U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the fiscal year ended April 28, 1996. (Fee required)
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934. (No fee required)
For the transition period from __________ to __________.
Commission File Number
0-18369
BOSTON RESTAURANT ASSOCIATES, INC.
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(Name of Small Business Issuer as Specified in its Charter)
Delaware 61-1162263
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
205 Portland Street
Boston, Massachusetts (617) 720-5684 02114
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(Address of Principal (Issuer's Telephone Number (Zip Code)
Executive Offices) Including Area Code)
Securities registered pursuant to Section 12(b) of the Securities Exchange
Act of 1934:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, $.01 par value per share Boston Stock Exchange
Redeemable Common Stock Purchase Warrants Boston Stock Exchange
Securities registered under Section 12(g) of the
Securities Exchange Act of 1934:
Common Stock, $.01 par value per share
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(Title of Class)
Redeemable Common Stock
Purchase Warrants
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(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange act during the past 12 months (or 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 [ ]
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Check if disclosures of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $10,864,418.
The aggregate market value of registrant's Common Stock, $.01 par value
per share, held by non-affiliates of the registrant as of August 6, 1996 was
$3,532,589 based upon the average closing bid and asked prices of such stock on
that date as reported on the Nasdaq Small-Cap Market on that date. As of August
6, 1996 there were 5,015,293 shares of the registrant's Common Stock, $.01 par
value per share outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement involving the election of
directors, which is expected to be filed within 120 days after the end of the
registrant's fiscal year, are incorporated by reference in Part III of this
Report.
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PART I
ITEM 1. BUSINESS
General
Boston Restaurant Associates, Inc. (the "Company")
owns and operates a chain of eight pizzerias under the name
Pizzeria Regina(R) and two full service restaurants in the
Boston, Massachusetts metropolitan area. The Company's
primary full service restaurant is based upon the Polcari's
North End(TM) Italian/American, family style restaurant concept
and is operated under the name Polcari's North End. The
Company's other full service restaurant is operated under the
name Bel Canto(R).
Founded in 1926, the original Pizzeria Regina restaurant
has served its signature Neapolitan style, thin crust pizza,
prepared in gas-fired brick ovens, for more than 65 years. The
Company believes that the Pizzeria Regina pizza and brand
name are local symbols of superior and distinctive pizza.
These restaurants are fast service, high volume pizzerias that
feature premium brick oven pizza. Of the eight Pizzeria
Regina restaurants, three are food court kiosks (self-service,
take-out style emphasizing pizza slices with common area
seating), two are self-service restaurants (food court style with
broader menu selections including pasta and submarine
sandwiches and in-restaurant seating), and three are wait-
service restaurants (full-service style emphasizing whole pizzas
with in-restaurant seating), including the Company's new
Regina's on Tap(TM) which features a wide selection of micro-
brewed beers. See "Pizzeria Regina Restaurants."
The Polcari's North End restaurant concept seeks to
create an Italian/American, family-style, casual dining
ambiance that captures the community spirit of the 1940's and
1950's in Boston's Italian North End neighborhood. The
Company's Polcari's North End restaurant highlights exposed
gas-fired brick ovens in open view of diners. In addition,
memorabilia and photographs depicting 1940 and 1950 scenes
in Boston's North End are used to create a neighborhood
atmosphere rich with history. The restaurant also features large
tables of six or more seats to encourage family style dining and
a value-oriented menu that includes branded Pizzeria Regina
pizza, large Italian/American pasta dishes, rotisserie products
and fresh baked breads. See "Polcari's North End Restaurant."
The Company's Bel Canto full service restaurant is a
moderately priced casual dining Italian style restaurant. The
Company is currently in negotiations to sell its Bel Canto
location.
In April 1994, the stockholders of Pizzeria Regina, Inc.
("PRI") acquired a 60% interest in Capucino's, Inc. (the
"Capucino's Acquisition"), which was then operating four
Capucino's restaurants (one of which has been converted into a
Polcari's North End restaurant, one of which has been
converted into a full service Pizzeria Regina restaurant and two
of which have been closed). The Company's Bel Canto
restaurant was acquired by the Company in 1991. See "Bel
Canto and Capucino's Restaurants" and "Capucino's
Acquisition."
The Company plans to expand its operations by opening
additional Pizzeria Regina food court kiosks in high volume
retail malls located in Massachusetts and neighboring states.
While the Company currently has no plans to open additional
Polcari's North End restaurants it may in the future review
opportunities to open additional Polcari's North End
restaurants. Such expansion of the Polcari's North End
concept will be dependent upon market opportunities and the
Company's overall financial and management resources. The
specific rate at which the Company is able to open new
restaurants will be determined by many factors, including the
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Company's success in obtaining adequate financing,
identifying satisfactory sites, negotiating satisfactory leases,
securing requisite governmental permits and approvals, and
training management personnel. There can be no assurance
that the Company will have the resources to expand, that
expansion will not be more costly than anticipated or that
current and future sites will operate profitably.
The Company's principal offices are located at 205
Portland Street, Boston, Massachusetts 02114 and its telephone
number is (617) 720-5684. As used in this Report, unless
otherwise indicated, the term Company refers to Boston
Restaurant Associates, Inc. and its subsidiaries (including
PRI). All references to Capucino's Inc. in this Report refer to
the Company prior to the Capucino's Acquisition. All
references to PRI in this Report refer to Pizzeria Regina, Inc.
which became a wholly-owned subsidiary of the Company in
connection with the Capucino's Acquisition but which was
prior to that time, an independently privately owned entity.
Pizzeria Regina Restaurants
The Company's signature product, its premium
Neapolitan style, thin crust, brick oven pizza, features a
proprietary dough and pizza sauce and whole-milk mozzarella
cheese, which the Company believes combine to produce a
distinct flavor and superior pizza. These pizzas are offered
with a wide variety of fresh vegetable and cured meat toppings.
By baking its pizza in gas-fired brick ovens (as opposed to
wood fired, electric or other ovens which have lower heat
recovery on the oven surface which the Company believes is
critical to pizza baking), at very high temperatures for short
periods of time, the Company is able to produce a light, evenly
cooked crust while preserving the flavor and moisture of the
toppings. In addition, the speed of the baking process enables
the Company to provide fast service and cater to high volume.
The Company believes that the quality of its pizza resulting
from its proprietary ingredients and baking process should
enable it to appeal to both the lunch and dinner markets.
The original Pizzeria Regina located in Boston's historic
North End has served the Company's premium brick oven pizza
since 1926. Since the purchase of this restaurant in 1946 by
John B. Polcari, Sr., three generations of the Polcari family
have developed and refined the Pizzeria Regina product to
produce what the Company believes is a widely recognized
local symbol of premium quality pizza.
The eight Pizzeria Regina restaurants currently operated
by the Company are located in the Boston metropolitan area.
These restaurants are fast service, high volume pizzerias that
feature premium pizza and cater primarily to the lunchtime
diner with the exception of the original North End location and
the new Regina's on Tap located in Brookline, Massachusetts,
which service both the lunch and dinner markets. Of these
eight restaurants, three are food court kiosks (self-service, take-
out style emphasizing pizza slices with common area seating),
two are self-service restaurants (food court style with broader
menu selections including pasta and submarine sandwiches and
in-restaurant seating), and three are wait-service restaurants
(full-service style emphasizing whole pizzas with in-restaurant
seating).
The Company recently increased its Pizzeria Regina
operations through the conversion of its Brookline,
Massachusetts Capucino's restaurant into a full service Pizzeria
Regina restaurant. The new Pizzeria Regina restaurant
featuring a wide selection of micro-brewed beers and brick-
oven pizzas, is modeled after the original Pizzeria Regina,
which is located in the North End of Boston. The Brookline
Capucino's was closed in November 1995, and the new
Regina's on Tap opened in February 1996.
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The Company intends to open additional Pizzeria Regina
food court kiosks primarily in retail malls within metropolitan
areas in Massachusetts and neighboring states. The Company
currently operates three food court kiosks, located in the
Quincy Market/Faneuil Hall Marketplace on the Boston,
Massachusetts waterfront, the Longwood Medical Center, also
in Boston, and the Burlington Mall in Burlington,
Massachusetts. The food court kiosks serve primarily pizza
slices with multiple topping choices and operate side by side
with other fast food vendors. Menu items are presented in a
self-service, take-out style designed to allow customers to
order, pay for and consume their food in a very short period of
time. Customers who desire to sit down after purchasing their
food may join customers of other food court vendors in one or
more designated common areas within the mall. The focused
menu, self-service, take-out style and common seating provide
food court customers with a fast dining, low cost alternative
relative to more traditional full service restaurants.
Based on the Company's experience and articles from
trade journals, the Company believes there is a trend at retail
malls to retrofit and upgrade food courts to emphasize fast food
as one of the emerging focal points of malls. The Company
further believes that lunchtime diners who visit retail shopping
malls seek high quality, quick service meals in a food court
setting, and that the premium quality of its brick oven pizza
should position it to compete effectively in food courts
locations.
The Burlington Mall food court kiosk represented the
first of the Company's planned kiosk expansion, having been
opened by the Company in November 1994 upon the
completion of the renovation of the food court in that mall.
The Company further expanded its food court kiosk operations
with the addition of kiosks in the Solomon Pond Mall in
Marlborough, Massachusetts, and the South Shore Plaza Mall
in Braintree, Massachusetts. The food courts in the Solomon
Pond Mall and the South Shore Plaza Mall both opened in the
beginning of August, 1996. Management currently estimates
that the cost of opening a typical food court kiosk is
approximately $350,000. There can be no assurance that the
Company will be able to obtain financing necessary to
construct additional food courts kiosks, that the South Shore
Plaza Mall or Solomon Pond Mall food courts will be
successful, that the Company will be able to complete the
construction of new kiosks on a timely basis and within budget,
if at all, or that the Company will be able to operate these
kiosks successfully. The Company has preliminarily identified
other potential site locations that it believes will become
available during the next 24 months.
Two of the Company's Pizzeria Regina restaurants (a
food court kiosk and a wait-service restaurant), both of which
are located in the Quincy Market/ Faneuil Hall Marketplace in
Boston, Massachusetts, had leases that expired on December
31, 1995. The Company recently entered into a new food court
kiosk lease, which is the more successful of the two
restaurants, that runs through December 2000. The Company
is currently operating the wait-service restaurant as a tenant-at-
will. The Company anticipates closing the wait-service
restaurant on or before December 31, 1996 at which time it will
seek to enter into a lease for additional space for a full service
restaurant in the Quincy Market/Faneuil Hall Marketplace.
While there can be no assurance in this regard, the Company
believes, based upon communications with the landlord of this
location, that it will be able to successfully negotiate a new
lease for a wait service location.
Polcari's North End Restaurant
The Company's newly created Polcari's North End
restaurant concept is designed to create an Italian/American,
family-style, casual dining ambiance that captures the
community spirit of the 1940's and 1950's in Boston's Italian
North End neighborhood. The Company's first Polcari's North
End restaurant highlights exposed gas-fired brick ovens in open
view of diners. In addition, memorabilia and photographs
depicting 1940 and 1950 scenes in Boston's North End
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are used to create a neighborhood atmosphere rich with history. The
restaurant also features large tables of six or more seats to
encourage family style dining and a value-oriented menu that includes
branded Pizzeria Regina pizza, large Italian/American pasta dishes and
fresh baked breads.
In 1922, John B. Polcari, Sr., the patriarch of the Polcari
family, opened a neighborhood Italian groceria opposite the
original North End Pizzeria Regina. In 1946, he purchased this
Pizzeria Regina. Mr. Polcari's son, John P. Polcari, Jr., later
operated Polcari's Restaurant, a well-known North End
restaurant for more than 30 years prior to its closure in 1989.
John P. Polcari, Jr., who serves as the Treasurer and a director
of the Company, is a highly visible, actively involved
restaurateur in the Boston community. Management believes
that the Polcari name evokes the Bostonian's image of
immigrant, Italian/American food.
In March 1995, the Company opened its first Polcari's
North End restaurant in Saugus, Massachusetts by converting
its existing Capucino's restaurant at the same location. During
the first full fiscal year of operation the restaurant has
experienced more than a 86% increase in total revenues, to
approximately $2,277,000 from approximately $1,222,000 in
the corresponding period in the previous year (during which
time the location was operated as a Capucino's restaurant for
approximately seven months, was closed for approximately
three months and was operated as a Polcari's North End for
approximately two months).
The Company may in the future review opportunities to
open additional Polcari's North End restaurants. Such
expansion will be dependent upon market opportunities and the
Company's overall financial and management resources.
Bel Canto and Capucino's Restaurants
The Company operates one full service casual dining
moderately priced Italian style restaurant under the name Bel
Canto. The Bel Canto Restaurant is located in Lexington,
Massachusetts. The Company introduced Pizzeria Regina
pizza in its Lexington Bel Canto restaurant in January 1995.
In furtherance of shifting the Company's full service
restaurant efforts away from the Capucino's and Bel Canto(R)
concepts the Company has, as detailed below, converted,
closed, or sold all of these restaurants other than its remaining
Lexington Bel Canto. The Company is also in negotiations to
sell its Lexington Bel Canto restaurant. There can be no
assurance that the Company will be able to sell its Lexington
restaurant on favorable terms, if at all.
The Company completed the conversion of its Brookline,
Massachusetts Capucino's restaurant into a full service Pizzeria
Regina in February 1996 and its Saugus, Massachusetts
Capucino's restaurant into a Polcari's North End restaurant in
March 1995. See "Pizzeria Regina Restaurants" and "Polcari's
North End Restaurants." The Company closed its Capucino's
restaurant in Framingham, Massachusetts in June 1995 with the
intention of converting it into a Polcari's North End restaurant.
The conversion of this location was delayed while the
Company refined the Polcari's North End concept in the
Saugus location. The Company subsequently determined that it
would be in its best interest to sell the restaurant and the
Company has entered into an agreement to sell the location.
The Company believes that the sale will close in the third
quarter of fiscal 1997. During May 1995, the Company also
closed its Capucino's restaurant in Cambridge, Massachusetts,
as a result of poor performance and to take advantage of an
opportunity to buy-out its lease for that restaurant. The
Company sold its Wellesley Bel Canto restaurant in October
1995 after determining that the location was not large enough
to accommodate the Polcari's North End concept and efforts to
obtain additional adjoining space
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proved unsuccessful. The Company closed a Bel Canto restaurant located in
Boston, Massachusetts in September 1993 upon expiration of the lease for that
restaurant due to insufficient size and expansion options.
Restaurant Operations
The Company invests substantial time and effort in its
training programs which focus on all aspects of restaurant
operations, including kitchen, bar and dining room operations,
food quality and preparation, alcoholic beverage service, liquor
liability avoidance, customer service and employee relations.
The Company holds regular meetings of its managers which
cover new products, continuing training and other aspects of
business management. Managers also attend seminars which
are periodically conducted by Company personnel and outside
experts on a broad range of topics.
New employees are trained by experienced employees
who have demonstrated their ability to implement the
Company's commitment to provide high quality food and
attentive service. The Company has developed manuals
regarding its policies and procedures for restaurant operations.
Senior management regularly visits Company restaurants and
meets with the respective management teams to ensure
compliance with the Company's strategies and standards of
quality in all respects of restaurant operations and personnel
development.
The Company seeks to attract and retain high caliber
restaurant managers by providing them with an appropriate
balance of autonomy and direction. Annual performance
objectives and budgets for each restaurant are jointly
determined by restaurant managers and senior management.
To provide incentives, the Company has a cash bonus program
tied to achievement of specified objectives.
The staff for a typical Pizzeria Regina restaurant consists
of one general manager, two managers and approximately 12 to
25 hourly employees. The staff for a Polcari's North End
restaurant consists of one general manager, two managers, one
kitchen manager and approximately 40 to 60 hourly employees.
Most of the Company's hourly employees are part-time
personnel. The general manager of each restaurant is primarily
responsible for the day-to-day operations of the entire
restaurant and maintaining standards of quality and
performance established by the Company.
The Company believes centralized financial and
management controls are fundamental to improving operating
margins. These controls are maintained through the use of an
automated data processing system and prescribed reporting
procedures. Each restaurant has a point-of-sale system that
captures restaurant operating information. The restaurants
forward daily sales reports, vendor invoices, payroll
information and other data to the Company's corporate
headquarters. Company management utilizes this data to
monitor centrally costs and sales mix and to prepare periodic
financial management reports. This system is also used for
budget analysis, planning and determining menu composition.
Restaurant managers perform daily inventories of key supplies.
All other supplies are inventoried weekly at the Pizzeria Regina
restaurants and are inventoried biweekly at the Polcari's North
End, and Bel Canto restaurants. Cash is controlled through
deposits of sale proceeds in local operating accounts following
each restaurant shift with respect to the Pizzeria Regina and Bel
Canto locations and following each business day with respect
to Polcari's North End location, the balances of which are wire
transferred daily to the Company's principal operating account.
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Purchasing and Commissary Operations
The Company maintains a commissary from which food
products such as pizza dough, bread dough and a full line of
desserts are produced for the Company's restaurants. These
products require a high degree of consistency that would be
more difficult to maintain at the individual restaurant locations.
The Company believes that close and centralized monitoring of
the dough preparation ensures a consistent and premium
product. All other food preparation is performed on site at the
restaurant level.
The Company negotiates on a centralized basis directly
with wholesale suppliers of high volume food ingredients such
as cheese, tomato sauce and flour to ensure consistent quality
and freshness of products across its restaurants and to obtain
competitive pricing. These ingredients are then purchased by
the Company's distributor at the negotiated price and
redistributed to the Company's restaurants. All other food
ingredients and beverage products are purchased directly by the
general manager of each restaurant in accordance with
corporate guidelines. The Company believes that all essential
food and beverage products are available from many qualified
wholesale suppliers.
Site Selection
The Company considers the specific location of a
restaurant to be critical to the restaurant's long term success and
devotes significant time and resources to the investigation and
evaluation of each prospective site. Local market
demographics, population density, average household income
levels and site characteristics such as visibility, accessibility
and traffic volume are considered.
Potential sites for the Pizzeria Regina restaurants are
generally sought within high-traffic food courts or retail
shopping malls located in metropolitan areas. Factors which
will favor a Polcari's North End restaurant site are its proximity
to high-volume, middle market traffic centers, such as retail
and residential areas with populations of at least 100,000
persons within a five mile radius. For both types of restaurants,
the Company also considers existing local competition and, to
the extent such information is available, the sales of other
comparably priced restaurants opening in the area.
Seasonality
The Company's restaurants are subject to seasonal
fluctuations in sales volume. Sales at the Pizzeria Regina
restaurants are typically higher in June through August and in
November and December due to increased volume in shopping
malls during the holiday and tourist seasons and school
vacations.
Sales volumes at the Company's full service restaurants
are typically higher in the Fall and Spring months. The
Company attributes this to an influx of the student population
near the restaurants which are located close to colleges and
moderate weather conditions during these seasons.
Employees
As of August 6, 1996, the Company had approximately
300 employees, of whom 10 were corporate and administrative
personnel, 32 were field supervision or restaurant managers or
management trainees, and the remainder were hourly restaurant
personnel. Many of the Company's hourly employees work
part-time. The Company believes that its relationship with
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its employees is good. None of the Company's employees is
covered by a collective bargaining agreement.
Advertising and Marketing
The Company's target market for the Pizzeria Regina
restaurants is very broad, consisting of individuals and families
who seek fast service and high value-to-price meals during the
lunch period. The target markets for the Polcari's North End
restaurant are adults and families who seek high quality brick
oven pizza and other moderately priced Italian dinner entrees,
in a comfortable environment. The Company believes that its
focus on premium quality, service and value is the most
effective approach to attracting customers.
The Company anticipates that it will obtain greater name
recognition due to the increase in distribution channels for its
premium Pizzeria Regina brick oven pizza through the
development of additional Pizzeria Regina food court kiosks.
In addition, management believes that the centralization of its
restaurants within the greater Boston and neighboring areas
will enable the Polcari's North End restaurant to benefit from
the recognition of the Pizzeria Regina and Polcari names. The
Company plans to rely upon local advertising such as direct
mail campaigns to targeted communities, local print
advertising, high-volume traffic flow at retail malls, and word
of mouth exposure.
Capucino's Acquisition
Pursuant to the Capucino's Acquisition, the Company,
then known as Capucino's, Inc., purchased all of the capital
stock of PRI, then known as Boston Restaurant Associates,
Inc., from George R. Chapdelaine, John P. Polcari, Jr.,
Anthony Polcari, Mary Polcari, BayBank as trustee of the
Anthony A. Polcari Irrevocable Trust, and Lucille Salhany
Polcari, the former stockholders of PRI, in exchange for
1,382,588 shares of Capucino's, Inc. Common Stock. Prior to
the Capucino's Acquisition, Capucino's, Inc. and PRI had no
affiliation and PRI was a privately held entity.
Capucino's, Inc. was incorporated in May 1989. In
March 1990 Capucino's, Inc. conducted a public offering of its
securities and at all times since March 1990, the Company's
Common Stock has traded on the Nasdaq Small-Cap Market.
The Polcari family purchased the original Pizzeria
Regina restaurant in 1946 and incorporated under the name
Boston Restaurant Associates, Inc. in 1986. In 1991, PRI
acquired the assets of the Bel Canto restaurants through its
wholly-owned subsidiary Bel Canto Restaurants, Inc.
At the time of the Capucino's Acquisition, Capucino's,
Inc. owned and operated four full service, casual dining
restaurants and PRI owned and operated a chain of six pizzerias
under the name Pizzeria Regina and two Bel Canto casual
dining restaurants, all in the Boston, Massachusetts
metropolitan area.
In connection with the Capucino's Acquisition, the
management of PRI assumed similar positions with the
Company. Richard J. Reeves and Terrance A. Smith retained
their positions as members of the Board of Directors of the
Company and Danny L. McDaniel retained his position as the
Company's Chief Financial Officer and Vice President of
Finance.
As a result of the Capucino's Acquisition, George R.
Chapdelaine and John P. Polcari, Jr., as the Voting Trustees of
a Voting Trust that holds substantially all of the Common
Stock
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acquired by the former PRI stockholders, became the
largest stockholders of the Company. No stockholder of
Capucino's, Inc. prior to the Capucino's Acquisition continued
to own 5% or more of the outstanding Common Stock after the
acquisition.
Following the Capucino's Acquisition, Capucino's, Inc.
assumed the name Boston Restaurant Associates, Inc., effected
a one-for-ten reverse stock split and changed the Nasdaq
Small-Cap market symbol for its Common Stock from CINO to
BRAI. In addition, PRI changed its name from Boston
Restaurant Associates, Inc. to Pizzeria Regina, Inc.
In 1993, prior management of Capucino's, Inc. closed its
Marblehead, Massachusetts and Arlington, Virginia Capucino's
restaurants due to poor operating performance. Prior
management also closed its Washington, D.C. Capucino's
restaurant in May 1992. Capucino's, Inc. opened its
Capucino's restaurants in Framingham and Saugus,
Massachusetts in December 1990 and May 1993, respectively.
Public Offering
In September 1994, the Company sold 854,000 units,
each unit consisting of three shares of the Company's common
stock and two redeemable common stock purchase warrants.
Each warrant entitles the holder to purchase, for a period of
five years, one share of common stock at a price of $2.80 per
share for the initial two and one-half years and $3.20 per share
for the remainder of such period. The units were sold to the
public at the price of $6.00. The net proceeds of the offering
received by the Company was approximately $3,567,000.
Competition
The restaurant industry is highly competitive with respect
to location, menu selection and quality, prices, service and
decor. The business is affected by changes in tastes and eating
habits of the public and by changes in local, regional or
national economic conditions, demographic trends and traffic
patterns, factors affecting consumers' disposable income and
spending habits and the types, number and location of
competing restaurants.
The Pizzeria Regina restaurants compete with other fast-
service, high volume food providers on the basis of the price,
value, relationship, location, and speed of service. The
Polcari's North End restaurant competes with other casual, full
service restaurants primarily on the basis of menu selection,
quality, price, service, ambiance and location. Many
competitors of the Company's restaurants are either locally
owned or part of national or regional restaurant chains, many of
which are well established and have substantially greater
financial and other resources than the Company.
Trademarks
The Company regards its service marks as having
significant value and as being an important factor in the
marketing of its products. Its most significant marks include
"Pizzeria Regina", "Regina", its crown design logo, and
"Polcari's". These marks, which appear in its advertisements,
menus and elsewhere, are widely recognized in the Boston
restaurant market.
"Pizzeria Regina" is a registered trademark of the
Company. The Company has applied with the United States
Patent and Trademark Office to register the crown design logo,
the "Polcari's" logo, "Polcari's North End" and the Regina
service marks. Regina on Tap is a trademark of the Company.
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Government Regulation
The Company is subject to a variety of federal, state and
local laws and regulations. Each of the Company's restaurants
is subject to licensing and regulation by a number of
government authorities, including alcoholic beverage control,
health, safety, sanitation, building and fire agencies in the state
or municipality in which the restaurant is located. Difficulties
in obtaining or failure to obtain required licenses or approvals
could delay or prevent the development of a new restaurant in a
particular area.
A significant portion of the Company's revenues at the
Polcari's NorthEnd, Bel Canto, original Pizzeria Regina and
new Brookline Pizzeria Regina restaurants is attributable to the
sale of alcoholic beverages. Alcoholic beverage control
regulations require each of the Company's restaurants which
serve alcohol to apply to a state authority and municipal
authorities for a license or permit to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually
and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous
aspects of restaurant operations, including minimum age of
patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, storage
and dispensing of alcoholic beverages. The failure of the
Company to obtain or retain liquor or food service licenses
could have a material adverse affect on the particular
restaurant's operations and the business of the Company
generally.
The Company is subject to "dram shop" statutes, which
generally provide a person injured by an intoxicated person the
right to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated person. The
Company presently carries liquor liability coverage for its
restaurants of $1,000,000, as well as excess liability coverage,
of $10,000,000 per occurrence, with a $10,000 deductible. The
Company has never been named as a defendant in a lawsuit
involving "dram shop" liability.
The Company's restaurant operations are also subject to
federal and state laws governing such matters as the proposed
government mandated health insurance, over which the
Company has no control. Significant numbers of the
Company's service, food preparation and other personnel are
paid at rates related to the federal minimum wage, and
increases in the minimum wage could increase the Company's
labor costs.
The development and construction of additional
restaurants will be subject to compliance with applicable
zoning, land use and environmental laws and regulations.
ITEM 2. DESCRIPTION OF PROPERTY
All of the Company's existing restaurants are located in
leased space in the Boston, Massachusetts metropolitan area
except for the North End Pizzeria Regina location which is
owned by the Company. All of the Company's leases provide
for a minimum annual rent, and most call for additional rent
based on sales volume at the particular location over a specified
minimum level. Generally, these leases are net leases which
require the Company to pay the cost of insurance, taxes and a
portion of the lessor's operating costs. Certain mall locations
also require the Company to participate in upkeep of common
areas and promotional activities.
The following table sets forth certain information with respect
to the Company's restaurant properties:
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Approx. Lease Approx. Seating Expiration
Location Sq.Ft. Capacity Date Name/Type
North End, Boston(1) 4,300 67 NA Pizzeria Regina
(wait-service)
Faneuil Hall Marketplace(2) 750 NA Tenant-At-Will Pizzeria Regina
Boston (Upstairs) (food court)
Faneuil Hall Marketplace(3) 2,000 75 12/31/95 Pizzeria Regina
Boston (Downstairs) (wait-service)
Longwood Medical Center(2) 650 NA 1/31/98 Pizzeria Regina
Boston (food court)
Burlington Mall 3,000 100 4/30/98 Pizzeria Regina
Burlington (self-service)
Burlington Mall(2) 1,018 NA 11/30/05 Pizzeria Regina
Burlington (food court)
South Shore Plaza (4) 3,650 100 12/31/96 Pizzeria Regina
Braintree (self-service)
South Shore Plaza (2)(5) 700 NA 2/28/06 Pizzeria Regina
Braintree (food court)
Lexington (6)(7) 3,850 160 11/14/98 Bel Canto
Brookline 3,400 145 5/31/97 Pizzeria Regina
(Wait Service)
Framingham(7)(9) 6,400 195 6/30/07 Vacant
Saugus(7)(8) 8,000 250 11/30/12 Polcari's
North End
Solomon Pond Mall(2)(5) 1,085 NA 1/30/07 Pizzeria Regina
Marlborough (food court)
___________________________
(1) Company-owned. This property is subject to a mortgage in
favor of Haymarket Co-Operative Bank. See "Management's
Discussion And Analysis Or Plan Of Operation -- Liquidity and
Capital Resources" Includes approximately 1,000 square feet
located in two adjacent condominiums owned by the Company
which have not been built-out as of the date of this Report.
(2) Food court locations have no independent seating capacity.
Seating is centralized in the common areas of the food courts.
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(3) The Company is a tenant-at-will at this location. The Company
intends to close this restaurant in December 1996. The Company is
currently in negotiations for a new wait service location within the
marketplace.
(4) In connection with the Company's lease for the food court at
this location, this lease was extended through December 1996. The
Company expects to close this restaurant upon the expiration of the
lease.
(5) The Solomon Pond Mall and South Shore Plaza Mall food
courts opened in August 1996.
(6) The Company is currently in negotiations to sell this location.
There can be no assurance that the Company will be successful in
these negotiations.
(7) Includes 30 seats located outdoors which are used weather
permitting.
(8) The expiration date anticipates the Company's exercise of all
extension options that may be exercised by the Company in its
discretion.
(9) The Company has entered into an agreement to sell this
location. The closing of the sale is scheduled to occur in the third
quarter of fiscal 1997.
The Company relocated its executive offices following the
Capucino's Acquisition from Louisville, Kentucky to PRI's existing
offices located in approximately 2,470 square feet of leased space in
Boston, Massachusetts. The lease for this space expired in May
1996 and the Company is currently occupying the space as a tenant-
at-will.
The Company also leases approximately 5,000 square feet of
warehouse space located in Somerville, Massachusetts under a lease
expiring on July 31, 2001 (including all extension options that may
be exercised by the Company in its discretion) and approximately
2,240 square feet for its commissary located in Charlestown,
Massachusetts under a lease expiring on October 31, 1997
(including all extension options that may be exercised by the
Company in its discretion).
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal matters in the
ordinary course of its business. Each of these matters is subject to
various uncertainties and some of these matters may be resolved
unfavorably to the Company. The Company has established a
reserve of $200,000 for matters that are probable and reasonably
estimable. Management believes that any liability that may
ultimately result from these matters in excess of amounts provided
will not have a material adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this
report no matters were submitted to a vote of security holders of the
Company.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock (Nasdaq symbol: "BRAI") is
traded publicly and is quoted on the Nasdaq Small-Cap Market. As
of August 6, 1996 there were approximately 170 holders of record
of the Company's Common Stock. On August 6, 1996, the last bid
and asked price of the Company's Common Stock as reported on the
Nasdaq Small-Cap Market were $0.9375 and $1.00 per share,
respectively.
The table below represents the quarterly high and low bid and
asked prices for the Company's Common Stock for the Company's
last two fiscal years. The prices listed in this table reflect quotations
without adjustment for retail mark-up, mark-down or commission,
and may not represent actual transactions.
High Low High Low
Bid Bid Asked Asked
Fiscal Year Ended
April 30, 1995
First Quarter 4.38 1.00 5.63 2.13
Second Quarter 2.63 1.75 2.88 2.00
Third Quarter 2.00 1.56 2.19 1.69
Fourth Quarter 1.94 1.38 2.00 1.44
Fiscal Year Ended
April 28, 1996
First Quarter 1.63 1.25 1.75 1.38
Second Quarter 1.32 .50 1.38 .69
Third Quarter 1.13 .50 1.19 .69
Fourth Quarter 1.13 .70 1.19 .88
The Company has never paid cash dividends on its
capital stock and does not anticipate paying any cash
dividends in the foreseeable future. Rather, the Company
intends to retain all of its future earnings to finance future
growth.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following table sets forth for the fiscal periods indicated the
percentage of total revenues, unless otherwise indicated, represented by certain
items reflected in the Company's consolidated statements of operations:
Fiscal Year Ended
---------------------------------------
April 28, 1996 April 30, 1995
-------------- --------------
Income Statement Data:
Net sales 100.0% 100.0%
Costs and expenses:
Cost of food and beverages 24.1 25.0
Other operating expenses 67.1 64.4
General and administrative 18.4 11.8
Depreciation and amortization 5.8 6.5
Loss from valuation of assets
impaired, assets to be disposed
of and restaurant closures 12.5 11.1
Total costs and expenses 127.9 118.8
Operating loss (27.9) (18.8)
Interest expense, Net .3 1.4
Other (income) expense, net .5 (.1)
Net loss (28.7) (20.1)
Results of Operations
Overview
The Company's results of operations for fiscal 1996 was
significantly affected by the Company's implementation of its
strategy to focus its efforts on the development of its Pizzeria Regina
restaurant operations and the corresponding effort to reduce its
Capucino's and Bel Canto restaurant formats. The Company closed
its Brookline, Massachusetts Capucino's restaurant in November
1995 and reopened that location in February 1996 as a full service
Pizzeria Regina. In June 1995 the Company closed its Capucino's
restaurant in Framingham, Massachusetts with the intention of
converting it into a Polcari's North End restaurant. The Company
subsequently determined that it would be in its best interest to sell the
restaurant and has entered into an agreement to sell the location. The
Company believes that the sale will close in the third quarter of fiscal
1997. During May 1995, the Company also closed its Capucino's
restaurant in Cambridge, Massachusetts and in October 1995, the
Company sold its Wellesley Bel Canto
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restaurant. The Company is also in negotiations to sell its Lexington Bel Canto
restaurant. In August 1996, the Company opened its new food court kiosks in the
Solomon Pond Mall and the South Shore Plaza Mall.
Results of Operations for the Years Ended April 28, 1996 and
April 30, 1995
Revenues
Net sales in fiscal 1996 were $10,864,000 compared to net
sales of $13,066,000 in fiscal 1995. The decrease in net sales in
fiscal 1996 as compared to fiscal 1995 reflected, among other things,
the closure of two Capucino's restaurants in May and June 1995,
respectively, the closure of the Brookline Capucino's restaurant for
remodeling in November 1995, the closure of the Wellesley Bel
Canto in October upon its sale and a reduction in net sales at the
remaining Bel Canto restaurant. These decreases were partially offset
by the addition of net sales from the new Burlington Pizzeria Regina
food court restaurant which was open for the entire 1996 fiscal year,
increased aggregate sales from the other Pizzeria Regina restaurants
and increased sales at the new Polcari's North End restaurant.
Net sales at the Company's Pizzeria Regina restaurants
increased to $6,543,000 in fiscal 1996 from $6,341,000 in fiscal
1995, principally due to the addition of sales from the new Pizzeria
Regina food court kiosk and the new Brookline location opened in
February 1996, as well as increased aggregate sales from the
previously existing Pizzeria Regina restaurants. As anticipated, the
increased sales associated with the opening of the new Burlington
Pizzeria Regina food court restaurant was partially offset by sales
reductions at the Company's existing Pizzeria Regina restaurant
located in the same mall.
Net sales at the Company's full service casual dinning
restaurants (including 7 months of operations of the Brookline
restaurant as a Capucino's) decreased to $4,287,000 in fiscal 1996
from $6,683,000 in fiscal 1995. While sales at the new Polcari's
North End restaurant in fiscal 1996 increased by over $1,055,000
from the sales in fiscal 1995 at the Capucino's restaurant at the same
location (during which time the location was operated as a
Capucino's restaurant for approximately seven months, was closed
for approximately three months and was operated as a Polcari's North
End for approximately two months), this increase was offset by
decreased sales at the remaining Capucino's restaurant and the two
Bel Canto restaurants. The decrease at the Capucino's restaurants
was primarily attributable to the closure of the Framingham,
Cambridge and Brookline locations. The decrease at the Bel Canto
restaurants was primarily attributable to the closure of the Wellesley
restaurant and increased competition in the Lexington area.
Costs and Expenses
Cost of Food and Beverages
Cost of food and beverages as a percentage of net sales was
24.1% in fiscal 1996, compared to cost of food and beverages as a
percentage of net sales in fiscal 1995 of 25.0%. The
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cost of food and beverages as a percentage of net sales was higher at the
Polcari's North End and Bel Canto restaurants than the Company's other
restaurants in both periods. The decrease in this cost as a percentage of net
sales in fiscal 1996 as compared to fiscal 1995 was primarily a result of the
reduction of net sales at the Company's full-service restaurants (due to store
closures) as a percentage of the Company's total net sales.
The cost of food and beverages as a percentage of net sales at
the Pizzeria Regina restaurants was 19.3% in fiscal 1996, compared
to 19.0% in fiscal 1995.
The cost of food and beverages as a percentage of net sales at
the Company's full service casual dining restaurants increased to
32.1% in fiscal 1996 from 30.9% in fiscal 1995. The increase in the
cost of food and beverages as a percentage of net sales was
principally due to a change in the menu composition at the
Company's full service restaurants .
Other Operating Expenses
Payroll Expenses. Payroll expenses were $3,667,000 (33.8%
of net sales) in fiscal 1996, compared to payroll expenses of
$4,525,000 (34.6% of net sales) in fiscal 1995. The decrease in
payroll expenses as a percentage of net sales compared to fiscal year
1995 was primarily attributable to the closing of the two Capucino's
and one Bel Canto restaurant in fiscal 1996, and the closing of the
Brookline Capucino's restaurant for remodeling. This decrease was
partially offset by increased payroll expenses at the Polcari's North
End restaurant and the Burlington food court kiosk.
Payroll expenses at the Pizzeria Regina restaurants increased
to $1,948,000 (29.8% of net sales) in fiscal 1996 from $1,825,000
(28.8% of net sales) in fiscal 1995 primarily due to the opening of the
new Pizzeria Regina food court restaurant in the Burlington mall in
November 1994 and the opening of the new Brookline location.
Payroll expenses at the Company's full service casual dining
restaurants decreased to $1,719,000 (40.1% of net sales) in fiscal
1996 from $2,700,000 (40.4% of net sales) in fiscal 1995. The
decrease in payroll expenses in amount and as a percentage of net
sales was primarily attributable to the June 1995 closure of the
Framingham Capucino's restaurant, the May 1995 closure of the
Cambridge Capucino's restaurant, the October 1995 closure of the
Wellesley Bel Canto restaurant, and the November 1995 closure of
the Brookline Capucino's restaurant for conversion to a Pizzeria
Regina restaurant.
Other Operating Expenses, Exclusive of Payroll. Other
operating expenses, exclusive of payroll, were $3,620,000 (33.3% of
net sales) in fiscal 1996 as compared to other operating expenses in
fiscal 1995 of $3,892,000 (29.8% of net sales). Other operating
expenses from the Pizzeria Regina restaurants exclusive of payroll
increased to $1,938,000 in fiscal 1996 from $1,682,000 in fiscal
1995. This increase in other operating expenses was attributable to
the addition of expenses associated with the full year of operations at
the food court in Burlington and the opening of the new Brookline
location. Other operating expenses from the Company's full service
casual dining restaurants exclusive of payroll decreased to $1,497,000
in fiscal 1996
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from $2,049,000 in fiscal 1995 primarily as a result of the closure of the
Wellesley Bel Canto, and the closure of the Brookline Capucino's restaurant for
conversion to a Pizzeria Regina restaurant. The decrease was partially offset by
an increase of operating expenses at the Polcari's North End restaurant. Other
operating expenses also includes commissary expenses which were $185,000 in
fiscal 1996 and $161,000 in fiscal 1995, respectively.
General and Administrative Expenses
General and administrative expenses were $1,997,000 (18.4%
of net sales) in fiscal 1996, as compared to general and administrative
expenses of $1,545,000 (11.8% of net sales) in fiscal 1995. The
increase in general and administrative expenses in fiscal 1996
compared to fiscal 1995 was due, principally, to legal and consulting
expenses related to real estate issues and salaries of two additional
officers of the Company.
Loss for Store Closures and the Write Down of Certain Assets
In fiscal 1996, the Company decided to close its Framingham,
Massachusetts Capucino's restaurant and its Wellesley,
Massachusetts Bel Canto restaurant. As a result, the Company
incurred restructuring charges of $1,050,000, including write downs
of approximately $216,000 of net leasehold improvements and
restaurant equipment, $635,000 of goodwill, $96,000 of other assets,
and an accrual for lease buyout of $103,000.
In fiscal 1996, the Company wrote down certain assets of its
Lexington, Massachusetts Bel Canto and its Burlington,
Massachusetts Pizzeria Regina restaurants, based upon its
determination that the historic and projected cash flows for these
restaurants will not be sufficient for the Company to recover the
historic carrying amount of the assets. A charge of $305,000 is
included in the Company's fiscal 1996 results of operations relating
to these restaurants, including write downs of approximately
$268,000 of net leasehold improvements, and $37,000 of other assets.
An effect of these restructuring charges will be to reduce the
Company's amortization of intangible assets in fiscal 1997 by
$35,000. Additionally, provided it is the Company will have no
further losses from operations in connection with the Framingham
(provided it is sold as anticipated in the third quarter of fiscal 1997)
and Wellesley restaurants, which in fiscal 1996 were approximately
$283,000 and $5,000, respectively, before the charges for the closure.
Interest Expense and Interest Income
Interest expense decreased to $34,000 in fiscal 1996 as
compared to interest expense in fiscal 1995 of $244,000. This
decrease reflects the conversion of shareholder debt totaling $482,500
into Common Stock in June 1994, the repayment of bank debt of
$460,000 and bridge financing of $500,000 ($500,000 face amount
less a discount of $147,000 assigned to related warrants) in October
1994, the retirement of a $490,000 mortgage in January 1995, and the
repayment of an aggregate of $116,000 of subordinated debentures in
fiscal 1996, partially offset by interest expense associated with
borrowings under the Company's new credit facility.
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Interest income decreased to $5,000 in fiscal 1996 from
$61,000 in fiscal 1995 as a result of the investment in the Company's
business of the proceeds of its public offering, completed during the
second quarter of fiscal 1995, which had previously been maintained
in interest bearing investments.
Litigation
The Company is involved in various legal matters in the
ordinary course of its business. Each of these matters is subject to
various uncertainties and some of these matters may be resolved
unfavorably to the Company. The Company has established a reserve
of $200,000 for matters that are probable and reasonably estimable.
Management believes that any liability that may ultimately result
from these matters in excess of amounts provided will not have a
material adverse effect on the Company's financial position.
Liquidity and Capital Resources
The Company has financed its operations primarily through
cash generated from operations, borrowings, and cash generated upon
the sale of restaurant locations. At April 28, 1996 the Company had a
negative net working capital of approximately $1,617,000 and cash
and cash equivalents of approximately $160,000. In December 1995,
the Company obtained a long-term credit facility with Haymarket Co-
Operative Bank. The terms of the credit facility provide that the
Company may initially draw upon a $500,000 credit line ("Phase
One"), and that, at the Bank's discretion, an additional $500,000
would be made available to the Company based upon the Company's
results of operations in fiscal 1996 ("Phase Two"). In April 1996, the
bank made available $350,000 of the amount potentially available
under Phase Two of the credit facility and in July 1996, the bank
made the remaining $150,000 of Phase Two of this credit facility
available to the Company. The interest rate on Phase One of this
credit facility is 2% above the bank's prime rate. The interest rate on
Phase Two of the credit facility is a fixed rate of 12% per annum.
The Company is obligated to make monthly principal payments of
$8,333 on Phase One of the loan, commencing May 1996, with all
outstanding amounts due and payable on or before April 1, 2001.
The Company is obligated to make monthly principal payments of
$8,333 on Phase Two of the loan, commencing August 1996. The
credit facility is secured by all of the assets of the Company and its
subsidiaries, including a mortgage on the Company's Pizzeria Regina
restaurant located in the North End of Boston Massachusetts. The
credit facility also contains certain covenants. The President and the
Treasurer of the Company and each of the Company's subsidiaries
have guarantied the Company's obligations to the bank. A member
of the Board of Directors of the Company also serves as a member of
the bank's board of directors. As of April 28, 1996, the Company
had borrowed $619,000 under this credit facility.
During fiscal 1996 the Company had a net decrease in cash of
$529,000 reflecting net cash used for operating activities of $632,000,
net cash used for investing activities of $395,000 and net cash
provided from financing activities of $498,000. The Company has
extended the payment of certain accrued liabilities and accounts
payable beyond their stated terms. The Company's cash used in operating
activities was adversely affected by the various closures of its
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full service casual dining Italian restaurants, including the closure
of the Brookline restaurant for most of the third quarter for
conversion into a Pizzeria Regina restaurant and by adverse weather
conditions in January 1996. The Brookline restaurant was reopened
in February 1996. Cash used in investing activities reflects costs
incurred in connection with the conversion of the Saugus and
Brookline restaurants and the initial cost for the site preparation of
the Framingham location, including an aggregate of $661,000 of cash
used in the expansion of the bar at the Saugus restaurant and the
conversion of the Brookline restaurant and additional property,
equipment, and other assets. During the first quarter of fiscal 1997
the Company incurred approximately $510,000 in connection with
the build-out of its two new food court kiosks. The Company funded
these expenditures primarily through borrowings under its credit
facility.
At April 28, 1996 the Company had long-term debt
obligations, less current maturities, in the amount of $665,000,
including the $474,000 of borrowings under the Company's credit
facility. At that date the Company's short term debt consisted of
current maturities of long-term debt in the aggregate amount of
$233,000, including $84,000 of subordinated debentures which were
due in January 1996. The maturity date and payment schedule of
these debentures has been extended, with outstanding principal and
interest thereon to be paid in periodic installments through October
1996.
The Company believes that its existing resources, cash flow
from operations and borrowings under its credit facility will be
sufficient to allow it to meet its obligations over the next twelve
months. The Company intends to fund its current obligations and
operating expenses through cash generated from operations,
borrowings under its credit facility and amounts received upon the
closing of the sale of its Framingham location. Upon the closing of
the sale of the Framingham location the Company will benefit from
the elimination of rental and other expenses associated with that
location ($283,000 in fiscal 1996). The Company is also actively
seeking to sell its Lexington location which should result in the
elimination of operating losses associated with that location
($104,000 in fiscal 1996) if it is able to sell the location. The
Company is also seeking additional financing in order to fund its
expansion plans and other cash flow requirements. There can be no
assurance that cash flows will improve in an amount sufficient to
allow the Company to fund its current obligations and operating
expenses, that the Company will be able to sell its Lexington
location, or that the Company will be able to obtain such additional
financing upon favorable terms, if at all. Failure of the Company to
do so could result in the Company's failure to be able to meet its cash
flow requirements.
"Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995
Forward-looking statements in this report, including, without
limitation, statements relating to the adequacy of the Company's
resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward-looking statements involve risks and
uncertainties, including without limitation: potential quarterly
fluctuations in the Company's operating results; seasonality of sales;
competition; risks associated with expansion; the Company's reliance
on key employees; risks generally associated with the restaurant
industry; risks associated with geographic concentration of the
Company's restaurants; risks associated with serving alcoholic
beverages; and other risks
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and uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Boston Restaurant Associates, Inc. and Subsidiaries
Index to Financial Statements F-1
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Balance sheets F-3
Statements of operations F-5
Statements of stockholders' equity F-6
Statements of cash flows F-7
Summary of accounting policies F-8
Notes to consolidated financial statements F-11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements on accounting principles or
practices or financial statement disclosure between the Company and its
accountants during the fiscal year ended April 28, 1996.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item 9 is hereby incorporated
by reference to the Company's definitive proxy statement to be filed by the
Company within 120 days after the close of its 1996 fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is hereby
incorporated by reference to the Company's definitive proxy statement to be
filed by the Company within 120 days after the close of its 1996 fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 11 is hereby
incorporated by reference to the Company's definitive proxy statement to be
filed by the Company within 120 days after the close of its 1996 fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is hereby
incorporated by reference to the Company's definitive proxy statement to be
filed by the Company within 120 days after the close of its 1996 fiscal year.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Reference
2 Stock for Stock Purchase A-2*
Agreement, as amended, among
Capucino's, Inc., a Delaware
corporation, and John P.
Polcari, Jr. and George R.
Chapdelaine, in their capacity
as Voting Trustees under that
certain Amended and Restated
Voting Trust Agreement dated
April 28, 1994
3(a) Amended Certificate of A-3(a)*
Incorporation of the Registrant
(b) Amended Bylaws of the A-3(b)*
Registrant
4(a) Description of Common Stock A-4(a)*
(contained in the Amended
Certificate of Incorporation of
the Registrant, filed as
Exhibit 3(a))
(b) Form of Certificate evidencing F-4(b)*
shares of Common Stock
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(c) Amended and Restated Voting A-9*
Trust Agreement dated April 28,
1994, as amended.
10(a) Lease dated July 15, 1987 A-10(a)*
between PRI and the Longwood
Galleria Associates Limited
Partnership regarding a
Pizzeria Regina location in the
Longwood Galleria Mall, Boston,
Massachusetts
(b) Lease dated June 15, 1987 A-10(b)*
(together with an amendment
dated January 23, 1991) between
Ocean, Inc. and the BRA Nominee
Trust regarding a Pizzeria
Regina location in the North
End of Boston, Massachusetts
(c) Lease dated September 9, 1987 A-10(c)*
between Ocean, Inc. and
Bellwether Properties of
Massachusetts Limited
Partnership regarding a
Pizzeria Regina location in the
Burlington Mall, Burlington,
Massachusetts
(d) Lease dated January 19, 1976 A-10(d)*
(together with amendments
thereto dated April 1, 1980 and
November 6, 1987 as well as an
amendment and renewal notice
dated December 7, 1990) between
Fantail Restaurant, Inc. and
Faneuil Hall Market Place, Inc.
regarding a Pizzeria Regina
location in the Faneuil Hall
Marketplace, Boston,
Massachusetts (upstairs)
(e) Lease dated December 30, 1986 A-10(e)*
(together with an amendment
thereto dated November 6, 1987
and a renewal notice dated
December 7, 1990) between
Fantail Restaurant, Inc. and
Faneuil Hall Market Place, Inc.
regarding a Pizzeria Regina
location in the Faneuil Hall
Marketplace, Boston,
Massachusetts (downstairs)
(f) Lease dated June 9, 1980 A-10(f)*
(together with an assignment
thereof dated March 11, 1991)
between Ocean, Inc. and
Braintree Property Associates
Limited Partnership regarding a
Pizzeria Regina location in the
South Shore Plaza, Braintree,
Massachusetts
(g) Lease dated March 6, 1984 A-10(g)*
(together with an amendment
thereto dated September 13,
1991) between Bel Canto
Restaurants, Inc. and the
Wellesley Realty Trust
regarding a Bel Canto location
in Wellesley, Massachusetts
(h) Lease dated January 12, 1988 A-10(h)*
(together with amendments
thereto dated August 31, 1988
and September 13, 1991 and an
assignment thereof dated
September 13, 1991) between Bel
Canto Restaurants, Inc. and the
1709 Mass Avenue Nominee Trust
regarding a Bel Canto location
in Lexington, Massachusetts
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(i) Lease dated October 23, 1990 A-10(i)*
(together with an amendment
thereto dated June 19, 1992)
between Capucino's Boston IV,
Inc. and Circuit City Stores,
Inc. regarding a Capucino's
location in Framingham,
Massachusetts
(j) Lease dated February 8, 1972 A-10(j)*
(together with an amendment
thereto dated July 10, 1973 and
an assignment thereof dated May
31, 1977) and March 11, 1982
(together with an amendment
thereto dated March 11, 1982)
between Capucino's, Inc. and
Ben-Har Properties Realty Trust
regarding a Capucino's location
in Brookline, Massachusetts
(k) Lease dated August 19, 1992 A-10(k)*
between Capucino's of Saugus,
Inc. and the Yen H. Tow Realty
Trust regarding a Capucino's
location in Saugus,
Massachusetts
(l) Lease dated August 2, 1990 A-10(l)*
between Capucino's Cambridge,
Inc. and LEST Corporation
regarding a Capucino's location
in Cambridge, Massachusetts
(m) Lease dated October 20, 1986 A-10(m)*
(together with an amendment
thereto dated September 10,
1991) between PRI and Portland
Causeway Realty Trust regarding
the Registrant's principal
executive offices in Boston,
Massachusetts
(n) Lease dated August 1, 1993 A-(10)n*
between Polcari Enterprises,
Inc. and the E.J.H. Realty
Trust regarding the
Registrant's warehouse located
in Somerville, Massachusetts
(o) Lease dated October 14, 1986 A-10(o)*
between Polcari Enterprises,
Inc. and Costa Fruit & Produce
Co., Inc. regarding the
Registrant's commissary located
in Charlestown, Massachusetts
(p) Lease dated June 30, 1995 G-10(p)*
between Berlin Properties
Limited Partnership and Ocean,
Inc. regarding a Pizzeria
Regina location in the Solomon
Pond Mall, Berlin and
Marlborough, Massachusetts
(q) Lease dated May 10, 1994 G-10(q)*
between Bellwether Properties
of Massachusetts, L.P. and
Ocean, Inc. regarding a
Pizzeria Regina location in the
Burlington Mall, Burlington,
Massachusetts
(r) Employment Agreement between A-10(p)* **
the Registrant and George R.
Chapdelaine
(s) Form of 1994 Nonemployee A-10(q)* **
Director Stock Option Plan
(t) Form of 1994 Combination Stock A-10(r) * **
Option Plan
-24-
<PAGE>
(u) Agent Borrowing Agreement by A-10(s)*
and among PRI and other
subsidiaries of the Registrant
and BayBank dated February 8,
1991, as amended on April 29,
1994
(v) $1,038,666 Commercial Note A-10(t)*
between PRI and BayBank dated
February 8, 1991 as amended on
April 29, 1994.
(w) $275,000 Commercial Note A-10(u)*
between PRI and BayBank dated
February 8, 1991, as amended on
April 29, 1994
(x) Master Note in favor of BayBank A-10(v)*
issued by PRI on April 29, 1994
(y) Form of Guaranty of the A-10(w)*
Registrant in favor of BayBank
(z) Form of Guaranty of George R. A-10(x)*
Chapdelaine in favor of BayBank
(aa) Form of Guaranty of John P. A-10(y)*
Polcari in favor of BayBank
(bb) Stock Purchase Warrant issued A-10(z)*
to Corning Partners IV L.P. on
April 29, 1994
(cc) $500,000 Subordinated debenture A-10(aa)*
of the Registrant issued to
Corning Partners IV, L.P. on
April 29, 1994
(dd) Form of Indemnification A-10(bb)* **
Agreement with each of the
directors and certain officers
of the Registrant
(ee) Incentive Stock Option Plan B-10(h)* **
(ff) Non-Employee Director's Stock C-10(h)* **
Option Plan
(gg) Form of Stock Option Agreement D-10(h)
between the Registrant and each
of James I. Maruna, W. Rex
Seley and Richard J. Reeves
(hh) Severance Agreement between the E-10(p)* **
Registrant and James I. Maruna
(ii) Amendment to Employment A-(hh)* **
Agreement between the
Registrant and George R.
Chapdelaine
(jj) $500,000 Note, dated December H-10.01*
28, 1995, issued by Boston
Restaurant Associates, Inc. in
favor of Haymarket Co-Operative
Bank
(kk) Condominium Mortgage-Security H-10.02*
Agreement, dated December 28,
1995, issued by George R.
Chapdelaine, Trustee of BRA
Nominee Trust, in favor of
Haymarket Co-Operative Bank
-25-
<PAGE>
(ll) Loan and Security Agreement, H-10.03*
dated December 28, 1995,
between Boston Restaurant
Associates, Inc. and Haymarket
Co-Operative Bank
(mm) Guaranty of Ocean, Inc., H-10.04*
Polcari Enterprises, Inc.,
Pizzeria Regina, Inc., Capucino
Boston IV, Inc., Fantail
Restaurant, Inc., Capucino's,
Inc., Bel Canto Restaurant,
Inc., and Capucino's of Saugus,
Inc., dated December 28, 1995,
in favor of Haymarket Co-
Operative Bank
(nn) Guaranty of George R. H-10.05*
Chapdelaine, individually and
as trustee of the BRA Nominee
Trust, dated December 28, 1995,
in favor of Haymarket Co-
Operative Bank
(oo) Guaranty of John P. Polcari, H-10.06*
Jr., dated December 28, 1995,
in favor of Haymarket Co-
Operative Bank
(pp) Form of Option granted to Mr. H-10.07*
Chapdelaine and Mr. Polcari in
consideration of their
guaranties of BRA's the
obligations of Boston
Restaurant Associates, Inc.
under its credit facility
(qq) Lease dated July 24, 1996 Filed Herewith
between Faneuil Hall
Marketplace, Inc. and Fantail
Restaurant, Inc. regarding a
Pizzeria Regina location in the
Faneuil Hall Marketplace Area,
Boston, Massachusetts
(rr) $350,000 Note, dated April 19, Filed Herewith
1996, issued by Boston
Restaurant Associates, Inc. in
favor of Haymarket Co-Operative
Bank
(ss) $500,000 Note, dated July 26, Filed Herewith
1996, issued by Boston
Restaurant Associates, Inc. in
favor of Haymarket Co-Operative
Bank
(tt) Equipment Lease dated July 26, Filed Herewith
1996 between HCB Corporation
and Ocean, Inc. regarding
certain equipment at a Pizzeria
Regina location in the Solomon
Pond Mall, Berlin and
Marlborough, Massachusetts
21 Subsidiaries of the Registrant A-21*
23 Consent of BDO Seidman, LLP Filed Herewith
27 Financial Data Schedule Filed Herewith
A Incorporated by reference to the Company's
registration statement on Form SB-2
(Registration No. 33-81068). The number set
forth herein is the number of the Exhibit in
said registration statement
-26-
<PAGE>
B Incorporated by reference to the Company's
registration statement on Form S-1 (File No.
33-31748). The number set forth herein is the
number of the Exhibit in said registration
statement
C Incorporated by reference to the Company's
annual report on Form 10-K for the year ended
April 30, 1991. The number set forth herein
is the number of the Exhibit in said annual
report
D Incorporated by reference to the Company's
transition report on Form 10-K for the seven
months ended April 30, 1990. The number set
forth herein is the number of the Exhibit in
said transition report
E Incorporated by reference to the Company's
annual report on Form 10-K for the year ended
April 30, 1993. The number set forth herein
is the number of the Exhibit in said annual
report
F Incorporated by reference to the Company's
annual report on Form 10-KSB for the year
ended April 30, 1994. The number set forth
herein is the number of the Exhibit in said
annual report
G Incorporated by reference to the Company's
annual report on Form 10-KSB for the year
ended April 30, 1995. The number set forth
herein is the number of the Exhibit in said
annual report
H Incorporated by reference to the Company's
quarterly report on Form 10-QSB for the period
ended January 28, 1996. The number set forth
herein is the number of the Exhibit in said
quarterly report
* In accordance with Rule 12b-32 under the
Securities Exchange Act of 1934, as amended,
reference is made to the documents previously
filed with the Securities and Exchange
Commission, which documents are hereby
incorporated by reference
** Management Contract or Compensatory Plan or
Arrangement
____________
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during fiscal 1996.
-27-
<PAGE>
SIGNATURES
In accordance with section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BOSTON RESTAURANT ASSOCIATES, INC.
Date: August 8, 1996 By: /s/ George R. Chapdelaine
George R. Chapdelaine, President
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE DATE
/s/ George R. Chapdelaine August 8, 1996
George R. Chapdelaine, Chief
Executive Officer, President, Chief
Financial Officer and Director
/s/ John P. Polcari August 8, 1996
John P. Polcari, Jr.,
Treasurer and Director
/s/ Joseph J. Caruso August 8, 1996
Joseph J. Caruso, Director
/s/ Richard J. Reeves August 8, 1996
Richard J. Reeves, Director
/s/ Terrance A. Smith August 8, 1996
Terrance A. Smith, Director
#505106 v1 - WHITECA - @tqq01!.DOC - 9172/1
-28-
<PAGE>
Boston Restaurant
Associates, Inc.
and Subsidiaries
Consolidated Financial Statements
Years Ended April 28, 1996 and
April 30, 1995
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Index to Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Balance sheets F-3 to F-4
Statements of operations F-5
Statements of stockholders' equity F-6
Statements of cash flows F-7
Summary of accounting policies F-8 to F-10
Notes to consolidated financial statements F-11 to F-25
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Boston Restaurant Associates, Inc.
We have audited the accompanying consolidated balance sheets of Boston
Restaurant Associates, Inc. and subsidiaries as of April 28, 1996 and April 30,
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Boston Restaurant
Associates, Inc. and subsidiaries at April 28, 1996 and April 30, 1995, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Boston, Massachusetts
June 20, 1996, except for
the second paragraph of Note
4, which is as of July 26, 1996
F-2
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
============================================================================
<S> <C> <C>
Assets (Note 4)
Current:
Cash and cash equivalents $ 159 564 $ 688 978
Accounts receivable 65 079 98 312
Inventories (Note 1) 232 427 347 821
Prepaid expenses and other 66 609 125 526
- - ----------------------------------------------------------------------------
Total current assets 523 679 1 260 637
- - ----------------------------------------------------------------------------
Property and equipment (Note 12):
Building 512 500 512 500
Leasehold improvements 2 759 369 3 220 816
Equipment, furniture and fixtures 1 995 784 2 556 439
- - ----------------------------------------------------------------------------
5 267 653 6 289 755
Less accumulated depreciation
and amortization 2 527 972 2 902 726
Net property and equipment 2 739 681 3 387 029
Other assets (Notes 2 and 12) 752 624 1 519 468
$4 015 984 $6 167 134
- - ----------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Balance Sheets
(Continued)
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
=================================================================================
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable (Note 12) $ 885 791 $ 751 137
Accrued expenses (Notes 3 and 12) 1 021 641 582 939
Current maturities (Notes 4, 5 and 6):
Long-term debt 144 836 971
Notes payable - stockholder 4 038 3 822
Subordinated debentures 84 000 200 000
- - ---------------------------------------------------------------------------------
Total current liabilities 2 140 306 1 538 869
Long-term obligations:
Long-term debt, less current maturities (Note 4) 474 414 -
Notes payable - stockholder, less current
maturities (Note 5) 130 072 134 108
Deferred rent (Note 9) 60 871 175 936
- - ---------------------------------------------------------------------------------
Total liabilities 2 805 663 1 848 913
- - ---------------------------------------------------------------------------------
Commitments and contingencies (Notes 4, 6, 9 and 10)
Stockholders' equity (Notes 5, 6, 10, 11 and 13):
Common stock, $.01 par value, 25,000,000
shares authorized; 5,015,293 shares issued 50 150 50 150
Additional paid-in capital 8 953 788 8 953 788
Accumulated deficit (7 793 617) (4 685 717)
- - ---------------------------------------------------------------------------------
Total stockholders' equity 1 210 321 4 318 221
- - ---------------------------------------------------------------------------------
$ 4 015 984 $ 6 167 134
=================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
April 28, April 30,
Years ended 1996 1995
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Net sales $10 864 418 $13 066 101
- - ---------------------------------------------------------------------------------
Costs and expenses:
Cost of food, beverages and liquor 2 618 187 3 264 286
Other operating expenses 7 287 378 8 417 733
General and administrative 1 996 752 1 544 540
Depreciation and amortization 635 378 848 564
Loss from valuation of assets impaired, assets to
to be disposed of and restaurant closures
(Note 12) 1 355 034 1 447 775
- - ---------------------------------------------------------------------------------
Total costs and expenses 13 892 729 15 522 898
- - ---------------------------------------------------------------------------------
Operating loss (3 028 311) (2 456 797)
Interest expense, net of interest income of
$5,305 and $61,285 in 1996 and 1995, respectively 29 185 182 679
Other (income) expense, net (Note 7) 50 404 (8 237)
Net loss $(3 107 900) $(2 631 239)
=================================================================================
Net loss per share (Note 14) (.62) (.65)
=================================================================================
Weighted average number of common and
dilutive common equivalent shares outstanding 5 015 293 4 029 079
=================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
ated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
$.01 Par Value Additional Total
Years ended Paid-In Accumulated Stockholders'
April 28, 1996 and April 30, 1995 Shares Amount Capital Deficit Equity
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1994 2 334 313 $23 343 $4 931 483 $(2 054 478) $ 2 900 348
Issuance of common stock
upon conversion of
stockholders' debt (Note 5) 118 670 1 187 481 313 - 482 500
Issuance of fractional shares
in connection with 1 for 10
reverse stock split 310 - - - -
Sale of common stock, net of
expenses (Note 13) 2 562 000 25 620 3 540 992 - 3 566 612
Net loss for the year - - - (2 631 239) (2 631 239)
- - --------------------------------------------------------------------------------------------------------------
Balance, April 30, 1995 5 015 293 50 150 8 953 788 (4 685 717) 4 318 221
Net loss for the year - - - (3 107 900) (3 107 900)
- - --------------------------------------------------------------------------------------------------------------
Balance, April 28, 1996 5 015 293 $50 150 $8 953 788 $(7 793 617) $ 1 210 321
==============================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Note 11)
<TABLE>
<CAPTION>
April 28, April 30,
Years ended 1996 1995
===========================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3 107 900) $(2 631 239)
Adjustments to reconcile net loss to net cash
used for operating activities:
(Gain) loss on disposal of fixed assets 46 477 (600)
Depreciation and amortization 635 378 848 564
Loss from valuation of assets impaired, assets to be
disposed of and restaurant closures 1 355 034 1 447 775
Interest expense from subordinated debenture warrants - 147 000
Changes in operating assets and liabilities:
Accounts receivable 33 233 (50 475)
Inventories 108 394 (19 718)
Prepaid expenses and other 749 14 497
Other assets (13 025) (152 547)
Accounts payable 134 654 65 630
Accrued expenses 174 302 (236 151)
Deferred rent 138 6 444
- - -------------------------------------------------------------------------------------------
Net cash used for operating activities (632 566) (560 820)
- - -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (661 054) (1 193 027)
Proceeds from sales of fixed assets 265 747 600
Maturity of certificate of deposit restricted as to use - 300 000
- - -------------------------------------------------------------------------------------------
Net cash used for investing activities (395 307) (892 427)
- - -------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 619 250 -
Repayments of long-term debt (971) (1 166 612)
Repayments of stockholder loans (3 820) (3 615)
Repayments of subordinated debentures (116 000) (500 000)
Proceeds from sale of common stock, net of expenses - 3 566 612
- - -------------------------------------------------------------------------------------------
Net cash provided by financing activities 498 459 1 896 385
- - -------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (529 414) 443 138
Cash and cash equivalents, beginning of year 688 978 245 840
Cash and cash equivalents, end of year 159 564 688 978
===========================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Summary of Accounting Policies
Nature of Business
and Basis of The Company is engaged in the restaurant business.
Presentation As of April 28, 1996, the Company operated eight pizza
and two casual Italian dining restaurants, one of which
is being held for sale. Another of the Company's
restaurant locations has been closed since June, 1995
and is also being held for sale (see Note 12). As of
April 30, 1995, the Company operated seven pizza and six
casual Italian dining restaurants, one of which was
closed May, 1995 (see Note 12).
The consolidated financial statements include the
accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Fiscal Year The Company's fiscal year ends on the last Sunday
in April. Fiscal 1996 and 1995 both included 52 weeks.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Inventories Inventories are valued at the lower of cost
(first-in, first-out) or market.
Property and Property and equipment are stated at cost. Depreciation
Equipment is computed using accelerated and straight-line methods
over the estimated useful lives of the assets. Leasehold
improvements are amortized over the estimated useful
lives of the improvements or the length of the lease,
including anticipated renewal periods, whichever is
shorter.
Other Assets
Goodwill Goodwill resulting from the excess of cost over fair
value of net assets acquired is being amortized on a
straight-line basis over 20 years. The Company evaluates
the recoverability and remaining life of its goodwill
and determines whether the goodwill should be completely
or partially written-off or the amortization period
accelerated. The Company will
F-8
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Summary of Accounting Policies
Other Assets (Continued)
Goodwill (Continued)recognize an impairment of goodwill if
undiscounted estimated future operating cash flows of
the acquired business are determined to be less than the
carrying amount of the goodwill. If the Company
determines that the goodwill has been impaired, the
measurement of the impairment will be equal to the
excess of the carrying amount of the goodwill over the
amount of the undiscounted estimated future operating
cash flows. If an impairment of goodwill were to occur,
the Company would reflect the impairment through a
reduction in the carrying value of goodwill. During
fiscal 1996 and 1995, goodwill was reduced due to the
Company's determination that impairments had occurred
(see Note 12).
Deferred Costs incurred in connection with obtaining financing
Financing Costs are amortized over the terms of the related debt.
Pre-Opening Costs All nonrecurring costs, such as recruiting,
training and other initial direct administrative
expenses associated with the opening of new restaurant
locations are expensed as incurred.
Taxes on Income The Company accounts for income taxes under the asset
and liability method pursuant to Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes." Under SFAS 109, deferred income
taxes are recognized for the future tax consequences
attributable to differences between the financial
statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the
years in which those temporary differences are expected
to be recovered or settled. Under SFAS 109, the effect
on deferred taxes of a change in tax rates is
recognized in income in the period that includes the
enactment date.
Cash Equivalents For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents.
F-9
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Summary of Accounting Policies
Net Loss Per Share Net loss per share is based on the weighted average
number of common and dilutive common equivalent shares
outstanding. Common stock equivalents in the form of
stock options and warrants are also considered in the
computation.
Stock Split In June 1994, the Company effected a 1 for 10 reverse
stock split. All net loss per share information and
common stock information presented in the accompanying
consolidated financial statements and notes to
consolidated financial statements reflect this stock
split.
New Accounting Effective May 1, 1994, the Company adopted SFAS No. 121,
Standards "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". The new
standard establishes new guidelines regarding when
impairment losses on long-lived assets, which include
property and equipment, certain identifiable intangible
assets and goodwill, should be recognized and how
impairment losses should be measured (see Note 12).
In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a new, fair
value-based method of measuring stock-based
compensation, but does not require an entity to adopt
the new method for preparing its basic financial
statements. For entities not adopting the new method for
preparing basic financial statements, SFAS No. 123
requires disclosures in the footnotes of pro forma net
earnings and earnings per share information as if the
fair value-based method had been adopted. Adoption of
SFAS No. 123 is required no later that the Company's
fiscal year ending April 27, 1997. The disclosure
requirements of SFAS No. 123 are effective for financial
statements for financial years beginning after December
15, 1995. The Company will comply with the disclosure
requirements of SFAS No. 123 in its financial statements
for its fiscal year ending April 27, 1997.
Reclassifications Certain reclassifications have been made to the 1995
financial statements to conform to the 1996
presentation.
F-10
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Inventories Inventories consist of the following:
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
=========================================================
<S> <C> <C>
Food, beverages and liquor $131 098 $185 667
Paper goods and supplies 101 329 162 154
---------------------------------------------------------
Total $232 427 $347 821
=========================================================
2. Other Assets Other assets consist of the following:
April 28, April 30,
1996 1995
=========================================================
Goodwill $765 133 $1 459 090
Favorable lease 41 590 41 590
Security and other deposits 31 762 81 375
Deferred financing costs 13 015 38 363
Other - 2 921
---------------------------------------------------------
851 500 1 623 339
Less accumulated amortization 98 876 103 871
---------------------------------------------------------
Total $752 624 $1 519 468
=========================================================
</TABLE>
F-11
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
3. Accrued Expenses Accrued expenses consist of the following:
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
==============================================================================
<S> <C> <C>
Reserves for store closures (Note 12) $ 263 599 $ 99 946
Compensation 226 015 194 821
Reserve for legal contingencies (Note 9) 200 000 -
Taxes other than income taxes 117 534 112 906
Professional fees 84 484 61 414
Insurance 41 708 19 476
Gift certificates 31 694 26 183
Interest 5 576 252
Other 51 031 67 941
-----------------------------------------------------------------------------
Total $1 021 641 $582 939
4. Long-Term Debt Long-term debt consists of the following:
April 28, April 30,
1996 1995
==============================================================================
Note payable to a bank, interest at prime
plus 2% (10.25% at April 28, 1996),
payable in monthly installments of
$8,333 plus interest, due April, 2001. $500 000 $ -
Note payable to a bank, interest at
12.0%, payable in monthly principal and
interest installments of $7,786, due June,
2001. 119 250 -
Note payable - other - 971
-----------------------------------------------------------------------------
Total 619 250 971
Less current maturities 144 836 971
-----------------------------------------------------------------------------
Long-term debt $474 414 $ -
==============================================================================
</TABLE>
F-12
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
4. Long-Term Debt The notes payable to a bank are collateralized by
(Continued) substantially all of the Company's assets, excluding
real estate, and are personally guaranteed by both the
Company's President and Treasurer.
Subsequent to April 28, 1996, the Company amended the
12% note and borrowed an additional $380,750. The terms
of the amended note include interest at 12%, payable in
monthly installments of $8,333 plus interest, due July,
2001.
In connection with their guarantees of the notes
payable, the Company issued warrants to purchase 178,500
shares of the Company's common stock to both the
Company's President and Treasurer. The Company also
issued warrants to purchase a total of 42,500 shares of
the Company's common stock to the bank in connection
with the issuance of the notes payable (see Note 10).
The value of these warrants was not material as of their
issuance dates. A member of the Company's Board of
Directors also serves as a member of the bank's Board of
Directors.
Maturities of the notes payable are as follows:
Fiscal year ending Amount
=========================================
1997 $144 836
1998 160 038
1999 114 376
2000 100 000
2001 100 000
-----------------------------------------
Total $619 250
=========================================
F-13
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
5. Notes Payable -
Stockholder Notes payable - stockholder consists of two notes, with
interest at 7.18% and 8%, payable in aggregate monthly
installments of principal and interest of $810, maturing
January, 2017.
Maturities of the stockholder notes are as follows:
Fiscal year ending Amount
==========================================
1997 $ 4 038
1998 4 261
1999 4 494
2000 4 739
2001 4 993
Thereafter 111 585
------------------------------------------
Total $134 110
==========================================
Effective June 24, 1994, the Company's outstanding
indebtedness to the holders of certain notes payable,
having an aggregate principal balance of $482,500, were
converted into 118,670 common shares of the Company. Had
this conversion taken place as of May 1, 1994, the net
loss per share for the year ended April 30, 1995 would
have remained at $(.65).
6. Subordinated On April 29, 1994, the Company issued a subordinated
Debentures debenture to an unaffiliated investor in the aggregate
principal amount of $500,000, bearing interest payable
quarterly at prime plus 2% (8.75% at April 30, 1994).
In October, 1994, the Company repaid the subordinated
debenture. In conjunction with the issuance of the
subordinated debenture, the Company issued a stock
purchase warrant valued at $147,000 entitling the holder
to purchase 210,000 shares of the Company's common
stock. This amount was recorded as a discount in the
valuation of the debenture and as interest expense upon
the repayment.
The stock purchase warrant entitles the holder to
purchase 210,000 shares of common stock at an exercise
price equal to $2.00 per share. The warrant is currently
exercisable and expires April 29, 1999.
F-14
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
6. Subordinated
Debentures Subordinated debentures outstanding at April 28,
(Continued) 1996 and April 30, 1995 consist of convertible
subordinated debentures bearing interest at 10% payable
quarterly and convertible into the Company's common
stock at a conversion rate of $5.00 per share. The
Company can redeem the convertible debentures under
certain conditions, as defined. The debentures were due
in January 1996, however, the maturity date and payment
schedule of these debentures have been extended, with
outstanding principal and interest thereon to be paid in
periodic installments through October 1996.
7. Other (Income) Other (income) expense, net consists of the following:
Expense, Net
<TABLE>
<CAPTION>
April 28, April 30,
Years ended 1996 1995
==========================================================================
<S> <C> <C>
Other (income) expense 3 927 $(7 637)
(Gain) loss on disposal of fixed assets 46 477 (600)
--------------------------------------------------------------------------
Total $50 404 $(8 237)
==========================================================================
</TABLE>
8. Taxes on Income At April 28, 1996, the Company has the following net
operating loss carryforwards, subject to review by the
Internal Revenue Service, available to offset future
taxable income for Federal income tax purposes as
indicated:
<TABLE>
<CAPTION>
Expiration
Amount Dates
=========================================================================
<S> <C> <C>
Net operating losses purchased in a 1994
acquisition, whose use is limited $2 918 000 2004-2009
Boston Restaurant Associates, Inc. net
operating losses incurred before and
after acquisition and available for
immediate offset against taxable income 3 547 000 1998-2011
</TABLE>
F-15
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
8. Taxes on Income Deferred tax assets are comprised of the following:
(Continued)
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
===========================================================================
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 2 198 000 $ 2 165 500
Losses on store closures and
write-downs not yet deductible
for tax purposes 459 000 500 000
Reserves and accruals not yet
deductible for tax purposes 80 000 -
Valuation allowance (2 737 000) (2 665 500)
---------------------------------------------------------------------------
Net deferred tax assets - -
===========================================================================
A reconciliation of the statutory federal income tax
rate (benefit) and the effective tax rate as a
percentage of income (loss) before taxes on income is as
follows:
April 28, April 30,
Years ended 1996 1995
===========================================================================
Statutory rate (benefit) (34.0)% (34.0)%
Operating losses generating
no current tax benefit 34.0 34.0
---------------------------------------------------------------------------
Effective tax rate -% -%
===========================================================================
</TABLE>
9. Commitments and
Contingencies
Operating Leases The Company is obligated under noncancellable operating
leases for its leased restaurant locations and office,
commissary and warehouse space. Lease terms range from
five to twenty years and in certain instances provide
options to extend the original term. Generally, the
Company is required to pay its proportionate share of
real estate taxes, insurance, common area and other
operating costs in addition to annual base rent.
Substantially all restaurant leases provide for
contingent rentals based on sales in excess of specified
amounts.
F-16
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
9. Commitments and
Contingencies
(Continued)
Operating Leases Deferred rent liabilities of $60,871 and $175,936 as of
(Continued) April 28, 1996 and April 30, 1995, respectively, were
recorded in order to recognize lease escalation
provisions on a straight-line basis for certain
operating leases.
Aggregate minimum rental requirements under these leases
as of April 28, 1996, are approximately as follows:
Total
Fiscal year ending Commitment
=============================================
1997 $1 387 000
1998 1 293 000
1999 906 000
2000 901 000
2001 901 000
Thereafter 3 006 000
---------------------------------------------
Total $8 394 000
=============================================
Rent expense under all operating leases was
approximately $1,497,000 and $1,373,000, which included
contingent rentals of approximately $10,000 and $31,000
in 1996 and 1995, respectively.
Lease Guarantees In connection with the sale of two restaurants to
non-affiliated third-parties, the Company is a guarantor
of the lease payments under the leases assumed by the
buyers. These leases expire in fiscal 1997 and 2001.
At April 28, 1996, the Company is contingently liable
for approximately $884,000 under the guarantees. The
Company is of the opinion that the buyers of these two
locations will be able to perform under the terms of the
respective lease agreements and that no payments will
be required or losses will be incurred by the Company
under the guarantees.
F-17
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
9. Commitments and
Contingencies
(Continued)
Employment
Agreement and The Company has an employment agreement with its
Guaranty President, which expires April 29, 1999. In addition
to a base salary, adjusted annually for cost-of-living
changes and an annual bonus, the agreement provides for
a performance bonus, as defined. The commitment for
future compensation, excluding the performance bonus
amounts to $200,000 per year. The employment agreement
further provides that upon the termination of the
President for reasons, as defined, the President will
agree not to compete with the Company for a three year
period and the Company will continue to pay the
President's then current base salary and annual bonus
for three years effective at the date of such
termination. The Company has also guaranteed personal
bank borrowings of its President in the amount of
$46,312.
Litigation The Company is involved in various legal matters
in the ordinary course of its business. Each of
these matters is subject to various uncertainties, and
some of these matters may be resolved unfavorably to the
Company. The Company has established a reserve of
$200,000 at April 28, 1996 (see Note 3) for matters that
are probable and reasonably estimable. Management
believes that any liability that may ultimately result
from the resolution of these matters in excess of
amounts provided will not have a material adverse effect
on the financial position of the Company.
10. Stock Options At April 28, 1996, outstanding options consist of the
and Warrants following:
The Company has an Employee Stock Option Plan (the
"Employee Plan") and a Directors' Stock Option Plan (the
"Directors' Plan") which was assumed by the Company in
connection with a fiscal 1994 acquisition. Under both
the Employee and Directors' Plans, options are granted
at the fair market value on the date of the grant and
are exercisable in part beginning one year after the
grant date and ending six years from the grant date
under the Employee Plan and five years after the grant
date under the Directors' Plan.
F-18
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
10. Stock Options
and Warrants In July, 1994, the Company's stockholders approved the
(Continued) 1994 Combination Stock Option Plan (the "1994
Combination Plan") and the 1994 Non-Employee Director
Stock Option Plan (the "1994 Director Plan"), which
replace the previously existing Employee and Directors'
Plans.
The 1994 Combination Plan provides for the grant of
incentive stock options intended to qualify under the
requirements of the Internal Revenue Code and options
not qualified as incentive stock options. Incentive
stock options may only be granted to employees of the
Company. Non-employees contributing to the success of
the Company are eligible to receive non-qualified stock
options. The 1994 Combination Plan is to be administered
by a Committee designated by the Board of Directors.
Options under the 1994 Combination Plan may not be
granted after July 2004 and the exercise price shall be
at least equal to the fair market value of the common
stock at the grant date.
Incentive stock options may be granted to holders of
more than 10% of the Company's common stock at an
exercise price of at least 110% of the fair market value
of the Company's common stock at the grant date. The
terms of the options granted are to be determined by the
Committee, but in no event shall the term of any
incentive stock option extend beyond three months after
the time a participant ceases to be an employee of the
Company. No options may be exercised more than five
years after the date of the grant for 10% stockholders,
or ten years after the date of grant for all other
participants. A total of 125,000 shares of common stock
have been reserved for issuance under the 1994
Combination Plan.
The 1994 Director Plan provides for the granting to each
eligible non-employee director of the Company an option
to purchase 5,000 shares of the Company's common stock.
Options granted under the 1994 Director Plan become
exercisable over a five year period at an exercise price
equal to the fair market value of the Company's common
stock at the grant date and expire ten years from the
grant date. A total of 30,000 shares have been reserved
for issuance under the 1994 Director Plan.
F-19
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
10. Stock Options
and Warrants During fiscal 1996, the Company issued options to the
(Continued) Company's President and Treasurer to purchase an
aggregate of 357,000 shares of the Company's common
stock, in connection with their guarantees of certain
notes payable (see Note 4). Options for an aggregate of
210,000 shares are exercisable at $0.94 per share and
expire December 16, 2000. The remaining options for an
aggregate of 147,000 shares are exercisable at $0.88
per share and expire April 19, 2001.
Changes in options outstanding under the Employee and
Directors' Plans, the 1994 Plans and options issued in
connection with the guarantee of certain debt by the
Company's President and Treasurer are summarized as
follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
====================================================================
<S> <C> <C>
Balance, May 1, 1994 41 380 $3.44 -$26.30
Granted 15 000 1.56 - 2.44
Exercised - -
Cancelled or expired (17 900) 3.44 - 26.30
--------------------------------------------------------------------
Balance, April 30, 1995 38 480 1.56 - 13.30
Granted 432 000 0.88 - 0.94
Exercised - -
Cancelled or expired (43 500) 0.94 - 13.30
--------------------------------------------------------------------
Balance, April 28, 1996 426 980 $0.88 - 7.00
====================================================================
As of April 28, 1996, options for 375,230 shares are
exercisable at prices ranging from $0.88 to $7.00.
</TABLE>
F-20
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
10. Stock Options
and Warrants At April 28, 1996, warrants and units outstanding,
(Continued) all of which are exercisable, consist of the following:
(a) Warrant for the purchase of 210,000 shares of
common stock, at an exercise price of $2.00 per
share expiring April 1999 (see Note 6).
(b) Warrants to purchase 1,708,000 shares of common
stock at a purchase price of $2.80 per share
through March 7, 1997 or at a purchase price of
$3.20 per share from March 8, 1997 through
September 7, 1999, issued in connection with the
Company's September 7, 1994 public offering (see
Note 13).
(c) Warrants to purchase 75,000 units (375,000 shares)
at prices ranging from $2.80 to $3.20 per share,
expiring September 7, 1999, issued in connection
with the Company's September 7, 1994 public
offering (see Note 13).
(d) Warrants to purchase 25,000 and 17,500 shares of
common stock at a purchase price of $2.00 per share
through June 28, 1998 and October 19, 1998,
respectively, or at a purchase price of $2.80 per
share from June 29, 1998 through December 28, 2000
and October 20, 1998 through April 19, 2001,
respectively, issued to the bank in connection with
the issuance of the notes payable (see Note 4).
The convertible subordinated debentures with an
outstanding balance of $84,000 at April 28, 1996 are
convertible into common shares at a conversion price of
$5.00 per share (see Note 6).
There were 2,851,750 shares reserved with respect to the
above options, warrants, convertible debentures and the
anti-dilution provisions related to a fiscal 1994
acquisition at April 28, 1996.
F-21
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
10. Stock Options
and Warrants During fiscal 1996 and 1995, the following units,
(Continued) warrants and options expired:
(a) Options to purchase 45,000 shares of common stock
at $16.70 per share.
(b) Options to purchase 36,400 shares of common stock
at prices ranging from $3.44 to $26.30 per share
granted under the Employee and Directors' Plans.
(c) Options to purchase 25,000 shares of common stock
at $0.94 per share granted under the 1994
Combination Plan.
(d) Warrants for the purchase of 8,658 shares of common
stock at $8.70 per share.
(e) Warrants for the purchase of 255,580 shares of
common stock at $27.50 per share.
(f) A unit purchase option granted to purchase 11,223
units at $53.46 per unit. Each unit was comprised
of 3 shares of common stock and 3 Class A Warrants.
Each Class A Warrant entitled the holder to
purchase 1 share of common stock and 1 Class B
Warrant for an aggregate purchase price of $18.75.
The Class B Warrant entitled the holder to purchase
1 share of common stock at a purchase price of
$27.50.
(g) Warrants for the purchase of 31,500 shares of
common stock at $8.70 per share.
(h) Warrants for the purchase of 6,000 shares of common
stock at $5.00 per share.
F-22
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
11. Supplemental Cash Cash paid for interest and income taxes are as follows:
Flow Information
April 28, April 30,
Years ended 1996 1995
========================================================
Interest $29 166 $87 964
Income taxes - -
During fiscal 1995, additional common stock was issued
upon conversion of indebtedness to stockholders
consisting of $482,500 in principal (see Note 5).
12. Assets Impaired, Charges included in the results of operations of
Assets to be $1,355,034 in fiscal 1996 and $1,447,775 in fiscal
Disposed of and 1995 are summarized as follows:
Restaurant
Closures
(a) As of April 28, 1996, the Company intends to
sell two of its existing casual Italian dining
restaurants. One of these restaurants has been
closed since June, 1995, while the other is
currently being operated.
(1) A charge of $1,049,835 for the closed restaurant
is included in the results of operations for the
year ended April 28, 1996 for the write-down to
net realizable value of leasehold improvements
($216,000), goodwill ($635,000) and other assets
($96,000) and an accrual for buy-out of the
lease ($102,000). The consolidated balance sheet
at April 28, 1996 includes assets, principally
leasehold improvements, with a value equal to
the gross expected selling price of $265,000,
and liabilities of $240,000, principally accrued
broker and legal fees, an accrual for the
payment of four months rent and an accrual for
buy-out of the lease related to the closure.
F-23
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(2) Charges of $159,228 and $103,835 are included
in the results of operations for the years ended
12. Assets Impaired, April 28, 1996 and April 30, 1995, respectively,
Assets to be for the write-down resulting from the impairment
Disposed of and of a covenant not-to-compete ($53,000),
Restaurant leasehold improvements ($173,000) and other
Closures assets ($37,000) at the operating restaurant.
(Continued)
(b) A charge of $145,971 is included in the results of
operations for the year ended April 28, 1996 for
the write-down resulting from the impairment of
leasehold improvements at one of the Company's pizza
restaurants.
(c) A charge of $713,133 is included in the results of
operations for the year ended April 30, 1995 for the
write-down resulting from the impairment of the
leasehold improvements ($14,000), goodwill
($591,000) and a favorable lease ($108,000) at one
of the Company's casual Italian dining restaurants.
During fiscal 1996, this restaurant was converted to
a pizza restaurant.
(d) During fiscal 1996, the Company sold one of its
casual Italian dining restaurants. A charge of
$23,130 is included in the results of operations for
the year ended April 30, 1995 resulting principally
from the write-down of a covenant not-to-compete.
(e) In May 1995, the Company notified the landlord of
its Cambridge, Massachusetts restaurant that it was
exercising its option to cancel the lease and
fulfill its guarantee with the payment of six months
rent. On May 26, 1995, the restaurant was closed.
A charge of $607,677 is included in the results of
operations for the year ended April 30, 1995,
resulting principally from the write-down of certain
leasehold improvements ($350,000), goodwill
($147,000) and the payment of six months rent
($68,000).
The consolidated balance sheet at April 30, 1995
includes assets, principally restaurant equipment,
with a net book value of approximately $75,000, to
be retained by the Company, and liabilities,
principally trade accounts payable and an accrual
for the payment of six months rent, of approximately
$150,000, related to the closure.
F-24
<PAGE>
Boston Restaurant Associates, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
The historic and projected cash flows for these
restaurants were not sufficient for the Company to
recover the historical carrying amount of
12. Assets Impaired, those assets. The assets were revalued at their
Assets to be estimated fair market value based upon sales of
Disposed of and comparable assets in the case of leasehold improvements,
Restaurant and at zero for the goodwill, covenant and favorable
Closures lease, based upon an estimate of the amount recoverable.
(Continued)
13. Public Offering During fiscal 1995, the Company filed a Form SB-2,
registration statement, under the Securities Act of 1933
with the Securities and Exchange Commission registering
862,500 units (including an underwriters' over-allotment
option of 112,500 units) for sale to the public. Each
unit consisted of three shares of the Company's common
stock and two redeemable common stock purchase warrants.
Each warrant entitles the holder to purchase, for a
period of five years, one share of common stock at a
price of $2.80 for the initial two and one- half years
and $3.20 for the remainder of such period. The
registration statement was declared effective on
September 7, 1994 and a total of 854,000 units were
sold. The Company received net proceeds after expenses
of approximately $3,567,000.
The sale increased common stock outstanding by 2,562,000
shares and increased common shares reserved for the
exercise of the warrants by 1,708,000.
14. Supplemental If the June 24, 1994 stockholder notes payable
Earnings Per Share conversion (see Note 5) and the repayment of certain
indebtedness had taken place as of May 1, 1994, the net
loss per share for the year ended April 30, 1995 would
have been $(.55).
Supplemental net loss per share of $(.55) for the year
ended April 30, 1995 is based upon the weighted average
number of shares of common stock that would have been
outstanding for the year ended April 30, 1995 had the
June 24, 1994 stockholder notes payable conversion taken
place as of May 1, 1994, (19,778 shares) (see Note 5),
and the sale of the number of shares (at a public
offering price of $2.00 per share) sold under the stock
offering (see Note 13) which would be necessary to fund
the repayment of certain indebtedness of $1,295,000
(344,735 shares) which was repaid with the proceeds of
the offering.
F-25
<PAGE>
EXHIBIT INDEX
Exhibit Page or
Number Reference
2 Stock for Stock Purchase Agreement, as amended, among A-2*
Capucino's, Inc., a Delaware corporation, and John
P. Polcari, Jr. and George R. Chapdelaine, in their
capacity as Voting Trustees under that certain
Amended and Restated Voting Trust Agreement dated
April 28, 1994
3(a) Amended Certificate of Incorporation of the Registrant A-3(a)*
(b) Amended Bylaws of the Registrant A-3(b)*
4(a) Description of Common Stock (contained in the Amended A-4(a)*
Certificate of Incorporation of the Registrant,
filed as Exhibit 3(a))
(b) Form of Certificate evidencing shares of Common Stock F-4(b)*
(c) Amended and Restated Voting Trust Agreement dated A-9*
April 28, 1994, as amended.
10(a) Lease dated July 15, 1987 between PRI and the Longwood A-10(a)*
Galleria Associates Limited Partnership regarding a
Pizzeria Regina location in the Longwood Galleria
Mall, Boston, Massachusetts
(b) Lease dated June 15, 1987 (together with an amendment A-10(b)*
dated January 23, 1991) between Ocean, Inc. and the
BRA Nominee Trust regarding a Pizzeria Regina
location in the North End of Boston, Massachusetts
(c) Lease dated September 9, 1987 between Ocean, Inc. and A-10(c)*
Bellwether Properties of Massachusetts Limited
Partnership regarding a Pizzeria Regina location in
the Burlington Mall, Burlington, Massachusetts
(d) Lease dated January 19, 1976 (together with amendments A-10(d)*
thereto dated April 1, 1980 and November 6, 1987 as
well as an amendment and renewal notice dated
December 7, 1990) between Fantail Restaurant, Inc.
and Faneuil Hall Market Place, Inc. regarding a
Pizzeria Regina location in the Faneuil Hall
Marketplace, Boston, Massachusetts (upstairs)
<PAGE>
(e) Lease dated December 30, 1986 (together with an amendment A-10(e)*
thereto dated November 6, 1987 and a renewal notice
dated December 7, 1990) between Fantail Restaurant,
Inc. and Faneuil Hall Market Place, Inc. regarding
a Pizzeria Regina location in the Faneuil Hall
Marketplace, Boston, Massachusetts (downstairs)
(f) Lease dated June 9, 1980 (together with an assignment A-10(f)*
thereof dated March 11, 1991) between Ocean, Inc.
and Braintree Property Associates Limited
Partnership regarding a Pizzeria Regina location in
the South Shore Plaza, Braintree, Massachusetts
(g) Lease dated March 6, 1984 (together with an amendment A-10(g)*
thereto dated September 13, 1991) between Bel Canto
Restaurants, Inc. and the Wellesley Realty Trust
regarding a Bel Canto location in Wellesley,
Massachusetts
(h) Lease dated January 12, 1988 (together with amendments A-10(h)*
thereto dated August 31, 1988 and September 13,
1991 and an assignment thereof dated September 13,
1991) between Bel Canto Restaurants, Inc. and the
1709 Mass Avenue Nominee Trust regarding a Bel
Canto location in Lexington, Massachusetts
(i) Lease dated October 23, 1990 (together with an amendment A-10(i)*
thereto dated June 19, 1992) between Capucino's
Boston IV, Inc. and Circuit City Stores, Inc.
regarding a Capucino's location in Framingham,
Massachusetts
(j) Lease dated February 8, 1972 (together with an amendment A-10(j)*
thereto dated July 10, 1973 and an assignment
thereof dated May 31, 1977) and March 11, 1982
(together with an amendment thereto dated March 11,
1982) between Capucino's, Inc. and Ben-Har
Properties Realty Trust regarding a Capucino's
location in Brookline, Massachusetts
(k) Lease dated August 19, 1992 between Capucino's of Saugus, A-10(k)*
Inc. and the Yen H. Tow Realty Trust regarding a
Capucino's location in Saugus, Massachusetts
(l) Lease dated August 2, 1990 between Capucino's Cambridge, A-10(l)*
Inc. and LEST Corporation regarding a Capucino's
location in Cambridge, Massachusetts
(m) Lease dated October 20, 1986 (together with an amendment A-10(m)*
thereto dated September 10, 1991) between PRI and
Portland Causeway Realty Trust regarding the
Registrant's principal executive offices in Boston,
Massachusetts
<PAGE>
(n) Lease dated August 1, 1993 between Polcari Enterprises, A-(10)n*
Inc. and the E.J.H. Realty Trust regarding the
Registrant's warehouse located in Somerville,
Massachusetts
(o) Lease dated October 14, 1986 between Polcari Enterprises, A-10(o)*
Inc. and Costa Fruit & Produce Co., Inc. regarding
the Registrant's commissary located in Charlestown,
Massachusetts
(p) Lease dated June 30, 1995 between Berlin Properties G-10(p)*
Limited Partnership and Ocean, Inc. regarding a
Pizzeria Regina location in the Solomon Pond Mall,
Berlin and Marlborough, Massachusetts
(q) Lease dated May 10, 1994 between Bellwether Properties G-10(q)*
of Massachusetts, L.P. and Ocean, Inc. regarding a
Pizzeria Regina location in the Burlington Mall,
Burlington, Massachusetts
(r) Employment Agreement between the Registrant and A-10(p)* **
George R. Chapdelaine
(s) Form of 1994 Nonemployee Director Stock Option Plan A-10(q)* **
(t) Form of 1994 Combination Stock Option Plan A-10(r) * **
(u) Agent Borrowing Agreement by and among PRI and other A-10(s)*
subsidiaries of the Registrant and BayBank dated
February 8, 1991, as amended on April 29, 1994
(v) $1,038,666 Commercial Note between PRI and BayBank A-10(t)*
dated February 8, 1991 as amended on April 29, 1994.
(w) $275,000 Commercial Note between PRI and BayBank dated A-10(u)*
February 8, 1991, as amended on April 29, 1994
(x) Master Note in favor of BayBank issued by PRI on A-10(v)*
April 29, 1994
(y) Form of Guaranty of the Registrant in favor of BayBank A-10(w)*
(z) Form of Guaranty of George R. Chapdelaine in favor A-10(x)*
of BayBank
(aa) Form of Guaranty of John P. Polcari in favor of A-10(y)*
BayBank
(bb) Stock Purchase Warrant issued to Corning A-10(z)*
Partners IV L.P. on April 29, 1994
(cc) $500,000 Subordinated debenture of the Registrant A-10(aa)*
issued to Corning Partners IV, L.P. on April 29, 1994
<PAGE>
(dd) Form of Indemnification Agreement with each of A-10(bb)* **
the directors and certain officers of the Registrant
(ee) Incentive Stock Option Plan B-10(h)* **
(ff) Non-Employee Director's Stock Option Plan C-10(h)* **
(gg) Form of Stock Option Agreement between the Registrant D-10(h)
and each of James I. Maruna, W. Rex Seley and
Richard J. Reeves
(hh) Severance Agreement between the Registrant and E-10(p)* **
James I. Maruna
(ii) Amendment to Employment Agreement between the A-(hh)* **
Registrant and George R. Chapdelaine
(jj) $500,000 Note, dated December 28, 1995, issued by H-10.01*
Boston Restaurant Associates, Inc. in favor of
Haymarket Co-Operative Bank
(kk) Condominium Mortgage-Security Agreement, dated H-10.02*
December 28, 1995, issued by George R. Chapdelaine,
Trustee of BRA Nominee Trust, in favor of Haymarket
Co-Operative Bank
(ll) Loan and Security Agreement, dated December 28, 1995, H-10.03*
between Boston Restaurant Associates, Inc. and
Haymarket Co-Operative Bank
(mm) Guaranty of Ocean, Inc., Polcari Enterprises, Inc., H-10.04*
Pizzeria Regina, Inc., Capucino Boston IV, Inc.,
Fantail Restaurant, Inc., Capucino's, Inc., Bel
Canto Restaurant, Inc., and Capucino's of Saugus,
Inc., dated December 28, 1995, in favor of
Haymarket Co-Operative Bank
(nn) Guaranty of George R. Chapdelaine, individually and H-10.05*
as trustee of the BRA Nominee Trust, dated December
28, 1995, in favor of Haymarket Co-Operative Bank
(oo) Guaranty of John P. Polcari, Jr., dated H-10.06*
December 28, 1995, in favor of Haymarket
Co-Operative Bank
(pp) Form of Option granted to Mr. Chapdelaine and H-10.07*
Mr. Polcari in consideration of their guaranties of
BRA's the obligations of Boston Restaurant
Associates, Inc. under its credit facility
(qq) Lease dated July 24, 1996 between Faneuil Hall
Marketplace, Inc. and Fantail Restaurant, Inc.
regarding a Pizzeria Regina location in the Faneuil
Hall Marketplace Area, Boston, Massachusetts
<PAGE>
(rr) $350,000 Note, dated April 19, 1996, issued by
Boston Restaurant Associates, Inc. in favor of
Haymarket Co-Operative Bank
(ss) $500,000 Note, dated July 26, 1996, issued by
Boston Restaurant Associates, Inc. in favor of
Haymarket Co-Operative Bank
(tt) Equipment Lease dated July 26, 1996 between HCB
Corporation and Ocean, Inc. regarding certain
equipment at a Pizzeria Regina location in the
Solomon Pond Mall, Berlin and Marlborough,
Massachusetts
21 Subsidiaries of the Registrant A-21*
23 Consent of BDO Seidman, LLP
27 Financial Data Schedule
A Incorporated by reference to the Company's registration statement on
Form SB-2 (Registration No. 33-81068). The number set forth herein is
the number of the Exhibit in said registration statement
B Incorporated by reference to the Company's registration statement on
Form S-1 (File No. 33-31748). The number set forth herein is the number
of the Exhibit in said registration statement
C Incorporated by reference to the Company's annual report on Form 10-K
for the year ended April 30, 1991. The number set forth herein is the
number of the Exhibit in said annual report
D Incorporated by reference to the Company's transition report on Form
10-K for the seven months ended April 30, 1990. The number set forth
herein is the number of the Exhibit in said transition report
E Incorporated by reference to the Company's annual report on Form 10-K
for the year ended April 30, 1993. The number set forth herein is the
number of the Exhibit in said annual report
F Incorporated by reference to the Company's annual report on Form 10-KSB
for the year ended April 30, 1994. The number set forth herein is the
number of the Exhibit in said annual report
G Incorporated by reference to the Company's annual report on Form 10-KSB
for the year ended April 30, 1995. The number set forth herein is the
number of the Exhibit in said annual report
H Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended January 28, 1996. The number set forth
herein is the number of the Exhibit in said quarterly report
<PAGE>
* In accordance with Rule 12b-32 under the Securities Exchange Act of
1934, as amended, reference is made to the documents previously filed
with the Securities and Exchange Commission, which documents are hereby
incorporated by reference
** Management Contract or Compensatory Plan or Arrangement
#504712 v1 - NELSONAL - @tfs01!.DOC - 9172/35
Exhibit 10(qq)
- - -------------------------------------------------------------------------------
LEASE AGREEMENT
by and between
FANEUIL HALL MARKETPLACE, INC.
(Landlord)
and
FANTAIL RESTAURANT, INC.
t/a PIZZERIA REGINA
(Tenant)
- - -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ATTACHMENT......................................2
Section 1.1. Certain Defined Terms......................................2
Section 1.2. Additional Defined Terms...................................5
Section 1.3. Attachments................................................7
ARTICLE II PREMISES.......................................................8
SECTION 2.1. DEMISE........................................................8
ARTICLE III TERM..........................................................8
Section 3.1. Term.......................................................8
Section 3.2. Termination................................................8
Section 3.3. Holding Over...............................................8
ARTICLE IV USE............................................................9
Section 4.1. Prompt Occupancy and Use...................................9
Section 4.2. Storage and Office Areas...................................9
Section 4.3. Tenant Trade Name..........................................9
Section 4.4. Store Hours................................................9
ARTICLE V RENTAL.........................................................10
Section 5.1. Rentals Payable...........................................10
Section 5.2. Annual Basic Rents........................................10
Section 5.3. Annual Percentage Rental..................................10
SECTION 5.4. "RENTAL YEAR.................................................11
SECTION 5.5. "GROSS SALES.................................................11
Section 5.6. Statements of Gross Sales.................................11
Section 5.7. Tenant's Records..........................................12
(i)
<PAGE>
Section 5.8. Payment of Rental.........................................13
Section 5.9. Advance Rental............................................13
Section 5.10. Future Expansion.........................................13
ARTICLE V TAXES..........................................................14
Section 6.1. Tenant to Pay Proportionate Share of Taxes................14
Section 6.2. Payment of Proportionate Share of Taxes...................14
SECTION 6.3. "TAX YEAR....................................................15
Section 6.4. Taxes on Rental...........................................15
ARTICLE VII IMPROVEMENTS.................................................15
Section 7.1. Tenant's Improvements.....................................15
Section 7.2. Effect of Opening for Business............................16
Section 7.3. Mechanic's Liens..........................................16
Section 7.4. Tenant's Leasehold Improvements and Trade Fixture.........17
ARTICLE VIII OPERATIONS..................................................17
Section 8.1. Operations by Tenant......................................17
Section 8.2. Signs and Advertising.....................................19
Section 8.3. Painting and Displays by Tenant...........................19
Section 8.4. Trash Removal Service.....................................19
Section 8.5. Permitted Use Disclaimer..................................20
Section 8.6. Hazardous Substances......................................20
ARTICLE IX REPAIRS AND ALTERATIONS.......................................21
Section 9.1. Repairs To Be Made By Landlord............................21
Section 9.2. Repairs To Be Made By Tenant..............................21
Section 9.3. Damage to Premises........................................21
Section 9.4. Alterations by Tenant.....................................22
(ii)
<PAGE>
Section 9.5. Changes and Additions to Shopping Center..................22
Section 9.6. Roof and Walls............................................22
ARTICLE X COMMON AREAS...................................................23
Section 10.1. Use of Common Areas......................................23
Section 10.2. Management and Operation of Common Areas.................23
Section 10.3. Employee Parking Areas...................................23
Section 10.4. Tenant to Share Expense of Common Areas..................23
Section 10.5. Landlord's Operating, Costs' Defined.....................24
Section 10.6. Mall Heating, Ventilating and Air-Conditioning
Equipment Contribution Rate..............................25
Section 10.7. Renovation Or Expansion of Common Areas..................25
ARTICLE XI MERCHANTS' ASSOCIATION.....................................26
SECTION 11.1. MERCHANTS' ASSOCIATION......................................26
Section 11.2. Tenant's Contribution to Merchants' Association..........26
Section 11.3. Landlord's Contribution to Merchants' Association........27
Section 11.4...........................................................27
Section 11.5. Advertising..............................................27
ARTICLE XII - UTILITIES...................................................28
Section 12.1. Water, Electricity, Telephone and Sanitary Sewer.........28
Section 12.2. Heating, Ventilating- and Air-Conditioning...............29
Section 12.3. Fire Protection Sprinkler System.........................29
Section 12.4. Discontinuances and Interruptions of Utility Service.....30
ARTICLE XIII - INDEMNITY AND INSURANCE....................................30
Section 13.1. Indemnities..............................................30
Section 13.2. Landlord Not Responsible for Acts Of Others..............31
Section 13.3. Tenant's Insurance.......................................31
Section 13.4. Tenant's Contractor's Insurance..........................31
(iii)
<PAGE>
Section 13.5. Policy Requirements......................................32
Section 13.6. Increase in Insurance Premiums...........................32
Section 13.7. Waiver of Right of Recovery..............................33
Section 13.8. Tenant to Pay Proportionate Share of
Insurance Costs..........................................33
ARTICLE XIV - DAMAGE AND DESTRUCTION......................................33
Section 14.1. Landlord's Obligation to Repair and Reconstruct..........33
Section 14.2. Landlord's Option to Terminate Lease.....................34
Section 14.3. Demolition of Landlord's Building........................34
Section 14.4. Insurance Proceeds.......................................34
ARTICLE XV - CONDEMNATION.................................................35
Section 15.1. Effect of Taking.........................................35
Section 15.2. Condemnation Awards......................................35
ARTICLE XVI - ASSIGNMENTS AND SUBLETTING..................................35
Section 16.1. Landlord's Consent Required..............................35
Section 16.2. Transfer of Corporate Shares.............................37
Section 16.3. Transfer of Partnership Interests........................38
Section 16.4. Acceptance of Rent from Transferee.......................38
Section 16.5. Additional Provisions Respecting Transfers...............38
ARTICLE XVII - DEFAULT....................................................39
Section 17.1. "Event of Default" Defined...............................39
Section 17.2. Remedies.................................................40
Section 17.3. Damages..................................................41
Section 17.4. Remedies in Event of Bankruptcy or
Other Proceeding.........................................43
ARTICLE XVIII - SUBORDINATION AND ATTORNMENT..............................45
Section 18.1. Subordination............................................45
(iv)
<PAGE>
Section 18.2. Mortgagee's Unilateral Subordination.....................46
Section 18.3. Attornment...............................................46
ARTICLE XIX - NOTICES.....................................................46
Section 19.1. Sending of Notices.......................................46
Section 19.2. Notice to Mortgagees.....................................47
ARTICLE XX - MISCELLANEOUS................................................47
(v)
<PAGE>
NOTICE OF LEASE MODIFICATIONS
Please be advised that those Sections of the Lease between FANEUIL HALL
MARKETPLACE, INC. and FANTAIL RESTAURANT, INC. listed below have been modified
and/or supplemented by the Rider to Lease found immediately following the
signature page of the Lease. It is therefore imperative that the Lease and Rider
be read simultaneously. Wherever there is any conflict between the Rider and the
Lease, the provisions of the Rider are paramount and the Lease shall be
construed accordingly.
Section 1.1. Section 11.5.
Section 2.1. Section 12.1.
Section 3.1. Section 12.2.
Section 3.3. Section 12.3.
Section 4.1. Section 12.4.
Section 4.4. Section 13.1.
Section 5.3. Section 13.3.
Section 5.5. Section 13.4.
Section 5.6. Section 13.5.
Section 5.7. Section 13.6.
Section 5.9. Section 13.7.
Section 5.10. Section 13.8.
Section 6.1. Section 14.1.
Section 6.2. Section 14.2.
Section 6.3. Section 14.3.
Section 7.1. Section 15.1.
Section 7.3. Section 16.1.
Section 7.4. Section 17.1.
Section 8.1. Section 17.2.
Section 8.3. Section 17.3.
Section 8.4. Section 17.4.
Section 8.6. Section 18.1.
Section 9.1. Section 18.2.
Section 9.2. Section 20.1.
Section 9.3. Section 20.2.
Section 9.4. Section 20.3.
Section 9.5. Section 20.4.
Section 9.6. Section 20.6.
Section 10.1. Section 20.7.
Section 10.2. Section 20.17.
Section 10.3. Section 20.20.
Section 10.4. Section 20.21.
Section 10.5. Section 20.22.
Section 10.7. Section 20.23.
Section 11.3. Article XXI
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<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") dated ___________________ by and
between FANEUIL HALL MARKETPLACE, INC., a Maryland corporation ("Landlord"),
and FANTAIL RESTAURANT, INC., a Massachusetts corporation, t/a PIZZERIA
REGINA, ("Tenant").
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION of the sum of One Dollar ($1.00) and the
mutual covenants herein contained, the parties hereto do hereby covenant and
agree as follows:
ARTICLE I DEFINITIONS AND ATTACHMENT
DEFINITIONS AND ATTACHMENTS
Section 1.1. Certain Defined Terms
As used herein, the term:
A. "Marketplace Area" (otherwise hereinafter also referred to as
"Shopping Center Area") means that certain parcel of land owned,
leased or controlled by Landlord situate in the City of Boston,
County of Suffolk, Commonwealth of Massachusetts, more
particularly described in Schedule "A-1", and upon the opening
for business with the public of any expansion of the Markets on
any property adjacent to the Marketplace Area (other than the
construction or expansion of an Anchor Store on the Property
described in Schedule "A-2"), the term Marketplace Area shall
include the property used for such expansion.
B. "Markets" (otherwise hereinafter also referred to as "Shopping
Center") means the Marketplace Area and the adjacent parcel or
parcels of land more particularly described in Schedule "A-2",
and, upon any expansion of any Anchor Store or the opening of an
additional Anchor Store on property adjacent to the Markets, the
term "Markets" shall include the property used for such expansion
or addition.
C. "Landlord's Building" means the structures or portions of
structures constructed, known as North Market, South Market and
Quincy Market Buildings, or to be constructed by Landlord in the
Marketplace Area intended to be leased to retail tenants in the
location shown on Schedule "A" as the same may be altered,
reduced, expanded or replaced from time to time.
D. "Premises" means Tenant's portion of Landlord's Building shown on
Schedule "A" having the following Area:
Floor Area: 751 square feet.
E. "Outside Commencement Date" means January 1, 1996.
-2-
<PAGE>
"Termination Date" means December 31, 2000.
F. "Permitted Use" means the sale at retail of traditional pizza,
deep dish pizza and covered pizza (with dough) with a variety of
toppings including but not limited to pepperoni, sausage, pepper,
onions and gourmet toppings such as artichokes and sundried
tomatoes. Tenant shall also have the right to sell at retail, as
incidental to pizza, carbonated soft drinks in single-serving
containers, juices and Snapple brand drinks.
G. "Annual Basic Rental" means an amount equal to the product of the
following figure multiplied by Tenant's Floor Area (subject to
adjustment as provided in Section 5.1.): $175.00.
H. "Annual Percentage Rental" means a sum equal to eight percent
(8%) of the amount by which annual Gross Sales exceed the product
of $2,187.50 multiplied by Tenant's Floor Area (the
"Breakpoint"), subject to adjustment as provided in Section 5.1.;
provided, however, that if, during the first or last Rental Year
in the Term, the Premises are not open for business with the
general public for twelve (12) full calendar months, the
Breakpoint shall be adjusted for any such Rental Year by
multiplying the Breakpoint specified above by a fraction, the
numerator of which shall be the actual number of full calendar
months in such Rental Year during which the Premises were open
for business with the general public, and the denominator of
which shall be twelve (12).
I. "Security Deposit" means the sum of $0.00. See Rider Section 5.9.
J. "HVAC Equipment Contribution Rate" means the sum of $1.00. See
Schedule F.
K. "Mall Heating, Ventilating and Air-Conditioning Equipment
Contribution Rate" is included in HVAC Equipment Contribution
Rate in Section 1.1.J.
L. "Merchants' Association Contribution Rate" means the sum of
$4.75. See Article XI.
M. "Sprinkler Contribution Rate" means the sum of $.25. See Section
12.3.
N. "Trash Removal Service Charge". See Section 8.4.
O. "Water and Sewer Charge". See Schedule E.
P. "Tenant Notice Address" means
FANTAIL RESTAURANT, INC.
Attn: George Chapdelaine
205 Portland Street
Boston, MA 02141
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<PAGE>
Q. "Tenant Trade Name" means PIZZERIA REGINA which Tenant represents
it is entitled to use pursuant to all applicable laws.
R. "Store Hours" means Monday through Saturday 10:00 A.M. to 9:00
P.M. and Sunday 12:00 Noon to 6:00 p.m.
S. "Restriction Area" means one-quarter (1/4) mile.
T. "Landlord's Floor Area" means the aggregate number of square feet
of Landlord's leasable floor area in Landlord's Building
(exclusive of Anchor Stores) which, with respect to any such
floor area which has been leased to any rent-paying tenant, shall
be determined in accordance with the provisions of any lease
applicable thereto and which, with respect to any such floor area
not so leased, shall consist of all such leasable floor area in
Landlord's Building designed for the exclusive use and occupancy
of rent-paying tenants, which shall exclude Common Areas, storage
areas leased separately from retail areas, mezzanine areas and
areas used for Landlord's management and promotion offices.
U. "Tenant's Floor Area" means the number of square feet contained
in that portion of Landlord's Floor Area constituting the
Premises which shall be measured (a) with respect to the front
and rear width thereof, from the exterior face of the adjacent
exterior or corridor wall or, if none, from the center of the
demising partition, to the opposite exterior face of the adjacent
exterior or corridor wall or, if none, to the center of the
opposite demising partition, and (b) with respect to the depth
thereof, from the front lease line to the exterior face of the
rear exterior wall, or corridor wall, or, if neither, to the
center of the rear demising partition; and in no case shall there
be any deduction for columns or other structural elements within
any tenant's premises.
V. "Common Areas" means those areas and facilities which may be
furnished by Landlord or others in or near the Shopping Center
Area for the non-exclusive general common use of tenants, Anchor
Stores and other occupants of the Shopping Center, their
officers, agents, employees and customers including (without
limitation) parking areas, access areas (other than public
streets), employee parking areas, truckways, driveways, loading
docks and areas, delivery passageways, package pick-up stations,
sidewalks, interior and exterior pedestrian walkways and
pedestrian bridges, malls, promenades, mezzanines, roofs,
sprinklers plazas, courts, ramps, common seating areas,
landscaped and planted areas, retaining walls balconies,
stairways, escalators, elevators, bus stops, first-aid stations,
sewage treatment facilities (if any) lighting facilities, comfort
stations or rest rooms, civic center, meeting rooms, and other
similar areas, facilities or improvements.
W. "Default Rate" means an annual rate of interest equal to the
lesser of (i) the maximum rate of interest for which Tenant may
lawfully contract in the State in which the Shopping Center is
located, or (ii) eighteen percent (18%).
-4-
<PAGE>
X. "Anchor Store" means any department or specialty store which
either (i) occupies a floor area in excess of 50,000 square feet
in the Shopping Center, or (ii) is designated an Anchor Store in
a notice to that effect given by Landlord to Tenant.
Y. "Landlord's Leased Floor Area" means the monthly average of the
aggregate number of square feet contained in those portions of
Landlord's Floor Area leased to tenants (including the Premises)
as of the first day of each calendar month during the billing
period in question, but not less than eighty-five percent (85%)
of Landlord's Floor Area.
Section 1.2. Additional Defined Terms.
The following additional terms are defined in the
places in this Lease noted below:
Term Section
"Additional Rent" 5.1
"Annual Merchants' Association Contribution" 11.2
"Association" 11.1
"Association Year" 11.4
"Casualty" 14.1
"Commencement Date" 3.1
"Consumer Price Index" 11.2
"Electricity Component" Schedule E (if applicable)
"Electricity Factor" Schedule E (if applicable)
"Event of Default" 17.1
"Expansion Opening Contribution" 11.2
"First Association Year" 11.4
"Fiscal Year" Schedule F (if applicable)
"Gross Sales" 5.5
"Hazardous Substance" 8.6
"HVAC Equipment Contribution" Schedule F (if applicable)
"HVAC Factor" Schedule F (if applicable)
"Landlord's Operating Costs" 10.5
"Liquidated Damages" 17.3
"Mortgage" 18.2
"Mortgagee" 18.2
"Release" 8.6
"Rental" 5.1
"Rental Year" 5.4
"Taxes" 6.1
"Tax Year" 6.3
"Tenant's Electrical Installation" Schedule E (if applicable)
"Tenant's HVAC Charge" Schedule F (if applicable)
"Tenant's V/CW Charge" Schedule F (if applicable)
-5-
<PAGE>
"Term" 3.1
"Termination Damages" 17.3
"Umpire" Schedule E (if applicable)
"V/CW Equipment Contribution" Schedule F (if applicable)
"V/CW Factor" Schedule F (if applicable)
-6-
<PAGE>
Section 1.3. Attachments.
The following documents are attached hereto, and
such documents, as well as all drawings and documents
prepared pursuant thereto, shall be deemed to be a part
hereof:
Schedule "A" - Drawing of Shopping Center Area including
Landlord's Building and Tenant's Premises
Schedule "A-1" - Legal Description of Shopping Center
Schedule "A-2" - Diagram Showing the Markets
Schedule "B" - None
Schedule "C" - None
Schedule "D" - None
Schedule "E" - Utility Consumption and Payment Schedule
Schedule "F" - Tenant Heating, Ventilating and
Air-Conditioning Schedule or V/CW Schedule
-7-
<PAGE>
ARTICLE II
PREMISES
Section 2.1. Demise.
Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord,
the Premises having the Floor Area as set forth in clause D of Section 1.1.
hereof, which Landlord and Tenant hereby conclusively agree represents Tenant's
Floor Area for all purposes of this Lease.
Landlord warrants that it and no other person or corporation has the
right to lease the Premises hereby demised, and that so long as Tenant is not in
default hereunder, Tenant shall have peaceful and quiet use and possession of
the Premises, subject to any Mortgage, and all matters of record or other
agreements to which this Lease is or may hereafter be subordinated.
Notwithstanding anything to the contrary contained herein, the Premises
have been inspected by Tenant who shall be deemed to have accepted the same as
existing as of the date Landlord delivers the Premises to Tenant for completion
of all work required of it.
ARTICLE III
TERM
Section 3.1. Term
The term of this Lease (the "Term") shall commence on that date (the
"Commencement Date") which shall be the earlier to occur of (a) the Outside
Commencement Date or (b) the opening by Tenant of its business in the Premises,
and shall terminate on the Termination Date. Landlord and Tenant agree, upon
demand of the other, to execute a declaration setting forth the Commencement
Date as soon as the Commencement Date has been determined.
Section 3.2. Termination.
This Lease shall terminate on the Termination Date, without the
necessity of any notice from either Landlord or Tenant to terminate the same,
and Tenant hereby waives notice to vacate or quit the Premises and agrees that
Landlord shall be entitled to the benefit of all provisions of law respecting
the summary recovery of possession of the Premises from a tenant holding over to
the same extent as if statutory notice had been given. Tenant hereby agrees that
if it fails to surrender the Premises at the end of the Term, or any renewal
thereof, Tenant will be liable to Landlord for any and all damages which
Landlord shall suffer by reason thereof, and Tenant will indemnify Landlord
against all claims and demands made by any succeeding tenants against Landlord,
rounded upon delay by Landlord in delivering possession of the Premises to such
succeeding tenant. For the period of three (3) months prior to the expiration of
the Term, Landlord shall have the right to display on the exterior of the
Premises a "For Rent" sign (not to exceed one foot by one foot in size) and
during such period Landlord may show the Premises and all parts thereof to
prospective tenants during normal business hours.
Section 3.3. Holding Over.
-8-
<PAGE>
If Tenant shall be in possession of the Premises after the expiration of
the Term, in the absence of any agreement extending the Term, the tenancy under
this Lease shall become one from month to month, terminable by either party on
thirty (30) days' prior notice, and shall be subject to all of the terms and
conditions of this Lease as though the Term had been extended from month to
month, except that (i) the Annual Basic Rental payable hereunder for each month
during said holdover period shall be equal to twice the monthly installment of
Annual Basic Rental payable during the last month of the Term, (ii) the
installments of Annual Percentage Rental payable hereunder for each such month
shall be equal to one-twelfth (l/12th) of the average Annual Percentage Rental
payable hereunder for the last three (3) Rental Years of the Term, or if the
Term is less than three (3) Rental Years, then such installments shall be equal
to one-twelfth (l/12th) of the Annual Percentage Rental payable hereunder for
the last complete Rental Year preceding expiration of the Term, and (iii) all
Additional Rental payable hereunder shall be prorated for each month during such
holdover period.
ARTICLE IV
USE
Section 4.1. Prompt Occupancy and Use.
Tenant shall occupy the Premises upon commencement of the Term and
thereafter will continuously use the Premises for the Permitted Use and for no
other purpose whatsoever.
Section 4.2. Storage and Office Areas.
Tenant shall use only such minor portions of the Premises for storage
and office purposes as are reasonably required therefor.
Section 4.3. Tenant Trade Name.
Unless otherwise approved by Landlord, Tenant shall conduct business in
the Premises only in the Tenant Trade Name.
Section 4.4. Store Hours.
Tenant shall cause its business to be conducted and operated in good
faith and in such manner as shall assure the transaction or a maximum volume of
business in and at the Premises. Tenant covenants and agrees that the Premises
shall remain open for business at least during the Store Hours or such other
hours as shall be seasonally adjusted by Landlord. If Tenant shall fail to cause
its business to be operated during the hours required by the preceding sentence,
or as otherwise required by Landlord, in addition to any other remedy available
to Landlord under this Lease, Tenant shall pay to Landlord, as liquidated
damages for such breach, a sum equal to One Hundred Dollars ($100.00) for each
hour or portion thereof during, which Tenant shall fail to so operate.
If Tenant shall request Landlord's approval of the opening of the
Premises for business for periods exceeding those designated above and Landlord
shall approve such request, Tenant
-9-
<PAGE>
shall pay for any additional costs incurred by Landlord in connection with
Tenant's opening the Premises for business during such additional hours,
including but not limited to, a proportionate share of any additional amounts of
Landlord's Operating Costs, additional costs of heating, ventilating and
air-conditioning the Premises, and additional utilities furnished to the
Premises by Landlord.
ARTICLE V
RENTAL
Section 5.1. Rentals Payable.
Tenant covenants and agrees to pay to Landlord as
rental ("Rental") for the Premises, the following:
(a) the Annual Basic Rental specified in clause G of Section 1.1;
plus
(b) the Annual Percentage Rental specified in clause H of Section
1.1; plus
(c) all additional sums, charges or amounts of whatever nature to be
paid by Tenant to Landlord in accordance with the provisions of
this Lease, whether or not such sums, charges or amounts are
referred to as additional rental (collectively referred to as
"Additional Rental");
provided, however, that the Annual Basic Rental and the minimum amount of Gross
Sales utilized in the computation of Annual Percentage Rental shall be adjusted
proportionately for any Rental Year of more or less than twelve (12) calendar
months.
Section 5.2. Annual Basic Rentals.
Annual Basic Rental shall be payable in equal monthly installments in
advance on the first day of each full calendar month during the Term, the first
such payment to include also any prorated Annual Basic Rental for the period
from the date of the commencement of the Term to the first day of the first full
calendar month in the Term.
Section 5.3. Annual Percentage Rental.
Annual Percentage Rental shall be determined and payable monthly on or
before the fifteenth (15th) day following the close of each full calendar month
during the Term, based on Gross Sales for the preceding calendar month. Monthly
payments of Annual Percentage Rental shall be calculated by (a) dividing the
product specified in clause H of Section 1.1. by twelve (12); (b) subtracting
the quotient thus obtained from the amount of Gross Sales for the month in
question, and (c) multiplying the difference thus obtained (if greater than
zero) by the percentage specified in clause H of Section 1.1. The first monthly
payment of Annual Percentage Rental due hereunder shall include prorated Annual
Percentage Rental based on Gross Sales from the Commencement Date through the
last day of the month immediately prior to the first full calendar month in the
Term. As soon as practicable after the end of each Rental Year, the
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<PAGE>
Annual Percentage Rental paid or payable for such Rental Year shall be adjusted
between Landlord and Tenant, and each party hereby agrees to pay to the other,
on demand, the amount of any excess or deficiency in Annual Percentage Rental
paid by Tenant to Landlord during the preceding Rental Year as may be necessary
to effect adjustment to the agreed Annual Percentage Rental.
Section 5.4. "Rental Year" Defined.
The first "Rental Year" shall commence on the first day of the Term and
shall end at the close of the twelfth full calendar month following the
commencement of the Term; thereafter each Rental Year shall consist of
successive periods of twelve calendar months. Any portion of the Term remaining
at the end of the last full Rental Year shall constitute the final Rental Year
and all Rental shall be apportioned therefor.
Section 5.5. "Gross Sales" Defined.
"Gross Sales" means the actual sales prices or rentals of all goods,
wares and merchandise sold, leased, licensed or delivered and the actual charges
for all services performed by Tenant or by any subtenant, licensee or
concessionaire in, at, from, or arising out of the use of the Premises, whether
for wholesale, retail, cash, credit, trade-in or otherwise, without reserve or
deduction for inability or failure to collect. Gross Sales shall include,
without limitation, sales and services (a) where the orders therefor originate
in, at, from, or arising out of the use of the Premises, whether delivery or
performance is made from the Premises or from some other place, (b) made or
performed by mail, telephone, or telegraph orders, (c) made or performed by
means of mechanical or other vending devices in the Premises, or (d) which
Tenant or any subtenant, licensee, concessionaire or other person in the normal
and customary course of its business would credit or attribute to its operations
in any part of the Premises. Any deposit not refunded shall be included in Gross
Sales. Each installment or credit sale shall be treated as a sale for the full
price in the month during which such sale is made, regardless of whether or when
Tenant receives payment therefor. No franchise, occupancy or capital stock tax
and no income or similar tax based on income or profits shall be deducted from
Gross Sales.
The following shall not be included in Gross Sales: (i) any exchange of
merchandise between stores of Tenant where such exchange is made solely for the
convenient operation of Tenant's business and not for the purpose of
consummating a sale made in, at or from the Premises, or for the purpose of
depriving Landlord of the benefit of a sale which would otherwise be made in or
at the Premises, (ii) returns to shippers or manufacturers, (iii) cash or credit
refunds to customers on transactions (not to exceed the actual selling price of
the item returned) otherwise included in Gross Sales, (iv) sales of trade
fixtures, machinery and equipment after use thereof in the conduct of Tenant's
business, (v) amounts collected and paid by Tenant to any government for any
sales or excise tax, and (vi) the amount of any discount on sales to employees.
Section 5.6. Statements of Gross Sales.
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Tenant shall deliver to Landlord: (a) within ten (10) days after the
close of each calendar month of the Term, a written report signed by Tenant or
by an authorized officer or agent of Tenant, showing the Gross Sales made in the
preceding calendar month and (b) within sixty (60) days after the close of each
Rental Year, a statement of Gross Sales for the preceding Rental Year which
shall conform to and be in accordance with generally accepted accounting
principles and Section 5.5. The annual statement shall be accompanied by the
signed certificate of an independent Certified Public Accountant stating
specifically that (i) he has examined the report of Gross Sales of the preceding
Rental Year, (ii) his examination included such tests of Tenant's books and
records as he considered necessary or appropriate under the circumstances, (iii)
such report presents fairly the Gross Sales of the preceding Rental Year, and
(iv) the said Gross Sales conform with and are computed in compliance with the
definition of Gross Sales Contained in Section 5.5 hereof. If Tenant shall fail
to deliver such annual statement and certificate to Landlord within said sixty
(60) day period, Landlord shall have the right thereafter to employ an
independent Certified Public Accountant to examine such books and records,
including without limitation all records required by Section 5.7, as may be
necessary to certify the amount of Tenant's Gross Sales for such Rental Year,
and Tenant shall pay to Landlord the cost thereof as Additional Rental.
If such audit shall disclose that Tenant's records, in the opinion of
such independent Certified Public Accountant, are inadequate to disclose such
Gross Sales, Landlord shall be entitled to collect, as Additional Rental, an
equitable sum determined by such independent Certified Public Accountant but not
exceeding fifty percent (50%) of the Annual Basic Rental payable by Tenant
during the period in question.
Section 5.7. Tenant's Records.
For the purpose of permitting verification by Landlord of any amounts
due as Rental, Tenant will (i) cause the business upon the Premises to be
operated so that a duplicate sales slip, invoice or non-resettable cash register
receipt, serially numbered, or such other device for recording sales as Landlord
approves, shall be issued with each sale or transaction, whether for cash,
credit or exchange, and (ii) preserve for at least three (3) years, and during
the Term shall keep at the Tenant Notice Address or the Premises, a general
ledger, required receipts and disbursement journals and such sales records and
other supporting documentation, together with original or duplicate books and
records, which shall disclose all information required to determine Tenant's
Gross Sales and which shall conform to and be in accordance with generally
accepted accounting principles. At any time or from time to time after advance
notice to Tenant, Landlord or any Mortgagee, their agents and accountants, shall
have the right during business hours to make any examination or audit of such
books and records which Landlord or such Mortgagee may desire. If such audit
shall disclose a liability in any Rental Year for Rental in excess of the Rental
theretofore paid by Tenant for such period, Tenant shall promptly pay such
liability. Should any such liability for Rental equal or exceed three percent
(3%) of Annual Percentage Rental previously paid for such Rental Year, or if
such audit shall disclose that Tenant has underreported Gross Sales by five
percent (5%) or more during any Rental Year, (a) Tenant shall promptly pay the
cost of audit and interest at the Default Rate on all additional Annual
Percentage Rental then payable, accounting from the date such additional Annual
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Percentage Rental was due and payable, and (b) an Event of Default shall be
deemed to exist unless, within ten (10) days after Landlord shall have given
Tenant notice of such liability, Tenant shall furnish Landlord with evidence
satisfactorily demonstrating to Landlord that such liability for additional
Annual Percentage Rental was the result of good faith error on Tenant's part. If
such audit shall disclose that Tenant's records, in Landlord's opinion, are
inadequate to accurately reflect Tenant's Gross Sales, Landlord shall have the
right to retain a consultant to prepare and establish a proper recording system
for the determination of Tenant's Gross Sales and Tenant agrees that it shall
use the system, books and records prescribed by such consultant for such
purpose. Tenant shall pay to Landlord, as Additional Rental, the fees and
expenses of such consultant.
Section 5.8. Payment of Rental.
Tenant shall pay all Rental when due and payable, without any setoff,
deduction or prior demand therefor whatsoever. Except as provided herein, Tenant
shall not pay any Rental earlier than one (1) month in advance of the date on
which it is due. If Tenant shall fail to pay any Rental within seven (7) days
after the same is due, Tenant shall be obligated to pay a late payment charge
equal to the greater of One Hundred Dollars ($100.00) or ten percent (10%) of
any Rental payment not paid when due to reimburse Landlord for its additional
administrative costs. In addition, any Rental which is not paid within seven (7)
days after the same is due shall bear interest at the Default Rate from the
first day due until paid. Any Additional Rental which shall become due shall be
payable, unless otherwise provided herein, with the next installment of Annual
Basic Rental. Rental and statements required of Tenant shall be paid and
delivered to Landlord at the management office of Landlord in the Shopping
Center Area during normal business hours, or at such other place as Landlord may
from time to time designate in a notice to Tenant. Any payment by Tenant or
acceptance by Landlord of a lesser amount than shall be due from Tenant to
Landlord shall be treated as a payment on account. The acceptance by Landlord of
a check for a lesser amount with an endorsement or statement thereon, or upon
any letter accompanying such check, that such lesser amount is payment in full,
shall be given no effect, and Landlord may accept such check without prejudice
to any other rights or remedies which Landlord may have against Tenant.
Section 5.9. Advance Rental.
Upon execution of this Lease by Tenant, Tenant shall pay to Landlord the
Advance Rental, the same to be held as security for the performance by Tenant of
all obligations imposed under this Lease which Tenant is required to perform
prior to the commencement of the Term. If Tenant shall faithfully perform all
such obligations, then the Advance Rental shall be applied, pro tanto, by
Landlord against the Rental first becoming due hereunder. Otherwise, Landlord
shall be entitled to apply the Advance Rental, pro tanto, against any damages
which it may sustain by reason of Tenant's failure to perform its obligations
under this Lease, but such application shall not preclude Landlord from
recovering greater damages if the same can be established.
Section 5.10. Future Expansion.
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In the event that during the Term (i) additional Anchor Stores are
constructed in the Shopping Center, or (ii) one or more expansions of Landlord's
Building, each involving the addition of at least 50,000 square feet of
Landlord's Floor Area, are constructed, then, upon the opening for business of
each such additional Anchor Store or expansion of Landlord's Building, the
Annual Basic Rental shall be increased by ten percent (10%) for each such Anchor
Store or expansion opening and the Breakpoint shall be increased by a like
percentage.
ARTICLE V
TAXES
Section 6.1. Tenant to Pay Proportionate Share of Taxes.
Tenant shall pay in each Tax Year during the Term, as Additional Rental,
a proportionate share of all amounts payable by Landlord with respect to real
estate taxes, ad valorem taxes and assessments, general and special, taxes on
real estate rental receipts, taxes on Landlord's gross receipts, or any other
tax imposed upon or levied against real estate, or upon owners of real estate as
such rather than persons generally, extraordinary as well as ordinary,
foreseeable and unforeseeable, including taxes imposed on leasehold improvements
which are assessed against Landlord, payable with respect to or allocable to the
Shopping Center Area, including all land, Landlord's Building and all other
buildings and improvements situated thereon, together with the reasonable cost
(including fees of attorneys, consultants and appraisers) of any negotiation,
contest or appeal pursued by Landlord in an effort to reduce any such tax,
assessment or charge, and all of Landlord's reasonable administrative costs in
relation to the foregoing, all of the above being collectively referred to
herein as "Taxes". Tenant's proportionate share of Taxes shall be computed by
multiplying the amount of such Taxes (less any contributions by Anchor Stores)
by a fraction, the numerator of which shall be Tenant's Floor Area and the
denominator of which shall be Landlord's Floor Area. For the Tax Year in which
the Term commences or terminates, the provisions of this Section shall apply,
but Tenant's liability for its proportionate share of any Taxes for such year
shall be subject to a pro rata adjustment based upon the number of days of such
Tax Year falling within the Term.
Section 6.2. Payment of Proportionate Share of Taxes.
Tenant's proportionate share of Taxes shall be paid by Tenant in monthly
installments in such amounts as are estimated and billed for each Tax Year
during the Term by Landlord, each such installment being due on the first day of
each calendar month. At any time during a Tax Year, Landlord may reestimate
Tenant's proportionate share of Taxes and thereafter adjust Tenant's monthly
installments payable during the Tax Year to reflect more accurately Tenant's
proportionate share of Taxes. Within one hundred twenty (120) days after
Landlord's receipt of tax bills for each Tax Year, or such reasonable (in
Landlord's determination) time thereafter, Landlord will notify Tenant of the
amount of Taxes for the Tax Year in question and the amount of Tenant's
proportionate share thereof. Any overpayment or deficiency in Tenant's payment
of its proportionate share of Taxes for each Tax Year shall be adjusted between
Landlord and Tenant, and Landlord and Tenant hereby agree that Tenant shall pay
Landlord or Landlord shall credit to Tenant's account (or, if such adjustment is
at the end of the Term, Landlord shall pay
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Tenant), as the case may be, within fifteen (15) days of the aforesaid notice to
Tenant, such amounts as may be necessary to effect such adjustment. Failure of
Landlord to provide such notice within the time prescribed shall not relieve
Tenant of its obligations hereunder. Notwithstanding the foregoing, if Landlord
is required under law to pay Taxes in advance, Tenant agrees to pay Landlord,
upon commencement of the Term of this Lease, an amount equal to Tenant's share
of Taxes for the entire Tax Year in which the Term of this Lease commences, and
in such event, at the termination of this Lease, Tenant shall be entitled to a
refund of Taxes paid which are attributable to a period after this Lease
expires.
Section 6.3. "Tax Year" Defined.
The term "Tax Year" means each twelve (12) month period (deemed, for the
purpose of this Section, to have 365 days) established as the real estate tax
year by the taxing authorities having lawful jurisdiction over the Shopping
Center Area.
Section 6.4. Taxes on Rental.
In addition to Tenant's proportionate share of Taxes, Tenant shall pay
to the appropriate agency any sales, excise and other taxes (not including,
however, Landlord's income taxes) levied, imposed or assessed by the State in
which the Shopping Center is situate or any political subdivision thereof or
other taxing authority upon any Rental payable hereunder. Tenant shall also pay,
prior to the time the same shall become delinquent or payable with penalty, all
taxes imposed on its inventory, furniture, trade fixtures, apparatus, equipment,
leasehold improvements installed by Tenant or by Landlord on behalf of Tenant
(except to the extent such leasehold improvements shall be covered by Taxes
referred to in Section 6.1), and any other property of Tenant. Landlord may
require that Tenant's leasehold improvements be separately assessed by the
taxing authority.
ARTICLE VII
IMPROVEMENTS
Section 7.1. Tenant's Improvements.
Tenant agrees, at its sole cost and expense, to remodel the interior and
exterior of the Premises in accordance with approved plans and specifications,
using new and quality materials and equipment. Plans and specifications for all
improvements, including the type of materials to be used by Tenant in the
Premises, must be set forth in detail and submitted to Landlord for approval
immediately upon execution of this Lease. Tenant agrees to commence remodeling
of the Premises promptly upon approval by Landlord of such plans and
specifications. All such remodeling must be completed prior to commencement of
the Term.
For the purpose of performing its obligations hereunder and for the
purpose of installing its fixtures and other equipment, Tenant will be permitted
to enter the Premises not less than thirty (30) days prior to the commencement
of the Term, on condition that (i) Tenant's activities are conducted in such a
manner so as not to unreasonably interfere with Landlord's shopping center
activities, and (ii) Tenant shall, at its own expense, remove from the Premises
and from
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the Shopping Center Area in its entirety all trash which may accumulate in
connection with Tenant's activities. It is understood and agreed that during
said thirty (30) day period, Tenant shall perform all duties and obligations
imposed by this Lease, saving and excepting only the obligation to pay Rental
(other than any Additional Rental due Landlord by reason of Tenant's failure to
perform any of its obligations hereunder).
Section 7.2. Effect of Opening for Business.
By opening the Premises for business, Tenant shall be deemed to have (a)
accepted the Premises, (b) acknowledged that the same are in the condition
called for hereunder, and (c) agreed that the obligations of Landlord imposed
hereunder have been fully performed.
Section 7.3. Mechanic's Liens.
No work performed by Tenant pursuant to this Lease, whether in the
nature of erection, construction, alteration or repair, shall be deemed to be
for the immediate use and benefit of Landlord so that no mechanic's or other
lien shall be allowed against the estate of Landlord by reason of any consent
given by Landlord to Tenant to improve the Premises. Tenant shall place such
contractual provisions as Landlord may request in all contracts and subcontracts
for Tenant's improvements assuring Landlord that no mechanic's liens will be
asserted against Landlord's interest in the Premises or the property of which
the Premises are a part. Said contracts and subcontracts shall provide, among
other things, the following: That notwithstanding anything in said contracts or
subcontracts to the contrary, Tenant's contractors, subcontractors, suppliers
and materialmen (hereinafter collectively referred to as "Contractors") will
perform the work and/or furnish the required materials on the sole credit of
Tenant; that no lien for labor or materials will be filed or claimed by the
Contractors against Landlord's interest in the Premises or the property of which
the Premises are a part; that the Contractors will immediately discharge any
such lien filed by any of the Contractor's suppliers, laborers, materialmen or
subcontractors; and that the Contractors will indemnify and save Landlord
harmless from any and all costs and expenses, including reasonable attorneys'
fees, suffered or incurred as a result of any such lien against Landlord's
interest that may be filed or claimed in connection with or arising out of work
undertaken by the Contractors. Tenant shall pay promptly all persons furnishing
labor or materials with respect to any work performed by Tenant or its
Contractors on or about the Premises. If any mechanic's or other liens shall at
any time be filed against the Premises or the property of which the Premises are
a part by reason of work, labor, services or materials performed or furnished,
or alleged to have been performed or furnished, to Tenant or to anyone holding
the Premises through or under Tenant, and regardless of whether any such lien is
asserted against the interest of Landlord or Tenant, Tenant shall forthwith
cause the same to be discharged of record or bonded to the satisfaction of
Landlord. If Tenant shall fail to cause such lien forthwith to be so discharged
or bonded after being notified of the filing thereof, then, in addition to any
other right or remedy of Landlord, Landlord may bond or discharge the same by
paying the amount claimed to be due, and the amount so paid by Landlord,
including reasonable attorneys' fees incurred by Landlord either in defending
against such lien or in procuring the bonding or discharge of such lien,
together with interest thereon at the Default Rate, shall be due and payable by
Tenant to Landlord as Additional Rental.
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Section 7.4. Tenant's Leasehold Improvements and Trade Fixture.
All leasehold improvements (as distinguished from trade fixtures and
apparatus) installed in the Premises at any time, whether by or on behalf of
Tenant or by or on behalf of Landlord, shall not be removed from the Premises at
any time, unless such removal is consented to in advance by Landlord; and at the
expiration of this Lease (either on the Termination Date or upon such earlier
termination as provided in this Lease), all such leasehold improvements shall be
deemed to be part of the Premises, shall not be removed by Tenant when it
vacates the Premises, and title thereto shall vest solely in Landlord without
payment of any nature to Tenant.
All trade fixtures and apparatus (as distinguished from leasehold
improvements) owned by Tenant and installed in the Premises shall remain the
property of Tenant and shall be removable at any time, including upon the
expiration of the Term; provided Tenant shall not at such time be in default of
any terms or covenants of this Lease, and provided further, that Tenant shall
repair any damage to the Premises caused by the removal of said trade fixtures
and apparatus and shall restore the Premises to substantially the same condition
as existed prior to the installation of said trade fixtures and apparatus.
To protect Landlord in the event Tenant defaults hereunder, Tenant
hereby grants to Landlord a security interest in all goods, inventory,
equipment, trade fixtures, and all personal property belonging to Tenant which
are or may be put into the Premises during the Term and all proceeds of the
foregoing. Said security interest shall secure all amounts to be paid by Tenant
to Landlord hereunder, including all costs of collection and other costs
specified in Sections 17.2 and 17.3 hereof, and any other indebtedness of Tenant
to Landlord. Tenant agrees to sign any financing statement or security agreement
requested by Landlord in order to perfect such security interest. The lien
granted hereunder shall be in addition to any Landlord's lien that may now or at
any time hereafter be provided by law.
ARTICLE VIII
OPERATIONS
Section 8.1. Operations by Tenant.
In regard to the use and occupancy of the Premises, Tenant will at its
expense: (a) keep the inside and outside of all glass in the doors and windows
of the Premises clean; (b) keep all exterior store surfaces of the Premises
clean; (c) replace promptly any cracked or broken glass of the Premises with
glass of like color, grade and quality; (d) maintain the Premises in a clean,
orderly and sanitary condition and free of insects, rodents, vermin and other
pests; (e) keep any garbage, trash, rubbish or other refuse in rat-proof
containers within the interior of the Premises until removed; (f) deposit such
garbage, trash, rubbish and refuse, on a daily basis, in designated receptacles
provided by Landlord; (g) keep all mechanical apparatus free of vibration and
noise which may be transmitted beyond the Premises; (h) comply with all laws,
ordinances, rules and regulations of governmental authorities and all reasonable
recommendations of Landlord's casualty insurer(s) and other applicable insurance
rating organization now or hereafter in effect; (i) light the show windows of
the Premises and exterior signs and turn the same off to the extent required by
Landlord; (j) keep in the Premises and maintain in good working order one (1) or
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more type 2A1OBC dry chemical fire extinguisher(s); (k) comply with and observe
all rules and regulations established by Landlord from time to time which apply
generally to all retail tenants in the Shopping Center Area; (l) maintain
sufficient and seasonal inventory and have sufficient number of personnel to
maximize sales volume in the Premises; and (m) conduct its business in all
respects in a dignified manner in accordance with high standards of store
operation consistent with the quality of operation of the Shopping Center Area
as determined by Landlord and provide an appropriate mercantile quality
comparable with the entire Shopping Center.
In regard to the use and occupancy of the Premises and the Common Areas,
Tenant will not: (n) place or maintain any merchandise, signage, trash, refuse
or other articles in any vestibule or entry of the Premises, on the footwalks or
corridors adjacent thereto or elsewhere on the exterior of the Premises, nor
obstruct any driveway, corridor, footwalk, parking area, mall or any other
Common Areas; (o) use or permit the use of any objectionable advertising medium
such as, without limitation, loudspeakers, phonographs, public address systems,
sound amplifiers, reception of radio or television broadcasts within the
Shopping Center, which is in any manner audible or visible outside of the
Premises; (p) permit undue accumulations of or burn garbage, trash, rubbish or
other refuse within or without the Premises; (q) cause or permit objectionable
odors (in Landlord's opinion) to emanate or to be dispelled from the Premises;
(r) solicit business in any Common Areas; (s) distribute handbills or other
advertising matter in any Common Areas (including placing any of the same in or
upon any automobiles parked in the parking areas); (t) permit the parking of
vehicles so as to interfere with the use of any driveway, corridor, footwalk,
parking area, mall or other Common Areas; (u) receive or ship articles of any
kind outside the designated loading areas for the Premises; (v) use the mall,
corridor or any other Common Areas adjacent to the Premises for the sale or
display of any merchandise or for any other business, occupation or undertaking;
(w) conduct or permit to be conducted any auction, fictitious fire sale, going
out of business sale, bankruptcy sale (unless directed by court order), or other
similar type sale in or connected with the Premises (but this provision shall
not restrict the absolute freedom of Tenant in determining its own selling
prices, nor shall it preclude the conduct of periodic seasonal, promotional or
clearance sales); (x) use or permit the use of any portion of the Premises in a
manner which will be in violation of law, or for any activity of a type which is
not generally considered appropriate for regional shopping centers conducted in
accordance with good and generally accepted standards of operation; (y) place a
load upon any floor which exceeds the floor load which the floor was designed to
carry; (z) operate its heating or air-conditioning in such a manner as to drain
heat or air-conditioning from the Common Areas or from the premises of any other
tenant or other occupant of the Shopping Center; or (aa) use the Premises for
any unlawful or illegal business, use or purpose, or for any business, use or
purpose which is immoral or disreputable (including without limitation "adult
entertainment establishments" and "adult bookstores"), or which is hazardous, or
in such manner as to constitute a nuisance of any kind (public or private), or
for any purpose or in any way in violation of the certificates of occupancy (or
other similar approvals of applicable governmental authorities).
Tenant acknowledges that it is Landlord's intent that the Shopping
Center Area be operated in a manner which is consistent with the highest
standards of decency and morals prevailing in the community which it serves.
Toward that end, Tenant agrees that it will not sell,
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distribute, display or offer for sale any item which, in Landlord's good faith
judgment, is inconsistent with the quality of operation of the Shopping Center
Area or may tend to injure or detract from the moral character or image of the
Shopping Center Area within such community Without limiting the generality of
the foregoing, Tenant will not sell distribute, display or offer for sale (i)
any roach clip, water pipe, bong, coke spoon, cigarette papers, hypodermic
syringe or other paraphernalia commonly used in the use or ingestion of illicit
drugs, (ii) any pornographic, lewd, suggestive, or "adult" newspaper, book,
magazine, film, picture, recording representation or merchandise of any kind, or
(iii) any handgun.
Section 8.2. Signs and Advertising.
Tenant will not place or suffer to be placed or maintained on the
exterior of the Premises, or any part of the interior visible from the exterior
thereof, any sign, banner, advertising matter or any other thing of any kind
(including, without limitation, any hand-lettered advertising), and will not
place or maintain any decoration, letter or advertising matter on the glass of
any window or door of the Premises without first obtaining Landlord's approval.
Tenant will, at its sole cost and expense, maintain such sign, banner,
decoration, lettering, advertising matter or other thing as may be permitted
hereunder in good condition and repair at all times.
Section 8.3. Painting and Displays by Tenant.
Tenant will not paint or decorate any part of the exterior of the
Premises, or any part of the interior of the Premises visible from the exterior
thereof, without first obtaining Landlord's approval. Tenant will install and
maintain at all times, subject to the other provisions of this Section, displays
of merchandise in the show windows (if any) of the Premises. All articles, and
the arrangement, style, color and general appearance thereof, in the interior of
the Premises including, without limitation, window displays, advertising matter,
signs, merchandise and store fixtures, shall be in keeping with the character
and standards of the improvements within the Shopping Center, as determined by
Landlord. Landlord reserves the right to require Tenant to correct any
non-conformity.
Section 8.4. Trash Removal Service
At its option, Landlord may furnish (or authorize others to furnish) a
service for the removal of trash from receptacles designated by Landlord for the
daily deposit by Tenant of its garbage, trash, rubbish or other refuse, and, if
it shall do so, then in each Rental Year, at Landlord's election, Tenant shall
either (i) reimburse Landlord monthly, as Additional Rental, for all costs
incurred by Landlord in furnishing such service, or (ii) pay Landlord the Trash
Removal Service Charge, if any, set forth in clause N of Section 1.1. in twelve
(12) equal monthly installments, subject to adjustments reflecting any increase
in Landlord's cost and expense in furnishing such trash removal service, or
(iii) pay directly such person, firm or corporation authorized by Landlord to
provide such trash removal service; provided, however, that all amounts which
Tenant is obligated to pay to Landlord pursuant to clause (i) or (ii) above
shall not exceed the amounts which Tenant would otherwise be obligated to pay
directly to the same independent contractor utilized by Landlord for the removal
of Tenant's trash, if Tenant were dealing with such contractor at arm's length
for trash removal services for the Premises.
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Section 8.5. Permitted Use Disclaimer
Nothing contained in this Lease shall be construed to indicate any
intent or attempt on the part of Landlord to restrict the price or prices at
which Tenant may sell any goods or services permitted to be sold at or from the
Premises pursuant to this Lease.
Section 8.6. Hazardous Substances
Tenant shall not use or allow the Premises to be used for the Release,
storage, use, treatment, disposal or other handling of any Hazardous Substance,
without the prior consent of Landlord. The term "Release" shall have the same
meaning as is ascribed to it in the Comprehensive Environmental Response,
Compensation and Liability Act. 42 U.S.C. S 9601 et seq., as amended,
("CERCLA"). The term "Hazardous Substance" means (i) any substance defined as a
"hazardous substance" under CERCLA, (ii) petroleum, petroleum products, natural
gas, natural gas liquids, liquefied natural gas, and synthetic gas, and (iii)
any other substance or material deemed to be hazardous, dangerous, toxic, or a
pollutant under any federal, state or local law, code, ordinance or regulation.
Tenant shall: (a) give prior notice to Landlord of any activity or
operation to be conducted by Tenant at the Premises which involves the Release,
use, handling, generation, treatment, storage, or disposal of any Hazardous
Substance ("Tenant's Hazardous Substance Activity"), (b) comply with all
federal, state, and local laws, codes, ordinances, regulations, permits and
licensing conditions governing the Release, discharge, emission, or disposal of
any Hazardous Substance and prescribing methods for or other limitations on
storing, handling, or otherwise managing Hazardous Substances, (c) at its own
expense, promptly contain and remediate any Release of Hazardous Substances
arising from or related to Tenant's Hazardous Substance Activity in the
Premises, Landlord's Building, the Shopping Center, the Shopping Center Area or
the environment and remediate and pay for any resultant damage to property,
persons, and/or the environment, (d) give prompt notice to Landlord, and all
appropriate regulatory authorities, of any Release of any Hazardous Substance in
the Premises, Landlord's Building, the Shopping Center, the Shopping Center Area
or the environment arising from or related to Tenant's Hazardous Substance
Activity, which Release is not made pursuant to and in conformance with the
terms of any permit or license duly issued by appropriate governmental
authorities, any such notice to include a description of measures taken or
proposed to be taken by Tenant to contain and remediate the Release and any
resultant damage to property, persons, or the environment, (e) at Landlord's
request, which shall not be more frequent than once per calendar year, retain an
independent engineer or other qualified consultant or expert acceptable to
Landlord, to conduct, at Tenant's expense, an environmental audit of the
Premises and immediate surrounding areas, and the scope of work to be performed
by such engineer, consultant, or expert shall be approved in advance by
Landlord, and all of the engineer's, consultant's, or expert's work product
shall be made available to Landlord, (f) at Landlord's request from time to
time, execute affidavits, representations and the like concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Substances in the
Premises, (g) reimburse to Landlord, upon demand, the reasonable cost of any
testing for the purpose of ascertaining if there has been any Release of
Hazardous Substances in the Premises, if such testing is required by any
governmental agency or
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Landlord's Mortgagee, (h) upon expiration or termination of this Lease,
surrender the Premises to Landlord free from the presence and contamination of
any Hazardous Substance.
ARTICLE IX
REPAIRS AND ALTERATIONS
Section 9.1. Repairs To Be Made By LandlordSection 9.1. Repairs To Be
Made By Landlord.
Landlord, at its expense, will make, or cause to be made structural
repairs to exterior walls, structural columns, roof penetrations and structural
floors which collectively enclose the Premises (excluding, however, all doors,
door frames, storefronts, windows and glass); provided Tenant shall give
Landlord notice of the necessity for such repairs.
Section 9.2. Repairs To Be Made By Tenant
All repairs to the Premises or any installations, equipment or
facilities therein, other than those repairs required to be made by Landlord
pursuant to Sections 9.1, 12.3 or Section 14.1, shall be made by Tenant at its
expense. Without limiting the generality of the foregoing, Tenant will keep the
interior of the Premises, together with all electrical, plumbing and other
mechanical installations therein and (if and to the extent provided in Schedule
F) the heating, ventilating and air-conditioning system installed by Tenant in
the Premises, in good order and repair and will make all replacements from time
to time required thereto at its expense. Tenant will surrender the Premises at
the expiration of the Term or at such other time as it may vacate the Premises
in as good condition as when received, excepting depreciation caused by ordinary
wear and tear, damage by Casualty, unavoidable accident or Act of God. Tenant
will not overload the electrical wiring serving the Premises or within the
Premises, and will install at its expense, subject to the provisions of Section
9.4, any additional electrical wiring which may be required in connection with
Tenant's apparatus. Any damage or injury sustained by any person because of
mechanical, electrical, plumbing or any other equipment or installations, whose
maintenance and repair shall be the responsibility of Tenant, shall be paid for
by Tenant, and Tenant hereby agrees to indemnify and hold Landlord harmless from
and against all claims, actions, damages and liability in connection therewith,
including, but not limited to attorneys' and other professional fees, and any
other cost which Landlord might reasonably incur.
Section 9.3. Damage to Premises.
Tenant will repair promptly at its expense any damage to the Premises
and, upon demand, shall reimburse Landlord (as Additional Rental) for the cost
of the repair of any damage elsewhere in the Shopping Center, caused by or
arising from the installation or removal of property in or from the Premises,
regardless of fault or by whom such damage shall be caused (unless caused by
Landlord, its agents, employees or contractors). If Tenant shall fail to
commence such repairs within five (5) days after notice to do so from Landlord,
Landlord may make or cause the same to be made and Tenant agrees to pay to
Landlord promptly upon Landlord's demand, as Additional Rental, the cost thereof
with interest thereon at the Default Rate until paid.
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Section 9.4. Alterations by Tenant.
Tenant will not make any alterations, renovations, improvements or other
installations in, on or to any part of the Premises (including, without
limitation, any alterations of the storefront, signs, structural alterations, or
any cutting or drilling into any part of the Premises or any securing of any
fixture, apparatus, or equipment of any kind to any part of the Premises) unless
and until Tenant shall have caused plans and specifications therefor to have
been prepared, at Tenant's expense, by an architect or other duly qualified
person and shall have obtained Landlord's approval thereof. If such approval is
granted, Tenant shall cause the work described in such plans and specifications
to be performed, at its expense, promptly, efficiently, competently and in a
good and workmanlike manner by duly qualified and licensed persons or entities,
using first grade materials, without interference with or disruption to the
operations of tenants or other occupants of the Shopping Center. All such work
shall comply with all applicable codes, rules, regulations and ordinances.
Section 9.5. Changes and Additions to Shopping Center.
Landlord reserves the right at any time and from time to time to (a)
make or permit changes or revisions in the plan for the Shopping Center or the
Shopping Center Area including additions to, subtractions from, rearrangements
of, alterations of, modifications of, or supplements to, the building areas,
walkways, driveways, parking areas, or other Common Areas, (b) construct
improvements in Landlord's Building and the Shopping Center Area and to make
alterations thereof or additions thereto and to build additional stories on or
in any such building(s) and build adjoining same, including (without limitation)
kiosks, pushcans and other displays in the Common Areas, and (c) make or permit
changes or revisions in the Shopping Center or the Shopping Center Area,
including additions thereto, and to convey portions of the Shopping Center Area
to others for the purpose of constructing thereon other buildings or
improvements, including additions thereto and alterations thereof; provided,
however, that no such changes, rearrangements or other construction shall reduce
the parking areas below the number of parking spaces required by law.
Section 9.6. Roof and Walls.
Landlord shall have the exclusive right to use all or any part of the
roof of the Premises for any purpose; to erect additional stories or other
structures over all or any part of the Premises; to erect in connection with the
construction thereof temporary scaffolds and other aids to construction on the
exterior of the Premises, provided that access to the Premises shall not be
denied; and to install, maintain, use, repair and replace within the Premises
pipes, ducts, conduits, wires and all other mechanical equipment serving other
parts of the Shopping Center Area, the same to be in locations within the
Premises as will not unreasonably deny Tenant's use thereof. Landlord may make
any use it desires of the side or rear walls of the Premises or other structural
elements of the Premises (including, without limitation, free-standing columns
and footings for all columns), provided that such use shall not encroach on the
interior of the Premises unless (i) all work carried on by Landlord with respect
to such encroachment shall be done during hours when the Premises are not open
for business and otherwise shall be carried out
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in such a manner as not to unreasonably interfere with Tenant's operations in
the Premises, (ii) Landlord, at its expense, shall provide any security services
to the Premises required by such work, and (iii) Landlord, at its expense, shall
repair all damage to the Premises resulting from such work.
ARTICLE X
COMMON AREAS
Section 10.1. Use of Common Areas.
Landlord grants to Tenant and its agents, employees and customers a
non-exclusive license to use the Common Areas in common with others during the
Term, subject to the exclusive control and management thereof at all times by
Landlord or others and subject, further, to the rights of Landlord set forth in
Sections 9.5 and 10.2.
Section 10.2. Management and Operation of Common Areas.
Landlord will operate and maintain, or will cause to be operated and
maintained, the Common Areas in a manner deemed by Landlord to be reasonable and
appropriate and in the best interests of the Shopping Center. Landlord will have
the right (i) to establish, modify and enforce reasonable rules and regulations
with respect to the Common Areas; (ii) to enter into, modify and terminate
easement and other agreements pertaining to the use and maintenance of the
Common Areas; (iii) to enforce parking charges (by operation of meters or
otherwise) with appropriate provisions for free parking ticket validation by
tenants; (iv) to close all or any portion of the Common Areas to such extent as
may, in the opinion of Landlord, be necessary to prevent a dedication thereof or
the accrual of any rights to any person or to the public therein; (v) to close
temporarily any or all portions of the Common Areas; (vi) to discourage
non-customer parking; and (vii) to do and perform such other acts in and to said
areas and improvements as, in the exercise or good business judgment, Landlord
shall determine to be advisable.
Section 10.3. Employee Parking Areas.
Tenant and its employees shall park their cars only in such areas
designated for that purpose by Landlord. Upon request by Landlord, Tenant shall
furnish Landlord with State automobile license numbers assigned to Tenant's car
or cars and cars used by its employees and shall thereafter notify Landlord of
any changes in such information within five (5) days after such changes occur.
If Tenant or its employees shall fail to park their cars in the designated
parking areas, then, without limiting any other remedy, which Landlord may
pursue in the event of Tenant's default, Landlord, after giving notice to
Tenant, shall have the right to charge Tenant, as Additional Rental, the sum of
Ten Dollars ($10.00) per day per car parked in violation of the provisions of
this Section. Tenant shall notify its employees in writing of the provisions of
this Section.
Section 10.4. Tenant to Share Expense of Common Areas.
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Tenant will pay Landlord, as Additional Rental, a proportionate share of
Landlord's Operating Costs which shall be computed by multiplying Landlord's
Operating Costs (less any contribution to such costs and expenses made by the
owner or operator of any Anchor Store in the Shopping Center) by a fraction, the
numerator of which is Tenant's Floor Area and the denominator of which is
Landlord's Leased Floor Area. Such proportionate share shall be paid by Tenant
in monthly installments in such amounts as are estimated and billed by Landlord
at the beginning of each twelve (12) month period commencing and ending on dates
designated by Landlord, each installment being due on the first day of each
calendar month. At any time during any such twelve (12) month period, Landlord
may reestimate Tenant's proportionate share of Landlord's Operating Costs and
thereafter adjust Tenant's monthly installments payable during such twelve (12)
month period to reflect more accurately Tenant's proportionate share of
Landlord's Operating Costs. Within one hundred twenty (120) days (or such
additional time thereafter as is reasonable under the circumstances) after the
end of each such twelve (12) month period, Landlord shall deliver to Tenant a
statement of Landlord's Operating Costs for such twelve (12) month period and
the monthly installments paid or payable shall be adjusted between Landlord and
Tenant, and Tenant shall pay Landlord or Landlord shall credit Tenant's account
(or, if such adjustment is at the end of the Term, Landlord shall pay Tenant),
as the case may be, within fifteen (15) days of receipt of such statement, such
amounts as may be necessary to effect such adjustment. Upon reasonable notice,
Landlord shall make available for Tenant's inspection (which inspection shall be
at Tenant's sole cost and expense) at Landlord's office, during normal business
hours, Landlord's records relating to Landlord's Operating Costs for such
preceding twelve (12) month period. Failure of Landlord to provide the statement
called for hereunder within the time prescribed shall not relieve Tenant from
its obligations hereunder.
Section 10.5. "Landlord's Operating, Costs Defined".
The term "Landlord's Operating Costs" means all costs and expenses
incurred by or on behalf of Landlord in operating, managing, insuring, securing
and maintaining the Common Areas pursuant to Section 10.2. "Landlord's Operating
Costs" includes, but is not limited to, all costs and expenses of operating,
maintaining, repairing, lighting, signing, cleaning, painting, striping,
policing and security of the Common Areas (including the cost of uniforms,
equipment and employment taxes); alarm and life safety systems; insurance,
including, without limitation, liability insurance for personal injury, death
and property damage, all-risks casualty insurance (including coverage against
fire, flood, theft or other casualties), worker's compensation insurance or
similar insurance covering personnel, fidelity bonds for personnel, insurance
against liability for assault and battery, defamation and claims of false arrest
occurring on and about the Common Areas, plate glass insurance for glass
exclusively serving the Common Areas; the costs and expenses of maintenance of
all exterior glass; maintenance of sprinkler systems; removal of water, snow,
ice, trash and debris; regulation of traffic; surcharges levied upon or assessed
against parking spaces or areas by governmental or quasi-governmental
authorities, payments toward mass transit or car pooling facilities or otherwise
as required by governmental or quasi-governmental authorities; costs and
expenses in connection with maintaining federal, state or local governmental
ambient air and environmental standards; the cost of all materials, supplies and
services purchased or hired therefor; operation of public toilets; installing
and renting of signs; fire protection; maintenance, repair and replacement of
utility systems serving the
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Common Areas, including, but not limited to, water, sanitary sewer and storm
water lines and other utility lines, pipes and conduits; costs and expenses of
maintaining and operating sewage treatment facilities, if any; costs and
expenses of inspecting and depreciation of machinery and equipment used in the
operation and maintenance of the Common Areas and personal property taxes and
other charges (including, but not limited to, financing, leasing or rental
costs) incurred in connection with such equipment; costs and expenses of the
coordination and use of truck docks and loading facilities; costs and expenses
of repair or replacement of awnings, paving, curbs, walkways, landscaping,
drainage, pipes, ducts, conduits and similar items, plate glass, lighting
facilities, floor coverings, and the roof; costs and expenses of planting,
replanting, replacing and displaying flowers, shrubbery and planters; costs and
expenses incurred in the purchase or rental of music program services and
loudspeaker system, including furnishing electricity therefor; costs of
providing light and power to the Common Areas; costs of providing energy to
heat, ventilate and air-condition the Common Areas and the operation,
maintenance, and repair of equipment required therefor (including, without
limitation, the costs of energy management system serving the Shopping Center
Area); cost of water services, if any, furnished by Landlord for the
non-exclusive use of all tenants; parcel pick-up and delivery services; and
administrative costs attributable to the Common Areas for on-site personnel and
an overhead cost equal to fifteen percent (15%) of the total costs and expenses
of operating and maintaining the Common Areas. Landlord may elect to amortize
any of the foregoing costs and expenses over a useful life determined in
accordance with generally accepted accounting principles.
Section 10.6. Mall Heating, Ventilating and Air-Conditioning Equipment
Contribution Rate.
In each Rental Year, Tenant shall pay Landlord annually (in twelve (12)
equal monthly installments together with the Annual Basic Rental), as Additional
Rental, an amount (the "Mall Heating, Ventilating and Air-Conditioning Equipment
Contribution") determined by multiplying the Mall Heating, Ventilating and
Air-Conditioning Equipment Contribution Rate by Tenant's Floor Area.
Section 10.7. Renovation or Expansion of Common Areas.
If, during the Term, the Common Areas, or any part thereof, are expanded
or renovated to the extent that Landlord's Improvement Costs incurred in
connection therewith exceed a sum equal to Twenty Dollars ($20.00) per square
foot of Landlord's Floor Area, the Annual Basic Rental and the dollar amount set
forth in clause H of Section 1.1 each shall be increased by ten percent (10%)
thereof for each such expansion or renovation effective as of the date on which
Landlord delivers to Tenant a notice that Landlord has incurred such costs. The
term "Landlord's Improvement Costs" means all direct and indirect costs and
expenses incurred by Landlord and properly allocated to the construction and
development of capital improvements to the Common Areas, but not including any
cost or expense included in Landlord's Operating Costs. Upon reasonable notice,
Landlord shall make available for Tenant's inspection (which inspection shall be
at Tenant's sole cost and expense) at Landlord's office, during normal business
hours, Landlord's records relating to Landlord's Improvement Costs as to which
any such notice shall have been delivered.
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ARTICLE XI
MERCHANTS' ASSOCIATION
Section 11.1. Merchants' Association.
Tenant agrees to maintain a membership in any merchants' association, if
and when established by Landlord (the "Association"), and for the purpose of
creating and maintaining a fund for the general promotion and welfare of the
Shopping Center as a whole, agrees to pay to the Association or its agent the
amounts specified in Section 11.2 regardless of whether Tenant shall remain a
member of the Association during the Term. Notwithstanding anything to the
contrary which may be contained in this Lease, or in any Article of
Incorporation, Corporate Charter or By-Laws of the Association, Tenant covenants
and agrees that Landlord may in its sole discretion elect to provide the
Association with any or all of the following, and Tenant further expressly
authorizes the Association to reimburse Landlord for providing: (i) the services
of a marketing manager and all staff deemed necessary by Landlord to carry out
effectively the promotion and public relations objectives of the Association;
(ii) such reasonable space as may be necessary to carry out the functions of the
marketing manager and his or her staff; and (iii) such office equipment,
supplies, telephones and other related costs as may be deemed necessary by
Landlord to service fully the marketing manager and his or her staff. The
Association may appoint Landlord as its agent for the collection of the
Association contributions with the right, joint and several, to collect and
enforce on behalf of the Association all debts owing by Tenant to the
Association. The Association shall have the benefit of Tenant's obligations
under this Article XI and shall be entitled to enforce such obligations
directly.
Section 11.2. Tenant's Contribution to Merchants' Association.
Tenant shall make the following contributions to the Association:
(a) In the First Association Year Tenant shall pay to the
Association on the first day of each calendar month an amount determined by (i)
multiplying the Merchants' Association Contribution Rate set forth in Section
1.1.L. by Tenant's Floor Area, and (ii) dividing the product thus obtained by
twelve (12). In each subsequent Association Year, Tenant shall pay to the
Association an amount (the "Annual Merchants' Association Contribution")
determined by multiplying the Merchants' Association Contribution Rate, adjusted
as provided below, by Tenant's Floor Area. The Annual Merchants' Association
Contribution shall be paid by Tenant in twelve (12) equal monthly installments,
in advance, on the first day of each calendar month. The Annual Merchants'
Association Contribution shall be adjusted annually, as of the first day of each
Association Year during the Term, in the same proportion as the Consumer Price
Index for All Urban Consumers (U.S. City Average) published by the Bureau of
Labor Statistics of the United States Department of Labor (the "Consumer Price
Index") most recently reported as of such adjustment date bears to the Consumer
Price Index reported for the first full calendar month of the Term, all such
adjustments to be apportioned for fractional years.
If during the Term the Consumer Price Index is changed or
discontinued, Landlord shall choose a comparable index, formula or other means
of measurement of the relative purchasing
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power of the dollar and such substitute index, formula or other means shall be
utilized in place of the Consumer Price Index as if it had been originally
designated in this Lease.
In addition to the adjustment for the Consumer Price Index, the
Annual Merchants' Association Contribution may be increased at any time during
the Term by a vote of tenants (exclusive of Anchor Stores and Landlord)
occupying more than fifty percent (50%) of Landlord's Floor Area.
(b) If the Shopping Center shall be expanded by adding floor area
equal to more than ten percent (10%) of Landlord's Floor Area contained in the
Shopping Center as of the date of this Lease, Tenant shall pay to said
Association a one time charge for each such expansion (the "Expansion Opening
Contribution") determined by (i) multiplying Tenant's Floor Area by the average
rate per square foot of all contributions which tenants in the expansion area
shall become obligated pursuant to their respective leases to make to the
Association with respect to promotion and advertising of the opening of such
expansion for business, and (ii) dividing the product thus obtained by two (2).
Section 11.3. Landlord's Contribution to Merchants' Association.
Landlord shall contribute to the Association for the First Association
Year and for each subsequent Association Year, an amount equal to one-fifth
(1/5) of the aggregate contributions made by the other contributors to the
Association for each such period.
Section 11.4. "First Association Year" and "Association Year" Defined.
"First Association Year" means the period commencing on the first day of
the Term and terminating on the second succeeding December 31. "Association
Year" means each successive period of twelve (12) months commencing with January
1.
Section 11.5. Advertising.
During each Rental Year, Tenant shall advertise its business at the
Premises either (i) by expending an amount equal to a minimum of three percent
(3 %) of Tenant's annual Gross Sales for such period in recognized regional
print or electronic advertising media, or (ii) by participating in twelve (12)
cooperative advertising units per year sponsored by the Association. Each
advertisement shall specify Tenant's business located at the Premises. If Tenant
elects to advertise pursuant to clause (i) hereof, Tenant shall preserve
original or duplicate books and records at Tenant's Notice Address which shall
disclose all information required to determine Tenant's advertising
expenditures. Upon advance notice, Landlord, its agents and accountants, shall
have the right to audit such books and records. If the audit discloses
noncompliance by Tenant for any Rental Year in question, Tenant, in addition to
the remedies contained in this Lease, shall pay to Landlord a sum equal to
Landlord's cost of the audit, which sum shall be deemed to be Additional Rental,
plus as liquidated damages, a sum equal to the amount by which Tenant's
expenditures for advertising as required by clause (i) above shall be less than
three percent (3%) of Tenant's annual Gross Sales.
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Tenant shall, within ten (10) days after the beginning of each Rental
Year, notify Landlord of its election to advertise its business either under
clause (i) or (ii) above. If Tenant elects to advertise under clause (ii),
Tenant may not withdraw such election until the following Rental Year; however,
if Tenant elects clause (i), Tenant shall have the right at any time during the
Rental Year to change such election to clause (ii).
ARTICLE XII
UTILITIES
Section 12.1. Water, Electricity, Telephone and Sanitary Sewer.
Landlord will provide, or cause to be provided, at points in or near the
Premises the facilities necessary to enable Tenant to obtain for the Premises
water, electricity, telephone and sanitary sewer service. Schedule E sets forth
those utilities for which service shall be provided to the Premises by Landlord,
if any, as well as the manner in which charges for their consumption shall be
determined and paid by Tenant. Unless otherwise provided in Schedule E, Landlord
shall not be responsible for providing any utility service to the Premises, nor
for providing meters or other devices for the measurement of utilities supplied
to the Premises, and Tenant shall arrange for the furnishing to the Premises of
such utility services as it may require, as well as for the installation of all
such meters or other devices. Tenant shall be solely responsible for and shall
promptly pay, as and when the same become due and payable, all charges for
water, sewer, electricity, gas, telephone and any other utility used or consumed
in the Premises and supplied by a public utility or public authority or any
other person, firm or corporation, including Landlord, supplying the same.
If Schedule E does not provide that Landlord will supply electricity to
the Premises, Landlord shall have the option, exercisable at any time and from
time to time during the Term, to supply electricity to the Premises. If Landlord
shall elect to supply electricity to the Premises, Tenant will purchase its
requirements for such service tendered by Landlord, and Tenant will pay
Landlord, within ten (10) days after mailing by Landlord to Tenant of statements
therefor, at the applicable rates determined by Landlord from time to time which
Landlord agrees shall not be in excess of the public utility rates for the same
service, if applicable. If Landlord so elects to supply electricity, Tenant
shall execute and deliver to Landlord, within ten (10) days after request
therefor, any documentation reasonably required by Landlord to effect such
change in the method of furnishing of electricity.
Landlord, in its sole discretion, shall have the right, from time to
time, to alter the method and source of supply to the Premises of electricity or
any other utility, and Tenant agrees to execute and deliver to Landlord such
documentation as may be required to effect such alteration, provided, however,
that Tenant shall not be required to bear any portion of the cost of such
alteration or to incur any additional financial obligation as a result of such
alteration, other than as provided in Schedule E.
Tenant shall not at any time overburden or exceed the capacity of the
mains, feeders, ducts, conduits, or other facilities by which such utilities are
supplied to, distributed in or serve the Premises. If Tenant desires to install
any equipment which shall require additional utility
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facilities or utility facilities of a greater capacity than the facilities
provided by Landlord, such installation shall be subject to Landlord's prior
approval of Tenant's plans and specifications therefor. If such installation is
approved by Landlord and if Landlord provides such additional facilities to
accommodate Tenant's installation, Tenant agrees to pay Landlord, on demand, the
cost for providing such additional utility facilities or utility facilities of
greater capacity.
Section 12.2. Heating, Ventilating- and Air-Conditioning.
Schedule F entitled "Tenant Heating, Ventilating and Air-Conditioning"
specifies the obligations of Landlord and Tenant (other than those obligations
set forth in Article X) regarding the heating, ventilating, and air-conditioning
equipment and system serving the Premises or the Shopping Center Area and the
energy required to operate the heating, ventilating and air-conditioning
equipment serving the Premises. Tenant covenants and agrees to pay to Landlord,
as Additional Rental and in the same manner as Annual Basic Rental is payable,
all charges as the same may be adjusted from time to time, and as more
particularly set forth in said Schedule F.
Landlord, in its sole discretion, shall have the right, from time to
time, to alter the heating, ventilating and air-conditioning systems and
equipment serving the Shopping Center, or any part thereof, and Tenant agrees to
execute and deliver to Landlord such documentation as may be required to effect
such alteration; provided, however, that Tenant shall not be required to bear
any portion of the cost of such alteration or to incur any additional financial
obligation as a result of such alteration.
Tenant shall not at any time overburden or exceed the capacity of the
heating, ventilating and air-conditioning systems and equipment serving the
Premises. If Tenant desires any additional equipment or revision of the design
of the existing equipment, or if Landlord deems it necessary, because of
internal loading causing the temperature in the Premises to exceed the
temperature in the Common Areas, to install any additional equipment or revise
the design of the existing equipment, such additional equipment or revised
design shall be subject to Landlord's prior approval of Tenant's plans and
specifications therefor and shall be at Tenant's sole cost and expense. If such
additional equipment or revised design is approved by Landlord and if Landlord
provides such additional equipment or revised design, Tenant agrees to pay
Landlord, on demand, the cost for providing such additional equipment or revised
design.
Section 12.3. Fire Protection Sprinkler System.
Landlord shall provide, install, repair and maintain, or cause to be
provided, installed, repaired and maintained, a fire protection sprinkler system
in the Premises, which system shall remain the property of Landlord. Tenant
shall pay Landlord, as Additional Rental, for providing such fire protection
sprinkler system, an annual amount determined by multiplying the Sprinkler
Contribution Rate by Tenant's Floor Area, said annual sum to be payable in
twelve (12) equal monthly installments, in advance on the first day of each
calendar month. Any modifications or additions to the existing sprinkler system,
whether required as a result of the improvements to be made to the Premises
pursuant to Section 7.1 or requested by Tenant after commencement of the Term,
shall be made by Landlord at Tenant's cost and expense (after agreement between
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Landlord and Tenant on a price for such work) or, at Landlord's election, shall
be made by Tenant (at its cost and expense), provided Tenant utilizes a licensed
contractor approved by Landlord for such purpose.
Section 12.4. Discontinuances and Interruptions of Utility Service.
Landlord reserves the right to cut off and discontinue, upon notice to
Tenant, furnishing any heating, ventilation, air-conditioning or other utility
services furnished by Landlord at any time when Tenant has failed to pay when
due any amount (whether as Rental or otherwise) due under this Lease. Landlord
shall not be liable for any damages resulting from or arising out of any such
discontinuance and the same shall not constitute a termination of this Lease or
an eviction of Tenant. Landlord shall not be liable to Tenant in damages or
otherwise (i) if any utility shall become unavailable from any public utility
company, public authority or any other person or entity (including Landlord)
supplying or distributing such utility, or (ii) for any interruption in any
utility service (including, without limitation, any heating, ventilation,
air-conditioning or sprinkler) caused by the making of any necessary repairs or
improvements or by any cause beyond Landlord's reasonable control, and the same
shall not constitute a termination of this Lease or an eviction of Tenant.
ARTICLE XIII
INDEMNITY AND INSURANCE
Section 13.1. Indemnities.
To the extent permitted by law, Tenant shall and does hereby indemnify
Landlord and agrees to save it harmless and, at Landlord's option, defend it
from and against any and all claims, actions, damages, liabilities and expenses
(including attorneys' and other professional fees) judgments, settlement
payments, and fines paid, incurred or suffered by Landlord in connection with
loss of life, personal injury and/or damage to property or the environment
suffered by third parties arising from or out of the occupancy or use by Tenant
of the Premises or any part thereof or any other part of the Shopping Center,
occasioned wholly or in part by any act or omission of Tenant, its officers,
agents, contractors, employees or invitees, or arising, directly or indirectly,
wholly or in part, from any conduct, activity, act, omission, or operation
involving the use, handling, generation, treatment, storage, disposal, other
management or Release of any Hazardous Substance in, from or to the Premises,
whether or not Tenant may have acted negligently with respect to such Hazardous
Substance. Tenant's obligations pursuant to this Section shall survive any
termination of this Lease with respect to any act, omission or occurrence which
took place prior to such termination.
To the extent permitted by law, Landlord shall and does hereby indemnify
Tenant and agrees to save it harmless from and against any and all claims,
actions, damages, liabilities and expenses (including attorneys' and other
professional fees) in connection with loss of life, personal injury and/or
damage to property suffered by third parties arising from or out of the use of
any portion of the Common Areas by Landlord, occasioned wholly or in part by any
act or omission of Landlord, its officers, agents, contractors or employees.
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Section 13.2. Landlord Not Responsible for Acts of Others.
Landlord shall not be responsible or liable to Tenant, or to those
claiming by, through or under Tenant, for any loss or damage which may be
occasioned by or through the acts or omissions of persons occupying space
adjoining the Premises or any part of the premises adjacent to or connecting
with the Premises or any other part of the Shopping Center, or otherwise, or for
any loss or damage resulting to Tenant, or those claiming by, through or under
Tenant, or its or their property, from the breaking, bursting, stoppage or
leaking of electrical cable and wires, or water, gas, sewer or steam pipes. To
the maximum extent permitted by law, Tenant agrees to use and occupy the
Premises, and to use such other portions of the Shopping Center as Tenant is
herein given the right to use, at Tenant's own risk.
Section 13.3. Tenant's Insurance.
At all times on and after delivery of the Premises to Tenant, Tenant
will carry and maintain, at its expense, a non-deductible:
(a) commercial general liability insurance policy, including
(but not limited to) insurance against assumed or
contractual liability under this Lease, with respect to
liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant
thereto, to afford protection with respect to personal
injury, death or property damage of not less than Two
Million Dollars ($2,000,000) per occurrence combined
single limit/Four Million Dollars ($4,000,000) general
aggregate (but not less than $2,000,000 per location
aggregate); and
(b) all-risks property and casualty insurance policy,
including theft coverage, written at replacement cost
value and with replacement cost endorsement, covering all
of Tenant's personal property in the Premises (including,
without limitation, inventory, trade fixtures, floor
coverings, furniture and other property removable by
Tenant under the provisions of this Lease) and all
leasehold improvements installed in the Premises by or on
behalf of Tenant; and
(c) comprehensive boiler and machinery equipment policy,
including electrical apparatus, if applicable; and
(d) if and to the extent required by law, workers'
compensation insurance policy, or similar insurance in
form and amounts required by law.
Section 13.4. Tenant's Contractor's Insurance.
Tenant shall require any contractor of Tenant performing work on the
Premises to carry and maintain, at no expense to Landlord, a non-deductible:
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(a) commercial general liability insurance policy, including
(but not limited to) contractor's liability coverage,
contractual liability coverage, completed operations
coverage, broad form property damage endorsement and
contractor's protective liability coverage, to afford
protection, with respect to personal injury, death or
property damage of not less than Three Million Dollars
($3,000,000) per occurrence combined single limit/Five
Million Dollars ($5,000,000) general aggregate (but not
less than $3,000,000 per location aggregate);
(b) comprehensive automobile liability insurance policy with
limits for each occurrence of not less than One Million
Dollars ($1,000,000) with respect to personal injury or
death and Five Hundred Thousand Dollars ($500,000) with
respect to property damage; and
(c) workers' compensation insurance policy or similar
insurance in form and amounts required by law.
Section 13.5. Policy Requirements.
The company or companies writing any insurance which Tenant is required
to carry and maintain or cause to be carried or maintained pursuant to Sections
13.3 and 13.4, as well as the form of such insurance, shall at all times be
subject to Landlord's approval and any such company or companies shall be
licensed to do business in the State in which the Shopping Center is located.
Commercial general liability and all-risks property and casualty insurance
policies evidencing such insurance shall, with respect to commercial general
liability policies, name Landlord and/or its designee(s) as additional insured
and, with respect to all-risks property and casualty insurance policies, name
Landlord and/or its designee(s) as loss payee, shall be primary and
non-contributory, and shall also contain a provision by which the insurer agrees
that such policy shall not be canceled, materially changed or not renewed
without at least thirty (30) days' advance notice to Landlord, c/o The Rouse
Company, 10275 Little Patuxent Parkway, Columbia, Maryland 21044, Attention:
Risk Manager, by certified mail, return receipt requested, or to such other
party or address as may be designated by Landlord or its designee. Each such
policy, or a certificate thereof, shall be deposited with Landlord by Tenant
promptly upon commencement of Tenant's obligation to procure the same. If Tenant
shall fail to perform any of its obligations under Sections 13.3, 13.4 or 13.5,
Landlord may perform the same and the cost of same shall be deemed Additional
Rental and shall be payable upon Landlord's demand.
Section 13.6. Increase in Insurance Premiums.
Tenant will not do or suffer to be done, or keep or suffer to be kept,
anything in, upon or about the Premises which will violate Landlord's policies
of hazard or liability insurance or which will prevent Landlord from procuring
such policies in companies acceptable to Landlord. If anything done, omitted to
be done or suffered by Tenant to be kept in, upon or about the Premises shall
cause the rate of fire or other insurance on the Premises or on other property
of Landlord or of others within the Shopping Center to be increased beyond the
minimum rate from
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time to time applicable to the Premises or to any such property for the use or
uses made thereof, Tenant will pay, as Additional Rental, the amount of any such
increase upon Landlord's demand.
Section 13.7. Waiver of Right of Recovery.
Except as provided in Section 8.6, neither Landlord nor Tenant shall be
liable to the other or to any insurance company (by way of subrogation or
otherwise) insuring the other party for any loss or damage to any building,
structure or other tangible property, or any resulting loss of income, or losses
under workers' compensation laws and benefits, even though such loss or damage
might have been occasioned by the negligence of such party, its agents or
employees. The provisions of this Section 13.7 shall not limit the
indemnification for liability to third parties pursuant to Section 13.1.
Section 13.8. Tenant to Pay Proportionate Share of Insurance Costs.
Tenant will pay Landlord, as Additional Rental, a proportionate share of
Landlord's cost of maintaining all insurance with respect to Landlord's Building
(other than the Common Areas) including, without limitation, all-risks property
and casualty insurance and rent insurance. Such insurance may be carried at the
discretion of Landlord in such amounts and companies as Landlord shall
determine.
Tenant's proportionate share of such costs shall be computed by
multiplying Landlord's insurance costs by a fraction, the numerator of which
shall be Tenant's Floor Area and the denominator of which shall be Landlord's
Floor Area. Such proportionate share shall be paid by Tenant in monthly
installments in such amounts as are estimated and billed by Landlord during each
twelve (12) month period commencing and ending on dates designated by Landlord,
each installment being due on the first day of each calendar month. At any time
during any such twelve (12) month period, Landlord may reestimate Tenant's
proportionate share of Landlord's insurance costs and thereafter adjust Tenant's
monthly installments payable during such twelve (12) month period to reflect
more accurately Tenant's proportionate share of such costs. Within one hundred
twenty (120) days (or such additional time thereafter, as is reasonable under
the circumstances) after the end of each such twelve (12) month period, Landlord
shall deliver to Tenant a statement of such insurance costs for such twelve (12)
month period and the installments paid or payable shall be adjusted between
Landlord and Tenant, and Tenant shall pay Landlord or Landlord shall credit to
Tenants account (or, if such adjustment is at the end of the Term Landlord shall
pay Tenant), as the case may be, within fifteen (15) days of receipt of such
statement, such amounts as may be necessary to effect such adjustment. Upon
reasonable notice, Landlord shall make available for Tenant's inspection at
Landlord's office, during normal business hours, Landlord's records relating to
such insurance costs for such preceding twelve (12) month period. Failure of
Landlord to provide the statement called for hereunder within the time
prescribed shall not relieve Tenant of its obligations hereunder.
ARTICLE XIV
DAMAGE AND DESTRUCTION
Section 14.1. Landlord's Obligation to Repair and Reconstruct.
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If the Premises shall be damaged by fire, the elements, accident or
other casualty (any of such causes being referred to herein as a "Casualty"),
but the Premises shall not be thereby rendered wholly or partially untenantable,
Landlord shall promptly cause such damage to be repaired and there shall be no
abatement of Rental. If, as the result of Casualty, the Premises shall be
rendered wholly or partially untenantable, then, subject to the provisions of
Section 14.2, Landlord shall cause such damage to be repaired and all Rental
(other than any Additional Rental due Landlord by reason of Tenant's failure to
perform any of its obligations hereunder) shall be abated proportionately as to
the portion of the Premises rendered untenantable during the period of such
untenantability, and, in addition, during such period of untenantability, the
Breakpoint shall also be proportionately reduced by an amount equal to the
amount obtained by multiplying the Breakpoint by a fraction, the numerator of
which shall be the length of time the Premises are closed and the denominator of
which shall be the length of the Rental Year(s) in question. All such repairs
shall be made at the expense of Landlord; provided, however, that Landlord shall
not be liable for interruption to Tenant's business or for damage to or
replacement or repair of Tenant's personal property (including, without
limitation, inventory, trade fixtures, floor coverings, furniture and other
property removable by Tenant under the provisions of this Lease) or to any
leasehold improvements installed in the Premises by or on behalf of Tenant, all
of which damage, replacement or repair shall be undertaken and completed by
Tenant promptly.
Section 14.2. Landlord's Option to Terminate Lease.
If the Premises are (a) rendered wholly untenantable, or (b) damaged as
a result of any cause which is not covered by Landlord's insurance or (c)
damaged or destroyed in whole or in part during the last three (3) years of the
Term, or if Landlord's Building is damaged to the extent of fifty percent (50%)
or more of Landlord's Floor Area, then, in any of such events, Landlord may
elect to terminate this Lease by giving to Tenant notice of such election within
ninety (90) days after the occurrence of such event. If such notice is given,
the rights and obligations of the parties shall cease as of the date of such
notice, and Rental (other than any Additional Rental due Landlord by reason of
Tenant's failure to perform any of its obligations hereunder) shall be adjusted
as of the date of such termination.
Section 14.3. Demolition of Landlord's Building.
If Landlord's Building shall be so substantially damaged that it is
reasonably necessary, in Landlord's sole judgment, to demolish same for the
purpose of reconstruction, Landlord may demolish the same, in which event the
Rental shall be abated to the same extent as if the Premises were rendered
untenantable by a Casualty.
Section 14.4. Insurance Proceeds.
If Landlord does not elect to terminate this Lease pursuant to Section
14.2, Landlord shall, subject to the prior rights of any Mortgagee, disburse and
apply any insurance proceeds received by Landlord to the restoration and
rebuilding of Landlord's Building in accordance with Section 14.1 hereof. All
insurance proceeds payable with respect to the Premises (excluding proceeds
payable to Tenant pursuant to Section 13.3) shall belong to and shall be payable
to Landlord.
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ARTICLE XV
CONDEMNATION
Section 15.1. Effect of Taking.
If the whole or any part of the Premises shall be taken under the power
of eminent domain, this Lease shall terminate as to the part so taken on the
date Tenant is required to yield possession thereof to the condemning authority.
Landlord shall make, or cause to be made, such repairs and alterations as may be
necessary in order to restore the part not taken to useful condition and all
Rental (other than any Additional Rental due Landlord by reason of Tenant's
failure to perform any of its obligations hereunder) shall be reduced in the
same proportion as the portion of the floor area of the Premises so taken bears
to Tenants Floor Area. If the aforementioned taking renders the remainder of the
Premises unsuitable for the Permitted Use, either party may terminate this Lease
as of the date when Tenant is required to yield possession by giving notice to
that effect within thirty (30) days after such date. If twenty percent (20%) or
more of Landlord's Floor Area is taken as aforesaid, or if parking spaces in the
Shopping Center are so taken thereby reducing the number of parking spaces to
less than the number required by law and Landlord does not deem it reasonably
feasible to replace such parking spaces with other parking spaces on the portion
of the Shopping Center not taken, then Landlord may elect to terminate this
Lease as of the date on which possession thereof is required to be yielded to
the condemning authority, by giving notice of such election within ninety (90)
days after such date. If any notice of termination is given pursuant to this
Section, this Lease and the rights and obligations of the parties hereunder
shall cease as of the date of such notice and Rental (other than any Additional
Rental due Landlord by reason of Tenant's failure to perform any of its
obligations hereunder) shall be adjusted as of the date of such termination.
Section 15.2. Condemnation Awards.
All compensation awarded for any taking of the Premises, Landlord's
Building, the Shopping Center Area, or any interest in any of the same, shall
belong to and be the property of Landlord, Tenant hereby assigning to Landlord
all rights with respect thereto; provided, however, nothing contained herein
shall prevent Tenant from applying for reimbursement from the condemning
authority (if permitted by law) for moving expenses, or the expense of removal
of Tenant's trade fixtures, or loss of Tenant's business good will, but only if
such action shall not reduce the amount of the award or other compensation
otherwise recoverable from the condemning authority by Landlord or the owner of
the fee simple estate in the Shopping Center Area.
ARTICLE XVI
ASSIGNMENTS AND SUBLETTING
Section 16.1. Landlord's Consent Required.
(a) Except as provided in Section 17.4 with respect to assignment of
this Lease following Tenant's bankruptcy, Tenant will not assign this Lease, in
whole or in part, nor sublet all or any part of the Premises, nor license
concessions or lease departments therein, nor pledge
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or encumber by mortgage or other instruments its interest in this Lease (each
individually and collectively referred to in this Section as a "transfer")
without first obtaining the consent of Landlord, which consent Landlord may
withhold in its sole and absolute discretion. This prohibition includes, without
limitation, any subletting or assignment which would otherwise occur by
operation of law, merger, consolidation, reorganization, transfer or other
change of Tenant's corporate, partnership or proprietary structure. Any transfer
to or by a receiver or trustee in any federal or state bankruptcy, insolvency,
or similar proceeding shall be subject to, and in accordance, with, the
provisions of Section 17.4. Consent by Landlord to any transfer shall not
constitute a waiver of the requirement for such consent to any subsequent
transfer.
(b) Subject to the provisions of Section 17.4 respecting assignment of
this Lease following Tenant's bankruptcy and assumption of this Lease by Tenant
or its trustee, it is expressly understood and agreed that Landlord may, in its
sole and absolute discretion, withhold its consent to any transfer of this Lease
or of all or any part of the Premises. The parties recognize that this Lease and
the Premises are unique, and that this Lease and the Premises derive value from
the remainder of Landlord's Building and the Shopping Center Area as a whole,
and that the nature and character of the operations within and management of the
Premises are important to the success of Landlord's Building and the Shopping
Center Area. Accordingly, and without limiting the generality of the foregoing,
Landlord may condition its consent to any transfer upon satisfaction of all or
any of the following conditions:
(i) the net assets of the assignee, licensee, sublessee or
other transferee or permittee (collectively "transferee")
immediately prior to the transfer shall not be less than
the greater of the net assets of Tenant immediately prior
to the transfer or the net assets of Tenant at the time of
the signing of this Lease;
(ii) such transfer shall not adversely affect the quality and
type of business operation which Tenant has conducted
theretofore;
(iii) such transferee shall possess qualifications for the
Tenant business substantially equivalent to those of
Tenant and shall have demonstrated recognized experience
in successfully operating such a business, including,
without limitation, experience in successfully operating a
similar quality business in first-class shopping centers;
(iv) such transferee shall continue to operate the business
conducted in the Premises under the same Tenant Trade
Name, in the same manner as Tenant and pursuant to all of
the provisions of this Lease;
(v) such transferee shall assume in writing, in a form
acceptable to Landlord, all of Tenant's obligations
hereunder and Tenant shall provide Landlord with a copy of
such assumption/transfer document;
(vi) Tenant shall pay to Landlord a transfer fee of One
Thousand Dollars ($1,000.00) prior to the effective date
of the transfer in order to reimburse
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Landlord for all of its internal costs and expenses
incurred with respect to the transfer, including, without
limitation, costs incurred in connection with the review
of financial materials, meetings with representatives of
transferor and/or transferee and preparation, review,
approval and execution of the required transfer
documentation, and, in addition, Tenant shall reimburse
Landlord for any out-of-pocket costs and expenses incurred
with respect to such transfer;
(vii) as of the effective date of the transfer and continuing
throughout the remainder of the Term, the Annual Basic
Rental shall be the greater of (A) the Annual Basic Rental
set forth in Section 1.1.G. hereof, or (B) the sum of all
Annual Basic Rental and all Annual Percentage Rental
payable by Tenant during the twelve calendar months
preceding the transfer;
(viii) Tenant to which the Premises were initially leased shall
continue to remain liable under this Lease for the
performance of all terms, including, but not limited to,
payment of Rental due under this Lease;
(ix) Tenant's guarantor, if any, shall continue to remain
liable under the terms of the Guaranty of this Lease and,
if Landlord deems it necessary, such guarantor shall
execute such documents necessary to insure the
continuation of its guaranty;
(x) Landlord shall receive upon execution of its consent the
full unamortized amount of any construction or other
allowances given to the original Tenant under this Lease,
any due but unpaid Rental, and an amount equal to fifteen
percent (15%) of any and all consideration paid or agreed
to be paid, directly or indirectly, to Tenant for such
transfer or for the sale of Tenant's business in
connection with which any such transfer is made; and
(xi) each of Landlord's Mortgagees shall have consented in
writing to such transfer.
Section 16.2. Transfer of Corporate Shares.
If Tenant is a corporation (other than a corporation the outstanding
voting stock of which is listed on a "national securities exchange," as defined
in the Securities Exchange Act of 1934) and if at any time after execution of
this Lease any part or all of the corporate shares shall be transferred by sale,
assignment, bequest, inheritance, operation of law or other disposition
(including, but not limited to, such a transfer to or by a receiver or trustee
in federal or state bankruptcy, insolvency, or other proceedings) so as to
result in a change in the present control of said corporation by the person(s)
now owning a majority of said corporate shares, Tenant shall give Landlord
notice of such event within fifteen (15) days of the date of such transfer. If
any such transfer is made (and regardless of whether Tenant has given notice of
same), Landlord may elect to terminate this Lease at any time thereafter by
giving Tenant notice of such election, in which event this Lease and the rights
and obligations of the parties hereunder shall cease as of a
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date set forth in such notice which date shall not be less than sixty (60) days
after the date of such notice. In the event of any such termination, all Rental
(other than any Additional Rental due Landlord by reason of Tenant's failure to
perform any of its obligations hereunder) shall be adjusted as of the date of
such termination.
Section 16.3. Transfer of Partnership Interests.
If Tenant is a general or limited partnership and if at any time after
execution of this Lease any part or all of the interests in the capital or
profits of such partnership or any voting or other interests therein shall be
transferred by sale, assignment, bequest, inheritance, operation of law or other
disposition (including, but not limited to, such a transfer to or by a receiver
or trustee in federal or state bankruptcy, insolvency or other proceedings, and
also including, but not limited to, any adjustment in such partnership
interests) so as to result in a change in the present control of said
partnership by the person or persons now having control of same, Tenant shall
give Landlord notice of such event within fifteen (15) days of the date of such
transfer. If any such transfer is made (and regardless of whether Tenant has
given notice of same), Landlord may elect to terminate this Lease at any time
thereafter by giving Tenant notice of such election, in which event this Lease
and the rights and obligations of the parties hereunder shall cease as of a date
set forth in such notice which date shall be not less than sixty (60) days after
the date of such notice. In the event of any such termination, all Rental (other
than any Additional Rental due Landlord by reason of Tenant's failure to perform
any of its obligations hereunder) shall be adjusted as of the date of such
termination.
Section 16.4. Acceptance of Rent from Transferee.
The acceptance by Landlord of the payment of Rental following any
assignment or other transfer prohibited by this Article shall not be deemed to
be a consent by Landlord to any such assignment or other transfer nor shall the
same be deemed to be a waiver of any right or remedy of Landlord hereunder.
Section 16.5. Additional Provisions Respecting Transfers.
Without limiting Landlord's right to withhold its consent to any
transfer by Tenant, and regardless of whether Landlord shall have consented to
any such transfer, neither Tenant nor any other person having an interest in the
possession, use or occupancy of the Premises or any part thereof shall enter
into any lease, sublease, license, concession, assignment or other transfer or
agreement for possession, use or occupancy of all or any portion of the Premises
which provides for rental or other payment for such use, occupancy or
utilization based, in whole or in part, on the net income or profits derived by
any person or entity from the space so leased, used or occupied, and any such
purported lease, sublease, license, concession, assignment or other transfer or
agreement shall be absolutely void and ineffective as a conveyance of any right
or interest in the possession, use or occupancy of all or any part of the
Premises. There shall be no deduction from the rental payable under any sublease
or other transfer nor from the amount thereof passed on to any person or entity,
for any expenses or costs related in any way to the subleasing or transfer of
such space.
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If Tenant shall make or suffer any such transfer without first obtaining
any consent of Landlord required by Section 16.1, any and all amounts received
as a result of such transfer shall be the property of Landlord to the extent the
same (determined on a square foot basis) is greater than the Annual Basic Rental
(on a square foot basis) payable under this Lease, it being the parties' intent
that any profit resulting from such transfer shall belong to Landlord, but the
same shall not be deemed to be a consent by Landlord to any such transfer or a
waiver of any right or remedy of Landlord hereunder.
ARTICLE XVII
DEFAULT
Section 17.1. "Event of Default" Defined.
Any one or more of the following events shall constitute an "Event of
Default":
(a) The sale of Tenant's interest in the Premises under
attachment, execution or similar legal process, or if Tenant
is adjudicated as bankrupt or insolvent under any state
bankruptcy or insolvency law or an order for relief is
entered against Tenant under the Federal Bankruptcy Code and
such adjudication or order is not vacated within ten (10)
days.
(b) The commencement of a case under any chapter of the Federal
Bankruptcy Code by or against Tenant or any guarantor of
Tenant's obligations hereunder, or the filing of a voluntary
or involuntary petition proposing the adjudication of Tenant
or any such guarantor as bankrupt or insolvent, or the
reorganization of Tenant or any such guarantor, or an
arrangement by Tenant or any such guarantor with its
creditors, unless the petition is filed or case commenced by
a party other than Tenant or any such guarantor and is
withdrawn or dismissed within thirty (30) days after the date
of its filing.
(c) The admission in writing by Tenant or any such guarantor of
its inability to pay its debts when due;
(d) The appointment of a receiver or trustee for the business or
property of Tenant or any such guarantor, unless such
appointment shall be vacated within ten (10) days of its
entry.
(e) The making by Tenant or any such Guarantor of an assignment
for the benefit of its creditors, or if in any other manner
Tenant's interest in this Lease shall pass to another by
operation of law.
(f) The failure of Tenant to pay any Rental or other sum of money
within seven (7) days after the same is due hereunder.
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(g) Default by Tenant in the performance or observance of any
covenant or agreement of this Lease (other than a default
involving the payment of money), which default is not cured
within ten (10) days after the giving of notice thereof by
Landlord, unless such default is of such nature that it
cannot be cured within such ten (10) day period, in which
case no Event of Default shall occur so long as Tenant shall
commence the curing of the default within such ten (10) day
period and shall thereafter diligently prosecute the curing
of same; provided, however, if Tenant shall default in the
performance of any such covenant or agreement of this Lease
two (2) or more times in any twelve (12) month period, then
notwithstanding that each of such defaults shall have been
cured by Tenant, any further similar default shall be deemed
an Event of Default without the ability for cure.
(h) The vacation or abandonment of the Premises by Tenant at any
time following delivery of possession of the Premises to
Tenant.
(i) The occurrence of any other event described as constituting
an "Event of Default" elsewhere in this Lease.
Section 17.2. Remedies.
Upon the occurrence of an Event of Default, Landlord, without notice to
Tenant in any instance (except where expressly provided for below or by
applicable law) may do any one or more of the following:
(a) With or without judicial process, enter the Premises and take
possession of any and all goods, inventory, equipment,
fixtures and all other personal property of Tenant, which is
or may be put into the Premises during the Term, whether
exempt or not from sale under execution or attachment (it
being agreed that said property shall at all times be bound
with a lien in favor of Landlord and shall be chargeable for
all Rental and for the fulfillment of the other covenants and
agreements herein contained), and Landlord may sell all or
any part thereof at public or private sale. Tenant agrees
that five (5) days prior notice of any public or private sale
shall constitute reasonable notice. The proceeds of any such
sale shall be applied, first, to the payment of all costs and
expenses of conducting the sale or caring for or storing said
property (including reasonable attorneys' fees); second,
toward the payment of any indebtedness, including (without
limitation) indebtedness for Rental, which may be or may
become due from Tenant to Landlord; and third, to pay Tenant,
on demand, any surplus remaining after all indebtedness of
Tenant to Landlord has been fully paid;
(b) Perform, on behalf and at the expense of Tenant, any
obligation of Tenant under this Lease which Tenant has failed
to perform and of which Landlord shall have given Tenant
notice, the cost of which performance by Landlord, together
with interest thereon at the Default Rate from the date
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of such expenditure, shall be deemed Additional Rental and
shall be payable by Tenant to Landlord upon demand.
Notwithstanding the provisions of this clause (b) and
regardless of whether an Event of Default shall have
occurred, Landlord may exercise the remedy described in this
clause (b) without any notice to Tenant if Landlord, in its
good faith judgment, believes it would be materially injured
by failure to take rapid action or if the unperformed
obligation of Tenant constitutes an emergency;
(c) Elect to terminate this Lease and the tenancy created hereby
by giving notice of such election to Tenant, and reenter the
Premises, without the necessity of legal proceedings, and
remove Tenant and all other persons and property from the
Premises, and may store such property in a public warehouse
or elsewhere at the cost of and for the account of Tenant
without resort to legal process and without Landlord being
deemed guilty of trespass or becoming liable for any loss or
damage occasioned thereby; or
(d) Exercise any other legal or equitable right or remedy which
it may have.
Any costs and expenses incurred by Landlord (including, without
limitation, reasonable attorneys' fees) in enforcing any of its rights or
remedies under this Lease shall be deemed to be Additional Rental and shall be
repaid to Landlord by Tenant upon demand.
Section 17.3. Damages.
If this Lease is terminated by Landlord pursuant to Section 17.2.,
Tenant nevertheless shall remain liable for (a) any Rental and damages which may
be due or sustained prior to such termination, all reasonable costs, fees and
expenses including, but not limited to, reasonable attorneys' fees, costs and
expenses incurred by Landlord in pursuit of its remedies hereunder, or in
renting the Premises to others from time to time (all such Rental, damages,
costs, fees and expenses being referred to herein as "Termination Damages"), and
(b) additional damages (the "Liquidated Damages"), which, at the election of
Landlord, shall be either:
(i) an amount equal to the Rental which, but for termination of
this Lease, would have become due during the remainder of the
Term, less the amount of Rental, if any, which Landlord shall
receive during such period from others to whom the Premises
may be rented (other than any Additional Rental received by
Landlord as a result of any failure of such other person to
perform any of its obligations to Landlord), in which case
such Liquidated Damages shall be computed and payable in
monthly installments, in advance, on the first day of each
calendar month following termination of the Lease and
continuing until the date on which the Term would have
expired but for such termination, and any suit or action
brought to collect any such Liquidated Damages for any month
shall not in
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any manner prejudice the right of Landlord to collect any
Liquidated Damages for any subsequent month by a similar
proceeding; or
(ii) an amount equal to the present worth (as of the date of such
termination) of Rental which, but for termination of this
Lease, would have become due during the remainder of the
Term, less the fair rental value of the Premises, as
determined by an independent real estate appraiser named by
Landlord, in which case such Liquidated Damages shall be
payable to Landlord in one lump sum on demand and shall bear
interest at the Default Rate until paid. For purposes of this
clause (ii), "present worth" shall be computed by discounting
such amount to present worth at a discount rate equal to one
percentage point above the discount rate then in effect at
the Federal Reserve Bank nearest to the location of the
Shopping Center.
If such termination shall take place after the expiration of two or more
Rental Years, then, for purposes of computing the Liquidated Damages, the Annual
Percentage Rental payable with respect to each Rental Year following termination
(including the Rental Year in which such termination shall take place) shall be
conclusively presumed to be equal to the average Annual Percentage Rental
payable with respect to each complete Rental Year preceding termination. If such
termination shall take place before the expiration of two Rental Years, then,
for purposes of computing the Liquidated Damages, the Annual Percentage Rental
payable with respect to each Rental Year following termination (including the
Rental Year in which such termination shall take place) shall be conclusively
presumed to be equal to twelve (12) times the average monthly payment of Annual
Percentage Rental due prior to such termination, or if no Annual Percentage
Rental shall have been payable during such period, then the Annual Percentage
Rental for each year of the unexpired Term shall be conclusively presumed to be
a sum equal to twenty-five percent (25%) of the Annual Basic Rental due and
payable during such unexpired Term. Termination Damages shall be due and payable
immediately upon demand by Landlord following any termination of this Lease
pursuant to Section 17.2. Liquidated Damages shall be due and payable at the
times set forth herein.
If this Lease is terminated pursuant to Section 17.2, Landlord may relet
the Premises or any part thereof, alone or together with other premises, for
such term or terms (which may be greater or less than the period which otherwise
would have constituted the balance of the Term) and on such terms and conditions
(which may include concessions or free rent and alterations of the Premises) as
Landlord, in its sole discretion, may determine, but Landlord shall not be
liable for, nor shall Tenant's obligations hereunder be diminished by reason of,
any failure by Landlord to relet the Premises or any failure by Landlord to
collect any rent due upon such reletting.
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for and obtain, in proceedings for the termination of this
Lease by reason of bankruptcy or insolvency, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and governing
the proceedings in which, the damages are to be proved, whether or not the
amount be greater, equal to, or less than the amount of the loss or damages
referred to
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above. The failure or refusal of Landlord to relet the Premises or any part or
parts thereof shall not release or affect Tenant's liability for damages.
Section 17.4. Remedies in Event of Bankruptcy or Other Proceeding
(a) Anything contained herein to the contrary notwithstanding, if
termination of this Lease shall be stayed by order of any court having
jurisdiction over any proceeding described in paragraph (b) of Section 17.1., or
by federal or state statute, then, following the expiration of any Such stay, or
if Tenant or Tenant as debtor-in-possession or the trustee appointed in any such
proceeding (being collectively referred to as "Tenant" only for the purposes of
this Section 17.4.) shall fail to assume Tenant's obligations under this Lease
within the period prescribed therefor by law or within fifteen (15) days after
entry of the order for relief or as may be allowed by the court, or if Tenant
shall fail to provide adequate protection of Landlord's right, title and
interest in and to the Premises or adequate assurance of the complete and
continuous future performance of Tenant's obligations under this Lease,
Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on fifteen (15) days' notice to Tenant and upon the
expiration of said fifteen (15) day period this Lease shall cease and expire as
aforesaid and Tenant shall immediately quit and surrender the Premises as
aforesaid. Upon the termination of this Lease as provided above, Landlord,
without notice, may re-enter and repossess the Premises using such force for
that purpose as may be necessary without being liable to indictment, prosecution
or damages therefor and may dispossess Tenant by summary proceedings or
otherwise.
(b) For the purposes of the preceding paragraph (a), adequate
protection of Landlord's right, title and interest in and to the Premises, and
adequate assurance of the complete and continuous future performance of Tenant's
obligations under this Lease, shall include, without limitation, the following
requirements:
(i) that Tenant comply with all of its obligations under this
Lease;
(ii) that Tenant pay to Landlord, on the first day of each
month occurring subsequent to the entry of such order, or
the effective date of such stay, a sum equal to the amount
by which the Premises diminished in value during the
immediately preceding monthly period, but, in no event, an
amount which is less than the aggregate Rental payable for
such monthly period;
(iii) that Tenant continue to use the Premises in the manner
originally required by this Lease;
(iv) that Landlord be permitted to supervise the performance of
Tenant's obligations under this Lease;
(v) that Tenant pay to Landlord within fifteen (15) days after
entry of such order or the effective date of such stay, as
partial adequate protection
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against future diminution in value of the Premises and
adequate assurance of the complete and continuous future
performance of Tenant's obligations under this Lease, an
additional security deposit in an amount acceptable to
Landlord;
(vi) that Tenant has and will continue to have unencumbered
assets after the payment of all secured obligations and
administrative expenses to assure Landlord that sufficient
funds will be available to fulfill the obligations of
Tenant under this Lease;
(vii) that if Tenant assumes this Lease and proposes to assign
the same (pursuant to Title 11 U.S.C. S 365, or as the
same may be amended) to any person who shall have made a
bona fide offer to accept an assignment of this Lease on
terms acceptable to such court having competent
jurisdiction over Tenant's estate, then notice of such
proposed assignment, setting forth (x) the name and
address of such person, (y) all of the terms and
conditions of such offer, and (z) the adequate assurance
to be provided Landlord to assure such person's future
performance under this Lease, including, without
limitation, the assurances referred to in Title 11 U.S.C.
S 365(b)(3), as it may be amended, shall be given to
Landlord by Tenant no later than fifteen (15) days after
receipt by Tenant of such offer, but in any event no later
than thirty (30) days prior to the date that Tenant shall
make application to such court for authority and approval
to enter into such assignment and assumption, and Landlord
shall thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time prior to
the effective date of such proposed assignment, to accept,
or to cause Landlord's designee to accept, an assignment
of this Lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide offer
made by such person less any brokerage commissions which
may be payable out of the consideration to be paid by such
person for the assignment of this Lease; and
(viii) that if Tenant assumes this Lease and proposes to assign
the same, and Landlord does not exercise its option
pursuant to paragraph (vii) of this Section 17.4, Tenant
hereby agrees that:
(A) such assignee shall have a net worth not less than
the net worth of Tenant as of the Commencement Date,
or such Tenant's obligations under this Lease shall
be unconditionally guaranteed by a person having a
net worth equal to Tenant's net worth as of the
Commencement Date;
(B) such assignee shall not use the Premises except
subject to all the restrictions contained in this
Lease;
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(C) such assignee shall assume in writing all of the
terms, covenants and conditions of this Lease
including, without limitation, all of such terms,
covenants and conditions respecting the Permitted
Use and payment of Rental, and such assignee shall
provide Landlord with assurances satisfactory to
Landlord that it has the experience in operating
stores having the same or substantially similar uses
as the Permitted Use, in first-class shopping
centers, sufficient to enable it so to comply with
the terms, covenants and conditions of this Lease
and successfully operate the Premises for the
Permitted Use;
(D) such assignee shall indemnify Landlord against, and
pay to Landlord the amount of any payments which
Landlord may be obligated to make to any Mortgagee
by virtue of such assignment;
(E) such assignee shall pay to Landlord an amount equal
to the unamortized portion of any construction
allowance made to Tenant; and
(F) if such assignee makes any payment to Tenant, or for
Tenant's account, for the right to assume this Lease
(including, without limitation, any lump sum
payment, installment payment or payment in the
nature of rent over and above the Rental payable
under this Lease), Tenant shall pay over to Landlord
one-half of any such payment, less any amount paid
to Landlord pursuant to clause (E) above on account
of any construction allowance.
ARTICLE XVIII
SUBORDINATION AND ATTORNMENT
Section 18.1. Subordination
Unless a Mortgagee (as hereinafter defined) shall
otherwise elect as provided in Section 18.2, Tenant's rights
under this Lease are and shall remain subject and
subordinate to the operation and effect of
(a) any lease of land only or of land and buildings in a
sale-leaseback or lease-subleaseback transaction involving
the Premises or Landlord's interest therein, or
(b) any mortgage, deed of trust or other security instrument
constituting a lien upon the Premises or Landlord's interest
therein,
whether the same shall be in existence at the date hereof or created hereafter,
any such lease, mortgage, deed of trust or other security instrument being
referred to herein as a "Mortgage", and the party or parties having the benefit
of the same, whether as lessor, mortgagee, trustee or
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noteholder, being referred to herein as a "Mortgagee". Tenant's acknowledgment
and agreement of subordination provided for in this Section are self-operative
and no further instrument of subordination shall be required; however, Tenant
shall execute such further assurances thereof as shall be requisite or as may be
requested from time to time by Landlord or any Mortgagee.
Section 18.2. Mortgagee's Unilateral Subordination
If a Mortgagee shall so elect by notice to Tenant or by the recording of
a unilateral declaration of subordination, this Lease and Tenant's rights
hereunder shall be superior and prior in right to the Mortgage of which such
Mortgagee has the benefit, with the same force and effect as if this Lease had
been executed, delivered and recorded prior to the execution, delivery and
recording of such Mortgage, subject, nevertheless, to such conditions as may be
set forth in any such notice or declaration.
Section 18.3. Attornment
If any person shall succeed to all or part of Landlord's interest in the
Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power
of sale, termination of lease or otherwise, and if so requested or required by
such successor in interest, Tenant shall attorn to such successor in interest
and shall execute such agreement in confirmation of such attornment as such
successor in interest shall reasonably request.
ARTICLE XIX
NOTICES
Section 19.1. Sending of Notices
Any notice, request, demand, approval or consent given or required to be
given under this Lease shall be in writing and shall be deemed to have been
given as follows:
(i) if intended for Landlord, on the third day following the day
on which the same shall have been mailed by United States
registered or certified mail or express mail, return receipt
requested, with all postage charges prepaid, addressed to
Landlord, Attention: General Counsel, c/o The Rouse Company
Building, Columbia, Maryland 21044, with a copy to Landlord's
management office in the Shopping Center except that payment
of Rental and sales reports shall be delivered to Landlord's
management office in the Shopping Center; and
(ii) if intended for Tenant, upon the earlier to occur of the
following:
(a) the third day following the day on which the same shall
have been mailed by United States registered or certified
mail or express mail, return receipt requested, with all
postal charges prepaid, addressed to Tenant at the Tenant
Notice Address, or
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(b) actual receipt at the Tenant Notice Address, and in the
event more than one copy of such notice shall have been
sent or delivered to Tenant, the first actually received
shall control for the purposes of this clause (b).
Either party may, at any time, change its address for the above purposes
by sending a notice to the other party) stating the change and setting forth the
new address.
Section 19.2. Notice to Mortgagees
If any Mortgagee shall notify Tenant that it is the holder of a Mortgage
affecting the Premises, no notice, request or demand thereafter sent by Tenant
to Landlord shall be effective unless and until a copy of the same shall also be
sent to such Mortgagee in the manner prescribed in Section 19.1 and to such
address as such Mortgagee shall designate.
ARTICLE XX
MISCELLANEOUS
Section 20.1. Radius Restriction.
Tenant agrees that Tenant (and if Tenant is a corporation or
partnership, its officers, directors, stockholders, any affiliates or partners)
shall not, directly or indirectly, operate, manage or have any interest in any
other store or business (unless in operation on the date of this Lease) which is
similar to or in competition with the Permitted Use on the commencement date of
this Lease and for the Term of this Lease within the Restriction Area. Without
limiting any of Landlord's remedies under this Lease, in the event Tenant
operates, manages or has any interest in a store or business violating the
provisions of this Section, then, at Landlord's option, Landlord may by notice
to Tenant require Tenant to include the gross sales of such other store or
business in the Gross Sales of the Premises for the purposes of calculating
Annual Percentage Rental under this Lease.
Section 20.2. Estoppel Certificates.
At any time and from time to time, within ten (10) days after Landlord
shall request the same, Tenant will execute, acknowledge and deliver to Landlord
and to such Mortgagee or other party as may be designated by Landlord, a
certificate in an acceptable form with respect to the matters required by such
party and such other matters relating to this Lease or the status of performance
of obligations of the parties hereunder as may be reasonably requested by
Landlord. If Tenant fails to provide such certificate within ten (10) days after
request by Landlord, Tenant shall be deemed to have approved the contents of any
such certificate submitted to Tenant by Landlord and Landlord is hereby
authorized to so certify.
Section 20.3. Inspections and Access by Landlord.
Tenant will permit Landlord, its agents, employees and contractors to
enter all parts of the Premises during Tenant's business hours to inspect the
same and to enforce or carry out any
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provision of this Lease, including, without limitation, any access necessary for
the making of any repairs which are Landlord's obligation hereunder; provided,
however, that, in the event of an emergency, Landlord may enter the Premises for
such purposes at any time, upon such notice to Tenant, if any, as shall be
feasible under the circumstances.
Section 20.4. Memorandum of Lease.
Neither this Lease nor a short form or memorandum thereof shall be
recorded in the public records.
Section 20.5. Remedies Cumulative.
No reference to any specific right or remedy shall preclude Landlord
from exercising any other right or from having any other remedy or from
maintaining any action to which it may otherwise be entitled at law or in
equity. No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof, or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of any
such breach, agreement, term, covenant or condition. No waiver by Landlord of
any breach by Tenant under this Lease or of any breach by any other tenant under
any other lease of any portion of the Shopping Center shall affect or alter this
Lease in any way whatsoever.
Section 20.6. Successors and Assigns.
This Lease and the covenants and conditions herein contained shall inure
to the benefit of and be binding upon Landlord, its successors and assigns, and
shall be binding upon Tenant, its successors and assigns and shall inure to the
benefit of Tenant and only such assigns and subtenants of Tenant to whom the
assignment of this Lease or the subletting of the Premises by Tenant has been
consented to by Landlord as provided in this Lease. Upon any sale or other
transfer by Landlord of its interest in the Premises and in this Lease, and the
assumption by Landlord's transferee of the obligations of Landlord hereunder,
Landlord shall be relieved of any obligations under this Lease accruing
thereafter.
Section 20.7. Compliance with Laws and Regulations.
Tenant, at its sole cost and expense, shall comply, and shall cause the
Premises to comply with (a) all federal, state, regional, county, municipal and
other governmental statutes, laws, rules, orders, regulations and ordinances
affecting any part of the Premises, or the use thereof, including, but not
limited to, those which require the making of any structural, unforeseen or
extraordinary changes, whether or not any such statutes, laws, rules, orders,
regulations or ordinances which may be hereafter enacted involve a change of
policy on the part of the governmental body enacting the same, and (b) all
rules, orders and regulations of the National Fire Protection Association,
Landlord's casualty insurer(s) and other applicable insurance rating
organizations or other bodies exercising similar functions in connection with
the prevention of fire or the correction of hazardous conditions which apply to
the Premises.
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Section 20.8. Captions and Headings.
The table of contents and the Article and Section captions and headings
are for convenience of reference only and in no way shall be used to construe or
modify the provisions set forth in this Lease.
Section 20.9. Joint and Several Liability.
If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) shall sign this Lease
as Tenant, the liability of each such individual, corporation, partnership or
other business association to pay rent and perform all other obligations
hereunder shall be deemed to be joint and several and all notices, payments and
agreements given or made by, with or to any one of such individuals,
corporations, partnerships or other business associations shall be deemed to
have been given or made by, with or to all of them. In like manner, if Tenant
shall be a partnership or other business association, the members of which are,
by virtue of statute or federal law, subject to personal liability, the
liability of each such member shall be joint and several.
Section 20.10. Broker's Commission.
Each of the parties represents and warrants that there are no claims for
brokerage commissions or finders' fees in connection with the execution of this
Lease, and agrees to indemnify the other against, and hold it harmless from, all
liability arising from any such claim including, without limitation, the cost of
counsel fees in connection therewith.
Section 20.11. No Discrimination.
It is Landlord's policy to comply with all applicable state and federal
laws prohibiting discrimination in employment based on race, age, color, sex,
national origin, disability, religion, or other protected classification. It is
further intended that the Shopping Center shall be developed and operated so
that all prospective tenants thereof, and all customers, employees, licensees
and invitees of all tenants shall have equal opportunity to obtain all the
goods, services, accommodations, advantages, facilities and privileges of the
Shopping Center without discrimination because of race, age, color, sex,
national origin, disability, or religion. To that end, Tenant shall not
discriminate in the conduct and operation of its business in the Premises
against any person or group of persons because of the race, age, color, sex,
religion, national origin or other protected classification of such person or
group of persons.
Section 20.12. No Joint Venture.
Any intention to create a joint venture or partnership relation between
the parties hereto is hereby expressly disclaimed. The provisions of this Lease
in regard to the payment by Tenant and the acceptance by Landlord of a
percentage of Gross Sales of Tenant and others is a reservation for rent for the
use of the Premises.
Section 20.13. No Option.
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The submission of this Lease for examination does not constitute a
reservation of or option for the Premises, and this Lease shall become effective
only upon execution and delivery thereof by both parties. Execution by signature
of an authorized officer of Landlord or any corporate entity acting on behalf of
Landlord shall be effective only upon attestation thereof and the affixation of
the seal of such corporation by a corporate Secretary or Assistant Secretary of
Landlord.
Section 20.14. No Modification.
This writing is intended by the parties as a final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealings between the parties or their
officers, employees, agents or affiliates shall be relevant or admissible to
supplement, explain or vary any of the terms of this Lease. Acceptance of, or
acquiescence in, a course of performance rendered under this or any prior
agreement between the parties or their affiliates shall not be relevant or
admissible to determine the meaning of any of the terms of this Lease. No
representations, understandings or agreements have been made or relied upon in
the making of this Lease other than those specifically set forth herein. This
Lease can be modified only by a writing signed by the party against whom the
modification is enforceable.
Section 20.15. Severability.
If any portion of any term or provision of this Lease, or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
Section 20.16. Third Party Beneficiary.
Nothing contained in this Lease shall be construed so as to confer upon
any other party the rights of a third party beneficiary except rights contained
herein for the benefit of a Mortgagee.
Section 20.17. Corporate Tenants.
If Tenant is a corporation, the persons executing this Lease on behalf
of Tenant hereby covenant and warrant that: Tenant is a duly constituted
corporation qualified to do business in the State in which the Shopping Center
is located; all Tenant's franchises and corporate taxes have been paid to date;
all future forms, reports, fees and other documents necessary for Tenant to
comply with applicable laws will be filed by Tenant when due; and such persons
are duly authorized by the board of directors of such corporation to execute and
deliver this Lease on behalf of the corporation.
Section 20.18. Applicable Law.
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This Lease and the rights and obligations of the parties hereunder shall
be construed in accordance with the laws of the State in which the Shopping
Center is located.
Section 20.19. Performance of Landlord's Obligations by Mortgagee.
Tenant shall accept performance of any of Landlord's obligations
hereunder by any Mortgagee of Landlord.
Section 20.20. Waiver of Certain Rights.
Landlord and Tenant hereby mutually waive any and all rights which
either may have to request a jury trial in any action, proceeding or
counterclaim (except for those involving personal injury or property damage)
arising out of this Lease or Tenant's occupancy of or right to occupy the
Premises.
Tenant further agrees that in the event Landlord commences any summary
proceeding for nonpayment of rent or possession of the Premises, Tenant will not
interpose and hereby waives all right to interpose any counterclaim of whatever
nature in any such proceeding. Tenant further waives any right to remove said
summary proceeding to any other court or to consolidate said summary proceeding
with any other action, whether brought prior or subsequent to the summary
proceeding.
Section 20.21. Limitation on Right of Recovery Against Landlord.
Tenant acknowledges and agrees that the liability of Landlord under this
Lease shall be limited to its interest in the Shopping Center Area and any
judgments rendered against Landlord shall be satisfied solely out of the
proceeds of sale of its interest in the Shopping Center Area. No personal
judgment shall lie against Landlord upon extinguishment of its rights in the
Shopping Center Area and any judgment so rendered shall not give rise to any
right of execution or levy against Landlord's assets. The provisions hereof
shall inure to Landlord's successors and assigns including any Mortgagee. The
foregoing provisions are not intended to relieve Landlord from the performance
of any of Landlord's obligations under this Lease, but only to limit the
personal liability of Landlord in case of recovery of a judgment against
Landlord; nor shall the foregoing be deemed to limit Tenant's rights to obtain
injunctive relief or specific performance or to avail itself of any other right
or remedy which may be awarded Tenant by law or under this Lease.
If Tenant claims or asserts that Landlord has violated or failed to
perform a covenant of Landlord not to unreasonably withhold or delay Landlord's
consent or approval, Tenant's sole remedy shall be an action for specific
performance, declaratory judgment or injunction and in no event shall Tenant be
entitled to any money damages for a breach of such covenant and in no event
shall Tenant claim or assert any claim for any money damages in any action or by
way of set off, defense or counterclaim and Tenant hereby specifically waives
the right to any money damages or other remedies.
Section 20.22. Survival.
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All representations, warranties, covenants, conditions and agreements
contained herein which either are expressed as surviving the expiration or
termination of this Lease or, by their nature, are to be performed or observed,
in whole or in part, after the termination or expiration of this Lease,
including (without limitation) the obligations of Tenant pursuant to Sections
8.6 and 13.1, shall survive the termination or expiration of this Lease.
Section 20.23. Relocation of Premises.
In the event of an expansion, renovation or remerchandising of the
Shopping Center in the vicinity of the Premises, Landlord may elect, by giving
notice of such election to Tenant, to require Tenant to surrender possession of
all or such portion of the Premises and for such period of time (including the
remainder of the Term) as Landlord, in its sole discretion, shall deem to be
required for such purposes. Such election shall be exercised not more than once
during the Term, except that if any such notice of election shall be withdrawn
by Landlord, the same shall be deemed not to have been given. Landlord's notice
of the exercise of such election shall designate (i) the portion of the Premises
required for such purpose; (ii) the period of time during which such surrender
shall be required, and (iii) the date by which possession of same shall be
surrendered by Tenant, which date shall not be earlier than ninety (90) days
after the date on which such notice is given.
If Tenant shall be required to surrender possession of all or a portion
of the Premises for a period of time which is less than the remainder of the
Term, Rental shall abate as to such portion or all of the Premises required to
be surrendered, such abatement to be effective beginning as of the date Tenant
is required to surrender such possession and continuing until the date on which
Landlord redelivers possession to Tenant. For purposes of determining the extent
of such abatement of Rental, Tenant's Floor Area hereunder shall be deemed to be
reduced during the abatement period by the number of square feet contained in
the portion of the Premises of which possession is required to be surrendered.
If Tenant shall be required to surrender possession of a portion of the
Premises for the entire remainder of the Term, this Lease shall terminate as to
such portion as of the date on which Tenant is required to surrender possession
thereof to Landlord and all Rental shall be proportionately reduced. For
purposes of determining the extent of such reduction of Rental, Tenant's Floor
Area hereunder shall be deemed to be reduced as of the date of such termination
by the number of square feet contained in the portion of the Premises of which
possession is required to be surrendered.
If Tenant shall be required to surrender possession of a portion of the
Premises, Landlord shall (a) provide any permanent or temporary barriers
required by the nature of Landlord's use of such portion, which barriers shall
be constructed in such a manner so as to not materially interfere with Tenant's
business operations in the Premises; and (b) make such alterations as may be
necessary in order to restore the remainder of the Premises to useful condition.
If Tenant shall be required to surrender possession of a portion of the
Premises and the remainder of the Premises shall be rendered unsuitable for the
Permitted Use, or if Tenant shall be required to surrender possession of the
entire Premises, Landlord shall have the further right
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and option to cause Tenant to relocate its business, within ninety (90) days
after notice to do so, to another location within the Shopping Center Area,
comparable in size and location to the Premises, mutually agreed upon by
Landlord and Tenant. Within sixty (60) days after any such notice shall be
given, Landlord and Tenant shall execute and deliver an amendment to this Lease
which shall substitute a description of the premises to which Tenant is to be
relocated for the description of the Premises contained herein and shall modify
Tenant's Floor Area accordingly; otherwise all of the terms and conditions of
this Lease shall be applicable to Tenant's occupancy of the new premises.
If Landlord and Tenant cannot agree on a new location within such sixty
(60) days after notice of the exercise by Landlord of its relocation option
described in the preceding paragraph, then Landlord may elect to withdraw its
notice requiring Tenant to relocate its business, in which event Tenant shall
remain in possession of the Premises and this Lease shall remain in full force
and effect. If Landlord shall not elect to withdraw its notice requiring Tenant
to relocate its business, the Term shall terminate on the ninetieth (90th) day
after such notice, in which event Landlord agrees to pay to Tenant, provided
Tenant is, not in default under this Lease, and, provided Tenant shall have
furnished Landlord with the statement referred to in the last sentence of this
paragraph, an amount equivalent to the unamortized value of Tenant's leasehold
improvements which were installed in the Premises at Tenant's sole cost and
expense. Said amortization shall be determined on the straight-line depreciation
method allowed by the Internal Revenue Code of 1986 (as amended) assuming a
depreciation period commencing with the placement in service of such leasehold
improvements and ending on the date of expiration of the Term determined
pursuant to Section 3.1. Payment of the amount equivalent to the unamortized
value of Tenant's leasehold improvements will be made to Tenant within thirty
(30) days after Tenant shall have vacated the Premises in accordance with the
terms of this Lease, provided that Landlord shall have the right to deduct
therefrom any amounts due Landlord from Tenant pursuant to this Lease. For
purposes of this Section, "Tenant's leasehold improvements" shall include
partitioning, electrical wiring, plumbing (other than plumbing fixtures),
painting, wallpaper, storefront and other permanent improvements installed,
affixed or attached in or to the Premises, but shall not include (x) Tenant's
inventory or stock in trade, (y) such trade fixtures, electrical fixtures,
equipment or apparatus as are removable by Tenant at the expiration of the Term
pursuant to Section 7.4, or (z) Landlord's fixtures or other improvements
installed by or at the expense of Landlord. In order for Tenant to be entitled
to payment of the unamortized value of its leasehold improvement as set forth in
this paragraph, Tenant shall, within sixty (60) days after commencement of the
Term, furnish to Landlord a statement, signed by an independent certified public
accountant, setting out in detail the cost of Tenant's leasehold improvements.
If this Lease shall be terminated as to any portion or all of the
Premises pursuant to this Section, the rights and obligations of the parties
hereunder shall cease as of the date specified herein and Rental (other than any
Additional Rental due Landlord by reason of Tenant's failure to perform any of
its obligations hereunder) shall be adjusted as of the date of such termination.
No further documentation shall be required to effect the termination of this
Lease, but each party agrees that, upon the request of the other party to do so,
it shall execute, acknowledge and deliver an appropriate instrument evidencing
such termination prepared by or at the expense of the party requesting the same.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
hereby have executed this Lease under their respective hands and seals as of the
day and year first above written.
ATTEST: FANEUIL HALL MARKETPLACE, INC., Landlord
____________________________ By:_______________________(SEAL)
Assistant Secretary Vice-President
(CORPORATE SEAL)
ATTEST: FANTAIL RESTAURANT, INC., Tenant
____________________________ By:_______________________(SEAL)
Assistant Secretary President
(CORPORATE SEAL)
If Tenant is a corporation, the authorized officers must sign on behalf
of the corporation, and by doing so such officers make the covenants and
warranties contained in Section 20.17 hereof. The Lease must be executed for
Tenant, if a corporation, by the president or vice-president and be attested by
the secretary or the assistant secretary, unless the by-laws or a resolution of
the board of directors shall provide that other officers are authorized to
execute the Lease, in which event, a certified copy of the by-laws or
resolution, as the case may be, must be furnished. Tenant's corporate seal must
be affixed.
#504930 v1 - NELSONAL - @tl%01!.DOC - 9172/1
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<PAGE>
RIDER TO LEASE
THIS RIDER is annexed to and forms part of the Lease dated ____________,
between FANEUIL HALL MARKETPLACE, INC., a Maryland corporation as Landlord, and
FANTAIL RESTAURANT, INC., a Massachusetts corporation, t/a PIZZERIA REGINA, as
Tenant.
The printed part of the Lease is hereby modified and supplemented
as follows. Wherever there is any conflict between this Rider and
the Lease, the provisions of this Rider are paramount and the
Lease shall be construed accordingly.
Section 1.1. (The printed Section deals with Certain Defined Terms):
W. Delete the words and number "eighteen percent (18%)" appearing in the
printed Section 1.1.W., and insert in lieu thereof "four (4) percentage points
over the Prime Rate, reported as of the beginning of the most recent calendar
quarter prior to the date as of which the interest is to accrue. 'Prime Rate' is
an annual percentage rate published by The Wall Street Journal in its Money
Rates."
Section 2.1. (The printed Section deals with Demise):
Add the following to the end of the printed Section 2.1.:
"It is intended and understood by the parties hereto that this Lease is
both (i) a sublease of the Premises and is subject to a certain Indenture of
Lease (the 'BRA Lease') by and between Landlord and the Boston Redevelopment
Authority (the 'Authority') dated as of February 21, 1975, and (ii) a
sub-sublease of the Premises, and is subject to a certain lease (the 'City
Lease') by and between the City of Boston (the 'City') as lessor, and the
Authority, as lessee, dated as of February 21, 1975; and all of the foregoing
being collectively referred to herein as the 'Ground Lease'.
"In the event of a termination of the City Lease or the BRA Lease, or
both, Tenant will attorn to the City or the Authority (as the case may be) and
will execute and deliver such instruments as the party requesting such
attornment may require in order to confirm such attornment."
Add the following at the end of the printed Section 2.1.:
"Landlord represents that, at the time of execution of this Lease, it is not
aware of any agreements of record applicable to the premises which would
prohibit Tenant from operating its Permitted Use in the premises."
-1-
<PAGE>
Section 3.1. (The printed Section deals with Term):
In the second and third lines of the printed Section 3.1., delete the
language "the earlier to occur of (a) the Outside Commencement Date, or (b) the
opening by Tenant of its business in the premises" and insert "Outside
Commencement Date set forth in Section 1.1.E." in lieu thereof.
Section 3.3. (The printed Section deals with Holding Over):
Delete the word "twice" in the sixth line of the printed Section 3.3.,
and insert in lieu thereof the words "one and one-half times."
Add the following to the end of the printed Section 3.3.:
"For a period of sixty (60) days following the Termination Date,
provided Landlord and Tenant are engaged in good-faith negotiations for a
renewal or extension of this Lease, the provisions of this Section 3.3. shall be
waived with regard to the change in the terms regarding the payment of Rental,
and during such 60-day period, Tenant shall continue to pay the Rental which was
due and payable under the Lease at the end of the Term.
"If such negotiations terminate before the expiration of said 60-day
period, or if Landlord and Tenant have not executed a renewal lease or an
extension of this Lease within the aforesaid 60-day period, the provisions of
this Rider Section 3.3. shall no longer be applicable, and the full provisions
of the printed Section 3.3. shall prevail. Nothing herein shall be construed to
obligate Landlord to negotiate with Tenant for a renewal or extension of this
Lease."
Section 4.1. (The printed Section deals with Prompt Occupancy and Use):
Add the following to the end of the printed Section 4.1.:
"Tenant covenants and agrees that it will not devote the Premises or any
portion thereof to any use or other activity not specified in or permitted by
the Downtown Waterfront-Faneuil Hall Urban Renewal Plan dated April 15, 1964,
and recorded at the Suffolk Registry of Deeds in Book 7948, Page 52, as amended
by amendments dated April 8, 1965, and December 13, 1973, and as the same may be
further amended from time to time."
After the words "continuously use" in the second line of the printed
Section 4.1., add the following: ", except when the Shopping Center is not open
for business to the public,".
Section 4.4. (The printed Section deals with Store Hours):
After the word "Landlord" in the fourth line of the first paragraph of
the printed Section 4.4., add the following: ", except for customary holidays
observed by Landlord when the Shopping Center is closed for business."
After the word "request" in the second line of the second paragraph of
the printed Section 4.4., add the following: "which approval shall not be
unreasonably withheld or delayed."
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<PAGE>
Before the word "additional" in the third line of the second paragraph
of the printed Section 4.4., add the word "reasonable."
Before the word "Tenant's in the third line of the second paragraph of
the printed Section 4.4., add the words "and due solely to".
Add the following to the end of the printed Section 4.4.:
"Notwithstanding anything to the contrary contained in this Section
4.4., Landlord shall give Tenant notice one (1) time in each Rental Year for
Tenant's failure to open for business at the Premises at least during the Store
Hours on any one (1) day before assessing the liquidated damages for such breach
or imposing such other remedies available to Landlord under this Lease for such
failure. On the second and subsequent such failure in any one (1) Rental Year,
Landlord shall have recourse to any remedy available to it under this Lease,
including, but not limited to, the collection of liquidated damages."
Section 5.3. (The printed Section deals with Annual Percentage Rental):
Delete the printed Section 5.3. in its entirety and insert in lieu
thereof the following:
"Tenant shall be under no obligation to make any payments of Annual
Percentage Rental in any Rental Year until Tenant has achieved the Breakpoint
set forth in Section 1.1.H. of this Lease for that Rental Year. Upon achieving
such Breakpoint in any Rental Year, Tenant shall thereupon make monthly payments
of Annual Percentage Rental payable on or before the fifteenth (15th) day
following the close of each full calendar month during the Term, based on Gross
Sales for such period. Monthly payments of Annual Percentage Rental shall be
calculated by multiplying the amount of Gross Sales for the month in question by
the percentage specified in Section 1.1.H., the first such payment to include
also any prorated Annual Percentage Rental for the period from the date Tenant's
Gross Sales reach the Breakpoint set forth in Section 1.1.H. to the first day of
the next full calendar month in the Term. If necessary, as soon as practicable
after the end of each Rental Year, the Annual Percentage Rental paid or payable
for such Rental Year shall be adjusted between Landlord and Tenant, each party
hereby agreeing to make such adjustment and to pay to the other, on demand, such
amount as may be necessary to effect adjustment to the agreed Annual Percentage
Rental."
Section 5.5. (The printed Section deals with "Gross Sales" Defined):
At the end of clause (b) appearing in the first paragraph of the printed
Section 5.5., add the words "to or from the Premises."
Section 5.6. (The printed Section deals with Statements of Gross Sales):
Insert the word "reasonable" before the word "cost" in the fifteenth
line of the first paragraph of the printed Section 5.6.
Add the following to the end of the printed Section 5.6.:
-3-
<PAGE>
"Notwithstanding anything to the contrary in this Section 5.6., so long
as Tenant's records are maintained in accordance with generally accepted
accounting principles, reporting of Gross Sales remains accurate, and Tenant is
not in default under the provisions of Sections 5.2., 5.3. and 5.7. of this
Lease, Tenant's annual statement of Gross Sales may be signed by Tenant's Chief
Financial Officer in lieu of certification by an independent Certified Public
Accountant. In the event Landlord's audit of Tenant's Gross Sales reveals a
discrepancy in Annual Percentage Rental previously payable in excess of three
percent (3%) for any one Rental Year, or Tenant defaults under said Sections
5.2., 5.3. or 5.7., Tenant shall be required to have such statement accompanied
by the signed certificate of an independent Certified Public Accountant for each
Rental Year during the remainder of the Term, as further provided in the printed
Section 5.6."
Add the following to the end of the printed Section 5.6.:
"If Tenant fails to deliver to Landlord its monthly report of Gross
Sales by the twentieth (20th) day after the close of each calendar month as
required pursuant to the provisions of the printed Section 5.6., in addition to
any other right or remedy of Landlord under the Lease, Tenant shall pay, as
Additional Rental, a late reporting charge equal to Twenty-Five Dollars ($25.00)
for each day after the date the report was due in which Tenant fails to deliver
such report to Landlord; if Tenant fails to deliver to Landlord its annual
statement of Gross Sales by the sixtieth (60th) day after the close of each
Rental Year as required pursuant to the provisions of the printed Section 5.6.,
in addition to any other right or remedy of Landlord under the Lease, Tenant
shall pay, as Additional Rental, a late reporting charge equal to Twenty-Five
Dollars ($25.00) for each day after the date the statement was due in which
Tenant fails to deliver such statement to Landlord."
Section 5.7. (The printed Section deals with Tenant's Records):
Insert the words "ten (10) days written" before the word "advance" in
the ninth line of the printed Section 5.7.
After the word "notice" in the nineteenth line of the printed Section
5.7., add the words "as provided herein."
After the words "time to time" in the ninth line of the printed Section
5.7., add the words ", within three (3) years after the end of each Rental
Year,".
Section 5.9. (The printed Section deals with Advance Rental): Delete the
printed Section 5.9. in its entirety.
Section 5.10. (The printed Section deals with Future Expansion): Delete
the printed Section 5.10. in its entirety.
Section 6.1. (The printed Section deals with Tenant to Pay proportionate
Share of Taxes):
Delete the printed Section 6.1. in its entirety, and insert the
following in lieu thereof:
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<PAGE>
"Section 6.1.
"A. Definitions.
"The following terms wherever initially capitalized in this Article
shall have the following meanings:
(i) 'Accounting Period' shall mean each twelve-month period beginning on
June 1 of each year and ending on May 31 of the following year.
(ii) 'Bull Market Tenants' shall mean push cart operators and other
licensees of the Marketplace Area selling goods, wares, merchandise or other
services to the public who pay flat license fees and/or percentage rental,
without additional charges.
(iii) 'Bull Market Tenants Tax Portion' shall mean for any Tax Year an
amount equal to sixteen and two-thirds percent (16 2/3%) of the Gross Rental
Income derived by the Landlord from all Bull Market Tenants in the Accounting
Period ended immediately prior to such Tax Year.
(iv) 'Certified Gross Rental Income' shall mean the Gross Rental Income
derived from Retail Tenants and the Gross Rental Income derived from Other
Tenants of the Marketplace Area in each Accounting Period, as certified in
writing by Landlord to the City of Boston.
(v) 'Gross Rental Income' shall mean all income derived by the Landlord
from all tenants of the Marketplace Area, in each Accounting Period, determined
on an accrual basis in the same manner as Gross Rental Income is determined and
reported to the City of Boston under the Letter Agreement, as in effect from
time to time.
(vi) 'Letter Agreement' shall mean the Letter Agreement between Faneuil
Hall Marketplace, Inc., and the City of Boston dated May 13, 1974, and revised
on February 20, 1975, with respect to the real estate tax levy on the North and
South Market Buildings, the Quincy Market Building and certain discontinued
streets leased by the City of Boston to Faneuil Hall Marketplace, Inc.,
collectively comprising the entire Marketplace Area.
(vii) 'Other Tenants' shall mean all tenants of the Marketplace Area
which are not Retail Tenants or Bull Market Tenants.
(viii) 'Other Tenants Tax Portion' shall mean for any Tax Year an amount
equal to twenty-five percent (25%) of the Gross Rental Income derived by the
Landlord from all Other Tenants in the Accounting Period ended immediately prior
to such Tax Year.
(ix) 'Retail Tax Payment' shall mean an amount determined by multiplying
the Tax Payment for each Tax Year by a fraction, the numerator of which is the
Retail Tenants Tax Portion and the denominator of which is the sum of the Retail
Tenants Tax Portion, the Bull Market Tenants Tax Portion and the Other Tenants
Tax Portion.
-5-
<PAGE>
(x) 'Retail Tenants' shall mean tenants of the Marketplace Area which
are engaged primarily in selling goods, wares, merchandise or other services to
the public, but specifically excluding Bull Market Tenants and Other Tenants. In
the case of tenants selling services, including, without limitation, those sold
by banks, loan and finance companies, a tenant shall be deemed a Retail Tenant
only as to those portions thereof devoted to the sale of services to the public.
(Such definition, with the exclusion of Bull Market Tenants, is intended to be
the same definition as the definition of 'Retail Subtenants' as set forth in the
Letter Agreement).
(xi) 'Retail Tenants Tax Portion' shall mean for any Tax Year an amount
equal to sixteen and 67/100 percent (16.67%) of the Gross Rental Income derived
by the Landlord from Retail Tenants in the Accounting Period ended immediately
prior to such Tax Year.
(xii) 'Tax Payment' shall mean the actual amounts billed by the City of
Boston to, and paid by, Landlord under the Letter Agreement for each Tax Year.
(xiii) 'Tax Year' shall mean each twelve-month period commencing July 1
of each year and ending on June 30 of the following year during the Term hereof,
or such other period as may from time to time hereafter be established as a real
estate tax year by the taxing authority having jurisdiction over the Marketplace
Area.
"B. Background.
"Landlord represents and warrants that the following states the manner
in which Landlord makes payments in lieu of real estate taxes to the City of
Boston pursuant to the Letter Agreement: Landlord annually certifies to the City
of Boston the amount of Gross Rental Income derived from Retail Tenants, Bull
Market Tenants and from Other Tenants at the Marketplace Area for each
Accounting Period, and based on such certification the City of Boston calculates
the amount of Tax Payments due under the Letter Agreement for the succeeding Tax
Year. For example, the Gross Rental Income for the Accounting Period ended May
31, 1984, is used to calculate the Tax Payment due the City of Boston for the
Tax Year beginning July 1, 1984, and ending June 30, 1985. Landlord further
represents that although Landlord certifies to the City of Boston the amounts
necessary to calculate the total Tax Payment due under the Letter Agreement, as
a result of the City of Boston's assessing practices, in many Tax Years the
actual Tax Payment for such Tax Year does not exactly equal the amounts due
under the Letter Agreement based on the Certified Gross Rental Income; and in
such event the City of Boston makes a subsequent adjustment in the Tax Payments
due for the succeeding Tax Year or Years. Landlord further represents that the
effect of the tax formula set forth in the Letter Agreement is that the amount
of the Tax Payment for any Tax Year should be an amount equal to the sum of
twenty-five percent (25%) of the Gross Rental Income derived by the Landlord
from Other Tenants, sixteen and two-thirds percent (16 2/3%) of the Gross Rental
Income derived by the Landlord from Bull Market Tenants and sixteen and
two-thirds percent (16 2/3%) of the Gross Rental Income derived by the Landlord
from Retail Tenants for the Accounting Period ending immediately prior to such
Tax Year."
Section 6.2. (The printed Section deals with Payment of Proportionate
Share of Taxes):
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<PAGE>
Delete the printed Section 6.2. in its entirety, and insert the
following in lieu thereof:
"Section 6.2. Tenant to Pay Proportionate Share of Taxes.
"Tenant shall pay to Landlord for each Tax Year during the Term, as
Additional Rental, as Tenant's payment for and in lieu of real estate taxes, an
amount equal to Tenant's Allocable Share of the Retail Tax Payment for each Tax
Year during the Term, Tenant's payment to be approximately prorated for any
partial Tax Year included in the Term. Tenant's Allocable Share for each Tax
Year shall be determined by multiplying the Retail Tax Payment for such Tax Year
by a fraction, the numerator of which shall be the number of square feet of the
Premises and the denominator of which shall be the total number of square feet
in the Marketplace Area leased or leaseable to Retail Tenants during such Tax
Year (excluding, however, from the calculation of leased or leaseable area the
outside seating areas (but not any substantial increase in the size thereof)
used, on a short-term or seasonal basis only, by Retail Tenants under leases in
effect on January 1, 1986, to the extent the existing or any future tenants
thereof do not pay minimum rent or tax payments for such areas). Tenant's
Allocable Share shall be paid in equal monthly installments on the first day of
each month during each Tax Year in an amount reasonably determined by Landlord
based upon Tenant's Allocable Share for the prior Tax Year (and/or if Tenant did
not occupy the Premises during all or any part of the prior Accounting Period,
based on the Tenant's Allocable Share attributable to the prior occupant of the
premises during such Accounting Period) and amounts reasonably estimated for the
current Tax Year based on the Gross Rental Income derived from Retail Tenants
for the Accounting Period ended immediately prior to such Tax Year as such Gross
Rental Income is reasonably estimated by the Landlord. Not later than one
hundred eighty (180) days after the end of each Tax Year, Landlord will certify
to Tenant the amount of Tenant's Allocable Share due for such Tax Year, which
certification shall be accompanied by a schedule setting forth the Tax Payment
for such Tax Year, the calculation of the Retail Tax payment for such Tax Year
based on such Tax Payment, and the Certified Gross Rental Income for such Tax
Year and the calculation of Tenant's Allocable Share for such Tax Year. Tenant's
Allocable Share paid or payable for such Tax Year shall be adjusted between
Landlord and Tenant, each party hereby agreeing to pay to the other, as the case
may be, within thirty (30) days of delivery of the aforesaid certification to
Tenant, such amount as may be necessary to effect such adjustment. In
determining Retail Tax Payments, there shall be allocated to the Tax Payment for
any Tax Year any refunds, abatements, credits, rebates or other adjustments to
the Tax Payment for such Tax Year, net any costs, expenses and reasonable
attorneys' fees incurred in obtaining same. Landlord shall have no right to
collect any adjustment on account of Tenant's Allocable Share for any Tax Year
which is not so certified to Tenant as aforesaid within one hundred eighty (180)
days after the end of such Tax Year.
"Landlord agrees that it will pay the appropriate taxing authority all
taxes assessed, levied or imposed against the Shopping Center Area which
Landlord is required to pay, subject to Landlord's right to contest or appeal in
an effort to reduce any such tax, assessment or charge. So long as Tenant is not
in default of the requirement to pay its Taxes, Tenant shall not be required to
pay any interest or penalties imposed for non-payment of Taxes.
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<PAGE>
"Within a reasonable time after receipt of Tenant's written request
therefor, Landlord shall forward copies of paid real estate tax bills to Tenant
indicating that said bills have been paid. Landlord shall also forward all
reasonable and non-confidential information required by Tenant to compute its
proportionate share of said Taxes.
"Nothing in this Section 6.1. shall require Tenant to pay any general
income, franchise, corporate transfer, estate or gift tax imposed upon Landlord
generally rather than as owner and/or lessee of the Shopping Center Area."
Section 6.3. (The printed Section deals with "Tax Year" Defined):
Delete the printed Section 6.3. in its entirety, and insert the
following in lieu thereof:
"Section 6.3. Changes to the Method of Calculating Tax Payment.
"Tenant's Allocable Share is calculated and payable based on the manner
in which Tax Payments are made by Landlord to the City of Boston pursuant to the
Letter Agreement on account of Gross Rental Income derived from Retail Tenants,
as represented by Landlord in Section 6.1.B. above. In the event that the Letter
Agreement is amended, or the manner of calculation of Retail Tax Payments is
changed under the Letter Agreement, but nevertheless taxes thereunder continue
to be calculated and payable based upon Gross Rental Income derived from Retail
Tenants or otherwise on account of payments by, or amounts collected by, the
Landlord from Retail Tenants, an appropriate adjustment shall be made to the
calculation of Retail Tax Payments so that each Tenant shall at all times only
pay to Landlord Tenant's Allocable Share of Tax Payments due the City of Boston
on account of Gross Rental Income or other income from or payments by Retail
Tenants. In the event that the Letter Agreement shall be terminated or amended
so that taxes are payable to the City of Boston pursuant to a formula which is
not based on Gross Rental Income derived from Retail Tenants, Bull Market
Tenants and Other Tenants, Tenant's Allocable Share shall be determined by
dividing the total number of square feet of rentable floor area within the
entire Marketplace Area (including, without limitation, all areas leased or
leaseable from time to time for retail uses and counting for this purpose one
hundred twenty-five (125) square feet for each push-cart appropriately prorated
for the periods of occupancy, but, excluding, however, from the calculation of
leased or leaseable area the outside seating areas (but not any substantial
increase in the size thereof) used, on a short-term or seasonal basis only, by
Retail Tenants under leases in effect on January 1, 1986, to the extent that the
existing or any future tenants thereof do not pay minimum rent or tax payments
for such areas) into the total real estate taxes (plus the cost of any
negotiation, contest or appeal pursued by Landlord in an effort to reduce the
tax or assessment on which any tax or other imposition provided for in this
Section is based, including, without limitation, reasonable attorney's and
appraiser's fees) payable on the entire Marketplace Area, including, without
limitation, all buildings and other improvements situated thereon (such taxes
include, but are not limited to, any real estate tax, real estate rental receipt
or gross receipt tax or any other tax of Landlord imposed by state or local
taxing authorities as a substitute for or in addition to the current method of
property taxation) for the Tax Year in question and multiplying the resulting
quotient by the number of square feet of the Premises set forth in Section
1.1.D. hereof."
-8-
<PAGE>
Section 7.1. (The printed Section deals with Tenant's Improvements):
Delete the printed Section 7.1. in its entirety.
Section 7.3. (The printed Section deals with Mechanic's Liens):
After the word "may" appearing in the twenty-fifth line of the printed
Section 7.3., insert: ", after thirty (30) days notice to Tenant,".
Delete the third sentence of the printed Section 7.3. appearing in lines
seven through seventeen.
After the word "Landlord" in the twenty-third line of the printed
Section 7.3., add the words "within thirty (30) days."
Section 7.4. (The printed Section deals with Tenant's Leasehold
Improvements and Trade Fixtures):
At the end of the second paragraph of the printed Section 7.4., change
the period to a comma, and insert the phrase "ordinary wear and tear excepted."
Add the following to the end of the printed Section 7.4.:
"Notwithstanding anything to the contrary contained in this Section
7.4., Landlord agrees to subordinate any lien which it may have on Tenant's
goods, inventory, equipment, trade fixtures and all other personal property
belonging to Tenant, excluding leasehold improvements, and any such items
acquired by Tenant with funds received from a construction allowance, if any,
paid by Landlord as a construction allowance pursuant to this Lease, on a form
acceptable to Landlord, to the rights of a recognized institutional lender or
supplier of inventory to be sold under the terms and conditions of this lease
which is a secured creditor of Tenant for the purpose of originally financing
said goods, inventory, equipment, trade fixtures and all other personal property
for use in the Premises.
"Tenant shall pay to Landlord, as Additional Rental, the sum of One
Hundred Dollars ($100.00) to cover Landlord's administrative costs, overhead and
counsel fees, plus all out-of-pocket expenses, in connection with such
subordination of lien and any and all additional costs and expenses incurred as
a result thereof."
Section 8.1. (The printed Section deals with Operations by Tenant):
(h) After the word "effect" in the printed Section 8.1.(h), insert "with
respect to Tenant's unique and specific use and occupancy of the Premises;"
(m) Insert a period after the word "Landlord" in the printed Section
8.1.(m) and delete the remainder of the paragraph.
(z) Before the word "drain" in the printed Section 8.1., insert the word
"unreasonably."
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<PAGE>
(m) Before the word "determined" in the printed Section 8.1.(m), insert
the word "reasonably".
Delete the word "and" appearing between subsections (1) and (m) in the
printed Section 8.1.
At the end of the first paragraph of the printed Section 8.1., change
the period to a semicolon and insert the following language:
"(aa) have the filters in the hoods to the food processing exhaust
systems removed on a regular basis and washed; (bb) have the hoods scraped and
cleaned a minimum of once every three (3) months, a record of such cleaning to
be presented to Landlord's Shopping Center Manager upon request therefor; (cc)
install grease traps in the Premises and keep same in a clean and sanitary
condition and in good working order and repair, such traps to be thoroughly
cleaned on a monthly basis and a record of such cleaning to be presented to
Landlord's Shopping Center Manager upon request therefor; and (dd) if gas is
used in the Premises, install a proper gas cut-off valve in the Premises."
Add the following to the end of the printed Section 8.1.:
"Quality Control.
"For the purpose of maintaining a uniform and consistent quality of
merchandise and merchandising and for the mutual protection of all tenants of
the Marketplace Area, Tenant agrees with Landlord as follows:
(a) Landlord shall have the right to establish and from time to time
modify standards of merchandise and standards of merchandising
applicable to all of the Marketplace Area tenants, and so long as
such standards do not discriminate against Tenant, do not alter
the appearance of the Premises as approved by Landlord, nor alter
Tenant's use of the Premises, Tenant shall at all times comply
with and meet such standards then in effect.
(b) Tenant shall remove from sale and from the Marketplace Area any
merchandise which, in the reasonable judgment of Landlord, does
not meet the aforesaid standards, when and as directed by an
employee of Landlord responsible for the management of the
Marketplace Area (the "Marketplace Manager").
(c) In the event the premises are located in The Food Court, Tenant's
personnel, while working in the Premises, shall be attired in
uniforms, the design of which shall be subject to Landlord's
reasonable approval.
(d) All complaints against Tenant received by Landlord from customers
will be promptly adjusted and satisfied to the reasonable
satisfaction of the customer involved or the Marketplace Manager.
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<PAGE>
(e) Tenant shall comply with the reasonable oral or written
directions of the Marketplace Manager with respect to any of the
matters mentioned in clauses (b) and (d) above within three (3)
days after such directions are given, and if the matter shall not
be corrected to the reasonable satisfaction of the Marketplace
Manager within such period, it shall be an Event of Default
hereunder."
"Pest Control Service.
"Tenant agrees to obtain extermination services for the entire Premises
at least once each month during the Term hereof, and any extensions and renewals
thereof. Landlord may (but shall not be required to) make available to Tenant a
contractor who will provide extermination services to the Premises in the course
of providing such services to other tenants in the Marketplace Area, whereupon
Tenant, if it so elects, shall contract with and pay such contractor directly.
In lieu of the above, Tenant may obtain its own contractor to provide such
extermination services; provided, however, that such contractor (a) performs at
a level of quality equal to the contractor made available by Landlord, and (b)
submits to Landlord, if requested, a certificate stating the date and frequency
of performance of such extermination services."
Section 8.3. (The printed Section deals with Painting and Displays by
Tenant):
After the word "approval" appearing in the second line of the printed
Section 8.:3., change the period to a semicolon, and insert the following:
"provided, however, that Landlord's approval shall not be necessary for the
painting or decorating of any portion of the interior of the Premises so long as
such painting or decorating is in conformance with the color or decorating
scheme originally installed by Tenant and approved by Landlord for the
Premises."
Before the word "determined" appearing in the seventh line of the
printed Section 8.3., insert the word "reasonably", and after the first
occurrence of the word "Landlord" in the seventh line, insert "based upon
Landlord's most current Design Criteria."
Section 8.4. (The printed Section deals with Trash Removal Service):
After the word "increase" in the seventh line of the printed Section
8.4., add the words "or decrease."
Add the following to the end of the printed Section 8.4.:
"If Landlord is providing trash removal service to the Premises,
Landlord agrees that any charges imposed by it for such trash removal shall be
reasonable for and competitive with the same quality of service rendered by
other companies providing trash removal service in the area in which the
Shopping Center is located."
Section 8.6. (The printed Section deals with Hazardous Substances):
(b) At the beginning of the printed Section 8.6.(b), insert the phrase
"if Tenant engages in Hazardous Substance Activity,".
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(c) At the beginning of the printed Section 8.6.(c), insert the phrase
"if Tenant engages in Hazardous Substance Activity,".
(e) At the beginning of the printed Section 8.6.(e), insert the phrase
"if Tenant engages in Hazardous Substance Activity,".
(g) Add the following to the end of the printed Section 8.6.(g): ", but
with respect to testing required by Landlord's Mortgagee, Tenant shall only be
responsible for testing costs for Releases caused by the acts or omissions of
Tenant, its officers, agents, contractors, employees or invitees".
(h) At the end of the printed Section 8.6.(h), insert the phrase "caused
by the acts or omissions of Tenant, its officers, agents, contractors, employees
or invitees".
Add the following to the end of the printed Section 8.6.:
"As of the date of execution of this Lease, to the best of Landlord's
knowledge and information, the Common Areas of the Shopping Center are in
compliance with all federal, state, local and municipal codes, laws, ordinances
and regulations which relate to Hazardous Substances."
"Landlord agrees that it shall not look to Tenant for contribution to
the cost of any remedial activity necessitated as a result of a sudden
catastrophic spill or discharge involving Hazardous Substances in the Premises,
except to the extent (if any) that such existence resulted, directly or
indirectly, from the acts or omissions of Tenant, its officers, agents,
contractors, employees or invitees.
"Landlord agrees that it shall not require Tenant to contribute to the
cost of any remedial activity required in the Premises by laws or regulations in
effect as of the execution of this Lease due to the presence of a Hazardous
Substance (defined as of the execution date) in the Premises, unless the
remediation activity is required due to the actions or negligence of Tenant, its
agents or employees."
Section 9.1. (The printed Section deals with Repairs to be Made by
Landlord):
After the words "structural columns" appearing in the second line of the
printed Section 9.1., add the words ", roof (subject to the provisions contained
in Section 10.4. and Section 10.5.)".
Add the following at the end of the printed Section 9.1.:
"Landlord is responsible for repairs to plumbing, electrical, or other
mechanical installations which pass over and/or beneath the Premises but are not
directly servicing the Premises to the extent such repairs are not the
obligation of the utility company or other entity or person providing such
service, and provided that such repairs were not necessitated by reason of
Tenant's negligence."
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Section 9.2. (The printed Section deals with Repairs to be Made by
Tenant):
After the word "indemnify" in the fourteenth line of the printed Section
9.2., add the following: "subject to Section 13.7.,".
Add the following to the end of the printed Section 9.2.:
"Tenant's obligation to repair electrical, plumbing and other mechanical
installations contained within the Premises shall be limited to such
installations which are used solely by Tenant."
Section 9.3. (The printed Section deals with Damage to Premises):
Add the following to the beginning of the printed Section 9.3.: "Subject
to the printed Section 13.7.,"
Delete the word and number "five (5)" appearing in the fifth line of the
printed Section 9.3., and insert the word and number "ten (10)" in lieu thereof.
Section 9.4. (The printed Section deals with Alterations by Tenant):
Before the word "interference" in the ninth line of the printed Section
9.4., add the word "material."
Add the following to the end of the printed Section 9.4.:
"Notwithstanding anything to the contrary contained in this Section
9.4., without first obtaining Landlord's prior written consent or approval,
Tenant shall have the right to make interior repairs or replacements in and to
the Premises, provided (i) such interior alterations neither require any
structural alteration nor impose any greater load on any structural portion of
the Premises, (ii) such interior repairs or replacements are in accordance with
Tenant's originally approved plans and are in conformance with Landlord's most
current Design Criteria, (iii) the cost of such interior repair or replacement
shall not exceed Two Thousand Dollars ($2,000.00) per Rental Year."
Section 9.5. (The printed Section deals with Changes and Additions to
Shopping Center):
Add the following to the end of the printed Section 9.5:
"Any changes or additions by Landlord to the Shopping Center Area shall
be performed in such a manner so as not to unreasonably interfere with Tenant's
use of the Premises and shall not change in a material, adverse way the access
to the Premises from the Common Areas adjacent to the Premises. In no event,
however, shall this provision prevent Landlord from installing and maintaining
kiosks or pushcarts in the Common Areas."
Section 9.6. (The printed Section deals with Roof and Walls):
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Delete the word "deny" in the seventh line of the printed Section 9.6.,
and insert in lieu thereof the words "materially interfere with."
After the word "thereof" in the seventh line of the printed Section
9.6., delete the period and add the following: "and only after reasonable prior
notice, except in the case of emergencies."
Add the following to the end of the printed Section 9.6.
"Landlord agrees that any such uses contemplated her under shall not
decrease the size of the Premises nor materially interfere with Tenant's use of
or access to the Premises from the Common Areas immediately in front of and
adjacent to the Premises, and any such pipes or conduits shall be concealed
along the walls and ceilings of the Premises."
Section 10.1. (The printed Section deals with Use of Common Areas):
Add the following to the end of the printed Section 10.1.: "
and to the pertinent provisions, if any, of the Ground Lease."
Section 10.2. (The printed Section deals with Management and Operation
of Common Areas):
(i) After the word 'reasonable" appearing in the printed Section
10.2.(i), insert: "and non-discriminatory".
Add the following to the end of the printed Section 10.2.:
"Landlord covenants and agrees that it will provide, operate, repair and
maintain such Common Areas as are reasonably required for the operation of a
first class shopping center."
Add the following to the end of the printed Section 10.2.:
"Landlord agrees that the exercise of its rights under this Section
10.2. will not materially, adversely affect access to the Premises from the
Common Areas immediately in front of and adjacent to the Premises or Tenant's
use of the Premises."
Section 10.3. (The printed Section deals with Employee Parking Areas):
The printed Section 10.3. is hereby deleted in its entirety.
Section 10.4. (The printed Section deals with Tenant to Share Expense of
Common Areas):
Add the following to the end of the printed Section 10.4.:
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<PAGE>
"Landlord agrees that its annual statement of Landlord's Operating Costs
shall be reasonably itemized by expense category."
Section 10.5. (The printed Section deals with "Landlord's Operating
Costs" Defined):
Add the following after the word "services;" appearing in the
thirty-third line of the printed Section 10.5.:
"depreciation for capital expenditures made by Landlord to reduce operating
expenses if Landlord shall have reasonably determined that the annual reduction
in operating expenses shall exceed depreciation therefor (depreciation shall be
determined by dividing the original cost of such capital expenditure by the
number of years of useful life of the capital item acquired and the useful life
shall be reasonably determined by Landlord in accordance with generally accepted
accounting principles and practices in effect at the time of acquisition of the
capital item);".
Add the following to the end of the printed Section 10.5.:
"Landlord agrees that any item which is amortized shall be so amortized
in accordance with generally accepted accounting principles, and Tenant shall be
apportioned only its share of that part of the amortization which falls during
the Term of this Lease.
"Landlord agrees that any item which is a capital expenditure in
accordance with generally accepted accounting principles shall be depreciated in
accordance with generally accepted accounting principles, and Tenant shall be
apportioned only its share of that part of the amortization which falls during
the Term of this Lease.
"Landlord's Operating Costs shall not include (i) the cost of Landlord's
initial capital improvements in the Shopping Center, (ii) payments of principal,
interest, points and fees on any mortgages, deeds of trust or other financing
instruments relating to the financing of the Shopping Center; (iii) leasing
commissions or brokerage fees; (iv) costs associated with preparing, improving
or altering space for any leasing or releasing of any space within the Building;
(v) costs, including permit, license and inspection costs, incurred with respect
to the installation of tenant improvements in the Building or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
leaseable space for tenants or other occupants of leaseable premises in the
Building; (vi) costs incurred by Landlord for the repair of damage to the
Building, to the extent that Landlord is reimbursed by insurance proceeds; and
(vii) all items and services for which Tenant or any other tenant in the
Shopping Center reimburses Landlord (other than through tenant's proportionate
share of Landlord's Operating Costs)."
Section 10.7. (The printed Section deals with Renovation or Expansion of
Common Areas):
Add the following to the end of the printed Section 10.7.:
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"Notwithstanding anything contained in this Section 10.7. to the
contrary, it is hereby agreed that the aforementioned increase in Annual Basic
Rental shall not apply to Landlord's proposed renovation of Quincy Market
Building."
Section 11.3. (The printed Section deals with Landlord's Contribution to
Merchants' Association):
Delete the printed Section 11.3., and insert the following in lieu
thereof:
"Landlord shall contribute to the Association for each Association Year
an amount equal to Seventy-Five Thousand Dollars ($75,000.00)."
Section 11.5. (The printed Section deals with Advertising):
Delete the printed Section 11.5. in its entirety.
Section 12.1. (The printed Section deals with Water, Electricity,
Telephone and Sanitary Sewer):
After the word "Premises" in the third line of the second paragraph of
the printed Section 12.1., delete the period and add the following: "as set
forth in Schedule E."
After the second appearance of the word , "Landlord" in the eighth line
of the second paragraph of the printed Section 12.1., add the words "and
reasonably satisfactory to Tenant."
Delete the word "sole" in the first line of the third paragraph of the
printed Section 12.1.
Delete the period at the end of the printed Section 12.1., and add the
following: ", and provided further that Landlord shall use its reasonable
efforts to minimize interruption to electricity service to the Premises."
After the word "therefor" in the fifth line of the last paragraph of the
printed Section 12.1., add the words "which approval shall not be unreasonably
withheld or delayed."
Add the following to the end of the printed Section 12.1.:
"If any utility to the Premises should become unavailable for a period
in excess of seventy-two (72) consecutive hours and such unavailability is
directly caused by the willful act or gross negligence of Landlord, all Rental
shall abate until utility service to the Premises is restored."
Section 12.2. (The printed Section deals with Heating, Ventilating and
Air-Conditioning):
Before the word "Tenant" in the fourth line of the second paragraph of
the printed Section 12.2., add the words "such documentation is reasonably
satisfactory to Tenant, and provided further that."
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<PAGE>
After the word "Landlord" in the third line of the third paragraph of
the printed Section 12.2., add the words "in its reasonable determination."
After the word "approval" in the sixth line of the third paragraph of
the printed Section 12.2., add the words, "which approval shall not be
unreasonably withheld."
Before the word "cost" in the last line of the third paragraph of the
printed Section 12.2., add the word "reasonable."
Section 12.3. (The printed Section deals with Fire Protection Sprinkler
System):
After the word "required" in the seventh line of printed Section 12.3.,
add the word "only."
Section 12.4. (The printed Section deals with Discontinuances and
Interruptions of Utility Services):
Delete the first two sentences of the printed Section 12.4.
Section 13.1. (The printed Section deals with Indemnities):
Before the word "Tenant" in the first line of the first paragraph of the
printed Section 13.1., add the words "subject to Section 13.7.,".
Before the word "Landlord" in the first line of the second paragraph of
the printed Section 13.1., add the words "subject to Section 13.7.,".
Before the word "attorneys"' appearing in the third line of the printed
Section 13.1., insert the word "reasonable."
After the word "invitees" appearing in the eighth line of the printed
Section 13.1., insert the parenthetical phrase "(while in the Premises)".
Add the following to the end of the printed Section 13.1.:
"Landlord shall indemnify, hold harmless and defend Tenant, its agents,
servants and employees from and against all claims, actions, losses and expenses
made by third parties (including attorneys' and other professional fees),
arising from any conduct, activity, act, omission or operation involving the
use, handling, generation, treatment, storage, disposal or release of any
Hazardous Substance in, from or to the Premises or the Shopping Center, to the
extent caused directly by the actions of Landlord, its agents, servants and
employees, and not arising solely out of Landlord's position as an
Owner/Operator of the Shopping Center."
Section 13.3. (The printed Section deals with Tenant's Insurance):
Add the following to the end of the printed Section 13.3.(b):
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<PAGE>
"Notwithstanding anything to the contrary contained in this Section
13.3.(b), Tenant may carry the insurance required under this Section 13.3.(b) in
a deductible form, so long as the amount of such deductible does not exceed
$25,000.00 and so long as Tenant agrees not to hold Landlord, its officers,
agents, contractors or employees liable for any losses which would otherwise be
covered by such deductible. Tenant hereby expressly waives all right of recovery
against Landlord, its officers, agents, employees or contractors for damage
which would otherwise be covered by any deductible contained in Tenant's
insurance policies covering the Premises."
Section 13.4. (The printed Section deals with Tenant's Contractor's
Insurance):
(a) Delete the words and numbers "Three Million Dollars ($3,000,000)"
appearing in clause (a) of the printed Section 13.4., and insert "One Million
Dollars ($1,000,000.00)" in lieu thereof.
(b) Delete the words and numbers "One Million Dollars ($1,000,000)"
appearing in clause (b) of the printed Section 13.4., and insert "Five Hundred
Thousand Dollars ($500,000)" in lieu thereof.
Add the following to the end of the printed Section 13.4.:
"Notwithstanding anything to the contrary contained in this Section
13.4., Tenant's contractor may carry the insurance required under this Section
13.4. in a deductible form, so long as the amount of such deductible does not
exceed Twenty-Five Thousand Dollars ($25,000.00) and so long as Tenant agrees to
pay any party, including Landlord, for any losses suffered which would otherwise
be covered by such deductible."
Section 13.5. (The printed Section deals with Policy Requirements):
Before the word "approval" in the third line of the printed Section
13.5., add the word "reasonable."
After the word "certified" in the eleventh line of the printed Section
13.5., add the words ", registered or express."
Section 13.6. (The printed Section deals with Increase in Insurance
Premiums):
Add the following to the end of the printed Section 13.6:
"So long as Tenant complies with all laws, ordinances, rules and
regulations of governmental authorities in effect and all recommendations of the
National Fire Protection Association or similar entity selected by Landlord,
Landlord shall not require Tenant to pay any insurance increase solely because
Tenant's Permitted Use as of the Commencement Date results in the increase."
Section 13.7. (The printed Section deals with Waiver of Right of
Recovery):
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<PAGE>
After the word, "employees" in the fifth line of the printed Section
13.7., add the following: "to the extent of insurance coverage or if such party
fails to maintain insurance as required hereunder, to the extent same would have
been covered had said party fulfilled its insurance obligations."
Section 13.8. (The printed Section deals with Tenant to Pay
Proportionate Share of Insurance Costs):
After the word "insurance" in the second line of the first paragraph of
the printed Section 13.8., add the words "required hereunder."
Add the following to the end of the printed Section 13.8.:
"Landlord warrants that it maintains and covenants that it will at all
times maintain all risks casualty insurance covering Landlord's Building in an
amount equal to its full replacement value, and reasonably sufficient amounts of
general liability insurance."
Section 14.1. (The printed Section deals with Landlord's Obligation to
Repair and Reconstruct):
After the word "Rental" in the sixth line of the printed Section 14.1.,
add the words "and other charges."
Section 14.2. (The printed Section deals with Landlord's Option to
Terminate Lease):
After the word "insurance" in the second line of the printed Section
14.2., add the words "required to be carried hereunder,".
Add the following at the end of the printed Section 14.2.:
"Landlord shall have the right to terminate this Lease as specified in
(a), (b) and (c) of the printed Section 14.2. only in the event that (i)
Landlord elects not to rebuild the Premises and does not commence rebuilding of
the Premises within one (1) year after the date of such Casualty, and (ii)
Landlord terminates the leases of all other retail tenants in Landlord's
Building similarly affected by such Casualty, in which event, subject to Section
20.22. hereof, both parties will be relieved of all obligations under this Lease
except those obligations occurring or accruing prior to the date of such
termination.
"Tenant shall have the right to terminate this Lease if the Premises are
damaged in whole or in part and are thereby rendered untenantable during the
last three (3) years of the Term, by giving Landlord written notice of such
termination within thirty (30) days after the date of such Casualty. If Tenant
so terminates this Lease both parties, subject to Section 20.22. hereof, will be
relieved of all obligations under this Lease except those obligations occurring
or accruing prior to the date of such termination.
"If any of the events described in the printed Section 14.2. occur, and
Landlord does not elect to exercise its right to terminate this Lease, Landlord
shall give Tenant notice within ninety
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<PAGE>
(90) days after, the date of such Casualty, as to the length of time Landlord
reasonably expects it shall take to restore the Premises. If the Premises cannot
be repaired or restored within one (1) year after the date of such Casualty,
Tenant shall have the right to terminate this Lease within thirty (30) days
after receipt of such notice from Landlord by giving Landlord notice of its
intention to so terminate. In the event of such termination, both parties,
subject to Section 20.22. hereof, will be relieved of all obligations under this
Lease except those obligations occurring or accruing prior to the date of such
termination."
Section 14.3. (The printed Section deals with Demolition of Landlord's
Building):
Add the following to the end of the printed Section 14.3.:
"It is agreed between the parties hereto that if it is Landlord's
decision to demolish the building in which the Premises are located, then in
that event Tenant may terminate this Lease upon ninety (90) days' notice to
Landlord. In the event of such termination, both parties hereunder shall be
relieved of all obligations under this Lease saving and excepting those
obligations occurring or accruing prior to such termination."
Section 15.1. (The printed Section deals with Effect of Taking):
Add the following to the end of the printed Section 15.1.:
"If a material part of the Premises shall be taken under the power of
eminent domain to the extent that it is unreasonable to expect Tenant to
continue to operate its business in the Premises, or substantially impairs its
ability to conduct its business in the Premises, Tenant may terminate this
Lease, as of the date when Tenant is required to yield possession, by giving
notice to that effect to Landlord within thirty (30) days after such date. In
the event of any such termination, both parties shall be relieved of all
obligations under this Lease as of the date of such termination, saving and
excepting any obligation occurring or accruing prior to the date of such
termination."
Section 16.1. (The printed Section deals with Landlord's Consent
Required):
Add the following to the end of the printed Section 16.1.:
"Notwithstanding anything which may be to the contrary in this Section
16.1., provided Tenant is not in default under any of the terms and conditions
of this Lease, and further provided that Tenant has fully and faithfully
performed all of the terms and conditions of this Lease, Tenant shall have the
right, with written notice to Landlord within thirty (30) days of such
assignment, to assign this Lease to any parent, subsidiary or affiliate
corporation of Tenant, or to the surviving corporation in connection with a
merger, consolidation or acquisition between Tenant and any of its subsidiaries
for any of the then remaining portion of the unexpired Term without Landlord's
consent, at any time during the Term of the Lease, provided: (i) the net assets
of the assignee corporation at the time of the assignment shall not be less than
the net assets of Tenant at the time of the signing of this Lease; (ii) the
assignee corporation provides Landlord with audited financial statements
certifying such net assets; (iii) such assignee continues to
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operate the business conducted in the Premises under the same Tenant Trade Name,
in the same manner as Tenant and pursuant to all of the provisions of this
Lease; (iv) such assignee corporation shall assume in writing in form acceptable
to Landlord all of Tenant's obligations under this Lease and Tenant shall
provide Landlord with a copy of such assignment; and (v) Tenant continues to
remain liable on this Lease for the performance of all terms, including but not
limited to, payment of Rental due under this Lease."
Section 17.1. (The printed Section deals with "Event of Default"
Defined):
(f) Add the following to the printed Section 17.1(f):
"Notwithstanding anything to the contrary contained in this Section
17.1.(f), Landlord shall give Tenant seven (7) days' notice of late payment of
Rental once only in any one Rental Year during the Term before such late payment
shall constitute an Event of Default hereunder. Upon the second and subsequent
such occurrence in any Rental Year, Landlord shall have the right to proceed
against Tenant and the Premises without such notice".
(g) Delete the word and number "ten (10)", wherever they appear in the
printed Section 17.1.(g) and insert "thirty (30)" in each instance in lieu
thereof.
(g) After the word "times" in the ninth line of the printed Section
17.1.(g), add the words "with respect to the same covenant."
Section 17.2. (The printed Section deals with Remedies):
Delete the words "or without" appearing in the first line of the printed
Section 17.2.(a).
After the word "notice" in the third line of the printed Section
17.2.(b), add the words "and all applicable time to cure."
Before the word "costs" in the first line of the last paragraph of the
printed Section 17.2., add the word "reasonable."
Delete the phrase "reenter the Premises" appearing in the second line of
the printed Section 17.2.(c), and insert "initiate legal remedies available to
Landlord" in lieu thereof; and delete the phrases "without the necessity of
legal proceedings" and "without resort to legal process", respectively, as they
appear in the printed Section 17.2.(c).
Section 17.3. (The printed Section deals with Damages):
Before the word "expenses" in the fourth line of the first paragraph of
the printed Section 17.3., add the word "reasonable."
Add the following to the end of the printed Section 17.3.:
"Landlord agrees to use reasonable efforts to relet the Premises so as
to mitigate damages."
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Section 17.4. (The printed Section deals with Remedies in Event of
Bankruptcy or Other Proceeding):
Delete the last sentence of Section 17.4.(a), and insert in lieu thereof
the following: "Upon the termination of this Lease as provided above, Landlord
may avail itself of any of the remedies available in 17.3. and may dispossess
Tenant by summary proceedings."
Section 18.1. (The printed Section deals with Subordination):
After the word "Unless" appearing in the first line of the printed
Section 18.1., insert the words "the City, the Authority or".
Change the designations for subsections "(a)" and "(b)" to "(b)" and
"(c)", and insert the following as the new subsection (a):
"(a) the Ground Lease, and".
Add the following to the end of the printed Section 18.1.:
"Upon the written request of Tenant, Landlord shall use its reasonable
efforts to obtain a non-disturbance agreement from its Mortgagee in favor of
Tenant. Any fee charged by Landlord's Mortgagee connected with obtaining the
non-disturbance agreement shall be borne solely by Tenant. Landlord agrees,
however, to notify Tenant in the event there is a fee connected therewith, in
which event Tenant has the option to proceed with or cancel its request for such
non-disturbance."
Section 18.2. (The printed Section deals with Mortgagee's Unilateral
Subordination):
After the word "If" appearing in the first line of the printed Section
18.2., insert the words "the City, the Authority or"; before the word "Mortgage"
appearing in the third and fourth lines, respectively, of the printed Section
18.2., insert the words "Ground Lease and/or" in each instance.
Section 20.1. (The printed Section deals with Radius Restriction):
Add the following to the end of the printed Section 20.1.:
"The acquisition by Tenant of an existing restaurant facility within the
Restriction Area shall not be deemed an Event of Default hereunder."
Section 20.2. (The printed Section deals with Estoppel Certificates):
Delete the word and number "ten (10)" wherever they appear in the
printed Section 20.2. and substitute the word and number "twenty (20)" in each
instance in lieu thereof.
Add the following to the end of the printed Section 20.2.:
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"At any time and from time to time, within thirty (30) days after Tenant
shall request the same, Landlord will execute, acknowledge and deliver to
Tenant, or such other party as may be designated by Tenant, a certificate
setting forth the commencement and termination dates of the Lease, the amount of
Rental payable by Tenant hereunder and the nature, if any, of any Event of
Default existing as of the date of such certificate."
Section 20.3. (The printed Section deals with Inspections and Access by
Landlord):
After the word "hours" appearing in the second line of the printed
Section 20.3., add the words ", after forty-eight (48) hours' written notice to
Tenant at the Tenant Notice Address, except for emergencies or where Landlord's
daily routine inspections as part of its normal operating procedure do not
materially, adversely affect Tenant's routine use of the Premises,".
Section 20.4. (The printed Section deals with Memorandum of Lease):
Delete the printed Section 20.4., and insert the following in lieu
thereof:
"The parties hereby agree that, upon the request of either party, each
will execute, acknowledge and deliver a short form or memorandum of this Lease
in recordable form. Recording, filing and like charges and any stamp, charge for
recording, transfer or other tax shall be paid by the party requesting
recordation. In the event of termination of this Lease, within thirty (30) days
after written request from Landlord, Tenant agrees to execute, acknowledge and
deliver to Landlord an agreement removing such short form of lease from record.
If Tenant fails to execute such agreement within said thirty-day period or fails
to notify Landlord within said thirty-day period of its reasons for refusing to
execute such agreement, Landlord is hereby authorized to execute and record such
agreement removing the short form of lease from record. This provision shall
survive any termination of this Lease."
Section 20.6. (The printed Section deals with Successors and Assigns):
After the word "Lease" appearing in the fifth line of the printed
Section 20.6., change the period to a comma, and add the following language: "or
such assigns of Tenant to whom the assignment by Tenant does not require the
consent of Landlord pursuant to the provisions of this Lease".
Section 20.7. (The printed Section deals with Compliance With Laws and
Regulations):
Add the following to the end of the printed Section 20.7.:
"Notwithstanding anything to the contrary contained in this Section
20.7., Tenant's obligations hereunder shall be limited to its exercise of the
Permitted Use or its own improvements and those elements of the Premises the
maintenance and repair of which Tenant bears responsibility under Section 9.2.
hereof. If there is a change in any governmental statute, law, rule, order,
regulation or ordinance affecting the Premises which requires the making of a
change to any structural element in the Premises or to any improvement in the
Premises
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<PAGE>
originally required to be installed by Landlord at Landlord's expense,
Landlord shall be responsible for and bear the cost of any such change."
Section 20.17. (The printed Section deals with Corporate Tenants):
Add the following to the end of the printed Section 20.17.:
"If Landlord is a corporation, the undersigned officer of Landlord
hereby warrants and certifies to Tenant that Landlord is a corporation in good
standing and authorized to do business in the State in which the Premises are
located, all Landlord's franchises and corporate taxes have been paid to date;
all future forms, reports, fees and other documents necessary for Landlord to
comply with applicable laws will be filed by Landlord when due.
"The undersigned officer of the corporation executing this Lease,
FANEUIL HALL MARKETPLACE, INC., hereby further warrants and certifies to Tenant
that the corporation, and he/she, as such officer, are authorized and empowered
to execute this Lease on behalf of Landlord."
Section 20.20. (The printed Section deals with Waiver of Certain
Rights):
Before the word "counterclaim" appearing in the second line of the first
paragraph and the third line of the second paragraph, respectively, of the
printed Section 20.20., insert the word "non-compulsory" in each instance.
Add the following to the end of the printed Section 20.20.:
"Tenant shall only be obligated to waive its right to a jury trial in
the event of a monetary Default or holding over.
Section 20.21. (The printed Section deals with Limitation on Right of
Recovery Against Landlord):
Delete the second paragraph of the printed Section 20.21.
Section 20.22. (The printed Section deals with Survival):
After the word "Tenant" in the fourth line of the printed Section
20.22., add the words "and Landlord."
Section 20.23. (The printed Section deals with Relocation of Premises):
Delete the printed Section 20.23 in its entirety.
Add the following as new sections to the Lease:
"Section 21.1. Products Liability Insurance and Liquor Liability Insurance.
-24-
<PAGE>
During the Term Tenant shall, at its expense, take out and keep in force
a policy of products liability insurance in an amount satisfactory to Landlord.
In addition, if at any time during the Term Tenant sells or dispenses alcoholic
beverages pursuant to Section 1.1.F., Tenant shall, at its expense, take out and
keep in force, a policy of liquor liability insurance with limits, for each
occurrence, of not less than One Million Dollars ($1,000,000). Tenant shall
comply in all respects with the provisions of Section 13.5. with respect to any
such insurance and shall name Landlord and/or its designee(s) as additional
insured(s)".
"Section 21.2. The Food Court.
"The Premises are part of a larger area within Landlord's Building known
as 'The Food Court'. The Food Court comprises other Premises, adjacent to or
near the Premises, which Premises have been or are intended to be leased to
other tenants for the primary sale of food and beverages primarily for
off-premises consumption in Landlord's Building, and which premises shall be
designated from time to time by Landlord as being part of The Food Court (such
premises, together with the Premises, being referred to herein as 'The Food
Court Premises' and the tenants of such premises, including Tenant, being
hereinafter referred to as 'The Food Court Tenants'). The Food Court also
comprises certain common eating and table areas and facilities adjacent to or
near the Premises ('The Food Court Common Areas') as currently exists or as may
be adjusted by Landlord for the convenience of customers of The Food Court
Tenants. In each Rental Year, Tenant shall pay to Landlord, as Additional
Rental, a proportionate share of The Food Court Expenses. 'The Food Court
Expenses' means all reasonable costs and expenses incurred by Landlord (less any
contribution to such costs and expenses made by any tenant other than a Food
Court Tenant) in respect of (a) janitorial, bussing and management services for
The Food Court Common Areas, (b) removal of garbage from The Food Court Common
Areas, including (without limitation) depreciation of machinery and equipment
and other charges incurred in connection with such garbage removal equipment,
and (c) leasing, rental, maintenance, repair and replacement of all facilities,
fixtures and furnishings in The Food Court Common Areas. Tenant's proportionate
share shall be paid by Tenant in monthly installments in such amounts as are
estimated and billed by Landlord at the beginning of each twelve (12) month
period commencing and ending on dates designated by Landlord, each installment
being due on the first day of each calendar month. At any time during each
twelve (12) month period, Landlord may reestimate Tenant's proportionate share
of The Food Court Expenses and adjust Tenant's monthly installments payable
during such twelve (12) month period to reflect more accurately Tenant's
proportionate share of The Food Court Expenses. Tenant's proportionate share of
The Food Court Expenses shall be the sum of the products determined by (i)
multiplying one-half (1/2) of The Food Court Expenses for the twelve (12) month
period in question by a fraction, the numerator of which is Tenant's Gross Sales
for the same period and the denominator of which is the total Gross Sales
(computed in the same manner as Tenant's Gross Sales) of all of The Food Court
Tenants attributable to The Food Court premises (as determined by Landlord) and
(ii) multiplying one-half (1/2) of The Food Court Expenses for the twelve (12)
month period in question by a fraction, the numerator of which is Tenant's Floor
Area and the denominator of which is the total leased floor area of all of The
Food Court Premises. Within one hundred twenty (120) days (or such additional
time thereafter as is reasonable under the circumstances), after the end of each
such twelve (12) month period, Landlord shall deliver to Tenant a detailed
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<PAGE>
statement of The Food Court Expenses for such twelve (12) month period and the
monthly installments paid or payable shall be adjusted between Landlord and
Tenant, and Tenant shall pay Landlord or Landlord shall credit Tenant's account
(or, if such adjustment is at the end of its Term, Landlord shall pay Tenant),
as the case may be, within fifteen (15) days of receipt of such statement, such
amounts as may be necessary to effect such adjustment. Upon reasonable notice,
Landlord shall make available for Tenant's inspection at Landlord's office,
during normal business hours, Landlord's records relating to The Food Court
Expenses for such twelve (12) month period. Failure of Landlord to provide the
statement called for hereunder within the time prescribed shall not relieve
Tenant of its obligations hereunder.
"The Food Court Expenses shall not include (i) the cost of Landlord's
initial capital improvements in the Food Court; (ii) payments of principal,
interest, points and fees on any mortgages, deeds of trust or other financing
instruments relating to the financing of the Food Court; (iii) leasing
commissions or brokerage fees; (iv) costs associated with preparing, improving
or altering space for any leasing or releasing of any space within the Food
Court; (v) costs, including permit, license and inspection costs, incurred with
respect to the installation of tenant improvements in the Food Court or incurred
in renovating or otherwise improving, decorating, painting or redecorating
vacant leaseable space for tenants or other occupants of leaseable premises in
the Food Court; (vi) costs incurred by Landlord for the repair of damage to the
Food Court to the extent that Landlord is reimbursed by insurance proceeds; and
(vii) all items and services for which Tenant or any other tenant in the Food
Court reimburses Landlord (other than through tenant's proportionate share of
The Food Court Expenses)."
"Section 21.3. Mutual Release.
Landlord and Tenant are parties to a prior lease agreement dated January
19, 1976 (the "Prior Lease") pursuant to which Tenant currently occupies the
premises. In further consideration for the negotiated terms of this Lease
Agreement, effective upon the Commencement Date of this Lease Agreement
("Effective Date"), Tenant hereby releases Landlord and Landlord hereby releases
Tenant from any and all claims, offsets, demands, causes of action, damages,
liabilities and expenses, whether known or unknown, or whether arising in tort,
in contract or otherwise ("Claims"), which Tenant or Landlord may now have, or
may have had against the other at any time up to and including the Effective
Date, including, without limitation, (i) any and all Claims arising out the
Prior Lease, Tenant's use of the Premises pursuant to the Prior Lease, or
Landlord's operating and management of the Shopping Center, and (ii) any Claims
which either Landlord or Tenant (as an actual or potential class member) may
have against the other in that action currently pending in the United States
District Court for the District of Massachusetts captioned Faneuil Hall
Marketplace Merchants' Association, Inc., et al. v.. Faneuil Hall Marketplace,
Inc. (Civil Action No. 95-12270-PBS), but expressly excluding Claims based on
the obligations to indemnify against claims of third parties in Section 31. of
the Prior Lease to the extent that such Claims are covered by Tenant's insurance
required under Tenant's existing lease dated January 19, 1976."
-26-
<PAGE>
"Schedule "E". Utility Consumption and Payment Schedule.
Before the word "estimate" in the sixth line of paragraph 1., delete the
word "an" and insert in lieu thereof "a reasonable."
Before the word "rentals" in the twenty-fourth line of paragraph 2., add
the word "other."
"Schedule "F". Tenant Heating, Ventilating and Air-Conditioning
Schedule.
Before the word "costs" in the third line of clause (ii) of Section B.,
add the word "reasonable."
Before the word "estimated" in the second line of the second paragraph
of clause (ii) of Section B., add the word "reasonably."
After the word "forth" in the first line of clause (iii) of Section B.,
add "a detailed calculation of."
Before the word "fees" in the fifth line of clause (iv) of Section B.,
add the word "reasonable."
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
hereby have executed this Lease under their respective hands as of the day and
year first above written.
ATTEST: FANEUIL HALL MARKETPLACE, INC.,
Landlord
______________________________ By: ______________________________ (SEAL)
Assistant Secretary Vice-President
(CORPORATE SEAL)
ATTEST: FANTAIL RESTAURANT, INC.
Tenant
______________________________ By: ______________________________ (SEAL)
Secretary President
(CORPORATE SEAL)
#504979 v1 - STRAMTT - @tn701!.DOC - 9999/1
-27-
Exhibit 10(rr)
N O T E
$350,000.00 April 19, 1996
FOR VALUE RECEIVED, BOSTON RESTAURANT ASSOCIATES, INC. (the "Borrower")
hereby promises to pay to the order of HAYMARKET COOPERATIVE BANK, a
Massachusetts banking corporation (hereinafter sometimes referred to as the
"Lender" and/or the "Holder", as applicable) at its offices at 280 Atlantic
Avenue, Boston, MA 02110 or at such other place or places as the Holder
(including any successor in interest to Lender) hereof may designate, in lawful
money of the United States, the principal sum of THREE HUNDRED FIFTY THOUSAND
AND 00/100 ($350,000.00) DOLLARS on or before June 19, 2001, together with
interest on the principal balance hereof from time to time outstanding at an
annual rate of interest of twelve percent (12%). Interest only calculated as
aforesaid, is payable in arrears on the 19th day of May and the 19th day of
June, 1996. Principal and interest installments of $7,785.56 shall be due and
payable on the 19th day of each and every month during the term hereof,
commencing July 19, 1996.
Any payments made hereunder are to be applied first to the payment of
interest and the balance thereof is to be applied on account of the principal
balance hereof. The entire unpaid balance of the indebtedness of Borrower to
Holder hereunder, inclusive of any accrued interest and any other charges
arising hereunder, shall, unless earlier due and payable as hereinafter
1
<PAGE>
provided, be due and payable in full on June 19, 2001.
The Borrower shall have the right, at any time, to prepay
the unpaid principal balance hereof and all interest accrued hereon, in whole or
in part, without penalty or other prepayment charge.
1. This Note and all obligations of the Borrower to the Lender or
Holder hereof (whether such obligations be direct or indirect, absolute or
contingent, due or to become due, and whether now existing or hereafter arising)
shall, at the option of the Holder, become immediately due and payable, without
notice or demand by the Holder to Borrower, if, in respect to Borrower or any
endorser or guarantor hereof, any of the following events shall occur: (a)
assignment for the benefit of creditors; (b) application for, or appointment of,
a receiver of the estate of any such party; (c) filing of a voluntary or
involuntary petition or any application for relief, extension, moratorium,
reorganization or other accommodation under any bankruptcy, insolvency or
debtor's relief law not dismissed within sixty (60) days of the filing thereof,
(d) entry of a judgment which is not fully covered by insurance and remains
unsatisfied or unstayed for a period of thirty (30) days in an amount greater
than $5,000.00, unless appeal be duly filed by Borrower within said period of
time and be thereafter diligently prosecuted in all manner and circumstances
reasonably satisfactory to Holder; (e) failure to pay, withhold, collect or
remit any tax or tax deficiency within thirty (30) days after the same are
assessed or
2
<PAGE>
become due, as the case may be, unless the same be contested by Borrower within
said period of time and be thereafter diligently pursued in all manner and
circumstances reasonably satisfactory to Holder; (f) dissolution; (g) making a
bulk transfer or giving notice of intent to do so; (h) making a transfer,
conveyance, assignment or other disposition of, or granting a security interest,
in whole or in part, or involving any interest in, any asset or property
pledged, mortgaged or transferred as security for this Note, or for any guaranty
hereof, except as otherwise provided in any instrument effecting the security
for this Note and excepting for a purchase money security interest other than in
the ordinary course of business or with the consent of Lender; (i) suspension or
liquidation of usual business operations; (j) default, in the payment of any
installment of principal or interest on this Note when due and payable,
continuing for fifteen (15) days after the due date thereof; (k) default in the
due observance or performance of any term, covenant, condition or agreement
contained in this Note, any guaranty hereof, or any instrument securing any of
the same, which default is not cured within thirty (30) days of a written notice
by the Lender to the Borrower specifying such default; (l) failure after demand,
to furnish any financial information reasonably required by the Holder in
connection with the Borrower's business (including the business of any guarantor
or endorser), or to permit reasonable inspection of any books or records
involving the same; (m) if any representation or statement of the Borrower
(including any guar-
3
<PAGE>
antor) made in any financial statement, report, opinion or other document,
delivered to Lender to induce the making of the Loan evidenced by this Note (or
furnished in connection herewith), shall prove to have been incorrect in any
material respect; (n) if any obligation of the Borrower or any endorser or
guarantor hereof to the Holder for the payment of borrowed money becomes or is
declared to be due and payable under any note, guaranty or other loan document;
or (o) default beyond any applicable grace period in the performance of any
provision of any loan document in reference to the Loan evidenced by this Note.
2. The liability of Borrower shall be absolute and unconditional
without regard to the liability of any other party. Each and every party to this
instrument, either as maker, endorser, guarantor, surety or otherwise, hereby
waives presentment, demand for payment, notice of dishonor, protest, and any and
all notices and demands (other than as specifically provided hereunder) in
connection with the performance, default or enforcement of this Note, and
consents to any and all extensions or postponements of the time of payment or
other indulgence, renewals, waivers, substitutions of collateral granted to or
permitted by the Holder.
3. The interest rate after maturity (by acceleration or otherwise)
shall be the greater of 18% per annum or the prime rate from time to time
established by the Lender, plus five (5%) per annum. In the event that the
Borrower fails to pay the monthly payment within ten (10)days of the due date
hereunder,
4
<PAGE>
the Borrower shall pay, in addition to any other charges due hereunder, a late
charge equal to five (5%) percent of the principal and interest payment then
due. In the event this note is not paid when due, the Borrower agrees to pay all
costs of collection incurred by the Lender, including reasonable attorney's
fees.
4. The validity of this Note in its construction, interpretation and
enforcement and the rights of the parties hereunder shall be determined, under,
governed by and constructed in accordance with the laws of the Commonwealth of
Massachusetts. All parties submit to the jurisdiction of the courts of the
Commonwealth of Massachusetts in the County of Suffolk, with regard to any
dispute arising under this Note. The Borrower makes the following waiver
knowingly, voluntarily and intentionally and understands that the Lender in
making the loan evidenced by this Note is relying thereon: the Borrower, to the
extent otherwise entitled thereto, hereby irrevocably waives any present or
future right to jury in any trial of any case or controversy in which the Lender
is, or becomes, a party (whether such case or controversy is initiated by or
against the Lender or in which the Lender is joined as a party litigant) which
case
5
<PAGE>
or controversy arises out of or is in respect to this Note.
EXECUTED as a sealed instrument this 19th day of April, 1996.
WITNESS: BOSTON RESTAURANT ASSOCIATES, INC.
TB
_____________________ By /s/ GEORGE R. CHAPDELAINE
GEORGE R. CHAPDELAINE, President
and Treasurer
Secured by a Loan and Security Agreement and Pledge of Stock dated
December 28, 1995.
66595
6
Exhibit 10(ss)
N O T E
$500,000.00 July 26, 1996
FOR VALUE RECEIVED, BOSTON RESTAURANT ASSOCIATES, INC. (the "Borrower")
hereby promises to pay to the order of HAYMARKET COOPERATIVE BANK, a
Massachusetts banking corporation (hereinafter sometimes referred to as the
"Lender" and/or the "Holder", as applicable) at its offices at 280 Atlantic
Avenue, Boston, MA 02110 or at such other place or places as the Holder
(including any successor in interest to Lender) hereof may designate, in lawful
money of the United States, the principal sum of FIVE HUNDRED THOUSAND AND
00/100 ($500,000.00) DOLLARS in or within five years from the date hereof,
together with interest on the principal balance hereof from time to time
outstanding at an annual rate of interest of twelve percent (12%). Interest
calculated as aforesaid, together with principal installments of $8,333.33 are
payable in arrears on the 26th day of each and every month during the term
hereof, commencing August 26, 1996, with a final payment of principal in the
amount of $8,333.53 due and payable on July 26, 2001 unless earlier due and
payable as hereinafter provided for.
Any payments made hereunder are to be applied first to the payment of
interest and the balance thereof is to be applied on account of the principal
balance hereof. The entire unpaid
1
<PAGE>
balance of the indebtedness of Borrower to Holder hereunder, inclusive of any
accrued interest and any other charges arising hereunder, shall, unless earlier
due and payable as hereinafter provided, be due and payable in full on July 26,
2001.
The Borrower shall have the right, at any time, to prepay the unpaid
principal balance hereof and all interest accrued hereon, in whole or in part,
without penalty or other prepayment charge.
1. This Note and all obligations of the Borrower to the Lender or
Holder hereof (whether such obligations be direct or indirect, absolute or
contingent, due or to become due, and whether now existing or hereafter arising)
shall, at the option of the Holder, become immediately due and payable, without
notice or demand by the Holder to Borrower, if, in respect to Borrower or any
endorser or guarantor hereof, any of the following events shall occur: (a)
assignment for the benefit of creditors; (b) application for, or appointment of,
a receiver of the estate of any such party; (c) filing of a voluntary or
involuntary petition or any application for relief, extension, moratorium,
reorganization or other accommodation under any bankruptcy, insolvency or
debtor's relief law not dismissed within sixty (60) days of the filing thereof,
(d) entry of a judgment which is not fully covered by insurance and remains
unsatisfied or unstayed for a period of thirty (30) days in an amount greater
than $5,000.00, unless appeal be duly filed by Borrower within said period of
time and be thereafter diligently prosecuted in all
2
<PAGE>
manner and circumstances reasonably satisfactory to Holder; (e) failure to pay,
withhold, collect or remit any tax or tax deficiency within thirty (30) days
after the same are assessed or become due, as the case may be, unless the same
be contested by Borrower within said period of time and be thereafter diligently
pursued in all manner and circumstances reasonably satisfactory to Holder; (f)
dissolution; (g) making a bulk transfer or giving notice of intent to do so; (h)
making a transfer, conveyance, assignment or other disposition of, or granting a
security interest, in whole or in part, or involving any interest in, any asset
or property pledged, mortgaged or transferred as security for this Note, or for
any guaranty hereof, except as otherwise provided in any instrument effecting
the security for this Note and excepting for a purchase money security interest
other than in the ordinary course of business or with the consent of Lender; (i)
suspension or liquidation of usual business operations; (j) default, in the
payment of any installment of principal or interest on this Note when due and
payable, continuing for fifteen (15) days after the due date thereof; (k)
default in the due observance or performance of any term, covenant, condition or
agreement contained in this Note, any guaranty hereof, or any instrument
securing any of the same, which default is not cured within thirty (30) days of
a written notice by the Lender to the Borrower specifying such default; (l)
failure after demand, to furnish any financial information reasonably required
by the Holder in connection with the Borrower's business (including the
3
<PAGE>
business of any guarantor or endorser), or to permit reasonable inspection of
any books or records involving the same; (m) if any representation or statement
of the Borrower (including any guarantor) made in any financial statement,
report, opinion or other document, delivered to Lender to induce the making of
the Loan evidenced by this Note (or furnished in connection herewith), shall
prove to have been incorrect in any material respect; (n) if any obligation of
the Borrower or any endorser or guarantor hereof to the Holder for the payment
of borrowed money becomes or is declared to be due and payable under any note,
guaranty or other loan document; or (o) default beyond any applicable grace
period in the performance of any provision of any loan document in reference to
the Loan evidenced by this Note.
2. The liability of Borrower shall be absolute and unconditional
without regard to the liability of any other party. Each and every party to this
instrument, either as maker, endorser, guarantor, surety or otherwise, hereby
waives presentment, demand for payment, notice of dishonor, protest, and any and
all notices and demands (other than as specifically provided hereunder) in
connection with the performance, default or enforcement of this Note, and
consents to any and all extensions or postponements of the time of payment or
other indulgence, renewals, waivers, substitutions of collateral granted to or
permitted by the Holder.
3. The interest rate after maturity (by acceleration or
otherwise) shall be the greater of 18% per annum or the prime
4
<PAGE>
rate from time to time established by the Lender, plus five (5%) per annum. In
the event that the Borrower fails to pay the monthly payment within ten (10)days
of the due date hereunder, the Borrower shall pay, in addition to any other
charges due hereunder, a late charge equal to five (5%) percent of the principal
and interest payment then due. In the event this note is not paid when due, the
Borrower agrees to pay all costs of collection incurred by the Lender, including
reasonable attorney's fees.
4. The validity of this Note in its construction, interpretation and
enforcement and the rights of the parties hereunder shall be determined, under,
governed by and constructed in accordance with the laws of the Commonwealth of
Massachusetts. All parties submit to the jurisdiction of the courts of the
Commonwealth of Massachusetts in the County of Suffolk, with regard to any
dispute arising under this Note. The Borrower makes the following waiver
knowingly, voluntarily and intentionally and understands that the Lender in
making the loan evidenced by this Note is relying thereon: the Borrower, to the
extent otherwise entitled thereto, hereby irrevocably waives any present or
future right to jury in any trial of any case or controversy in which the Lender
is, or becomes, a party (whether such case or controversy is initiated by or
against the Lender or in which the Lender is joined as a party litigant) which
case or
5
<PAGE>
controversy arises out of or is in respect to this Note.
EXECUTED as a sealed instrument this 26th day of July,
1996.
WITNESS: BOSTON RESTAURANT ASSOCIATES, INC.
TB
_____________________ By /s/ GEORGE R. CHAPDELAINE
GEORGE R. CHAPDELAINE, President
and Treasurer
Secured by a Loan and Security Agreement and Pledge of Stock dated
December 28, 1995.
71770
6
Exhibit 10(tt)
EQUIPMENT LEASE
This LEASE is made in the Commonwealth of Massachusetts, on July 26,
1996, between HCB CORPORATION, a duly organized and existing Massachusetts
corporation, having a principal place of business at 280 Atlantic Avenue,
Boston, MA 02110 (herein called the "Lessor"), and OCEAN, INC., a duly organized
and existing Massachusetts corporation, having a place of business at Space No.
F-207, doing business under the name and style of Pizzeria Regina in the Solomon
Pond Mall, located in the Town of Berlin and the City of Marlborough,
Massachusetts (herein called the "Lessee"), wherein it is agreed as follows:
1. The Lessor leases to Lessee and the Lessee rents from Lessor the
equipment ("Equipment") listed in the schedule hereto annexed, marked Exhibit
"A" and made a part hereof. Each item of Equipment listed is hereinafter called
an "Item", together with any parts, mechanisms and devices relating thereto or
used in connection therewith, attached to or delivered with the Equipment, or
thereafter attached to or used in connection therewith. The Lessor warrants and
represents to the Lessee that the Lessor is the owner of the equipment free and
clear of any liens or claims and has the authority to enter into this Equipment
Lease.
2. Lessor has not made and does not make any representation, warranty
or covenant, express or implied, with respect to the merchantability, fitness,
condition, quality or durability of any item of Equipment for Lessee's purposes,
or any other representation, warranty, or covenant, express or implied, with
respect to the leased Equipment or any part thereof; Lessee hereby disclaims any
and all liability of Lessor with respect thereto. Lessor shall not be liable or
responsible to Lessee for any damage, defect, failure to meet specifications,
late delivery, failure to deliver or shortage in respect to any item leased
hereunder, or for failure of the supplier to properly install or assemble any
item, or for the failure of the supplier thereof for any reason whatsoever, to
comply with the terms of any purchase order. Lessee agrees to look only to such
supplier and/or to any carrier of the item in respect thereto. Lessee agrees
that Lessor shall not be liable or responsible to Lessee for any claim, loss,
damage, liability or expense of any kind or nature caused, directly or
indirectly, by the leased equipment or any part thereof, or the inadequacy
thereof for any purpose, or any defect or deficiency therein, or the use,
operation, or storage thereof, or the interruption or loss of the service or use
thereof, or arising from any other reason or cause whatsoever relating to or
concerning the leased equipment, or any part thereof. Lessor assigns to Lessee
all rights under any manufacturer's warranties or guarantees, including any and
all rights of subrogation and any claims in connection with any defects as to
the Equipment.
1
<PAGE>
3. The term of this Lease is for a period of five (5) years to commence
on July 26, 1996, and to end on July 26, 2001. The Lessee shall pay to the
Lessor, its successors and assigns, rental as follows: $4,520.09 on or before
August 26, 1996, and an equal amount on the same date of each year thereafter
until July 26, 2001. On July 26, 2001, Lessee may purchase the equipment upon
payment to the Lessor of $19,000. Upon such payment, the Lessor agrees to
execute and deliver to the Lessee a Warranty Bill of Sale for the equipment.
4. In the event the Lessee shall not exercise its option as
hereinbefore set forth, the Lessee shall, upon the expiration of the term of
this Lease, ship all of the Equipment (a) by delivering such Item at Lessee's
expense to such place as Lessor shall specify within the city or county in which
the same is then permanently located, or (b) by loading such Item at Lessee's
expense on board such carrier as Lessor shall specify and shipping the same,
freight collect, to destination designated by Lessor. At the end and/or
termination of this Lease, the Lessee shall surrender such Equipment to the
Lessor in good order and condition, reasonable wear and tear resulting from its
proper use alone accepted.
5. Equipment leased hereunder shall be located and used at the location
of the Lessee set forth above unless Lessor shall consent in writing to the
removal to a different location. The Lessee agrees to use its good faith and
reasonable efforts to furnish to Lessor, when required, a landlord's waiver of
distraint for rent and consent to remove all of the Equipment if any of the
above Equipment is affixed or to be affixed to realty during the rental period,
such release to be furnished prior to such affixation. Notwithstanding anything
hereinabove contained, the Equipment shall remain the personal property of the
Lessor until the Lessee exercises its purchase option and pays the purchase
option price at which time the Equipment shall become the personal property of
the Lessee. Lessee acknowledges that the Equipment covered by this Lease is
owned by the Lessor, and such title shall remain in the Lessor at all times. The
Lessee shall give the Lessor immediate notice in the event that any of the said
Equipment is levied upon or is about to become liable or is threatened with
seizure, and the Lessee shall indemnify the Lessor against all loss and damages
caused by such action. Upon the expiration of this Lease or termination for any
reason whatsoever, the Lessor shall have the right and privilege to remove its
Equipment, in whole or in part, without liability therefor.
6. The parties hereto agree that this Lease is a net lease, and that
Lessee shall pay, without notice or demand, the rent reserved under paragraph
"3" hereof, and all other sums payable under any other provision of this Lease,
as and when the same shall be due and payable; and the Lessee further agrees
that it
2
<PAGE>
shall pay promptly all costs, expenses and obligations of every kind and nature
relating to the Equipment which may arise or become due during the term of this
Lease, whether or not specifically mentioned herein. No such rental or other
sums payable by Lessee pursuant to this Lease shall be subject to set-off,
deduction, counterclaim or abatement, nor shall this Lease terminate, nor shall
Lessee be entitled to any credit against such rental or other sums, for any
reason whatsoever, including but not in any way limited to: any damage to or
destruction of the Equipment or any item thereof; any limitation, restriction,
deprivation or prevention of, or any interference with, Lessee's use of the
Equipment or any item thereof, whether the same shall be lawful or unlawful; any
dispossession of Lessee from the Equipment or any item thereof by title
paramount or otherwise; the requisition or taking by statute or by exercise of
the power of eminent domain or other governmental authority or otherwise, or by
injunction or by any private person, of the Equipment or any item thereof; the
prohibition of Lessee's business, in whole or in part, whether pursuant to law
or otherwise; or any reason whether similar or dissimilar to the foregoing.
Lessee shall be entitled to the possession and use of the Equipment during the
term of and pursuant to the provisions of this Lease so long as no event of
default has occurred.
7. The Lessee agrees to use the leased Equipment only in good operating
condition. The Lessee shall obtain from the supplier and shall pay therefor, all
duplicate parts, extras, mechanisms and devices of every kind needed or used in
operating, repairing or renewing the leased Equipment and the same shall become
part of the leased Equipment. Other than repairs made to the Equipment by the
Lessee as required hereby, Lessee shall not otherwise make or allow to be made
any addition, subtraction or alteration to, from or in the leased Equipment
without the written consent of Lessor, but Lessor shall not be responsible for
delay on providing, or for failure to provide any such item or items.
8. (A) No loss or damage to the Equipment or any part thereof, shall
impair any obligation of Lessee under this Lease which shall continue in full
force and effect. Lessee shall, at its own expense, keep the Equipment insured
against all risks of loss or damage from every cause whatsoever for not less
than the then fair market value of said Equipment. If any Equipment is
determined by Lessor to be lost, stolen, destroyed or damaged in whole or in
part, Lessee at its option and at its expense, shall within (30) days; (i) place
the same in good repair, condition and working order, or (ii) replace the same
with like Equipment in good repair, condition or working order and deliver to
Lessor a bill of sale covering the replaced Equipment, or (iii) cause to be paid
over to Lessor any insurance proceeds payable on account of such loss, theft or
destruction.
3
<PAGE>
(B) Lessee shall, at its own expense, carry public liability and
property damage insurance covering the Equipment. Policies providing coverage
against bodily injury and property damage shall provide for not less than
$1,000,000/$2,000,000 insurance for injury to or death of one person, and,
subject to that limit for each person, a total liability of
$1,000,000/$2,000,000 for all persons injured or killed in the same accident and
$190,000 property damage or such higher limits as Lessor may require. Blanket
coverage for liability and property damage may be provided by Lessee in lieu of
the foregoing.
(C) All said insurance shall be in form and with companies approved
by Lessor, and shall be in the joint names of Lessor and Lessee. Lessee shall
pay the premiums therefor and deliver said policies, or duplicates thereof, to
Lessor. Each insurer shall agree by endorsement upon the policy or policies
issued by it or by independent instrument furnished to Lessor, that it will give
Lessor twenty (20) days' written notice before the policy in question shall be
altered or cancelled. With respect to any insurable loss of the Equipment, the
proceeds of such insurance, other than liability insurance, at the option of
Lessee, shall be applied (a) toward the replacement, restoration or repair of
the Equipment, or (b) toward payment of the obligations of Lessee hereunder.
Lessee assigns to Lessor all moneys to the extent due and owing to the Lessor
under this Lease with respect to any insurable loss of Equipment which may
become due under any policy covering the Equipment, and directs the insurance
company to make payment directly to Lessor or its assignee.
(D) If Lessee fails to secure, maintain and pay for such insurance
coverage, and furnish Lessor with evidence satisfactory to it of such insurance
coverage having been obtained maintained and paid for by Lessee, such failure on
Lessee's part shall constitute an event of immediate default.
(E) Lessee assumes all risks and liability, whether or not covered
by insurance, for loss or damage to the Equipment and for injuries or deaths of
persons and damage to property, howsoever arising from or incident to the use,
operation or storage of the items leased hereunder, whether such injury or death
to persons be of agents or employees of the Lessee or of third parties, and
whether such damage to property be of Lessee or of others. Lessee agrees to
indemnify, save and hold Lessor harmless from all losses, damages, claims,
penalties and expenses, including attorneys' fees, however arising or incurred,
because of or incident to any item or the real or alleged use, operation or
storage thereof.
9. Lessee agrees to grant and provide Lessor and/or its
representatives free access to premises at all times during the
4
<PAGE>
process of delivery and/or removal of Equipment. Employees of the Lessor shall
have access to and may inspect said Equipment at all reasonable times during
normal business hours, and at any location, during the lease period. Lessee
agrees, whenever requested by Lessor, to give Lessor the exact location of all
Equipment covered by this Lease, if removed to any other location than as stated
herein.
10. Lessee shall pay all taxes of every kind and nature imposed or
levied by any taxing authority in connection with the ownership of the Equipment
by Lessor, the leasing, use possession and operation of Equipment and payment of
rentals therefor, including but not limited to, all federal, state and local
taxes and other governmental charges, however designated, levied or assessed
upon the Lessee and Lessor or either of them or said Equipment, or upon the use
or operation thereof, sales or use taxes, allocable privilege or allocable
franchise taxes measured by or based on gross revenue, personal property taxes
assessed on the Equipment of the Lessor, but excluding Lessor's income and
franchise taxes. A default under this paragraph shall be deemed a default under
this Lease. If Lessee does not pay any of such taxes and Lessor becomes
obligated to or at its option, pays the same, the Lessee shall pay the Lessor
the amount thereof on demand, together with any penalties or interest thereon,
all with interest at the rate of 15% per annum, and the same shall be deemed
additional rent. Lessee shall provide all permits and licenses necessary for the
installation, operation and use of the Equipment or any parts thereof. Lessee
will comply with all laws, regulations and ordinances applicable to the
installation, use, possession and operation of the Equipment. If compliance with
any ordinance, rule, regulation or permit by any governmental agency, requires
changes or additions to be made on or to the aforesaid Equipment, such changes
or additions shall be made by the Lessee at its own expense.
11. Without the prior written consent of Lessor, Lessee shall not
assign, transfer, pledge or hypothecate this Lease, the Equipment or any part
thereof, or any interest therein, or sublet or lend the Equipment or any part
thereof, or permit the Equipment or any part thereof to be used by anyone other
than Lessee. Consent by the Lessor to any of the foregoing prohibited acts
applies only in the given instance. Any such attempted action by Lessee either
by voluntary or involuntary act or by operation of law or otherwise, shall
constitute an event of immediate default. Neither this Lease or Lessee's
interest therein, is assignable or transferable by operation of law. If Lessee
is adjudged a bankrupt or makes an assignment for the benefit of creditors, or a
receiver is appointed for Lessee, this Lease shall not be treated as an asset of
Lessee and Lessor may exercise any and all remedies provided in paragraph 13
hereof.
5
<PAGE>
12. (A) It is understood that Lessor may assign this Lease and/or
mortgage the Equipment, and that any assignee may assign the same. All rights of
Lessor hereunder may be assigned, pledged, mortgaged, transferred or otherwise
disposed of, either in whole or in part, without notice to or consent of the
Lessee. If Lessor assigns this Lease or the rentals due or to become due
hereunder or any other interest herein, whether as security for any of its
indebtedness or otherwise, Lessee agrees, after notice of such assignment has
been given by Lessor or such assignee to Lessee, that this agreement may not be
terminated and the terms and provisions thereof may not be altered, modified or
waived without the prior written consent of the assignee, and Lessee further
agrees unconditionally to pay to the assignee the rentals, or amounts equal to
such rentals, and all other sums which may be or become due hereunder directly
to such assignee, notwithstanding any of the terms of this Lease which might
relieve the Lessee from the payment of rentals hereunder, or the termination of
this Lease for any reason or any other event whatsoever including without
limitation the bankruptcy or insolvency of the Lessor or any disaffirmance of
this Lease by any trustee or receiver, and notwithstanding any defense, set off
or counterclaim whatsoever whether by reason of breach of this Lease or
otherwise, which Lessee may or might now or hereafter have as against Lessor,
Lessee reserving its rights to have recourse directly against Lessor on account
of any such defense, set off or counterclaim. Lessee's undertaking with respect
to any such assignee shall constitute a direct, independent and unconditional
obligation of Lessee to such assignee. The receipt by such assignee of such
payments shall discharge the obligations of Lessee to Lessor hereunder to the
extent thereof.
(B) All rights, powers and privileges and obligations of Lessor
hereunder shall be succeeded to by the assignee under any assignment. Lessee
agrees to execute any and all documents including, but not limited to, consent
to assignment, presented to it by Lessor to enable Lessor to effect the
foregoing. After notice to Lessee of any such assignment, Lessee agrees that it
shall possess and use the Equipment subject to the Assignee's interest therein.
13. In the event Lessee shall default in the payment of any rent,
additional rent, or any other sums due hereunder for a period of fifteen (15)
days, or in the event of any default or breach of the terms and conditions of
this Lease, or any other lease between the parties hereto, or if any execution
or other writ or process shall be issued in any action or proceeding, against
the Lessee, whereby the said Equipment may be taken or distrained, or if a
proceeding in bankruptcy, receivership or insolvency shall be instituted by or
against the Lessee or its property, or if the Lessee shall enter into any
agreement or composition with its creditors, breach any of the terms of any loan
or credit agreement, or default thereunder, then and in that
6
<PAGE>
event Lessor and its assignee shall have all remedies available at law without
being required to elect among Lessor's remedies, and without limiting the
foregoing, in addition shall have the following rights and remedies to the
extent permitted by law: (a) all obligations, including any note issued in
connection herewith, shall immediately become due and payable at the option of
the holder hereof without notice or demand; (b) The holder hereof or its
representative may enter the premises where any of the Equipment may be located,
and take and carry away the same with or without legal process to the holder's
place of storage; (c) sell the Equipment at public or private sale, whether or
not the Equipment is present at such sale and whether or not the Equipment is in
constructive possession of the holder or the person conducting the sale, in one
or more sales, as an entirety or in parcels, for the best price that the holder
can obtain, and upon such terms as the holder may deem desirable; (d) the holder
hereof may be the purchaser at any such sale; (e) require Lessee to pay all
expenses of such sale, taking, keeping and storage of the Equipment, including
reasonable attorney's fees; (f) apply the proceeds of such sale to all expenses
in connection with the taking and sale of the Equipment, and any balance of such
proceeds may be applied toward the payment of the obligations in such order of
application as the holder may from time to time elect; (g) upon holder's demand
Lessee agrees, at Lessee's expense, to assemble the Equipment at a convenient
place acceptable to both parties; and (h) exercise any one or more rights or
remedies accorded by law and the Uniform Commercial Code. If the proceeds of any
such sale are insufficient to pay the expenses as aforesaid and the obligations,
the Lessee agrees to pay any deficiency to the holder hereof upon demand, and if
such proceeds are more than sufficient to pay such expenses and the obligations,
the holder agrees to pay surplus to Lessee. If this contract is referred to an
attorney to enforce collection Lessee agrees to pay reasonable attorney's fees
and costs. Whenever any payment is not made when due hereunder, Lessee promises
to pay to Lessor its assignee not later than one month thereafter an amount
calculated at the rate of five cents per dollar of each such delayed payment if
allowed by law. In the event of litigation of any matter connected with this
Lease or resulting from transactions hereunder, the right of a trial by jury is
hereby waived by the Lessee.
14. The omission by the Lessor at any time to enforce any default or
right reserved to it, or to require performance of any of the terms, covenants
or provisions hereof by the Lessee at any time designated, shall not be a waiver
of any such default or right to which the Lessor is entitled, nor shall it in
any way affect the rights to which the Lessor is entitled, nor shall it in any
way affect the rights of the Lessor to enforce such provisions thereafter. The
Lessor may exercise all remedies, successively or concurrently, pursuant to the
terms hereof, and any such action or inaction shall not operate to release the
7
<PAGE>
Lessee until the full amount of the rentals due and to become due, and all other
sums to be paid hereunder have been paid in full.
15. Lessee authorizes the Lessor to fill in descriptive material in
connection with the Equipment, including, but not limited to, serial numbers, to
date the Lease, and to correct any patent errors.
16. At request of Lessor, Lessee will join Lessor in executing all such
documents and other instruments including financing statements pursuant to the
Uniform Commercial Code as may be necessary or desirable to evidence Lessor's
ownership of the Equipment. Lessee authorizes Lessor and Lessor's assignee and
each subsequent assignee to file a financing statement signed only by Lessor or
such assignee in all places where necessary to perfect Lessor's security
interest in all jurisdictions where such authorization is permitted by law. Upon
request of Lessor or any assignee hereof, Lessee agrees to deliver from time to
time but not more often than once in each six month period during the term of
this Lease, such information regarding its business affairs and financial
condition as may be reasonably requested.
17. The foregoing represents the entire lease between the parties. This
Lease may not be modified or changed orally but only by a writing signed by both
parties. This Lease shall be binding upon the parties hereto and their
respective successor and assigns. The parties agree that the interpretation and
legal effect of this Lease shall be governed by the laws of the [ ]. Notices,
when required hereunder, shall be in writing by prepaid mail, addressed to
either of the parties at the addresses designated above, or at such other
addresses as may be designated by the parties during the term of this Lease by
written notice addressed to the other party and sent by prepaid mail.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
OCEAN, INC.
By /s/ George R. Chapdelaine
George R. Chapdelaine,
President and Treasurer
HCB CORPORATION
By____________________________
Paul M. Sutton, Treasurer
71845
8
Exhibit 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference to the Company's
previously filed Registration Statement on Form S-8 of our report dated June 20,
1996, except for the second paragraph of Note 4, which is as of July 26, 1996,
relating to the consolidated financial statements of Boston Restaurant
Associates, Inc. appearing in the Company's Annual Report on Form 10-KSB for the
year ended April 28, 1996.
BDO Seidman, LLP
Boston, Massachusetts
August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Apr-28-1996
<PERIOD-START> May-1-1995
<PERIOD-END> Apr-28-1996
<EXCHANGE-RATE> 1
<CASH> 159,564
<SECURITIES> 0
<RECEIVABLES> 65,079
<ALLOWANCES> 0
<INVENTORY> 232,427
<CURRENT-ASSETS> 523,679
<PP&E> 5,267,653
<DEPRECIATION> 2,527,972
<TOTAL-ASSETS> 4,015,984
<CURRENT-LIABILITIES> 2,140,306
<BONDS> 604,486
0
0
<COMMON> 50,150
<OTHER-SE> 1,160,171
<TOTAL-LIABILITY-AND-EQUITY> 4,015,984
<SALES> 10,864,418
<TOTAL-REVENUES> 10,864,418
<CGS> 2,618,187
<TOTAL-COSTS> 13,892,729
<OTHER-EXPENSES> 50,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,185
<INCOME-PRETAX> (3,107,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,107,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,107,900)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
