLE 13
DESTRUCTION OF LEASED PREMISES
13.01 TOTAL OR PARTIAL DESTRUCTION. If the Leased Premises shall be partially or
totally destroyed by fire or other casualty insurable under full standard fire
and extended risk insurance, so as to become partially or totally untenantable,
the same (unless Landlord shall elect not to rebuild as hereinafter provided)
shall be repaired and restored by and at the cost of Tenant , and Rent shall
continue during such period of repair and restoration for the longer of six (6)
months or the period for which Tenant's business interruption insurance makes
payments to Tenant as a result of such destruction and interruption of Tenant's
business. Thereafter, a just and proportionate part of the rent, as provided for
hereinafter, shall be abated until the Leased Premises are so restored.
Landlord and Tenant agree to take all reasonable steps to make the proceeds of
their respective casualty insurance coverages available to Tenant so that Tenant
may fulfill its reconstruction obligations hereunder. Landlord and Tenant
additionally agree to take all reasonable steps to mutually assure that the
reconstruction proceeds so as not to lose the exclusive "Brew Pub" use that the
Property enjoys pursuant to paragraph 2 of the Restrictions Agreement.
If more than one-third (1/3) of the building in which the Leased Premises are
located shall be destroyed or damaged by fire or other casualty, and if the
unexpired portion of the term of this Lease shall be two (2) years or less at
the date of the damage, then Landlord may elect not to repair or rebuild by
giving written notice within thirty (30) days after such occurrence of its
election to terminate this Lease; otherwise, Tenant shall commence and pursue
such reconstruction diligently to completion.
In the event that Landlord shall exercise the right heretofore given to
terminate, then this Lease shall cease as of the date of such damage or
destruction, and all rent or other charges payable by Tenant shall be prorated
to the date of such damage or destruction. In the event that this Lease is not
canceled, then the Rent shall continue during such period of repair and
restoration for the longer of six (6) months or the period for which Tenant's
business interruption insurance makes payments to Tenant as a result of such
destruction and interruption of Tenant's business. Thereafter, a just and
proportionate part of the rent shall be abated until the Leased Premises are so
restored.
13.02 PARTIAL DESTRUCTION OF PROPERTY. In the event that sixty percent (60) or
more of the gross leasable area in the Property shall be damaged or destroyed by
fire or other cause during the last two (2) years of the Lease, or during the
last two (2) years of any extended term, notwithstanding that the Leased
Premises may be unaffected by such fire or other cause, Landlord or Tenant shall
have the right, to be exercised by notice in writing delivered to the other
party, within thirty (30) days after said occurrence, to cancel and terminate
this Lease. Upon the giving of such notice to Tenant, the term of this Lease
shall expire as of the date of the damage, and Tenant shall vacate the Leased
Premises and surrender the same to Landlord pursuant to the terms of the lease,
allowing a reasonable period of time for the closing of Tenant's business and
the removal of Tenant's property from the premises.
ARTICLE 14
EMINENT DOMAIN
14.01 TOTAL CONDEMNATION. If the whole of the Leased Premises shall be acquired
or condemned by eminent domain for any public or quasi-public use or purpose, or
be conveyed in lieu of any such taking, or if a part of the Leased Premises
shall be so acquired or condemned, and if such partial taking or acquisition
renders the Leased Premises unsuitable for the business of Tenant, in Tenant's
reasonable business judgment, then the term of this Lease shall cease and
terminate as of the date of the taking, and all rentals shall be paid up to that
date.
14.02 PARTIAL CONDEMNATION. In the event of a partial taking, or conveyance of
the Leased Premises in lieu thereof, which is not extensive enough to render the
Leased Premises unsuitable for the business of Tenant, in Tenant's reasonable
business judgment, the Landlord, shall promptly restore the Leased Premises to a
condition comparable to its condition immediately prior to such taking (less the
portion lost in the taking), and this Lease shall continue in full force and
effect. In such case, all rents due hereunder shall, from the date of said
taking or conveyance, be abated on a fair and equitable basis to the extent of
any reduction, if any, in the area of the Leased Premises resulting from such
taking and not restored, and also taking into account the impact, if any, of the
loss of parking in the Property.
14.03 DAMAGES. In the event of any condemnation, taking, or conveyance in lieu
thereof, as hereinbefore provided, whether whole or partial, Tenant shall not be
entitled to any part of the award or price, as damages or otherwise, awarded to
Landlord for such condemnation, taking, or conveyance, except to the extent
provided in paragraph 14.04. Tenant hereby expressly waives any right or claim
to any part thereof and assigns to Landlord its interest therein; provided,
however, that where the taking is such as results in a termination of the Lease
pursuant to other provisions of this Article, then and in that event,
notwithstanding anything herein to the contrary, Landlord shall not be entitled
to that portion, if any, of an award made to or for the benefit of Tenant for
loss of Tenant's business or depreciation to and cost of removal of its stock,
trade fixtures and equipment which Tenant is entitled to remove. Tenant shall
have no claim against Landlord for the value of any unexpired term of this
Lease.
14.04 TENANT'S DAMAGES. The foregoing language notwithstanding, Tenant shall
have the right to claim and recover from the condemning authority (but not from
Landlord) such compensation as may be separately awarded to Tenant in Tenant's
own name and right on account of all damages suffered by Tenant of any nature
whatsoever, including, without limitation, court costs and attorney's fees, by
reason of the condemnation and including without limitation any cost which
Tenant may incur in removing its property from the Leased Premises or restoring
all or any portion of the Leased Premises to their former condition.
ARTICLE 15
DEFAULT OF TENANT
15.01 DEFAULT. Any one or more of the following shall constitute an
"Event of Default" under this Lease:
(a) failure of Tenant to pay any Rent, Additional Rent or other
charge due hereunder within ten (10) days after receipt by Tenant of written
notice that the same has not been paid; or ,
(b) Tenant's failure to perform any other of the terms, conditions
or covenants of this Lease to be observed or performed by Tenant for more than
thirty (30) days after receipt of written notice thereof; or, if such
performance cannot reasonably be completed within said thirty (30)days, failure
to commence the performance within said thirty (30) days and pursue the same
diligently to completion, or ,
(c) if Tenant shall file or have filed against it any
bankruptcy proceedings, or take or have taken against it in any court pursuant
to any statute, either of the United States or of any state, a petition of
bankruptcy or insolvency, or for reorganization or for the appointment of a
receiver or trustee of all or a portion of Tenant's property, or if Tenant makes
an assignment for the benefit of creditors, or petitions for or enters into an
arrangement; and shall not withdraw, or have withdrawn, said filing or petition
within sixty (60) days of the date of filing; or ,
(d) if Tenant shall abandon the Leased Premises (other than during
periods of repair or renovation, or as a result of casualty, force majeur, or
other events beyond the reasonable control of Tenant) and shall fail to pay sums
due hereunder in a timely manner, or suffer this Lease to be taken under any
writ of execution.
If an Event of Default occurs, the Landlord shall, upon proper observance of all
requirements of law, have the right to enter the Leased Premises and take
possession thereof and of all permanent improvements thereon and may remove all
persons and property from the Leased Premises by force, summary action, or
otherwise, and such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.
Tenant agrees to quit and deliver up possession of the Property, including
permanent improvements to the Property, when this Lease terminates.
15.02 REMEDIES. If an Event of Default occurs, the Landlord may elect to
re-enter, as herein provided, or take possession pursuant to legal proceedings
or pursuant to any notice provided for herein, and Landlord may either terminate
this Lease, or may from time to time and without terminating this Lease make
such alterations and repairs as may be reasonably and commercially necessary in
order to relet the Premises and relet said Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this Lease)
and at such rental or rentals and upon such other terms and conditions as
Landlord in its reasonable business judgment and discretion may deem advisable.
Upon each such reletting all rentals 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 reasonable costs and
expenses of such reletting, including reasonable brokerage fees and reasonable
attorneys' fees, and of reasonable costs of such alterations and repairs; third
to the payment of rent due and unpaid hereunder; and the residue, if any, shall
be held by Landlord and applied in payment of future rent as the same may become
due and payable hereunder from Tenant. If such rentals received from such
reletting during any month are less than that to be paid during that month by
Tenant hereunder, Tenant shall be liable for the payment of such deficiency to
Landlord. Such deficiency shall be calculated and become payable monthly. No
such re-entry or the taking of possession of the Leased Premises by Landlord
shall be construed as an election on its part to terminate this Lease or to
accept a surrender thereof unless a written notice of such intention is given to
Tenant. Notwithstanding any such reletting without termination, Landlord may at
any time thereafter elect to terminate this Lease for such previous breach.
Should Landlord at any time terminate this Lease for any Event of Default, in
addition to any other remedies it may have, it may recover from Tenant the
reasonable cost of recovering the Leased Premises. Any reletting shall be done
in such reasonable and commercially prudent manner as Landlord may deem proper.
Tenant agrees that this lease is a lease of "real property in a Property" and
that a debtor in possession and/or trustee in bankruptcy acting pursuant to the
provisions of the revised bankruptcy code, may assume this lease only if, in
addition to such other conditions of this lease and of applicable law, said
debtor in possession/trustee shall provide Landlord with such written assurances
of future performance as are acceptable to Landlord. Any closing of Tenant's
business, or alteration in the size of the premises, by said debtor in
possession/trustee shall be deemed to be a material disruption in the tenant mix
and balance of the Property.
15.03 LEGAL EXPENSES. If suit shall be brought for recovery of possession of the
Leased Premises, and/or the recovery of rent or any other amount due under
provisions of this Lease, or because of the breach of any other covenant herein
contained on the part of the Tenant to be kept or performed, and the breach
shall be established, Tenant shall pay to Landlord, in addition to all other
sums and relief available to Landlord, all reasonable expenses incurred
therefor, including reasonable attorneys' fees to the maximum extent permitted
by law.
If suit shall be brought for the breach of any covenant herein contained on the
part of the Landlord to be kept or performed, and the breach shall be
established, Landlord shall pay to Tenant, in addition to all other sums and
relief available to Tenant, all expenses incurred therefor, including reasonable
attorneys' fees to the maximum extent permitted by law.
15.04 FAILURE TO PAY, INTEREST ON AMOUNT DUE. If either party at any time shall
fail to pay any taxes, assessments, or liens, or to make any payment or perform
any act required by this Lease to be made or performed by it, the party not
required to make the payment or perform the act, without waiving or releasing
the non-performing party from any obligation or default under this Lease, may
(but shall be under no obligation to) at any time thereafter make such payment
or perform such act for the account and at the expense of the non-performing
party. All sums so paid and all costs and expenses so incurred shall accrue
interest at a rate equal to the "prime" rate charged by Norwest Bank of Denver
to its best commercial customers, plus three (3) percentage points, per year,
simple, from the date of payment or incurring thereof by the party making the
payment or performing the obligation of the non-performing party and shall be
paid to the performing party upon demand.
15.05 LIMITATION ON DAMAGES. Any language in this Article 15 or in this Lease to
the contrary notwithstanding, and except as specifically provided in this
Article, neither Landlord nor Tenant shall be liable, each to the other, for
punitive, exemplary, or consequential damages as a result of the breach of such
party's obligations hereunder.
ARTICLE 16
ACCESS BY LANDLORD
16.01 RIGHT OF ENTRY. Upon forty-eight (48) hours' prior written
notice, Landlord or Landlord's agents shall have the right to enter the Leased
Premises at all reasonable times to examine the same and to make such repairs as
may be reasonably necessary and as Landlord is required to make under the terms
of this Lease, and Landlord shall be allowed to take all material into and upon
said Premises that may be required therefor without the same constituting an
eviction of Tenant in whole or in part. Nothing herein contained, however, shall
be deemed or construed to impose upon Landlord any obligation, responsibility or
liability whatsoever for the care, maintenance or repair of the building or any
part hereof, except as otherwise herein specifically provided. During the six
(6) months prior to the expiration of the term of this Lease or any renewal
term, Landlord may exhibit the Premises to prospective tenants. Except in the
case of emergency repairs necessary to prevent or mitigate damage to the
Premises or injury to persons, Landlord shall not exercise any rights under this
paragraph during Tenant's usual "busy" times, being the lunch and dinner periods
of the day.
ARTICLE 17
TENANT'S PROPERTY
17.01 TAXES ON TENANT'S PERSONAL PROPERTY. Tenant shall be responsible for and
shall pay before delinquency all municipal, county, or state taxes assessed
during the term of this Lease against any personal property of any kind owned by
or placed in, upon, or about the Leased Premises by Tenant.
17.02 LOSS AND DAMAGE. Landlord shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow, or leaks from any part of the Leased Premises,
or from the pipes, appliances or plumbing works, or from the roof, street or
subsurface, or from any other place, or by dampness or by any other cause of
whatsoever nature, and whether originating in the Leased Premises or elsewhere,
unless the same be caused by the negligent act or negligent failure to act of
Landlord, or Landlord's agents, representatives, employees, or others in privity
with Landlord. The terms of this paragraph notwithstanding, Landlord shall not
be liable by way of subrogation if the claim is barred or waived under the
waiver of subrogation provisions of this Lease. All property of Tenant kept or
stored on the Leased Premises shall be so kept or stored at the risk of the
Tenant only, and Tenant hereby holds Landlord harmless from any claims arising
out of damage to the same, including subrogation claims by Tenant's insurance
carrier, a waiver of which shall be obtained in advance by Tenant.
17.03 NOTICE BY TENANT. Tenant shall give reasonable notice to Landlord in case
of fire or accidents, or of defects in the Leased Premises or in the building of
which the Leased Premises are a part.
<PAGE>
ARTICLE 18
NOTICE PROVISIONS
18.01 NOTICES. Any notice by Tenant to Landlord must be served either:
A. by certified mail, postage prepaid, addressed to Landlord at the
place designated for the payment of rent, or at such other address
as Landlord may designate from time to time by written notice; or,
B. by personal service upon Landlord at such address; or, C. by
nationally recognized overnight courier service to such address; or, D.
by facsimile transmission to the facsimile number provided to Tenant in
writing.
Until otherwise notified in writing, Tenant shall pay all rent reserved
herein and all other sums required under this Lease at, and the
information for notice is:
Zymotic, LLC,
a Colorado limited liability company
c/o David E. Carpenter
1115 N. Elm Street
P.O. Box 216
West Liberty, Iowa 52776
Phone: (319) 627-4101
Fax: (319) 627-4403
Any notice by Landlord to Tenant must be served either:
A. by certified mail, postage prepaid, addressed to Tenant at its
home office at 248 Centennial Parkway - Suite 100, Louisville, CO
80027, and to Tenant's General Manager at the Leased Premises, or
at such other address or addresses as Tenant may designate from
time to time by written notice to Landlord; or,
B. by personal service on Tenant at said addresses; or,
C. by nationally recognized overnight courier service to such
addresses; or,
D. by facsimile transmission to the facsimile number provided to
Landlord in writing. Tenant's facsimile number is (303)664-4199.
Notice via certified or registered mail shall be deemed delivered the earlier of
actual delivery or three (3) days after deposit in the mail as described above.
Notice by personal service shall be deemed delivered upon actual receipt. Notice
by nationally recognized overnight courier service shall be deemed delivered the
earlier of actual delivery or two (2) days after deposit with the courier
service. Notice by facsimile shall be deemed delivered on the date transmitted
if transmitted before 12 noon; otherwise, on the next regular business day after
the date of transmission. A business day for the purpose of this Lease means any
day other than Saturday, Sunday or the following national holidays: New Year's
Day, Martin Luther King Day, President's' Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving and Christmas.
Upon receipt of any communication from third parties requiring any response by
Landlord, Tenant agrees to exercise reasonable efforts to transmit said
communication to Landlord in sufficient time for Landlord to comply with the
requirements of said communication.
ARTICLE 19
SUBORDINATION, NONDISTURBANCE, ATTORNMENT,
ESTOPPEL AND PLEDGE OF TENANT'S INTEREST
19.01 SUBORDINATION OF LEASE TO LANDLORD'S LENDERS. Tenant agrees that this
Lease and the estate of Tenant hereby created may be made subject and
subordinate to the lien of any mortgage, mortgages, deeds of trust or similar
encumbrances hereafter placed upon the Leased Premises. Notwithstanding anything
set out in this Lease to the contrary, in the event the holder of any mortgage
or deed of trust elects to have this Lease superior to its mortgage or deed of
trust, then, upon Tenant being notified to that effect by such encumbrance
holder, this Lease shall be deemed prior to the lien of said mortgage or deed of
trust, whether this Lease is adopted prior to or subsequent to the date of said
mortgage or deed of trust; provided, however, neither the holder of the
encumbrance nor any person or entity claiming by or through said holder may
disrupt, terminate or otherwise interfere with Tenant's quiet possession of the
Premises so long as Tenant keeps and performs the covenants of Tenant hereunder.
The agreements herein shall be self-operative and no further instrument of
subordination shall be required. However, upon demand by the holder of any
mortgage covering all or any part of the Property, Tenant shall forthwith
execute, acknowledge and deliver an agreement in favor of and in the form
customarily used by such encumbrance holder. The foregoing language
notwithstanding, Tenant shall not be required to sign, nor presumed to have
signed or agreed to, any document hereunder which is not accurate or does not
contain in form reasonably satisfactory to Tenant language which provides that
notwithstanding the subordination of the Lease to the encumbrance in question,
neither the holder of the encumbrance nor any person or entity claiming by or
through said holder may disrupt, terminate or otherwise interfere with Tenant's
quiet possession of the Premises so long as Tenant keeps and performs the
covenants of Tenant hereunder.
<PAGE>
Landlord reserves the right, without notice to or consent of Tenant, to assign
this Lease and/or any and all rents hereunder as security for the payment of any
mortgage loan, deed of trust loan, or other method of financing or refinancing.
If the Property is presently encumbered by a mortgage, deed of trust or other
encumbrance, it shall be a condition of Tenant's liability hereunder that
Landlord obtain from the holders of any such encumbrance(s) a non-disturbance
agreement reasonably acceptable in form and substance to Tenant, conforming with
the terms of this paragraph 19.01.
19.02 ESTOPPEL CERTIFICATE. Tenant agrees, no more frequently than once per
year, upon not less than ten (10) business days' prior notice by Landlord, to
execute, acknowledge and deliver to Landlord, a statement in writing addressed
to Landlord or other party designated by Landlord certifying that this Lease is
in full force and effect (or, if there have been modifications, that the same is
in full force and effect as modified and stating the modifications), stating the
actual commencement and expiration dates of the Lease, stating the dates to
which rent, and other charges, if any, have been paid, that the Leased Premises
have been completed on or before the date of such certificate and that all
conditions precedent to the Lease taking effect have been carried out, that
Tenant has accepted possession, that the lease term has commenced, Tenant is
occupying the Leased Premises and is open for business, and stating whether or
not to the best of Tenant's knowledge and belief there exists any default by
either party in the performance of any covenant, agreement, term, provision or
condition contained in this Lease, and, if so, specifying each such default of
which the signer may have knowledge and the claims or offsets, if any, claimed
by the Tenant, it being intended that any such statement delivered pursuant
hereto may be relied upon by Landlord or a purchaser of Landlord's interest and
by any mortgagee or prospective mortgagee of any mortgage affecting the Leased
Premises or the Property.
Landlord agrees, no more frequently than once per year, upon not less than ten
(10) business days' prior notice by Tenant, to execute, acknowledge and deliver
to Tenant, a statement in writing addressed to Tenant or other party designated
by Tenant certifying that this Lease is in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications), stating the actual commencement and expiration
dates of the Lease, stating the dates to which Rent, and other charges, if any,
have been paid, that the Leased Premises have been completed on or before the
date of such certificate and that all conditions precedent to the Lease taking
effect have been carried out, that Tenant has accepted possession, that the
lease term has commenced, Tenant is occupying the Leased Premises and is open
for business, and stating whether or not to the best of Landlord's knowledge and
belief there exists any default by either party in the performance of any
covenant, agreement, term, provision or condition contained in this Lease, and,
if so, specifying each such default of which the signer may have knowledge and
the claims or offsets, if any, claimed by the Landlord, it being intended that
any such statement delivered pursuant hereto may be relied upon by Tenant or any
person to whom Tenant may deliver such certificate.
19.03 ATTORNMENT. Tenant agrees that no foreclosure of a mortgage affecting the
Leased Premises, nor the institution of any suit, action, summary or other
proceeding against the Landlord herein, or any successor Landlord, or any
foreclosure proceeding brought by the holder of any such mortgage to recover
possession of such property, shall by operation of law or otherwise result in
cancellation or termination of this Lease or the obligations of the Tenant
hereunder, and upon the request of the holder of any such mortgage, Tenant
covenants and agrees to execute an instrument in writing satisfactory to such
party or parties or to the purchaser of the mortgaged premises in foreclosure
whereby Tenant attorns to such successor in interest. The foregoing language
notwithstanding, Tenant shall not be required to sign, nor presumed to have
signed or agreed to, any document hereunder which does not contain in form
reasonably satisfactory to Tenant language which provides that notwithstanding
the attornment document, neither the holder of the document nor any person or
entity claiming by or through said holder may disrupt, terminate or otherwise
interfere with Tenant's quiet possession of the Property or the Premises so long
as Tenant keeps and performs the covenants of Tenant hereunder.
19.04 PLEDGE OF PERSONAL PROPERTY AND/OR LEASE INTEREST. The foregoing language
notwithstanding, Landlord acknowledges that Tenant may seek financing or funding
which requires it to encumber the personal property owned by Tenant, as well as
similar property from other restaurant operations, by way of a first and prior
security interest in the collateral for the benefit of an institutional lender.
In such event, Landlord shall execute such documents as are reasonably required
by such lender to evidence subordination of Landlord's security interest, if
any, in accordance with this paragraph.
<PAGE>
ARTICLE 20
MISCELLANEOUS PROVISIONS
20.01 ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly rent installments herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent.
20.02 APPLICABLE LAW. This Lease and the rights and obligations of the parties
arising hereunder shall be construed in accordance with the laws of the State of
Colorado.
20.03 CAPTIONS AND SECTION NUMBERS. The headings which have been used throughout
this Lease have been inserted for convenience of reference only and do not
constitute matter to be construed in interpreting this Lease. Words of any
gender used in this Lease shall be held and construed to include any other
gender and words in a singular number shall be held to include the plural, and
vice versa, unless the context requires otherwise. The words "herein," "hereof,"
"hereunder," and other similar compounds of the word "here" when used in this
Lease shall refer to the entire Lease and not to any particular provision or
section. If the last day of any time period stated herein shall fall on a
Saturday, Sunday, or legal holiday, then the duration of such time period shall
be extended so that it shall end on the next succeeding day which is not a
Saturday, Sunday, or legal holiday.
20.04 COVENANTS AND RESTRICTIONS. Subject to the undertakings imposed upon
Landlord pursuant to paragraph 12.01 regarding Governmental Regulations and
Article 13 regarding Destruction of Leased Premises, Tenant shall undertake to
see that the Property and the Premises and the operation of Tenant's business
thereon and therein shall at all times comply with the Declaration, the
Restrictions Agreement and any other covenants, declarations or other
restrictions as may be applicable to the Property and Premises from time to time
and Tenant shall bear all costs associated with such compliance.
20.05 COUNTERPARTS. This Lease may be executed in several counterparts, each of
which shall be full effected as an original and all of which together shall
constitute one and the same instrument.
20.06 ENTIRE AGREEMENT. The Lease, the Exhibits and any Rider set forth all the
covenants, promises, agreements, conditions and understandings between Landlord
and Tenant concerning the Leased Premises and there are no covenants, promises,
agreements, conditions or understandings, either oral or written, between them
other than as herein set forth. All prior communications, negotiations,
arrangements, representations, agreements and understandings, whether oral,
written or both, between the parties hereto, and their representatives, are
merged herein and extinguished, this Lease superseding and canceling the same.
Except as herein otherwise provided, no subsequent alteration, amendment, change
or addition to this Lease shall be binding upon Landlord or Tenant unless
reduced to writing and executed by the party against which such subsequent
alteration, amendment, change or modification is to be enforced. If any
provision contained in any Exhibit or Rider hereto is inconsistent with any
printed provisions of this Lease the provision contained in such Exhibit or
Rider shall supersede said printed provision.
20.07 EXHIBITS. All references to Exhibits contained herein are references to
Exhibits attached hereto, all of which are made a part hereof for all purposes
the same as if set forth herein verbatim, it being expressly understood that if
any Exhibit attached hereto which is to be executed and delivered contains
blanks, the same shall be completed correctly and in accordance with the terms
and provisions contained herein and as contemplated herein prior to or at the
time of execution and delivery thereof.
20.08 FACSIMILE SIGNATURES. Facsimile copies bearing copies of the signatures of
Landlord and Tenant shall be binding upon the parties until such time as each
party has received a copy of this Lease bearing original signatures.
20.09 FORCE MAJEURE. In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lockouts, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrection, war, or other reason of a like nature not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then the time allowed for performance of such act shall be extended by a period
a equivalent to the period of such delay. The provisions of this Section 20.09
shall not operate to excuse Tenant, or Landlord as the case may be, from the
prompt payment of Rent or any other payments required by the respective parties
under the terms of this Lease.
20.10 GUARANTOR. This Lease is Guaranteed by Rock Bottom Restaurants, Inc.,
pursuant to the Guaranty attached hereto as Exhibit ___.
20.11. HAZARDOUS MATERIALS: Neither Landlord nor Tenant will store, use, or
dispose of any hazardous, toxic, corrosive, explosive, reactive or radioactive
matter in, on, or about the Premises or the Property. Landlord and Tenant will
comply with all applicable environmental laws and permitting requirements
impacting the operations on the Leased Premises. Tenant shall indemnify and hold
harmless the Landlord from any claims or actions, including, without limitation,
costs, reasonable attorneys' fees and costs of remediation, arising out of
Tenant's use, storage or disposal of toxic or hazardous materials on or in the
Leased Premises.
<PAGE>
20.12 NO PARTNERSHIP OR OTHER ASSOCIATION. Landlord does not, in any way or for
any purpose, become a partner of Tenant in the conduct of its business or
otherwise, or joint venturer or a member of a joint enterprise with Tenant.
20.13 NOTICE TO LANDLORD OF DEFAULT. In the event of any act or omission by
Landlord which would give Tenant the right to terminate this Lease, or make any
claim against Landlord for the payment of money, Tenant will not make such claim
or exercise such right until it has given written notice of such act or omission
to the Landlord, and after fifteen (15) days shall have elapsed following the
giving of such notice, during which Landlord has not commenced diligently to
remedy such act or omission or to cause the same to be remedied.
20.14 PARTIAL INVALIDITY. If any one or more of the provisions of this Lease, or
the applicability of any such provision to a specific situation, shall be held
invalid or unenforceable, such provision shall be modified to the minimum extent
necessary to make it or its application valid and enforceable, and the validity
and enforceability of all other provisions of this Lease and all other
applications of any such provisions shall not be affected thereby.
20.15 PRELIMINARY NEGOTIATIONS. This Lease is executed in conjunction with the
Purchase and Sale Agreement dated June ___, 1997, between Zymotic, LLC, or
assigns and Rock Bottom Restaurants, Inc. Tenant's obligations under this Lease
are contingent or conditioned only upon the closing of the transaction
contemplated by said Purchase and Sale Agreement. If for any reason said
transaction does not close, and Landlord does not acquire title to the Property,
the Lease shall be of no force or effect, and each party shall be released from
any obligation hereunder.
20.16 QUIET ENJOYMENT, LANDLORD'S COVENANT. Upon payment by Tenant of the rents
herein provided, and upon the observance and performance of all the covenants,
terms and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Leased Premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through, or under Landlord. In that
regard, and notwithstanding any other language herein to the contrary, when
exercising its rights and performing its obligations under this Lease, Landlord
shall take no action which shall interfere with the conduct of Tenant's
business, cause inconvenience to Tenant's customers, increase Tenant's cost of
doing business or cost for common area maintenance and expenses, or change or
interfere with the ingress/egress provided to and from the Leased Premises, or
change, decrease or interfere with Tenant's signage, without Tenant's prior
written consent, which consent shall be given or withheld in Tenant's reasonable
business judgment. The within limitation shall not apply to actions taken by
Landlord to enforce its rights after a default and failure to cure by Tenant,
and shall not apply to the extent Landlord and Tenant are governed by the rules,
regulations, covenants, restrictions, etc. applicable to the Property and the
Premises.
20.17 REAL ESTATE COMMISSIONS. Landlord and Tenant warrant to each other they
have not dealt with any broker or Realtor with respect to this transaction.
20.18 RECORDING. A certificate or memorandum of this Lease, prepared by
Landlord, may at the option and expense of Landlord, be recorded. Tenant shall
execute any such certificate or memorandum which accurately reflects the general
non-monetary terms of this Lease upon request by Landlord; provided, however, no
such certificate or memorandum shall state the amount of rent or other charges
payable by Tenant to Landlord under this Lease.
20.19 TENANT'S ASSERTION OF LANDLORD'S RIGHTS. So long as Tenant is not in
default under the terms of the within Lease, Landlord assigns to Tenant, at
Tenant's expense, Landlord's right to:
(a) Audit the Common Expenses of the Centennial Promenade
Shopping Center as provided in paragraph 8 (c ) of the
Declaration; and,
(b) Enforce the terms of the Restrictions Agreement pursuant to which
the Property is to be the sole site of a "Brew Pub" in the
Centennial Promenade Shopping Center.
20.20 WASTE. Tenant shall not allow nor commit waste on or about the Premises.
20.21 NO WAIVER CUMULATIVE RIGHTS. The various rights and remedies contained in
this Lease shall not be exclusive of any other right or remedy, but shall,
except as specifically set forth otherwise, be cumulative and in addition to any
other remedy now or hereafter existing at law, in equity, or by statute. No
delay or omission of any exercise of any right by either party shall impair any
such right, or constitute or give rise to a waiver of any right or of any
default or any acquiescence therein. One or more waivers of any covenant or
condition of this Lease by either party shall not constitute or give rise to any
waiver of any subsequent rights under the same covenant or condition. The
consent or approval by either party to or of any act or thing requiring consent
or approval shall not be deemed to waive or render unnecessary consent to
approval of any subsequent similar act.
<PAGE>
ARTICLE 21
HOLDING OVER; SUCCESSORS
21.01 HOLDING OVER. In the event Tenant remains in possession of the Leased
Premises after the expiration of the tenancy created hereunder, and without the
execution of a new lease, Tenant, at the option of Landlord, shall be deemed to
be occupying the Leased Premises as a tenant from month to month, at one hundred
fifty percent (150%) of the Base Rent for the last Lease Year of the term,
subject to all the other conditions, provisions and obligations of this Lease
insofar as the same are applicable to month-to-month tenancy.
21.02 SUCCESSORS AND ASSIGNS. Except as otherwise herein provided, this Lease
and all the covenants, terms, provisions and conditions herein contained shall
inure to the benefit of and be binding upon the heirs, representatives,
successors and assigns of each party hereto, and all covenants herein contained
shall run with the land and bind any and all successors in title to Landlord.
TENANT: LANDLORD:
WALNUT BREWERY, INC., a ZYMOTIC, LLC, a Colorado
Colorado corporation, limited liability company
By:
---------------------------- ----------------------
Thomas A. Moxcey, President David E. Carpenter,
Manager-Member
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 512,716
<SECURITIES> 0
<RECEIVABLES> 1,161,367
<ALLOWANCES> 0
<INVENTORY> 2,630,620
<CURRENT-ASSETS> 8,493,579
<PP&E> 105,839,996
<DEPRECIATION> (15,345,083)
<TOTAL-ASSETS> 107,467,016
<CURRENT-LIABILITIES> 13,228,245
<BONDS> 26,816,956
0
0
<COMMON> 79,421
<OTHER-SE> 65,117,073
<TOTAL-LIABILITY-AND-EQUITY> 105,491,709
<SALES> 110,854,824
<TOTAL-REVENUES> 110,854,824
<CGS> 27,461,339
<TOTAL-COSTS> 105,750,487
<OTHER-EXPENSES><F1> 5,165,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,133,302
<INCOME-PRETAX> (945,925)
<INCOME-TAX> (508,633)
<INCOME-CONTINUING> (437,292)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (437,292)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
<FN>
<F1> Includes restructuring charge of $5,165,685
</FN>
</TABLE>
