SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number O-27542
FUN TYME CONCEPTS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 11-3157259
(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
290 Wild Avenue, Staten Island, New York 10314
(Address of Principal Executive Offices)
(718) 761-6100
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of
the Act:
Title of Each Class Name of Each Exchange on Which Registered
NONE
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $.001 par value
(Title of Class)
Common Stock Purchase Warrants
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
The Registrant's revenues for its fiscal year ended March 31, 1997 were
$949,910.
The aggregate market value of the voting stock on June 10, 1997
(consisting of Common Stock, par value $.001 per share) held by non-affiliates
was approximately $492,289, based upon the average bid and asked prices for such
Common Stock on said date ($.313), as reported by a market maker. On such date,
there were 2,512,465 shares of Registrant's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
Fun Tyme Concepts, Inc. ("the Company") is a New York corporation which
was organized in April 1993. The Company commenced operations with the
construction of its first Fun Bubble play center in October 1994, in Staten
Island, New York. Two of the Company's wholly owned subsidiaries recently
entered into lease agreements and expect to open two additional Fun Bubble play
centers, one in Edmonton, Canada and one in East Brunswick, New Jersey, by
August 1, 1997 and September 1, 1997, respectively. Each Fun Bubble shall be
designed based on a theme unique in comparison to the themes of the others: the
Staten Island Fun Bubble focuses on space; the East Brunswick Fun Bubble will
focus on the future; and the Edmonton Fun Bubble will emphasize the jungle.
While the Company's business plan has focused, thus far, on children's
educational and play facilities and has targeted children ages twelve years old
and under, the Company is currently in the preliminary and conceptual stage of
research with respect to virtual reality play facilities for older children and
for adults. Since this latter idea is merely in the conceptual design phase,
there can be no assurance that the Company will proceed beyond this stage and in
fact design such facilities geared to older children and adults.
Initial Public Offering
On August 15, 1996, through State Street Capital Markets Corp. ("State
Street"), the Company consummated an initial public offering ("IPO") of
1,250,000 units, each unit comprising one share of Common Stock, par value
$.001, and one redeemable Common Stock Purchase Warrant, at a purchase price of
$6.25 per unit, inclusive of 800,000 shares of Common Stock sold by the Company,
200,000 shares of Common Stock sold by certain security holders and 250,000
shares of Common Stock and 1,250,000 warrants sold by a certain selling security
holder.
Net proceeds to the Company from the IPO approximated $3,328,242. Also
in connection with the IPO, the Company sold to State Street warrants to
purchase 125,000 units. The over-allotment option was not exercised. The net
proceeds of the IPO were apportioned as follows: (i) approximately $205,000 has
been used to date for the costs associated with the demolition and construction
associated with the opening of the two new Fun Bubbles: one in East Brunswick,
New Jersey and one in Edmonton, Canada;(ii) $36,000 was used to purchase the
assets of the Edmonton, Canada facility and (iii) the balance is being used for
the Company's working capital needs.
In August 1996, State Street ceased operations. The lack of market
support by the Company's underwriter and principal market maker limited the
liquidity of the Company's securities and decreased market quotations to a point
whereby the units were trading below
<PAGE>
$1.00. As a result of this continued low trading, though the Company strove to
keep its securities listed on the Nasdaq SmallCap Stock Market, Nasdaq delisted
the securities on April 7, 1997, at which time the Company's securities began
trading on the OTC Bulletin Board.
In keeping with its attempt to increase stockholder value and the
liquidity of its securities, the Company has actively sought, and continues to
seek, market makers for its securities. In October 1996, by correspondence
agreed to and acknowledged in writing by State Street, the Company terminated
its underwriting agreement with same.
Background
In 1993, the founders of the Company began to research the children's
entertainment industry and, in doing so, joined the International Association of
Amusement Parks and Attractions. They attended trade shows and seminars and
visited many other children's entertainment facilities. They noticed that most
facilities had limited floor space and low ceilings which limited the space for
the larger children's toys and which gave most of the stores a closed-in
feeling. After estimating the possibilities, the founders decided that building
a facility in an air supported dome with a 40 foot ceiling would create an airy
uncluttered environment, and, with the help of a manufacturer of pneumatically
inflated domes, in 1993, the Company designed a dome unit that would have a 40
foot ceiling. In October 1994, the Company opened its first Fun Bubble in Staten
Island, New York. See "Staten Island, New York Fun Bubble."
Outlook
The Company plans to expand its business operations by seeking to open
additional Fun Bubbles, similar to the Staten Island Fun Bubble, in other
locations. These Fun Bubbles will be either under pneumatic domes or in
traditional building structures. In either event, the Company will seek to
incorporate high ceilings and large space in keeping with its initial concept.
The Company intends to open Fun Bubbles in or near locations that are family
oriented, in areas that have large populations of children under the age of 12,
and/or in areas with higher than average disposable income. The proceeds from
the Company's IPO were earmarked to enable the Company to open three additional
Fun Bubbles, each of which is expected to combine various elements of a
children's entertainment center along with indoor recreational and educational
facilities and specifically designed toddler programs. The Company has made
plans to open two new Fun Bubbles, one in East Brunswick and another in
Edmonton, Canada, and intends to seek other locations at which it might open
additional Fun Bubbles.
The Company encourages the participation of parents and/or guardians
with their children and to this end has designed a play maze and other play
equipment which will allow children and their parents and/or guardians to play
together. Management believes that the Staten Island Fun Bubble is designed to
provide a fun, safe, reliable, and interactive environment whereby children can
exercise their bodies and minds and acquire certain necessary skills. It is
Management's intention that each Fun Bubble provide such an environment. Each
Fun Bubble will be geared toward enhancing a child's (i) hand, eye, and muscle
coordination; (ii) motor skills; (iii) flexibility; and (iv) social skills. The
Company plans to continuously update its facilities to meet
<PAGE>
children's recreational and educational needs in a stimulating, safe, and
fun arena. See "Toddler and Pre-School Programs."
Staten Island, New York Fun Bubble
The Staten Island Fun Bubble, which opened in October 1994, is
constructed under a pneumatic translucent dome with 40 foot ceiling heights,
similar to those used for tennis courts. Although the Company intends to open
additional Fun Bubbles under similar structures, it may also operate Fun Bubbles
in traditional building structures. The Staten Island Fun Bubble charges an
admission fee of $6.95 per child; there is no admission fee for adults
accompanying children.
The Fun Bubble has (i) an environmentally controlled, supervised "Open
Air Atmosphere" which is climate controlled throughout the seasons; (ii) a party
play center for kids twelve years old and under, which includes athletic games
and games of skill; and (iii) a three level soft-sculptured modular foam play
maze. All activities are designed with safety in mind and are continuously
supervised by the Company's trained employees. The children purchase tokens to
play skill games and receive points at the end of each game. These points may be
redeemed at any time to receive a prize at the merchandise and concession
counter. See "Safety and Arcade Redemption Systems."
In addition to the foregoing, the facility also includes private party
rooms, a snack bar, and a sound proof television lounge for parents. The party
rooms can be reserved for birthdays and other group events. The Company offers a
variety of party packages which combine all aspects of a celebration. The
parents' lounge provides a quiet place for adults to retreat on occasion while
their children play: it includes a television and a large clear window for
viewing the play area.
In fiscal year 1997, the Staten Island Fun Bubble was remodeled in
keeping with the Company's desire to effect an outer space theme. Accordingly,
all equipment was redesigned with space and spaceships as the focus.
East Brunswick, New Jersey Fun Bubble
In December 1996, the Company formed a wholly owned subsidiary, Fun
Tyme of East Brunswick, Inc. ("FTEB"). On January 21, 1997, FTEB it signed a
lease to open an 18,000 square foot Fun Bubble in the Miracle Mall in East
Brunswick, New Jersey. The Company is in the process of renovating a movie
theater therein to bring this area its largest children's entertainment
facility. The Miracle Mall is a 120,000 square foot landmark center in the heart
of East Brunswick's most active regional shopping area. This mall includes 18
centrally anchored stores and is adjacent to Tices Lane on which an additional
700,000 square feet of retail stores are situated. The movie theater was chosen
because of its high ceilings and existing layout, both of which will enable the
Company to retrofit the space into its "Fun Bubble" concept. The Company shall
create a theme fantasy playland for children which shall include state of the
art soft-sculptured play equipment and high-tech interactive games.
<PAGE>
While the Company initially estimated that the East Brunswick Fun
Bubble would open in the spring of 1997, delays in obtaining building permits
and use variances resulted in a postponement of the opening. The Company now
expects to begin operating the facility in September 1997.
Edmonton, Canada Fun Bubble
In February 1997, the Company formed a wholly-owned subsidiary, Fun
Tyme of Edmonton, Inc. ("FTE"). FTE purchased the assets of a pre-existing
facility in Edmonton, Canada. This facility was in bankruptcy, and the asset
purchase by the Company was effected on May 20, 1997 by and between FTE and
Browning Smith Inc., trustee of the estate in bankruptcy.
On May 21, 1997, upon approval of Browning Smith Inc., FTE and the
lessor of the former facility executed a lease for the premises which FTE is in
the process of renovating to encompass one of the Company's unique themes.
Though the Company estimated that the facility would open in April 1997, delays
caused by ongoing lease negotiations resulted in a postponement of the opening
of the Fun Bubble. The Company now expects to begin operating the facility in
August 1997.
Marketing
The Company has incurred marketing expenses in purchasing cable
television and radio advertising time, local newspaper and magazine print
advertisements, and brochures which it has disseminated at its Staten Island Fun
Bubble. As the Company expands to add additional locations, it intends to
increase its advertising and marketing activities: it expects to contact local
school systems, clubs, and religious organizations to organize events for
children and attract target groups of children to its Fun Bubbles.
Suppliers
Operation of the Fun Bubbles is contingent upon the ability of the
Company to purchase and lease equipment from suppliers. Though the Company
intends to purchase most of the play equipment it requires for each facility, it
may lease certain pieces of equipment which are either (i) untested for consumer
acceptance; (ii) unavailable by the manufacturer for sale; or (iii) believed by
the Company to be only a fad. The Company will purchase one play maze (discussed
above), at an estimated cost of $250,000 for each facility. Currently, the
Company has one vendor which supplies pneumatic domes. While loss of this
supplier might have a detrimental effect on the Company since its Staten Island
Fun Bubble utilizes a pneumatic dome, the Company believes there are other
suppliers of such domes. The Company also believes that there are many vendors
and suppliers of the games and equipment it purchases and leases. The Company
believes it will continue to be able to purchase and lease equipment in the
future at prices and on terms similar to those at which it presently does so. If
conflicts arise or there is a void of vendors and suppliers, the Company's
operation will suffer to a degree.
<PAGE>
Competition
The children's amusement industry is a highly competitive industry in
which the Company competes with several large national chains such as the
Discovery Zone and Chuck E. Cheese, both of which have multiple locations. While
the Discovery Zone has filed for bankruptcy protection and has closed many of
its locations, it nonetheless remains a competitor to the Company.
The Company also competes with many other small companies which have
individual amusement center locations providing basically the same services as
the Company. The Company believes that many of its competitors have (i) more
extensive research and development and marketing and customer support
capabilities; and (ii) greater financial, technological, and other resources
than those of the Company. Further, the Company does not believe there are any
significant barriers to entry by new companies into this industry.
The Company's Fun Bubbles will be directed at the highly competitive
business of children's indoor recreation and educational facilities. Other
competitors operate single unit operations with facilities similar to the Staten
Island Fun Bubble in many metropolitan areas. The Company expects additional
entities to enter into the market in the near future, some of which may have
significantly greater resources than the Company has. The Company expects that
its Fun Bubbles will naturally compete with other ventures similar to the
Company's with respect to location, availability of new and distinct product and
service offerings, and cost per visit.
In addition to competing with other companies in the business of
children's indoor amusement and educational facilities, the Company will compete
for dollars spent on entertainment for children involving other types of
amusement, sports, recreation, and fitness services such as park district
programs, amusement parks, and specialty restaurants.
The children's amusement industry is subject to rapid technological and
innovative change. Competition from and among companies which provide amusement
centers and other arenas for the amusement of children is characterized by
continuous technological and innovative changes and advances. There can be no
assurance that the Company will be able to keep pace with the technological and
innovative developments in the industry or to implement changes in accordance
with such developments; therefore, competitors may develop products which may
make the Company's Fun Bubbles obsolete. Given that children's consumer
preferences and tastes continually change, and thus children's entertainment
products are often limited in life cycle, the success of the Company is
dependent on its ability to adapt to such fads.
Safety and Arcade Redemption Systems
The Company is very concerned about the safety of the children entering
its Fun Bubbles. Accordingly, it has designed the Staten Island Fun Bubble, and
intends to design all additional Fun Bubbles, to guard against (i) injuries to
children using the facilities; (ii) children leaving the facilities
unaccompanied; and (iii) children leaving the facilities without the parent
and/or
<PAGE>
guardian with whom they entered. As additional precautions, the Company will
continue to purchase only the type of play equipment it deems safe and will
provide constant supervision over its young patrons in order to minimize
injuries.
Electronic
One measure the Company has taken to ensure the safety of children
visiting its Fun Bubbles involves the use of a child safety alarm system. The
goal of this system is to prevent a child from leaving the Fun Bubble without
his supervising adult. To accomplish this goal, the Company provides electronic
tags for each child entering the facility. These electronic tags are attached to
the child's clothing. When a child leaves the Fun Bubble with his supervising
adult, the electronic tag is removed. At each exit of the Fun Bubble, the
Company has installed electronic arches which sound an alarm if a child whose
tag has not been removed attempts to leave the facility.
Wristband System
An additional safety concern of the Company is that a child only leave
with the adult who brought him to the Fun Bubble. To achieve this goal, no adult
is admitted to a Fun Bubble unless he is accompanied by a child. In addition,
the Company provides individually numbered and bar coded wristbands which fasten
around the wrists of each adult and child who enter the facility. Each adult's
wristband number and bar code correspond with the wristband and bar code of each
child the adult is supervising. When an adult leaves the facility with a child,
the adult will only be allowed to take the child whose wristband number and bar
code correspond to the adult's.
(These bar coded wrist bands are also used for children to accrue points in
order to receive prizes and memorabilia when playing the skill games.) By
following this procedure, the Company hopes to prevent a child from leaving the
facility without his supervising adult.
Toddler and Pre-School Programs
Mommy & Me
The Company, as part of the services it makes available to the public,
has developed with its consultants a toddler program called "Mommy & Me."
Parents with children ages twelve to eighteen months attend class together at
the Fun Bubble on a weekly basis for nine weeks, at a cost ranging from $168.00
to $250.00 per child, the cost depending on the number of hours per week parents
and children attend. In this program, children participate in activities which
focus on socializing, singing, exercising, and playing in the Company's
specially designed toddler play area. As children reach eighteen months, the
classes include creative arts and crafts programs. Children work with materials
such as paints, glue, and beads. After class ends each week, the children are
invited to play at the Fun Bubble with their parents. The Company offers Mommy &
Me programs for children up to the age of 4 1/2 years old. Each child who
enrolls will receive an identification card and during class hours will be
required to wear an electronic tag as part of the child safety alarm system.
These programs are designed and run primarily by two consultants to the Company,
pursuant to the terms of a consulting agreement. These consultants
<PAGE>
have been designing and instructing the Mommy & Me class for several years at
other locations.
Separation Classes
Another program the Company provides is a series of "Separation
Classes." These classes have been designed, and are run at the Fun Bubble, by
the same consultants who designed and now teach the Mommy & Me classes. These
classes are designed for children who soon will be experiencing their first
separation from their parents. The classes focus on topics such as sharing,
manners, food groups, recognizing letters and numbers, shapes and colors,
worksheets, play stations, creative arts and crafts projects, special theme
weeks, and holiday parties. The classes meet from one to two times a week for 2
1/2 hours at a time for nine weeks, at a cost ranging from $110.00 to $190.00
per child. The classes are open to children two to five years of age. Each child
who enrolls receives an identification card and, during class hours, is required
to wear an electronic tag as part of the child safety alarm system. After class
ends each week, the children are invited to stay at the Fun Bubble and play.
Theme Parties/Dances
The Company has begun a weekend program of holding theme parties and
dances at the Staten Island Fun Bubble for children ages nine to thirteen years
old. These events require advance ticket purchase and age identification. The
Fun Bubble provides early evening entertainment including live or disc jockey
music, dancing, refreshments, and various games and activities for which prizes
may be awarded. The parties and/or dances typically begin at the close of the
Company's general operating hours and continue until approximately 10:00 p.m.
Day Camp
The Company also has developed a day camp called "Camp Fun Bubble"
which provides four different day camp programs for different age groups. The
program for children two to three years old is called the "playfull summer" camp
and is a two hour on premise program offered either two or three times per week
during either a four, six, or eight week period. This camp is an extension of
the Mommy and Me program, except that the parents choose whether or not to
participate. The camp is headed by the Mommy and Me program consultants.
The "junior camp" is for children three to four years old and provides on
premises activities from either 9 a.m. to 12 p.m. or 1 p.m. to 4 p.m., three to
five days per week, for a four, six, or eight week period.
The "day camp" is for children four to ten years old and provides
activities, on and off premises, from 9 a.m. to 4 p.m., three to five days per
week, during either a four, six, or eight week period. The day camp is run by
board of education certified teachers and includes bus transportation, lunch,
and regular camp type activities including sports and crafts.
The "traveling camp" is for children ages eleven to fourteen years old
and provides off-site activities three to five times per week for a four or
eight week period. These activities are
<PAGE>
also chaperoned by school teachers.
Air Structure
The Company's Staten Island Fun Bubble is constructed of a high
strength membrane which achieves its structural integrity and stability in space
by pretensioning with internal air pressure. The air structure is shaped to
provide an even distribution of load and stress. This system basically consists
of an inflated fabric envelope, an air supply system, controlled means of access
and egress, and an appropriate anchorage system.
Seasonality
The Company believes that its business may be considered seasonal and
that a large portion of its revenues and profits will be derived during the fall
and winter months. The Company believes that outdoor amusement centers and theme
parks will take business away from the inside amusement centers during the
spring and summer months. In the approximately twenty months since the Company
has been operating (since October 1994), the Company has observed that the
busier months have been in the fall and winter: the spring and summer months
have shown a decline in revenues. See "Day Camp."
Insurance
In view of the nature of the activities conducted in an amusement
center, there are inherent risks of exposure to certain personal injury
liabilities including product liability and negligence claims resulting from
injury caused by the use of, or items purchased in, the facilities. Accordingly,
with respect to the Staten Island Fun Bubble, the Company currently carries
general liability insurance in the amount of $1,000,000 and maintains an
additional $1,000,000 umbrella policy. For the Edmonton, Canada facility, the
Company carries a $5,000,000 general liability policy. For the East Brunswick,
New Jersey facility, the Company maintains a $2,000,000 general liability policy
and carries an additional $1,000,000 umbrella policy. The Company believes its
insurance coverage is sufficient.
Government Regulations
The Company is subject to the provisions of, among other laws, the
Federal Hazardous Substances Act and the Federal Consumer Product Safety Act,
the latter of which empowers the Consumer Products Safety Commission ("the
Consumer Commission") to protect children from hazardous toys and other articles
used by children. Any determination by the Consumer Commission outlawing the use
of the type of soft-sculpted modular foam or other toys provided for the
children by the Company in its facilities would adversely affect the Company's
ability to sustain its operations. Presently, the Company does not know of any
alternative products to the soft-sculpted modular foam it currently uses;
therefore, any restrictions on its use would significantly adversely affect the
Company and its operations. The Company also is required to comply with a wide
range of other state and local rules and regulations applicable to its business.
The ability of the Company to comply with the current and anticipated broad
federal, state, and
<PAGE>
local regulatory network is essential and may be costly. The failure to comply
with such regulations would have an adverse effect on the Company's operations.
Service Mark
The Company relies on common law service marks for use of its name "Fun
Bubble" at the Staten Island facility. The Company filed to register the Fun
Bubble service mark in the United States, and its application was approved on
April 3, 1996.
Research and Development
During the last two fiscal years, the Company's President, Mr.
Catalfumo, and its Vice President, Secretary, and Treasurer, Mr. Rosso have
spent approximately seventy-five percent of their time on research and
development of the indoor play facility market, the equipment utilized therein,
possibilities for new play equipment, and new locations at which additional Fun
Bubbles may be opened.
Employees
As of March 31, 1997, the Company had two executive Officers and
employed approximately ten full time employees and twenty-five part time
employees. The Company has hired two managers for its Edmonton Fun Bubble and
shall relocate two of its four Staten Island Fun Bubble managers to the East
Brunswick facility. None of the employees of the Company is represented by a
union. The Company considers relations with its employees to be good. With
respect to payroll, the Company is under agreement with Employee Management,
Inc. ("EMI"), a payroll service, whereby EMI issues all Company employee
paychecks and provides medical coverage to Company employees at a cost to the
Company which is less than the cost which the Company otherwise would incur were
it to provide medical coverage on its own. The Company continues to utilize
LaborChex Companies, a company located in Jackson, Missouri, to provide
screening of each applicant prior to employment. The screening process informs
the Company of the applicants' prior criminal histories, if any, their addresses
for the past five years, and their social security numbers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 31,000 square feet at 290 Wild Avenue,
Staten Island, New York 10314, where the Staten Island Fun Bubble is located.
The Company utilizes approximately 500 square feet of such space for its
executive offices. The lease extends for a period of seven years, until June 30,
2000, at approximately $95,000 per annum, with annual scheduled rent increases
of 4%. The lease term may be extended for two five year renewal terms, until
June 30, 2010.
In the event the first renewal term option is exercised by the Company,
the rental payment shall be the greater of the fair market value and 104% of the
prior year's rental payment (a 4% increase over such previous year's rental
payment). In each year of the first renewal
<PAGE>
period, commencing on the second year of the five year renewal period, the
yearly rental payment shall increase by 4% over the previous year's rent. In the
event the second renewal term is exercised, the Company will be required to pay
the fair market value of leasing the property for such renewal term.
On December 31, 1996, FTEB entered into a lease agreement for the
rental of approximately 18,000 square feet at the Miracle Mall located at Route
18 in East Brunswick, New Jersey, for the location of its East Brunswick Fun
Bubble. The East Brunswick lease extends for an initial term of ten years, said
term commencing one hundred twenty days after issuance of the required building
permits for the work, improvements, and alterations required for the Company to
open for business and expiring February 28, 2007 unless renewed at the Company's
option. The annual rent due under the lease is as follows: $183,240 for the
first five years of the lease; $206,145 for the second five years of the lease;
$231,951 for the eleventh year, $230,888 for the twelfth through fifteenth
years; and $260,964 for the final five years of the renewed lease.
Another wholly owned subsidiary of the Company, FTE, also entered into
a lease agreement, this one for the rental of approximately 4,063 square feet of
space for the location of its Edmonton Fun Bubble. The lease term extends for a
period of ten years, commencing April 1, 1997 and expiring March 31, 2007. The
space is leased at an annual rent of $52,704 for the first thirty months of the
lease term, $57,093 for the subsequent thirty months, $61,490 for the succeeding
thirty months, and $65,880 for the final thirty months. The Company expects to
open the Edmonton facility in August 1997.
ITEM 3. LEGAL PROCEEDINGS
In or about October 1996, the First Richmond Bank, S.B. ("plaintiff")
commenced suit against the Company and its principals and their wives. The only
parties served were the Company, Mr. Rosso, and Gemina Rosso. Mr. Catalfumo and
Maria Catalfumo were never served. Plaintiff alleges in its complaint that the
Company breached an equipment lease agreement with plaintiff (assignee of said
lease agreement) and seeks (i) $162,753.96 in damages, in toto, against all
parties; (ii) an order directing the Company to return the leased equipment to
plaintiff; and (iii) attorneys' fees, interests, and costs. The Company has
denied all allegations and has asserted a counterclaim against the plaintiff, in
which it seeks damages, attorneys' fees, and costs. The counterclaim alleges
that plaintiff committed acts of bad faith against the Company. The lawsuit is
in the "discovery" phase, meaning that demands for documents and information in
support of each party's claims have been made. Though compliance with these
demands is required to the extent that such documents and information exist, as
of this date, all discovery is stayed pending the court's decision on
plaintiff's recent motion for summary judgment and the Company's cross-motion to
dismiss plaintiff's complaint.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During its annual meeting on April 24, 1997, shareholders voted for the
reelection of Daniel Catalfumo, Richard Rosso, and Daniel Buchanan as Directors
of the Company to serve until the next annual meeting or until the election of
their respective successors. Votes were cast as follows: 2,186,457 votes were
cast for each of the aforesaid nominees; 28,534 votes were withheld.
Also during the annual meeting, 1,059,137 shares were voted in favor of
a reverse split of the Company's outstanding shares on a 1 for 3 basis; however,
1,144,854 shares were voted against the split, and 11,000 shares abstained from
voting; thus, the proposal to reverse split the shares was not approved.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Units were quoted on the SmallCap Market of the Nasdaq
Stock Market until April 7, 1997, at which time Nasdaq delisted the Company's
securities. The Company's Units are currently quoted on the OTC Bulletin Board.
The following table sets forth representative high and low closing bid quotes as
reported by a market maker for the Company's Units during the period August 1,
1996 through June 10, 1997. Bid quotations reflect prices between dealers, do
not include resale mark-ups, mark-downs, or other fees or commissions, and do
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Units
Calendar Period Low High
<S> <C> <C>
08/01/96 - 09/30/96 1 11 3/4
10/01/96 - 12/31/96 1/4 2
01/01/97 - 03/31/97 3/16 7/8
04/01/97 - 04/07/97(1) 11/16 11/16
04/08/97 - 06/10/97(1) 1/4 3/8
</TABLE>
(1) Effective April 7, 1997, Nasdaq delisted the Company's securities;
therefore, same have not been traded on Nasdaq since said date. As of April 8,
1997, the Company's securities have been traded on the OTC Bulletin Board.
Each Warrant entitles the registered holder thereof to purchase, at any
time during the period commencing on the separation date of the units, one share
of Common Stock at a price of $5.25 per share, for a period of five years. The
Warrants are redeemable by the Company at any time, commencing on the separation
date, upon 30 days' notice at a redemption price of $.05 per Warrant, provided
that the closing bid quotation of the Common Stock for at least 30 consecutive
trading days ending on the third day prior to the date on which the Company
gives notice has been at least 170% of the exercise price of the Warrants being
redeemed.
<PAGE>
As of June 9, 1997, there were 83 holders of record of the Company's
Common Stock, although the Company believes that there are approximately 500
additional beneficial owners of shares of Common Stock held in street name. As
of June 10, 1997, the number of outstanding shares of the Company's Common Stock
was 2,512,465.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
During the year ended March 31, 1997, revenues of the Company were
$949,910 as compared with $897,522 during the year ended March 31, 1996. This
increase of $52,388 (or 5.8%) can be attributed to an increase in operating
revenues which resulted from the introduction of new attractions and programs at
the Staten Island Fun Bubble. This increase was the result of a $66,525 (or
9.8%) increase in operating revenues and a $14,137 (or 6.4%) decrease in
merchandise revenues from the same period ended March 31, 1996. The increase in
operating revenues is due to the introduction of three new Fun Bubble programs
(Summer Day Camp, After School Program, and Little Miss Fun Bubble Pageant).
These programs started in the second quarter of fiscal 1996 and brought more
children into the facility on a daily basis. The programs provided further
exposure to the Company's already established programs and generated additional
revenue on their own. The decrease in merchandise revenues was caused by a
decrease in goods sold and the costs associated with the Company's giving away
of merchandise as prizes.
Operating expenses for the twelve months ended March 31, 1997 increased
by $52,258 (or 5.8%) as compared to the same period ended March 31, 1996. This
increase was primarily caused by increased costs including new staffing salaries
for those employed at the new locations and additional costs resulting from the
implementation of the three aforementioned new programs.
Selling, general, and administrative expenses also increased to
$436,693 (or by 134.2%) for the twelve months ended March 31, 1997 as compared
to the same period ended March 31, 1996. This increase is due to certain
marketing expenses and professional fees incurred by the Company in its search
for potential new sites in the Tri-State area, in Canada, and in China, which
expenses and fees aggregated approximately $130,000. The Company now has the
corporate overhead in place which will enable it to support additional
facilities.
Cost of merchandise sold amounted to 67.5% of merchandise revenues
during the twelve months ended March 31, 1997 as compared to 61.8% for the same
period ended March 31, 1996. Cost of merchandise sold varies based on product
mix and value discounts earned.
During the twelve months ended March 31, 1997, the Company incurred a
net loss of $509,693 (or $0.21 per share) as compared with the net loss of
$344,077 (or $0.19 per share) during the comparable period ended March 31, 1996.
The primary reason for the increase in the net loss and net loss per share was
an increase in operating expenses resulting from the
<PAGE>
Company's search for potential new sites, its implementation of new programs,
and an increase in corporate expenses for the twelve month period ended March
31, 1997, as compared to the comparable twelve month period ended March 31,
1996.
Financial Condition
At March 31, 1997, the Company had working capital of $2,141,599 and
shareholders' equity of $3,186,284.
During the twelve months ended March 31, 1997, the Company used
$564,777 in cash used for operating activities as compared with $92,654 cash
used for operating activities during the comparable twelve month period ended
March 31,1996. The increase of $472,123 is primarily due to expenses incurred in
connection with the Company's search for new sites in the Tri-State area, in
Canada, and in China, a decrease in accounts payable, and accrued officers'
compensation. The Company acquired fixed assets of $303,328 and $87,191 during
the twelve months ended March 31, 1997 and 1996, respectively. Cash was provided
by financing activities of $226,032 during the twelve months ended March 31,
1996 and $3,015,717 during the twelve months ended March 31, 1997.
New Accounting Pronouncement:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128 Earnings Per Share
("EPS"). SFAS No. 128 requires all companies to present "basic" EPS and, if they
have a complex capital structure, "diluted" EPS. Under SFAS No. 128, "basic" EPS
is computed by dividing income (adjusted for any preferred stock dividends) by
the weighted average number of common shares outstanding during the period.
"Diluted" EPS is computed by dividing income (adjusted for any preferred stock
or convertible stock dividends and any potential income or loss from convertible
securities) by the weighted average number of common shares outstanding during
the period plus the number of additional common shares that would have been
outstanding if any dilutive potential common stock had been issued. The issuance
of antidilutive potential common stock should not be considered in the
calculation. In addition, SFAS No. 128 requires certain additional disclosures
relating to EPS. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997. Thus, the Company expects to adopt the
provisions of this statement in fiscal year 1998. Management does not expect the
adoption of this pronouncement to have a significant impact on the Company's
financial statements.
ITEM 7. FINANCIAL STATEMENTS
See attached financial statements.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
Executive Officers and Directors
The executive Officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Daniel Catalfumo 40 President, Chief Executive Officer,
and Director
Richard Rosso 40 Vice President, Secretary,
Treasurer, and Director
Daniel Buchanan 51 Director
</TABLE>
All Directors hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified. The Executive Officers
are elected annually by the Board of Directors, serve at the discretion of the
Board of Directors, and hold office until their successors are duly elected and
qualified. Vacancies on the Board of Directors may be filled by the remaining
Directors.
Daniel Catalfumo has been the President and a Director of the Company since
its inception in 1993. From 1982 to November 1994, Mr. Catalfumo was the sole
shareholder, Officer, and Director of Professional Tile Contracting Co., a tile
contracting company located in Brooklyn, New York.
Richard Rosso is Mr. Catalfumo's uncle. He has been the Secretary,
Treasurer, and a Director of the Company since its inception in 1993. He became
the Vice President of the Company in April 1997. From 1983 to November 1994, Mr.
Rosso was the owner of Dynamic Dental Labs located in Brooklyn, New York. Mr.
Rosso operated Dynamic Dental Labs, which serviced over 1,000 area dentists, for
over ten years.
Daniel Buchanan was engaged as a consultant to the Company and elected as a
Director in December 1995. Since 1990, Mr. Buchanan has been the President of
Delta Play Ltd., a
<PAGE>
Canadian Corporation which manufactures children's play equipment, including the
soft-sculptured modular foam play mazes used by the Company.
As permitted under the New York Business Corporations Law, the
Company's Certificate of Incorporation eliminates the personal liability of the
Directors to the Company or any of its shareholders for damages for breaches of
their fiduciary duties as Directors. As a result of the inclusion of such
provision, stockholders may be unable to recover damages against Directors for
negligent or grossly negligent actions which Directors may take or for
Directors' actions which violate their fiduciary duties. The inclusion of this
provision in the Company's Certificate of Incorporation may reduce the
likelihood of derivative litigation against Directors and other types of
shareholder litigation.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Officers, Directors, and any persons who beneficially own
more than ten (10%) percent of a registered class of the Company's equity
securities to file reports of securities ownership and changes in such ownership
with the Securities and Exchange Commission ("SEC"). Officers, Directors, and
greater than ten percent beneficial owners also are required by rules
promulgated by the SEC to furnish the Company with copies of all Section 16(a)
forms they file. No person who, during the year ended March 31, 1997, was a
Director, Officer, or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of securities of the Company registered
under Section 12 of the Securities Exchange Act of 1934 ("the Act") failed to
file on a timely basis reports required by Section 16 of the Act during the most
recent fiscal year or prior years. The foregoing is based solely upon the
Company's review, during the most recent fiscal year, of (i) Forms 3 and 4 as
furnished to the Company under Rule 16a-3(d) under the Act; (ii) Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year; and (iii) any representation received by the Company from any
reporting person that no Form 5 is required, except as described herein.
ITEM 10. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(6) of Regulation S-B) compensation awarded
or paid by the Company during the years ended March 31, 1997, 1996, and 1995 to
each of the named Executive Officers of the Company.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Shares
Name and Principal Year End Other Annual Underlying
Position March 31 Salary($) Bonus($) Compensation Options
- ----------------------- -------- --------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
Daniel Catalfumo 1997 110,000 $1,000 (1) $12,000 (2) 30,000(3)
President and 1996 75,489
Director 1995 15,235
Richard Rosso 1997 110,000 $1,000 (1) $12,000 (2) 30,000(3)
Vice President, Sec., 1996 86,553
Treas., and Director 1995 15,235
- --------------------------
</TABLE>
(1) In December 1996, the Company issued a $1,000 cash bonus to each
Officer. The Company did not meet the financial requirements for
bonuses to be issued under their employment agreements.
(2) The Company leases automobiles, at approximately $1,000 per month for
Messrs. Catalfumo and Rosso.
(3) In December 1996, the Company granted Messrs. Catalfumo and Rosso
options each to purchase 5,000 shares of the Company's Common Stock at
an exercise price of $0.62 per share. In March 1997, the Company
granted Messrs. Catalfumo and Rosso options each to purchase 25,000
shares of the Company's Common Stock at an exercise price of $0.69 per
share.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
====================================================================================================================================
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% of Total
# of Securities Options/SAR'
underlying s Granted to Exercise or
Options/SAR's Employees in Base
Granted (1) Fiscal Year Price ($/SH)
Name Expiration
Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard Rosso 25,000 50% $.69 03/31/02
5,000 $.62 12/30/01
===================================================================================================================================
Daniel Catalfumo 25,000 50% $.69 03/31/02
5,000 $.62 12/30/01
====================================================================================================================================
</TABLE>
The following table contains information with respect to employees of
the Corporation concerning options held as of March 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
====================================================================================================================================
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-The-Money
Options/SAR's Options/SAR's
Shares at FY-End (#) at FY-End ($)
Acquired on Value Exerciseable/ Exerciseable/
Name Exercise (#) Realized ($) Unexerciseable Unexerciseable (1)
- ---- ------------ ------------ -------------- ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
25,000/0 0/0
Richard Rosso - - 5,000/0 350/0
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
25,000/0 0/0
Daniel Catalfumo - - 5,000/0 350/0
====================================================================================================================================
</TABLE>
(1) Based upon the closing price for the Common Stock on March 31, 1997
($.69), as reported by a market maker.
Employment and Consulting Agreements
In April 1995, the Company entered into employment agreements with both
of its Officers, Mr. Catalfumo and Mr. Rosso. Such Officers are employed full
time by the Company and pursuant to the terms of their agreements, shall receive
compensation at a rate of $100,000 annually, with yearly escalations during the
term of the agreement. The agreements are of five year duration and expire in
April 2000. Pursuant to the terms of the agreements, Messrs. Catalfumo and Rosso
are to receive yearly bonuses in an amount equal to (i) five percent (5%) of the
Company's first $200,000 of after-tax profit; (ii) seven and one half percent (7
1/2%) of the Company's next $200,000 to $400,000 of after-tax profit; and (iii)
ten percent (10%) of any after-tax profit over $400,000.
In December 1995, the Company entered into a two year consulting
agreement with Mr. Buchanan pursuant to which Mr. Buchanan agreed to provide the
Company with consulting and advisory services in locating, designing, and
building additional Fun Bubble facilities and in informing the Company as to
changes and innovations in the children's entertainment industry. Pursuant to
the terms of the consulting agreement, the Company issued Mr. Buchanan 15,000
restricted shares of Common Stock under its 1995 Senior Management Incentive
Plan. As of June 30, 1997, all shares are fully vested.
1995 Senior Management Incentive Plan
In February 1995, the Board of Directors adopted the Senior Management
Incentive Plan ("the Management Plan"), which was adopted by shareholder
consent. The Management Plan provides for the issuance of up to 150,000 shares
of the Corporation's Common Stock in
<PAGE>
connection with the issuance of stock options and other stock purchase rights to
executive Officers and other key employees of the Company.
The adoption of the Management Plan was prompted by the Company's
desire (i) to attract and retain qualified personnel, whose performance is
expected to have a substantial impact on the Company's long-term profit and
growth potential, by encouraging those persons to acquire equity in the
Corporation; and (ii) to provide the Board with sufficient flexibility regarding
the forms of incentive compensation which the Company will have at its disposal
in rewarding executive Officers, key employees, and consultants without
unnecessarily depleting the Company's cash reserves. The Management Plan is
designed to augment the Company's existing compensation programs and is intended
to enable the Company to offer executives, key employees, and consultants a
personal interest in the Company's growth and success through the grant of stock
options and/or other rights pursuant to the Management Plan. It is contemplated
that only those executive management employees (generally the Chairman of the
Board, Vice Chairman, Chief Executive Officer, Chief Operating Officer,
President, and Vice President of the Company), key employees, and consultants
who perform services of special importance to the Company will be eligible to
receive compensation under the Management Plan. As of the date hereof, the
Company's Officers and Directors number only three: Messrs. Catalfumo, Rosso,
and Buchanan.
A total of 150,000 shares of Common Stock have been reserved for
issuance under the Management Plan. Pursuant to the terms of his consulting
agreement with the Company, Mr. Buchanan received 15,000 restricted shares under
the Management Plan, all of which shares have vested. Also pursuant to the
Management Plan, options to purchase an aggregate of 30,000 shares were granted
to each of Messrs. Catalfumo and Rosso. It is anticipated that awards made under
the Management Plan will be subject to three year vesting periods, although the
vesting periods are subject to the discretion of the Administrator.
Unless otherwise indicated, the Management Plan is to be administered
by the Board of Directors or a committee of the Board, if such a committee is
appointed for this purpose (the Board or such committee, as the case may be,
shall be referred to in the following description as "the Administrator").
Subject to the specific provisions of the Management Plan, the Administrator
will have the discretion to determine (i) the recipients of the awards; (ii) the
nature of the awards to be granted; (iii) the dates such awards will be granted;
(iv) the terms and conditions of the awards; and (v) the interpretation of the
Management Plan, except that any award granted to any employee of the Company
who is also a Director of the Company shall also be subject - in the event the
persons serving as members of the Administrator of the Management Plan at the
time such award is proposed to be granted do not satisfy the requirements
regarding the participation of "disinterested persons" set forth in Rule 16b-3
("Rule 16b-3") promulgated under the Exchange Act - to the approval of an
auxiliary committee consisting of not less than two individuals who are
considered "disinterested persons" as defined under Rule 16b-3. As of the date
hereof, the Company has not yet determined who will serve on such auxiliary
committee, if one is required.
The Management Plan generally provides that, unless the Administrator
determines
<PAGE>
otherwise, each option or right granted shall become exerciseable in full upon
certain "change of control" events as described in the Management Plan, or
subject to any right or option granted under the Management Plan (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure, or
otherwise), the Administrator will make appropriate adjustments to such plans
and the classes, number of shares, and price per share of stock subject to
outstanding rights or options. Generally, the Management Plan may be amended by
action of the Board of Directors, except that any amendment which (i) would
increase the total number of shares subject to such plan; (ii) extend the
duration of such plan; (iii) materially increase the benefits accruing to
participants under such plan; or (iv) change the category of persons who can be
eligible for awards under such plan, must be approved by the affirmative vote of
a majority of the shareholders entitled to vote. The Management Plan permits
awards to be made thereunder until November 2004.
Directors who are not otherwise employed by the Company will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stock options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights), and
restricted stock purchase agreements.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information at June 10, 1997
with respect to the beneficial ownership of Common Stock held by (i) each person
known by the Company to be the owner of 5% or more of the outstanding Common
Stock; (ii) by each Director; and (iii) by all Officers and Directors as a
group. Except as otherwise indicated below, each named beneficial owner has sole
voting and investment power with respect to the shares of Common Stock listed:
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature Percentage of
of Class of Beneficial Owner of Beneficial Ownership Class (1)
- -------- ------------------- ----------------------- ---------
<S> <C> <C> <C>
common Daniel Catalfumo (2) 572,365 22.5%
stock c/o Fun Tyme Concepts, Inc.
290 Wild Avenue
Staten Island, New York 10314
common Richard Rosso (3) 427,278 16.8%
stock c/o Fun Tyme Concepts, Inc.
290 Wild Avenue
Staten Island, New York 10314
common Daniel Buchanan (4) 15,000 *
stock c/o Fun Tyme Concepts, Inc.
290 Wild Avenue
Staten Island, New York 10314
common Imafina, S.A. (5) 500,000 18.1%
stock Route de Beaumont
4 case 952 ch 1700
Fribourg, Switzerland
common All Officers and Directors 1,014,643 39.4%
stock as a group (3 persons) (1)-(4)(9)
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
* Less than 1%
(1) Includes a reduction in the number of shares outstanding from 2,676,000
to 2,516,000 due to the Company's buyback, the return of such shares to treasury
is currently being undertaken. From February through April 1997, the Company
repurchased an aggregate of 163,535 shares of its Common Stock at a total cost
of $113,660.01. See "Certain Relationships and Related Transactions" and "Recent
Developments."
(2) Includes (i) an aggregate of 151,365 shares of Common Stock owned by
members of Mr. Catalfumo's family, of which Mr. Catalfumo disclaims beneficial
ownership; (ii) 5,000 shares underlying options presently vested and
exerciseable; and (iii) 25,000 shares underlying options presently vested and
exerciseable.
(3) Includes (i) 6,278 shares of Common Stock owned by Mr. Rosso's parents,
of which Mr. Rosso disclaims beneficial ownership; (ii) 5,000 shares underlying
options presently vested and exerciseable; and (iii) 25,000 shares underlying
options presently vested and exerciseable.
(4) Mr. Buchanan and the Company entered into a restrictive share agreement
whereby 3,750 shares vested 30 days from date of grant and 3,750 shares vested
six months from the execution of the agreement and each six month period
thereafter until the shares were fully vested. All shares are vested as of the
date hereof.
(5) Includes 250,000 shares of Common Stock and 250,000 shares of Common
Stock issuable upon the exercise of outstanding warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1995, prior to the 19,000 to 1 stock split, the Company's
initial investors, prior to the Company's IPO, returned to the Company's
treasury an aggregate of 1,767,000 or 75% of the shares of Common Stock owned by
such shareholders, on a pro-rata basis, and retained an aggregate of 589,000
shares of Common Stock. As compensation for the return of their shares of Common
Stock, the investors received "piggyback" registration rights. At the same time,
each Officer returned 361,000 shares of Common Stock to the Company's treasury,
for no remuneration or compensation. In connection with the return of a portion
of their shares of Common Stock held by the investors, the Company recorded a
compensation charge of $229,500, which charge was based on the increase in
percentage ownership of the Company received by the Officers.
In July 1995, the Company issued a promissory note of $6,500 to Mr.
Catalfumo. This
<PAGE>
note accrued interest at the rate of 18% per annum. During this period, Mr.
Catalfumo advanced an additional $5,000 to the Company, which advance did not
accrue interest. In addition, the Company issued notes in the amount of $6,500
and $17,000 to Sal Catalfumo and Frank Catalfumo, respectively, which notes
accrued interest at the rate of 18% per annum. All of these notes and the
advance from Mr. Catalfumo were repaid in August 1995. The proceeds of the loans
were utilized for working capital.
In December 1995, the Company entered into a two year consulting
agreement with Mr. Buchanan pursuant to which Mr. Buchanan agreed to provide the
Company with consulting and advisory services in locating, designing, and
building additional Fun Bubble facilities and in informing the Company as to
changes and innovations in the children's entertainment industry. Pursuant to
the terms of the consulting agreement, the Company issued Mr. Buchanan 15,000
restricted shares of Common Stock under its 1995 Senior Management Incentive
Plan. As of June 30, 1997, all shares are fully vested.
The Company issued three promissory notes in the aggregate amount of
$200,000, two notes in the aggregate principal amount of $100,000 in January
1996, and one note in the principal amount of $100,000 in February, 1996 to
unaffiliated parties, bearing interest at 18% per annum. The principal amount of
each note was payable together with accrued interest on the earlier of July 1,
1997 or the consummation of an IPO of the Company's securities. Initially the
notes matured on the earlier of six months from issuance or the consummation of
an initial public offering of the Company's securities. The Company requested
that holders of the notes amend the term of maturity of the notes to the earlier
of July 1997 and the consummation of an initial public offering. The two notes
issued in January 1996 were personally guaranteed by the Company's Officers. The
notes were repaid from the proceeds of the Company's IPO.
In December 1996, the Company granted Messrs. Catalfumo and Rosso
options each to purchase 5,000 shares of the Company's Common Stock at an
exercise price of $0.62 per share. In addition, the Company issued $1,000
bonuses to each of Messrs. Rosso and Catalfumo. In March 1997, the Company
granted Messrs. Catalfumo and Rosso each options to purchase 25,000 shares of
the Company's Common Stock at an exercise price of $0.69 per share. Both sets of
options are exerciseable for a period of five years commencing on the date of
grant.
From February through April 1997, the Company repurchased an aggregate
of 163,535 shares of its Common Stock at a total cost of $113,660.01. The shares
are being returned to treasury as authorized but unissued.
For information on the Company's compensation arrangements, see "Employment
and Consulting Agreements."
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
All exhibits except those designated with an asterisk (*), which are
filed herewith, have previously been filed with the Commission in connection
with the Company's Registration Statement on form SB-2 under File No.
33-80931-NY, pursuant to 17 C.F.R 230.411, and are incorporated by reference
herein.
<TABLE>
<CAPTION>
<S> <C>
3.1 - Certificate of Incorporation of the Company filed April 19, 1993.
3.2 - Certificate of Amendment to the Certificate of Incorporation of the Company filed
May 19, 1995.
3.2(a) - Certificate of Amendment to the Certificate of Incorporation of the Company
dated February 7, 1996.
3.3 - By-Laws of the Company.
4.1 - Specimen of Common Stock Certificate.
4.2 - Specimen of Common Stock Purchase Warrant Certificate.
4.5 - Form of Common Stock Purchase Warrant Agreement.
10.2 - Employment Agreement of Daniel Catalfumo.
10.3 - Employment Agreement of Richard Rosso.
10.4 - Lease Agreement and amendments one through four thereto, between the
Company and Block 2467 Lot 1 Associates.
10.5 - The Company's Senior Management Incentive Plan.
10.7 - Form of Lock-up Agreement.
- Equipment lease with Delta Play Ltd., and the guarantee
executed by Daniel Catalfumo and Richard Rosso.
10.12 - Consulting Agreement between the Company and Dan Buchanan.
10.13 - Restricted Share Agreement between the Company and Dan Buchanan.
- Promissory note executed by Daniel Catalfumo and Richard Rosso
issued to Delta Play Ltd., for equipment purchased.
- Lease Agreement by and between Manufacturer's Lease Company
and the Company and personal guarantees of the Company's
officers.
10.3* - Lease Agreement for East Brunswick Fun Bubble and
Amendment thereto.
10.4* - Lease Agreement for Edmonton Canada Fun Bubble.
21.0* - List of all Company Subsidiaries.
22.0* - Inspector of Elections Report for April 24,1997 Annual Meeting.
27.0* - Financial Data Schedule.
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized this 11th day of July 1997.
FUN TYME CONCEPTS, INC.
By: \s\ Daniel Catalfumo
Daniel Catalfumo
President and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
\s\ Daniel Catalfumo Chief Executive Officer 07/11/97
Daniel Catalfumo President,and Director Date
\s\ Richard Rosso Vice President, Secretary, Treasurer, 07/11/97
Richard Rosso and Director Date
\s\ Daniel Buchanan Director 07/11/97
Daniel Buchanan Date
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Fun Tyme Concepts, Inc.
Staten Island, New York
We have audited the accompanying consolidated balance sheet of Fun Tyme
Concepts, Inc. and subsidiaries as at March 31, 1997 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the years in the two-year period 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 enumerated above
present fairly, in all material respects, the financial position of Fun Tyme
Concepts, Inc. and subsidiaries at March 31, 1997 and the results of its
operations and its cash flows for each of the years in the two-year period then
ended in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
April 30, 1997
With respect to Notes A and D
May 21, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
FUN TYME CONCEPTS, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 1997
A S S E T S
Current assets:
<S> <C>
Cash and cash equivalents .................................... $ 2,155,460
Inventories .................................................. 32,020
Prepaid expenses and other current assets .................... 92,194
Due from officer ............................................. 5,000
-----------
Total current assets .................................. 2,284,674
Property and equipment, net ..................................... 1,044,879
Other assets .................................................... 84,072
-----------
T O T A L ............................................. $ 3,413,625
===========
L I A B I L I T I E S
Current liabilities:
Accounts payable and accrued expenses ........................ $ 78,093
Customer deposits ............................................ 16,030
Current portion of capital lease obligation .................. 48,952
-----------
Total current liabilities ............................. 143,075
Capital lease obligation (less current portion) ................ 60,583
Deferred rent ................................................... 23,683
-----------
Total liabilities ..................................... 227,341
-----------
STOCKHOLDERS' EQUITY
Preferred stock - par value $.01, authorized 500,000
shares, none outstanding
Common stock - par value $.001, authorized 10,000,000
shares, 2,676,000 shares issued and outstanding .............. 2,676
Additional paid-in capital ...................................... 4,033,298
Deficit ......................................................... (760,047)
Treasury stock, at cost - 133,045 shares ........................ (89,643)
-----------
Total stockholders' equity ............................ 3,186,284
-----------
T O T A L ............................................. $ 3,413,625
===========
</TABLE>
The accompanying notes to
financial statements are an
integral part hereof.
F-2
<PAGE>
<TABLE>
<CAPTION>
FUN TYME CONCEPTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
March 31,
1997 1996
<S> <C> <C>
Operating revenue ................................ $ 744,196 $ 677,671
Merchandise revenue .............................. 205,714 219,851
----------- -----------
Total revenues ......................... 949,910 897,522
Operating expenses ............................... (944,906) (892,648)
Cost of merchandise sold ......................... (138,790) (135,784)
Selling, general and administrative expenses ..... (436,693) (186,463)
----------- -----------
(Loss) from operations ........................... (570,479) (317,373)
Other income (expense):
Other (expense) .............................. (4,930)
Interest income ............................... 88,403 2,069
Interest (expense) ............................ (11,892) (25,842)
----------- -----------
(Loss) before income taxes ....................... (498,898) (341,146)
Provision for income taxes:
Current tax expense ........................... 10,795 2,931
----------- -----------
NET (LOSS) ...................................... $ (509,693) $ (344,077)
=========== ===========
Net (loss) per share ............................. $ (0.21) $ (.19)
=========== ===========
Weighted average common shares and equivalents ... 2,410,795 1,816,195
=========== ===========
</TABLE>
The accompanying notes to
financial statements are an
integral part hereof.
F-3
<PAGE>
<TABLE>
<CAPTION>
FUN TYME CONCEPTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Stock Common Stock
Number Number
of . of Additional
Shares Par ($.01) Shares par $.001) Paid-in Treasury
Issued Amount Issued Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - March 31, 1995 .................. 1,361,000 $1,361 $1,132,541 $(420,090) $713,812
Issuance of preferred stock ...............150,000 $1,500 259,976 261,476
Reclassification of S Corp. losses ........ (513,813) 513,813 - 0 -
Conversion of preferred stock .............(150,000) (1,500) 500,000 500 1,000 - 0 -
Issuance of shares under the
management incentive plan ................. 15,000 15 52,485 52,500
Net (loss) for the year ................... (344,077) (344,077)
Balance - March 31, 1996 ..................- 0 - - 0 - 1,876,000 1,876 932,189 (250,354) 683,711
Issuance of common stock .................. 800,000 800 3,101,109 3,101,909
Purchase of 133,045 shares ................ $(89,643) (89,643)
Net (loss) for the year ................... (509,693) (509,693)
BALANCE - MARCH 31, 1997 ..................- 0 - $- 0 - 2,676,000 $2,676 $4,033,298 $(760,047) $(89,643) $3,186,284
</TABLE>
The accompanying notes to
financial statements are an
integral part hereof.
F-4
<PAGE>
<TABLE>
<CAPTION>
FUN TYME CONCEPTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
March 31,
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net (loss) ...................................................... $ (509,693) $ (344,077)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Compensation charge ......................................... 52,500
Depreciation and amortization ............................... 113,236 90,414
(Increase) decrease in inventories .......................... (17,285) 2,704
(Increase) decrease due from officers ....................... (5,000) 6,156
(Increase) decrease in prepaid expenses
and other current assets .................................. (64,559) 5,887
(Decrease) increase in accounts payable ..................... (53,364) 54,549
Increase in customer deposits ............................... 1,022 4,083
Increase in deferred rent ................................... 1,123 4,873
(Decrease) increase in deferred
officers' compensation .................................... (30,257) 30,257
----------- -----------
Net cash (used in) operating
activities ............................................ (564,777) (92,654)
----------- -----------
Cash flows from investing activities:
Acquisitions of fixed assets .................................... (303,328) (87,191)
(Increase) in deposits .......................................... (32,084) (1,224)
(Increase) in cash surrender value of
officers' life insurance ...................................... (26,664)
-----------
Net cash (used in) investing
activities ............................................ (362,076) (88,415)
----------- -----------
Cash flows from financing activities:
Proceeds of issuance of preferred stock
and warrants .................................................. 261,476
Proceeds from issuance of common stock .......................... 3,328,242 8,300
Proceeds of notes payable to stockholders ....................... 35,000
Proceeds (repayment) of notes payable ........................... (200,000) 200,000
Repayments of capital lease obligations ......................... (21,414) (13,779)
Repayments of notes payable to stockholders ..................... (1,468) (61,132)
Payment of deferred registration costs .......................... (203,833)
Purchase of treasury stock ...................................... (89,643)
-----------
Net cash provided by financing
activities ............................................ 3,015,717 226,032
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 2,088,864 44,963
Cash and cash equivalents - beginning of
period .......................................................... 66,596 21,633
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD .......................... $ 2,155,460 $ 66,596
=========== ===========
Supplemental schedule of noncash investing and financing activities:
Equipment acquired by capital lease ........................... $ 64,870 $ 4,524
Supplemental disclosures of cash flow information:
Interest paid ................................................. 11,892 19,877
Taxes paid .................................................... 10,795 2,931
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
(NOTE A) - The Company:
Fun Tyme Concepts, Inc. (the "Company") operates a children's
entertainment center in Staten Island, New York for children ages two through
twelve under the trade name "Fun Bubble, Party/Play Center". The Company also
operates a summer day camp program during the summer months which includes
indoor and outdoor activities for children ages three to fourteen. As of May
1997, the Company signed two leases for the opening of new locations one in
Edmonton, Canada and one in East Brunswick, N.J.
(NOTE B) - Summary of Significant Accounting Policies:
[1] Principles of consolidation:
The consolidated financial statements as of March 31, 1997
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
[2] Cash equivalents:
The Company considers all highly liquid investment instruments
purchased with a maturity of three months or less to be cash equivalents.
[3] Inventories:
Inventories consist of food, beverage and souvenir items for
sale at the "Fun Bubble" and are valued at the lower of cost, on a first-in,
first-out basis, or market.
[4] Property and equipment:
Property and equipment are stated at cost. Depreciation of the
respective assets is computed using the straight-line method over their
estimated lives. Leasehold improvements are amortized using the straight-line
method over the remaining life of the lease, including expected renewal options.
[5] Customer deposits:
Customer deposits for parties are recorded as liabilities when
received. Revenue is recognized when the event occurs.
[6] Advertising costs:
Advertising costs are charged to expense as incurred.
(continued)
<PAGE>
(NOTE B) - Summary of Significant Accounting Policies: (continued)
[7] Income taxes:
The Company, initially, had elected to be treated as an S
corporation pursuant to Section 1362 of the Internal Revenue Code for federal
and state income tax purposes. As a result of this election, the income of such
companies is generally taxed directly to the individual stockholders. After the
issuance of preferred stock in August 1995, the Company became a C corporation
and adopted Statement of Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for income
taxes.
Losses incurred while an S corporation are not available as
tax loss carryforwards to the C corporation since the tax benefits were passed
through to the individual stockholders. S Corporation accumulated losses from
inception (April 1993) to August 1995 of $513,813 were reclassified to paid-in
capital as a result of the change from an S corporation to a C corporation.
[8] 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 the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
[9] Net loss per share:
Net loss per share is computed using the weighted average
number of shares outstanding during the period. In accordance with Securities
and Exchange Commission requirements, common shares issued during the twelve
month period prior to the filing of the initial public offering have been
included in the calculation as if they were outstanding for all periods of
operations.
[10] Concentration of credit risk:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of temporary cash investments.
The Company places its temporary cash investments with high credit financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution.
[11] Stock based compensation:
During 1996, the Company implemented Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). The provisions of SFAS No. 123 allow companies to either expense the
estimated fair value of stock options or to continue to follow the intrinsic
value method set forth in APB Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") and disclose the pro forma effects on net income (loss)
had the fair value of the options been expensed. The Company elected to continue
to apply APB 25 in accounting
(continued)
<PAGE>
(NOTE B) - Summary of Significant Accounting Policies: (continued)
for its stock option incentive plans.
[12] Recently issued accounting pronouncements:
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 , "Earnings per
Share" ("SFAS 128"). SFAS 128 is effective for the Company's fiscal year ending
March 31, 1998. The Company believes that SFAS 128 will not have a material
impact on its financial statements.
(NOTE C) - Initial Public Offering:
On August 15, 1996, the Company completed an initial public offering of
800,000 units for net proceeds of $3,101,909, each unit comprising one share of
common stock and one warrant to purchase one share of common stock at $5.25 per
share. The securities underlying the units became separately transferable in
October 1996. A portion of the proceeds was used to repay promissory notes of
$200,000 issued in January and February 1996 which bore interest at 18%.
(NOTE D) - New Facilities:
In December 1996, the Company signed a lease agreement for the opening
of a new location in East Brunswick, N.J. Through a wholly owned subsidiary, Fun
Tyme of East Brunswick, Inc., the Company is planning to construct a play
structure inside the leased building.
In May 1997, the Company acquired the assets of a former children's
entertainment facility in Edmonton, Canada in a bankruptcy proceeding. Through a
wholly owned subsidiary, Fun Tyme of Edmonton, Inc., the Company acquired the
assets for approximately $36,000 and entered into a lease agreement with the
landlord of the facility.
(NOTE E) - Property and Equipment:
Property and equipment are summarized as follows:
Estimated
Useful March 31,
Lives 1997
Building - air structure . . .16 years $ 179,650
Equipment and autos under
capital lease . . . . . . 3-5 years 150,394
Equipment. . . . . . . . . . .5 years 425,291
Furniture and fixtures . . . .7 years 6,877
Leasehold improvements . . . 15-16 years 532,156
T o t a l. . . . . . . 1,294,368
Accumulated depreciation and
amortization. . . . . . . . . 249,489
----------
B a l a n c e. . . . . $1,044,879
==========
(continued)
<PAGE>
(NOTE F) - Prepaid Expenses and Other Current Assets:
Prepaid expenses and other current assets consist of the following:
Prepaid insurance . . . . . . . . $47,808
Other . . . . . . . . . . . . . . 44,386
$92,194
(NOTE G) - Other Assets:
Other assets consist of the following at December 31, 1996:
Cash surrender value of officers'
life insurance (a) . . . . . . $26,666
Deposits. . . . . . . . . . . . . 57,406
$84,072
(a) The Company is the beneficiary of life insurance policies on the
lives of the Company's two officers totaling $4,000,000.
(continued)
<PAGE>
(NOTE H) - Leasing Arrangements:
Operating leases:
The Company has operating leases for its children entertainment centers
expiring at various dates through March 31, 2007, some of which have renewal
options. The Company is responsible for property taxes, maintenance and
insurance under the leases.
Future minimum lease payments, including expected renewal options,
under noncancelable operating lease agreements are as follows:
Year Ending
March 31,
1998 . . . . . . . . . . . . . . $ 324,421
1999 . . . . . . . . . . . . . . 341,744
2000 . . . . . . . . . . . . . . 348,170
2001 . . . . . . . . . . . . . . 355,874
2002 . . . . . . . . . . . . . . 360,480
Thereafter . . . . . . . . . . . 4,986,900
----------
Total minimum lease
payments. . . . . . $6,717,589
Operating lease rent expense for each of the years ended March 31, 1997
and March 31, 1996 was $98,603.
Pursuant to one of the Company's operating leases, rent expense charged
to operations differs from rent paid due to scheduled rent increases.
Accordingly, the Company has recorded deferred rent payable of $23,683 at March
31, 1997. Rent expense is calculated by allocating total rental payments
including those attributable to scheduled rent increases, on a straight-line
basis, over the lease term.
Capital leases:
The Company is obligated under capital leases for play equipment,
computer equipment and autos. The leases require monthly payments through August
1999 and have interest imputed at rates from 7% to 28%. The leases are
collateralized by the underlying assets.
(continued)
<PAGE>
(NOTE H) - Leasing Arrangements: (continued)
Capital leases: (continued)
Future minimum lease payments required under these lease obligations
are as follows:
Year Ended
March 31,
1998. . . . . . . . . . . . . . $ 66,470
1999. . . . . . . . . . . . . . 48,948
2000. . . . . . . . . . . . . . 18,398
--------
Total minimum lease payments. . 133,816
Less amount representing
interest . . . . . . . 24,281
Present value of net minimum
lease payments . . . . . . . 109,535
Less current portion. . . . . . 48,952
------
Long-term portion . . . . . . . 60,583
========
(NOTE I) - Related Party Transactions:
[1] The President of an equipment manufacturer, who is the principal
supplier of the Company's play equipment, was elected as a member of the Board
of Directors of the Company in December 1995. In addition, the Company entered
into a two-year consulting agreement with the aforementioned director to provide
the Company with consulting services. Pursuant to the terms of the consulting
agreement the Company issued 15,000 restricted shares of common stock, subject
to a vesting schedule (see Note J).
[2] Amounts due from an officer of the Company bear interest at 6%.
(NOTE J) - Stockholders' Equity:
[1] In August 1995, the Company received net proceeds of $261,476 from
the sale to one investor in a private offering of 10 units, each unit consisting
of a) warrants for the purchase of 150,000 common shares at $5.25 per share and
b) 15,000 shares of preferred stock; each share was convertible into 5 shares of
common stock.
In December 1995, the holders of the then outstanding
convertible preferred stock converted 150,000 shares into 500,000 common shares,
in lieu of the 750,000 common
<PAGE>
shares to which they were entitled, and returned 50,000 convertible shares to
the Company's treasury.
[2] In February 1995, the Board of Directors authorized the Senior Management
Incentive Plan which provides for the grant of up to 150,000 shares of common
stock. In December 1995, the Company issued 15,000 restricted shares of common
stock under its Senior Management Incentive Plan, valued at $3.50 per share,
whereby 3,750 shares vest 30 days from the date of grant and 3,750 shares vest
six months from the execution of the agreement and each six-month period
thereafter.
The Company applies APB 25 in accounting for options issued under its
Senior Management Incentive Plan and, accordingly, recognizes compensation
expense for the difference between the fair value of the underlying common stock
and the exercise price of the option at the date of grant. The effect of
applying SAS No. 123 to 1997 net loss, as stated below, is not necessarily
representative of the effects on reported net income or loss for future years
due to, among other things, (1) the vesting period of the stock options and (2)
the fair value of additional stock options in future years. No options were
granted during the year ended March 31, 1996.
If such accounting provisions of SAS No. 123 were applied, then the
Company's net loss and net loss per share would have been $(513,793) and $(.21)
for the period ended March 31, 1997. The fair value of the options granted
during 1997 are estimated at $.07 on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: dividend yield 0%,
volatility of 75%, risk free interest rate of 6.04% and expected life of two
years.
Additional information with respect to 1997 stock option activity is
summarized as follows:
Weighted-
Average
Exercise
Shares Price
Options granted during the year. 60,000 $.67
Outstanding and exerciseable as
of March 31, 1997 . . . . . . 60,000 .67
All stock options issued under the Senior Management Incentive Plan are
exerciseable within five years from the date of grant.
[3] In January 1997, the Board of Directors of the Company approved a buy
back of
<PAGE>
up to an aggregate of $150,000 of its shares of common stock. As of March 31,
1997, the Company repurchased 133,045 shares of its common stock for
approximately $90,000.
[4] The Company has 2,560,000 shares of common stock reserved for issuance
as follows:
Common stock purchase
warrants. . . . . . . . . 2,425,000
Senior management incentive
plan. . . . . . . . . . . 135,000
-------
2,560,000
(NOTE K) - Income Taxes:
Deferred tax assets (liabilities) at March 31, 1997 result from the
following:
March 31,
1997
Deferred rent ...................... $ 7,850
Organization and deferred costs .... 27,674
Net operating loss carryforward .... 279,828
Depreciation and amortization ...... (22,049)
-------
293,303
Less valuation allowance ........... (293,303)
-------
Net deferred tax asset ............. $ - 0 -
=======
At March 31, 1997, the Company had net operating loss carryforwards
available of approximately $823,000 for federal income tax purposes, which
expire at various dates through 2011. Section 382 of the Internal Revenue
Service Code contains provisions which limit the loss carryforwards available if
significant changes occur in stockholder ownership interests. As a result of the
consummation of the initial public offering and repurchase of shares, the
Company may be subject to such limitations on the utilization of the major
portion of its net operating losses.
The Company's deferred tax asset has been fully reserved because the
realization of such benefit could not be estimated.
<PAGE>
The differences between the statutory federal income tax rate of 34%
and the actual rate are as follows:
Percent of
Pre-Tax (Loss)
From Operations
For the Period Ended
March 31,
1997 1996
"Expected" tax (benefit) . . . (34%) (34%)
Increase in taxes resulting
from:
S corporation losses for
which no tax benefit
has been provided . . . 15%
Compensation charge . . . 5%
Increase in valuation
reserve . . . . . . . . 34% 14%
Other . . . . . . . . . . 2%
----
2% 0%
(NOTE L) - Commitments and Contingencies:
In April 1995, the Company entered into five year employment agreements
with the two officers which provide for each officer an annual salary of
$100,000 per annum, increasing by 10% each year, and a bonus to each ranging up
to 10% of the Company's after-tax profit.
In October 1996, the Company received a complaint from First Richmond
Bank, S.B. ("First Richmond") alleging that it breached an equipment lease and
is seeking approximately $163,000 in damages. The Company has denied all
allegations and has asserted a counterclaim for damages, attorney fees, and
other costs against First Richmond. The motion is currently in the discovery
phase. As of March 31, 1997, the Company has an accrued liability of $75,000,
which is the balance due under the equipment lease. The accompanying financial
statements do not include any additional provision for potential loss resulting
from this complaint as currently no determination can be made as to the likely
outcome.
<PAGE>
Exhibit 10.29
Lease Agreement for East Brunswick Fun Bubble
and Amendment thereto.
L E A S E
Between
THE HARARY GROUP,
a Partnership of the State of New Jersey,
Landlord
and
FUN TYME CONCEPTS OF EAST BRUNSWICK, INC.
a Corporation of the State of New Jersey,
Tenant
Dated: December 31, 1996
<PAGE>
THIS AGREEMENT, entered into as of the 31st day of December, 1996,
between THE HARARY GROUP, a New Jersey partnership, having offices located at
1411 Broadway, 36th Floor, New York, New York 10018 (hereinafter referred to as
"Landlord") and FUN TYME CONCEPTS OF EAST BRUNSWICK, INC., a corporation of the
State of New Jersey, having offices located at 290 Wild Avenue, Staten Island,
New York 10314 (hereinafter referred to as "Tenant").
WITNESSETH:
PREMISES: The Landlord hereby demises and leases unto the Tenant and
the Tenant hereby hires and takes from Landlord, for the term and upon the
rentals, terms and conditions hereinafter specified, the premises known
crosshatched on Schedule "A" (the "Premises") consisting of approximately 15,270
square feet, which Premises are a part of a shopping center (the "Center") known
as the Miracle Mall located at Route 18, in the Township of East Brunswick,
County of Middlesex and State of New Jersey, and also includes a right of access
to the Premises and all public areas of the Center together with the parking
spaces in the parking area in common with other tenants of the Center.
SECTION 1. TERM.
The Premises are leased to the Tenant for an initial term of ten (10) years
(the "Initial Term"), commencing on or about April 1, 1997 and ending at
midnight on February 28, 2007, subject to the terms of this Lease. The actual
commencement date shall be determined in accordance with the provisions of
Section 10 of this Lease and the expiration date of this Lease shall be
determined accordingly.
Tenant shall have the right to extend the term of this Lease for two
successive periods of five (5) years each upon the terms and conditions
hereinafter set forth in Section 50 of this Lease.
SECTION 2. BASIC RENT.
(a) Basic Rent shall be payable in monthly installments, in advance, on the
first day of each calendar month during the term of this Lease, except that a
proportionately lesser sum may be paid for the first and last months of the term
of this Lease if the Commencement Date is other than the first day of the month.
The Basic Rent payable by Tenant to Landlord during the term hereof shall be the
sum of $1,946,925.00 (calculated on the basis of 15,270 rentable square feet of
space), which shall be payable in monthly installments as set forth on Schedule
B annexed hereto and made a part hereof. Tenant shall pay one month's Basic Rent
upon satisfaction or waiver by Tenant of the contingency set forth in Section 59
of this Lease, same to be applied against the Basic Rent due and payable for the
first month of the Term.
In consideration of the work to be performed by Tenant in the Premises in
accordance with the terms of this Lease, Landlord agrees that Tenant shall be
entitled to a monthly credit of $1,908.75 against each monthly payment of Basic
Rent due during the Initial Term of this Lease (based on an annual credit of
$1.50 per square foot).
(b) Tenant shall pay Basic Rent and any Additional Rent required to be paid
under this Lease (collectively referred to in this Lease as "Rent") in lawful
money of the United States to Landlord at Landlord's address set forth above, or
at such other place as Landlord may designate in writing, without demand and
without counterclaim, deduction or setoff, except as otherwise provided herein.
(c) If Tenant shall fail to pay, within seven (7) days of when the same is
due and payable, any Basic Rent or any Additional Rent, Tenant shall, upon
demand, pay to Landlord a late charge equal to twelve (12%) percent per annum on
the past due amount from the original due date until paid in full.
SECTION 3. PROPORTIONATE SHARE.
For purposes of this Lease, Landlord and Tenant agree that the Premises
constitute 16.85% of the Center, based upon the rentable square footage of the
Premises (15,270 square feet) and the rentable square footage of the Center
(90,610 square feet). The Tenant's Proportionate Share of all expenses and costs
of operation of the Center and Real Estate Taxes shall be deemed to be 16.85%,
subject to adjustment in the event there is an increase in the rentable square
footage constructed by Landlord or the Tenant leases more space in the Center.
SECTION 4. ADDITIONAL RENT.
(a) Tenant shall pay as Additional Rent its Proportionate Share of
"Operating Costs" as defined in Section 8 of this Lease. Tenant shall pay it's
Proportionate Share of Operating Costs in monthly installments, in advance, on
the first day of each month during the term, based upon Landlord's estimate of
Operating Costs for the applicable calendar year. At any time, and from time to
time, Landlord shall advise Tenant in writing of Tenant's Proportionate Share of
Operating Costs and Tenant shall pay the same in equal monthly installments,
such new rates being applied to the months for which the rental shall have
already been paid for the calendar year, as well as to the unexpired months of
such calendar year, with the adjustment for the expired months to be made at the
payment of the next succeeding monthly rental payment, all subject to final
adjustment at the expiration of each calendar year as hereinafter provided.
Landlord estimates that Tenant's Proportionate Share of Operating Costs
(including Real Estate taxes as defined in this Lease) is currently $2.75 per
square foot.
(b) Landlord shall submit an invoice to Tenant within one hundred twenty
(120) days after the end of each calendar year during the Term with a statement
of the actual Operating Costs; if Tenant's Proportionate Share of Operating
Costs exceeds the monthly sums provided above, Tenant shall forthwith make
payment to the Landlord of the amount in excess of the payments previously made
by Tenant for such calendar year, and if Tenant's Proportionate Share of
Operating Costs is less than the monthly sums provided above, Tenant shall
receive a credit for the difference against the next installments of Rent due
and owing, or if Tenant is entitled to a credit for the last year of this Lease,
such sum shall be refunded to Tenant within the one hundred twenty (120) day
period provided above. Tenant's monthly payment of its Proportionate Share of
Operating Costs shall be increased or decreased to coincide with any increase or
decrease described above.
(c) All sums of money or charges required to be paid by Tenant under this
Lease (other than Basic Rent), whether or not the same be so designated, shall
be deemed "Additional Rent". If such amounts or charges are not paid at the time
provided in this Lease, they shall nevertheless, if not paid when due, be
collectible as Additional Rent with the next installment of rent thereafter
falling due hereunder, but nothing herein contained shall be deemed to suspend
or delay the payment of any amount of money or charges as the same becomes due
and payable hereunder, or limit any other remedy of the Landlord.
SECTION 5. INTENTIONALLY OMITTED.
SECTION 6. INTENTIONALLY OMITTED.
SECTION 7. INTENTIONALLY OMITTED.
SECTION 8. OPERATING COSTS.
(a) Operating Costs, for the purposes of this Lease, shall mean the
aggregate of all expenses of operating the common areas of the Center and its
appurtenances and shall include, but shall not be limited to, the following: all
expenses for maintaining, operating and repairing the Center and its
appurtenances, including the expenses of normal replacement of worn out
equipment, facilities and installations; the cost of electricity, water, and
other utilities; security, gardening and other landscaping; snow removal,
maintenance and repair of the parking lot areas, driveways and roof; fire
insurance, liability insurance, rent insurance, real estate taxes as defined in
Section 29 of this Lease; painting, supplies, sales or use taxes on supplies or
services; wages, salaries, and fringe benefits of all persons engaged in the
operation, maintenance and repair of the Center and its appurtenances, but only
to the extent related or attributable directly to the Center; the charges of any
independent contractor who performs or does any of the work of operating,
maintaining, or repairing the Center and its appurtenances; and other repair and
operating and maintenance expenses or charges, including an administrative
charge (not to exceed 15% of Operating Costs), which are made and calculated in
accordance with sound accounting and management principles generally accepted
with respect to the operation of a first-class shopping center, and which is
reasonable and customary in the geographic area in which the Center is located.
In accordance with the provisions of Section 3 and 4 of this Lease, Tenant shall
pay its Proportionate Share of such Operating Costs (including, but not limited
to, its Proportionate Share of the administrative charge referred to above).
Operating Costs shall not include, however, executive salaries, leasing
commissions, and costs of additional buildings, if any, for which the Landlord
is responsible and depreciation, interest on and amortization of mortgages,
franchise, income and other taxes based upon the income of Landlord, provided
the same shall not have been levied as a substitute for real estate taxes, and
shall not include any items otherwise constituting such expenses to the extent
payment therefor is received from, or payable by, any other tenants of the
Center, to the extent such items are for the particular benefit of one or more
tenants of the Center and not for all tenants of the Center as a whole.
The following items shall be excluded from Operating Costs:
(1) costs attributable to Landlord's design and construction of
improvements to other premises in the Center in connection with Landlord
entering into new leases or extending leases and brokerage commissions paid by
Landlord; (2) costs for which Landlord is reimbursed by any parties' insurance
or by third parties warranting construction; (3) fines or penalties incurred due
to violations of governmental requirements; (4) the costs of clean-up or
remediation of hazardous or toxic wastes which were not caused by Tenant; (5)
capital costs, so characterized according to the Internal Revenue Code and
applicable Regulations to the extent that they improve the Common Areas beyond
their original condition or utility on the Commencement Date of this Lease,
provided such costs shall be amortized over the useful life of the repair or
improvement in accordance with the Internal Revenue Code and applicable
Regulations, and Tenant shall pay its Proportionate Share of the amortized
portion that falls within the Lease term; (6) compensation paid or owed to
property management firms, attorneys or brokers.
(b) Tenant (or its accountant and/or employees), upon reasonable advance
written notice to Landlord, may examine the books and records of Landlord, at
Landlord's place of business, regarding any costs pertaining to Operating Costs
for the prior twelve (12) month period, and may make copies thereof of
information which is not confidential. If, as a result of such examination,
Tenant's payment of its share of Operating Costs exceeds the amount that Tenant
should have been billed, then Landlord shall promptly refund the excess to
Tenant. If Tenant shall disagree with Landlord's determination of Tenant's
Proportionate Share of Operating Costs, then Landlord and Tenant shall attempt
to adjust such disagreement and if they are unable to do so, such disagreement
shall be subject to resolution by expedited arbitration in Middlesex County, New
Jersey, in accordance with the rules of the American Arbitration Association.
The determination of the arbitration shall be conclusive upon the parties, and
the parties shall share equally the expenses of the arbitration.
SECTION 9. COMMON AREAS.
(a) Tenant and Tenant's agents, employees, licensees and invitees shall
have the non-exclusive right, during the Term, to the reasonable use of the
Common Areas, together with Landlord and other lessees of portions of the
Center, their invitees, licensees, agents and employees. Landlord reserves the
right to grant to the owners and lessees of other properties in the vicinity of
the Center and to their invitees, licensees, agents and employees the right to
use the driveways located in the Center together with lessees of the Center, and
to grant easements and other rights therein for such purpose, provided that same
do not materially interfere or otherwise materially diminish the visibility,
use, occupation and enjoyment of the Premises or the use and enjoyment of the
Common Areas and appurtenances thereto by the Tenant or its employees, invitees
and guests.
In order to establish that the Center, and any portion thereof, is and will
continue to remain private property, Landlord shall have the unrestricted right
to close (for such periods of time and to the extent necessary, in the opinion
or belief of Landlord's attorneys, to be legally sufficient to prevent
dedication thereof, or the accrual of any right in any person or to the public
therein) the entire Center, and/or any portion thereof owned or controlled by
Landlord, to the general public. In connection therewith, Landlord may, in its
discretion, seal off entrances to the Center, or any portion thereof, for
periods of at least one (1) day in each calendar year. Landlord agrees that in
exercising such right, Landlord shall use its best efforts to limit the closure
to the shortest time period possible and with the least interference with
Tenant's operations or business as possible. All common areas and other
facilities in or about the Center provided by Landlord shall be subject to the
exclusive control of Landlord, provided there shall be no unreasonable
obstruction of Tenant's right of ingress to or egress from the Premises or any
material negative impact to the visibility of the Premises. Landlord shall have
the right to construct, maintain and operate lighting and other facilities on
all said areas and improvements; to police same; to change the area, level,
location and arrangement of parking areas and other facilities; to build
multi-story parking facilities, to allow anyone designated by Landlord to use
the parking facilities without charge; and/or to close temporarily all or any
portion of the parking areas and facilities to discourage non-customer parking;
and to erect additional buildings, improvements and structures in the Common
Areas including without limitation, the parking areas designated from time to
time by Landlord; provided, however, Landlord agrees that in exercising any such
rights hereunder, there shall be no material negative impact on Tenant's
business operations, the visibility of the Premises or ingress or egress to the
Premises. Landlord agrees that during the Lease Term, it will not construct or
permit to be constructed any building, parking facility, tower or other
structure or improvement, in the area cross-hatched on Schedule A-1 as the "No
Build Area", except for any required dumpster enclosures and as may otherwise be
required by governmental authority. Landlord shall operate and maintain the
Common Areas in such manner as Landlord in its discretion shall determine, and
Landlord shall have full right and authority to employ and discharge all
personnel with respect thereto. All Common Areas and facilities which Tenant may
be permitted to use and occupy are to be used and occupied under a non-exclusive
revocable license. Except as otherwise expressly provided hereunder, if the
amount of such areas be changed or diminished, Landlord shall not be subject to
any liability to Tenant, nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall diminution of such areas be deemed
constructive or actual eviction.
SECTION 10. COMMENCEMENT OF TERM.
(a) The parties estimate that the Commencement Date shall be on or about
April 1, 1997 (the "Estimated Commencement Date"), but the actual Commencement
Date shall be the date which is one hundred twenty (120) days after issuance of
any required building permits for the work, improvements and alterations
required for Tenant to open for business in the Premises (the "Tenant's Work").
After the Commencement Date, Landlord and Tenant, promptly upon the request of
either of them, will execute and deliver to each other a certificate setting
forth the Commencement Date.
(b) Tenant shall have the right to take possession of the Premises upon
issuance of building permits for the Tenant's Work for the purpose of
constructing and completing such Tenant's Work, and for the purpose of
commencing business in the Premises. During such period and until the
Commencement Date, Tenant shall not be required to pay any Rent to Landlord,
provided Tenant shall perform all of its other obligations under the terms of
this Lease during said period, including, but not limited to, maintaining any
required insurance coverage in accordance with Section 20 of this Lease.
Anything contained in this Lease to the contrary notwithstanding, if for any
reason, including but not limited to any prior tenant wrongfully holding over,
Landlord is unable to deliver possession of the Premises to Tenant at the time
Tenant receives all required building permits, this Lease shall nevertheless
continue in full force and effect, and the one hundred twenty (120) day period
provided in subsection (a) above shall not commence until Landlord delivers
possession of the Premises. Provided however, in the event Landlord is unable to
deliver possession of the Premises to Tenant by June 1, 1997, Tenant may
terminate this Lease upon written notice to Landlord, without further obligation
of the parties.
(c) Tenant shall be responsible for obtaining all governmental approvals
(including but not limited to any required site plan approval and/or variances)
and building permits required for the Tenant's intended use of the Premises and
for construction of the Tenant's Work, at its sole cost and expense, including
but not limited to any variance and/or site plan approval that may be required.
Tenant shall apply for any such approvals and/or permits within twenty (20) days
after the signing of this Lease by both parties. Tenant shall be responsible for
promptly preparing and providing, at its cost and expense, any and all plans and
specifications required by the Township of East Brunswick for issuance of any
such approvals and/or permits, subject to Landlord's prior approval of such
plans and specifications, which approval shall not be unreasonably withheld or
delayed. Tenant shall use its best efforts to obtain all required approvals and
permits and shall diligently and expeditiously pursue all applications for such
approvals and permits to completion. Tenant shall advise landlord as to the
status of all such applications promptly upon request from Landlord.
In the event Tenant is unable, within 90 days from the date hereof, to
secure all necessary governmental approvals and/or permits (other than a
Certificate of Occupancy) required for its intended use of the Premises and for
construction of the Tenant's Work in accordance with this Lease, then Landlord
or Tenant shall have the right, at any time after said 90 day period (but only
before all such approval and/or permits are obtained), to terminate this Lease,
upon written notice to the other party, without further obligation of the
parties. Landlord shall have the right to void any such termination notice
received from Tenant, and to extend the period within which Tenant has to obtain
such approvals and permits for a period not to exceed ninety (90) days from the
date of Tenant's termination notice, upon written notice given to Tenant within
ten (10) days after Landlord's receipt of such termination notice from Tenant.
In addition, in the event Landlord exercises this right to extend, Landlord
shall have the right, at any time during such extended period, to take over the
application process on behalf of Tenant, at Tenant's cost and expense, and
Tenant shall thereafter cooperate with Landlord in prosecuting such applications
to completion, provided Landlord shall not be authorized to make any revisions
to Tenant's plans and specifications or to Tenant's intended use of the Premises
without Tenant's consent, which shall not be unreasonably withheld or delayed.
Landlord shall not be required to make any changes, alterations or
modifications to the Center or to the Premises, or to perform any other work in
connection with any applications submitted by Tenant. Landlord agrees to
cooperate with Tenant (at no cost to Landlord) and to assist Tenant in any such
application so that any required approvals and permits may be obtained
expeditiously.
(d) Tenant agrees that upon issuance of all required building permits, it
shall, at its sole cost and expense, promptly commence and pursue all of the
Tenant's Work to completion in accordance with the approved plans and
specifications, and in compliance with all applicable codes, laws, rules and
regulations, and in accordance with the requirements of Section 16 of this
Lease, and shall obtain any required Certificate of Occupancy in accordance with
the requirements of Section 17(d) of this Lease.
SECTION 11. SECURITY DEPOSIT.
Landlord has agreed that Tenant shall not be required to post any security
deposit. Landlord, however, expressly reserves the right to require any
sublessee or assignee consented to by Landlord in accordance with Section 20 of
this Lease (referred to in this paragraph as "Tenant"), to pay a security
deposit equal to two (2) months Basic Rent as then due under the terms of this
Lease as security for the full and faithful performance by the Tenant of all the
terms, covenants and conditions of this Lease upon the Tenant's part to be
performed, provided this right shall not apply to any assignment or sublease
which does not require Landlord's consent pursuant to Section 20 hereof. Said
sum shall be returned to the Tenant without interest, after the expiration of
the Term (including any Renewal Terms), provided that Tenant has fully and
faithfully carried out all of said terms, covenants and conditions on Tenant's
part to be performed. Landlord shall have the right to apply any part of the
security deposit to cure any default of Tenant, and if Landlord does so, Tenant
shall, within ten (10) days after written demand, deposit with Landlord the
amount applied so that Landlord shall have the full deposit on hand at all times
during the term of this Lease. In the event of a sale or lease of the Center,
subject to this Lease, the Landlord shall thereupon be considered released by
the Tenant from all liability for the return of the security deposit and the
Tenant shall look to the new Landlord solely for the return thereof. It is
agreed that the foregoing shall apply to every transfer or assignment made of
the security to a new Landlord. Any security deposited under this Lease shall
not be mortgaged, assigned or encumbered by Tenant without the written consent
of the Landlord, and any attempt to do so shall be void. Landlord shall provide
notice to Tenant of all such transfers of the security deposit within seven (7)
days after said transfer. No trust relationship is created between Landlord and
Tenant as to any Security Deposit.
SECTION 12. NET LEASE.
This Lease is a net lease. The Basic Rent shall be absolutely net to
Landlord so that except as expressly provided in this Lease, this Lease shall
yield, net to Landlord, the Basic Rent during the Term.
SECTION 13. PURPOSE, TRADE NAME, RESTRICTIONS.
(a) Tenant shall use and occupy the Premises solely as an amusement and
recreational establishment catering primarily to children (includng programs for
children and parents), and for no other purpose. Tenant shall be permitted to
operate a snack bar in the Premises provided such use does not violate any
existing exclusive use. Tenant covenants and agrees to trade and do business
under the name "Fun Bubble". Tenant agrees not to use or permit the Premises to
be used for any purpose not described herein without the prior written consent
of Landlord, which consent Landlord may withhold in its sole discretion,
provided Landlord agrees not to unreasonably withhold or delay its consent if
the proposed use is consistent with the purposes leased to Tenant hereunder and
is not in conflict with the terms of any other lease in the Center.
(b) Tenant covenants and agrees that Tenant, at its own expense will keep
the premises free of insects, rodents, vermin and other pests. Tenant further
covenants and agrees that it shall not, at any time during the Term, keep any
animals of any kind at the Premises.
(c) Tenant shall not use or permit the use of any apparatus, or sound
reproduction or transmission equipment, or any musical instrument in such manner
that the sound so reproduced, transmitted or produced shall be audible beyond
the confines of the Premises, and will not use any other advertising medium
including, without limitation, flashing lights or searchlights which may be
heard or experienced outside the Premises, except as permitted pursuant to
subsection (e) below.
(d) Tenant covenants and agrees that it shall not cause, suffer or permit
any waste or damage to the Premises or permit the Premises or any use thereof to
constitute a nuisance or unreasonably interfere with the safety, comfort or
enjoyment of the Center by Landlord or any other occupants of the Center or
their customers, invitees or any others lawfully in or at the Center. Upon
written notice from Landlord to Tenant that any of the aforesaid is occurring,
Tenant agrees within five (5) days thereafter to do that which may be reasonably
necessary for the purpose of curing or obviating any such condition, or if such
condition cannot be cured within such five (5) day period using due diligence,
then Tenant shall commence to cure such condition within such five (5) day
period and shall diligently pursue such changes to completion.
(e) Tenant shall not cause or permit objectionable odors to emanate or be
dispelled from the Premises. In the event Tenant distributes handbills or other
advertising matter or holds demonstrations in the parking areas, walkways or
other common areas of the Center, Tenant shall promptly clean-up all resulting
debris, refuse and materials and shall not interfere with or disrupt the use of
the common areas or any other premises in the Center, or create any public or
private nuisance, and shall comply with all applicable laws.
(f) Tenant shall not use the plumbing facilities for any other purpose than
that for which they are constructed and will not permit any foreign substance of
any kind to be thrown therein and the expense of repairing any breakage,
stoppage, seepage or damage, whether occurring on or off the Premises resulting
from a violation of this provision by Tenant or Tenant's employees, agents or
invitees shall be borne by Tenant. All grease traps and other plumbing traps
shall be kept clean and operable by Tenant at Tenant's own cost and expense. To
the extent any such traps are shared with another tenant of the Center, the
maintenance responsibility and cost shall be equitably apportioned.
(g) Tenant shall properly store and dispose of all food waste, and shall
arrange for removal of food waste from the Premises on a daily basis. Tenant
shall store all food in enclosed containers and shall not store any food outside
of the Premises. Tenant shall take all steps necessary to avoid spillage of
foods and food waste and shall not permit any odors to emanate from within the
Premises or from outside of the Premises and shall provide all exhaust and
supply fans and other ventilation required for the operation of Tenant's
business, subject to Landlord's approval as required in this Lease.
(h) Notwithstanding anything in this Lease to the contrary, Tenant shall
not make any penetrations into the roof of the Premises or the Center. In the
event Tenant requires a penetration in the roof of the Premises, Tenant shall
request Landlord's permission for same, which Landlord may deny, in its sole
discretion, except for installation of exhaust and supply fans required for the
operation of Tenant's business in the Premises, in which event, Landlord shall
not unreasonably withhold its consent to the installation of such fans. If
Landlord grants its permission for such roof penetration, such work shall be
performed by a contractor designated by Landlord at Tenant's sole cost and
expense. In the event that Tenant violates any provision of this subparagraph
(h), Landlord may, at its option, repair or replace any portion of the roof of
the Premises requiring repairing or replacing at any time during the term of
this Lease, at Tenant's sole cost and expense. In addition, in the event of any
such breach by Tenant, Landlord may, at its option, repair or replace any
portion of the roof of the entire Center which requires such repairing or
replacing as a result of Tenant's penetration of the roof in breach of this
subparagraph (h). Tenant shall be liable for any and all damages (direct,
indirect and consequential) to Landlord and any and all other tenants of the
Center, resulting from Tenant's breach of the provisions of this subparagraph
(h).
(i) Tenant shall not under any circumstances make any penetrations to the
foundation or any other structural portions of the Premises. This subparagraph
(i) shall not apply with respect to any such penetrations made prior to the term
of this Lease with the consent of Landlord or any predecessor owner of the
Center.
SECTION 14. LANDLORD'S OBLIGATIONS.
(a) Except as otherwise provided in this Lease, Landlord, as part of
Operating Costs, shall keep in good repair the structural parts, roof and
foundation of the Center, the Common Areas, common facilities and systems,
grounds, shrubs and lawns in the Center, except for repairs or maintenance
occasioned by the negligence or intentional act of Tenant or Tenant's agents,
employees, permitted licensees or contractors. Any repairs or maintenance
occasioned by the negligence or intentional act of Tenant's agents, employees,
permitted licensees or contractors shall be repaired at the cost and expense of
Tenant upon five (5) days advance notice to Tenant, except in case of emergency.
The Landlord shall keep the driveways and parking areas reasonably free of snow
and ice.
(b) Except as specifically provided elsewhere in this Lease, there shall be
no allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
resulting from Landlord's, Tenant's or other's making or failing to make any
repairs, alterations, additions or improvements in or to any portion of the
Center or the Premises or in or to the fixtures, appurtenances or equipment
thereof, unless same shall constitute a default under this Lease. Landlord
agrees to use its best efforts to make any repairs required to be made by
Landlord under the terms of this Lease. The provisions of this Section 14 with
respect to the making of repairs shall not apply in the case of fire or other
casualty, which is dealt with in Section 18 hereof or as elsewhere required in
this Lease.
SECTION 15. CONDITION OF PREMISES; REPAIRS.
The Tenant shall keep the Premises in good condition, repair and
appearance, including without limiting the generality of the foregoing, all
plumbing, pipes, electrical wiring and conduits which are for the exclusive use
of Tenant and not located in the slab or foundation; heating, air-conditioning,
ventilating, electrical, lighting facilities and equipment within the Premises
which are used exclusively by Tenant; fixtures, exposed surface of walls,
ceilings, decking, floors (excluding slab and foundation), windows, doors, plate
glass and skylights located within the Premises, and signs located on the
Premises. In addition, Tenant shall be responsible for repairing, at its cost
and expense, any and all work, alterations, additions and improvements installed
or constructed by Tenant, whether structural or non-structural. The Tenant
further agrees to keep the Premises and all parts thereof, including, but not
limited to, electrical wiring, plumbing and heating, ventilating and air
conditioning equipment, windows, walkways, exits and entrances to the Premises,
in a clean and sanitary condition and free from trash, snow, ice, inflammable
materials and other objectionable matter. The Tenant shall quit and surrender
the Premises at the end of the Term in good condition, reasonable wear and tear
and damage by casualty excepted, and shall not make any alterations, additions
or improvements to the Premises except in accordance with the provisions of
Section 16 and other applicable provisions of this Lease. All erections,
alterations, additions and improvements, which are permanent in character, which
may be made upon the Premises either by the Landlord or the Tenant shall be the
property of the Landlord and shall remain upon and be surrendered with the
Premises as a part thereof at the expiration or sooner termination of this
Lease, without compensation to the Tenant. At the expiration or sooner
termination of this Lease, Tenant shall remove all of its furniture, trade
fixtures, machinery and equipment, and Tenant shall repair any structural damage
to the Premises resulting from Tenant's removal of such items.
SECTION 16. ALTERATIONS.
(a) The Demised Premises are leased to Tenant in their strictly "AS IS"
condition, except Landlord shall cause the theater seats, curtains, movie
screens and other trade fixtures, equipment and signs of the existing tenant of
the Premises to be removed prior to the delivery of possession of the Premises
to Tenant, and subject to the requirement that the HVAC system currently serving
the Premises shall be in good working order on the Commencement Date and the
roof of the Premises shall be free of leaks. Nothing contained in this Section
16(a) shall relieve or be deemed to relieve Landlord of any obligation it may
have to make repairs under the terms of this Lease. Landlord represents that it
has no notice of any structural defects in the Premises.
(b) Tenant shall be responsible for any and all work, installations,
additions, alterations and improvements required for Tenant to open for business
in the Premises, including but not limited to all structural and non-structural
alterations and any required leveling of the existing floor. Tenant shall make
no alterations, additions, permanent decorations, installations, substitution,
or improvements in or to the Premises, including but not limited to the removal
or installation of any partition, doors, electrical installations, plumbing
installations, water coolers, air-conditioning or cooling systems, or any other
apparatus, whether structural or nonstructural (hereinafter the "Tenant
Changes") without Landlord's prior written consent in each instance, which
consent shall not be unreasonably withheld or delayed, and only upon complying
with all of the provisions of this Section. In making any such alterations,
additions or improvements, Tenant shall comply with the requirements of
subsections (i) through (iv) of this subsection (b), and with the requirements
of subsections (c), (d), (e) and (f) of this Section 16.
Prior to commencing any Tenant Changes, or tenant's Work as defined in
Section 10 of this Lease, Tenant, at its sole cost and expense shall obtain and
deliver to Landlord, for Landlord's prior consent, all of the following:
(i) Detailed architect's plans and specifications, showing the proposed
Tenant Changes; (ii)A certificate evidencing that Tenant or Tenant's contractors
have procured and paid for workers' compensation insurance covering all persons
employed in connection with the Tenant Changes or who might assert claims for
death orbodily injury against Landlord, Tenant, or the Center; (iii) A
certificate evidencing that the personal injury and property damage insurance
required of Tenant under Section 21(b) is in full force and effect, and a
certificate from Tenant's contractors evidencing personal injury insurance in an
amount not less than $1,000,000. and property damage insurance in an amount not
less than $300,000., in connection with the Tenant Changes; (iv) Such permits,
authorizations or consents as may be required by any applicable law, rule, order
or requirement of any governmental authority having jurisdiction thereof,
provided, however, that no plans, specifications or applications (or any
modifications or amendments thereto) shall be filed by Tenant with any
governmental authority without first obtaining Landlord's prior written consent
in each instance, not to be unreasonably withheld or delayed. Landlord agrees to
cooperate with Tenant (including, without limitation, execution of required
applications) in connection with any permits, approvals, consents and licenses
which are required in connection with the Tenant Changes permitted hereunder.
(c) In no event shall any material or equipment be incorporated in or to
the Premises in connection with any Tenant Changes with is subject to any lien,
encumbrance, security interest or charge of any kind whatsoever, or subject to
any title retention agreement. Any construction lien claim, notice of unpaid
balance or other lien filed against all or any part of the Premises or the
Center or Landlord's interest therein, for work claimed to have been done for
Tenant, or materials claimed to have been furnished to Tenant, shall be
discharged by Tenant within thirty (30) days thereafter, at Tenant's cost and
expense, by filing any bond required by law or otherwise. Tenant shall defend,
indemnify and save Landlord harmless from and against any such liens and all
costs and expenses (including reasonable attorney's fees) incurred by Landlord
in connection therewith.
(d) Tenant shall cause all Tenant Changes to be performed promptly at its
sole cost and expense, in a good and workmanlike manner, using prime quality
materials and equipment, at least equal in quality and class to the original
Center installations, and in compliance with all applicable laws, and government
rules, permits, authorizations, licenses, regulations and orders. Tenant shall
not unreasonably disturb or materially interfere with or delay Landlord in the
operation of the Center or the provision of services thereto or to any other
lessees of the Center or any of their employees, agents, licensees or invitees
in the performance of such Tenant Changes, and shall not obstruct any of the
Common Areas or cause any damage or injury to the Center or to the property of
Landlord or any other lessee of the Center, or any of their employees, agents,
licensees or invitees.
(e) Tenant shall not intentionally exercise any of its rights pursuant to
the provisions of this Section in a manner which would create any work stoppage,
picketing, labor disruption or dispute under Landlord's union contracts
affecting the Center, if any, nor shall Tenant interfere with the business of
Landlord or any other lessee or occupant of the Center. Landlord represents that
there are no such union contracts currently affecting the Center.
(f) Notwithstanding the right of Landlord to approve any matter described
in this Section, Landlord shall have no responsibility or liability for the
performance or quality of work or materials furnished by any contractor,
subcontractor, agent or consultant of Tenant. The approval by Landlord, whether
expressed or implied, of any Tenant Changes shall in no way affect Landlord's
rights or Tenant's obligations relating to the restoration of the Premises at
the expiration or other termination of the Term as provided in Section 15 of
this Lease.
<PAGE>
SECTION 17. COMPLIANCE WITH RULES AND REGULATIONS; COMPLIANCE WITH LAW.
(a) Reasonable rules and regulations regarding the Premises and the Center,
including the walkways and parking areas, and the use thereof, which may
hereafter be promulgated by the Landlord, shall be observed by the Tenant and
the Tenant's employees, agents and business invitees, as long as they are
uniformly applied to and enforced against all tenants of the Center, are not
discriminatory and do not interfere with the Tenant's normal business operations
at the Premises. The Landlord reserves the right to rescind any rules
promulgated hereafter, and to make such other and further rules and regulations
as in its reasonable judgment may from time to time be desirable for the safety,
care and cleanliness of the Premises and the Center and for the preservation of
good order therein, which rules, when so made and reasonable notice given to the
Tenant, shall have the same force and effect as if originally made a part of
this Lease. Such other and further reasonable rules shall not, however, in
addition to the above, be inconsistent with the proper and rightful enjoyment by
the Tenant of the Premises and the Center in the conduct of its business.
Landlord represents that there are no such Landlord's rules or regulations
currently existing.
(b) As an essential inducement to execution of this Lease by Landlord,
Tenant acknowledges and agrees that Tenant's employees shall not be permitted to
park in an area other than that designated by Landlord from time to time for
such purpose, and Tenant agrees to take all steps necessary, upon written notice
from Landlord, required to enforce compliance with Landlord's parking
regulations. In the event Tenant's employees continue to violate Landlord's
parking regulations after such written notice from Landlord Tenant shall pay to
Landlord the sum of ten and 00/100 ($10.00) dollars per day for each car of its
employees which is parked in an area other than that designated by Landlord for
employee parking. All such regulations respecting employee parking shall be
uniformly applied to and enforced against all tenants of the Center. Landlord
agrees that any such employee parking regulations promulgated by Landlord shall
not interfere with the Tenant's normal business operations at the Premises.
(c) Tenant shall, at its expense, comply promptly with all applicable
statutes, ordinances, rules, regulations, orders, restrictions of record, and
requirements in effect during the Term or any part of the term hereof relating
to the use by Tenant of the Premises, including the making of structural and
non-structural repairs or alterations due to Tenant's occupancy. If any such
laws, ordinances, rules or regulations shall require structural alterations
which would have been required irrespective of the nature of the tenancy, then
in such event the same shall be complied with by Landlord and shall be deemed
part of Operating Costs.
(d) Subject to Tenant obtaining any zoning or site plan approvals required
for its use and occupancy of the Premises in accordance with the terms of
Section 10(c) of this Lease, Tenant hereby accepts the Demised Premises subject
to all applicable zoning, municipal, county and state laws, ordinances,
covenants of record, and regulations governing and regulating the use of the
Premises, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Landlord makes no representation as
to any permissive use or zoning ordinance interpretation. Tenant shall be
responsible for obtaining, at Tenant's cost and expense, a permanent Certificate
of Occupancy for the Premises from the Township of East Brunswick permitting
Tenant's use of the Premises as provided herein, if required by applicable law.
Provided however, the Commencement Date set forth in Section 10 shall not be
delayed or otherwise extended by reason of Tenant's failure to obtain a
Certificate of Occupancy on or before the Commencement Date, except if such
failure results from Landlord's failure to complete any work required to be
performed by Landlord hereunder. Landlord agrees to cooperate with Tenant in
obtaining any required Certificate of Occupancy for the Premises.
SECTION 18. DAMAGES TO CENTER; WAIVER OF SUBROGATION.
(a) In the event of (i) the total destruction of the Premises or the
destruction of fifty (50%) percent or more of the area of the Center by fire,
explosion, the elements or any other cause during the Term or (ii) such partial
destruction thereof as to render the Premises wholly untenantable, unfit for
occupancy, or unusable for Tenant's purposes hereunder, and in the case of (i)
or (ii), should the Premises be so badly damaged that the same cannot be
repaired within one hundred eighty (180) days from the happening of such damage,
then and in such case the term hereby created shall, at the option of Landlord
or Tenant, to be exercised by written notice sent within thirty (30) days
following the casualty or loss, cease and become null and void from the date of
such damage or destruction, and the Tenant shall immediately surrender the
Premises and all of the Tenant's interest therein to Landlord, and rent shall be
adjusted between Landlord and Tenant to the time of such damage, in which event
the Landlord may re-enter and repossess the Premises and may remove all parties
therefrom; provided that Tenant shall not have the right to terminate this Lease
in any such event if the damage is caused by Tenant or Tenant's employees,
agents, licensees or invitees. If neither Landlord nor Tenant elects to
terminate this Lease, or should the Premises be rendered untenantable and unfit
for occupancy, but yet be repairable within 180 days from the happening of such
damage, Landlord shall restore or rebuild the Center and the Premises as nearly
as possible to their previous condition with reasonable promptness, subject to
Force Majeure. Landlord shall have no duty or obligation to restore Tenant's
Property, equipment, fixtures or Tenant Changes.
(b) In any case in which Tenant's use of the Premises is materially and
adversely affected by any damage to the Center or appurtenances thereto, there
shall be either an abatement or an equitable reduction in Basic Rent and
Additional Rent depending on the period for which and the extent to which the
Premises are not reasonably usable for the purpose for which they are leased
hereunder. If the damage results from the fault of the Tenant, or Tenant's
agents, contractors, employees or invitees, Tenant shall be entitled to an
abatement or reduction in the Basic and Additional Rent, but not to exceed the
amount of any rent insurance payable to Landlord.
(c) Tenant and Landlord each waive any and all rights of recovery against
the other and against the officers, employees, agents, and representatives of
the other, for loss or damage, etc., to such waiving party or its property or
the property of others under its control, whether due to the acts or negligence
of the other party, where such loss or damage is insured against under any
insurance policy in force at the time of such loss or damage. In obtaining
policies of insurance required by this Lease, Landlord and Tenant shall obtain a
waiver of subrogation endorsement or an express provision in the policy having
that effect. In the event that any insurer imposes a charge for making such
waiver endorsement, the charge shall be paid by the respective party; and, in
the event that either party fails to obtain such a waiver endorsement from its
insurer, then the other party shall be likewise relieved from its obligation to
do so. Nothing in this paragraph shall be construed as a waiver of recovery
rights with regard to damages not compensated by insurance. SECTION 19. EMINENT
DOMAIN; CONDEMNATION.
(a) If the whole of the Premises shall be taken under the power of eminent
domain, then this lease shall be terminated as of the day possession shall be
taken.
(b) If more than twenty-five (25%) percent of the floor area of the
Premises, or if more than fifty (50%) percent of the common parking area, or if
more than fifty (50%) percent of all of the ground level floor area of the
Center shall be taken under power of eminent domain, either Landlord or Tenant
may terminate this lease by written notice given within thirty (30) days after
the date or surrendering possession to the public authority pursuant to such
taking, and if neither Landlord nor Tenant elects to terminate this lease,
Landlord shall restore and adapt the remaining Premises, and the rent shall be
reduced as described in Paragraph (c) of this Section.
(c) If twenty-five (25%) percent or less of the floor area of the Premises,
or fifty (50%) percent or less of the common parking area, or fifty (50%)
percent or less of all of the ground level floor area of the Center shall be
taken under the power of eminent domain, this lease shall not terminate but
shall continue in full force and effect, except that the rent shall be reduced
in the same proportion that the floor area of the Premises so taken bears to the
total floor area demised to Tenant at the time of such taking, or, in the event
of a taking of part of the parking area or of part of the ground floor level
area of the Center, the rent shall be equitably reduced; and Landlord shall, at
its own cost and expense, make all necessary restorations to the Premises as to
constitute the Premises or the building of which the Premises are a part, a
complete architectural unit.
(d) Tenant shall not be entitled to any part of the award for such taking
or any payment in lieu thereof, whether such award shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
Premises; provided however, Tenant may file a separate claim for any taking of
fixtures and improvements owned by Tenant which have not become the Landlord's
property, and for moving and relocation expenses, provided the same shall in no
way affect or diminish Landlord's award.
SECTION 20. ASSIGNMENT, SUBLETTING.
(a) The Tenant shall not, without first obtaining the written consent of
the Landlord, assign, mortgage, pledge or encumber this Lease in whole or in
part, or sublease the Premises or any part thereof, which consent shall not be
unreasonably withheld or delayed. This covenant shall be binding upon the legal
representatives of the Tenant and on every person to whom Tenant's interest
under this Lease passes by operation of law, but shall not apply to (i) an
assignment or subletting to the parent, subsidiary or an affiliated entity of
the Tenant or an entity under the same control as the Tenant, or a division of
the Tenant, (ii) to the transfer of Tenant's leasehold interest occasioned by a
consolidation or merger involving the Tenant so long as the net worth of any
such related entity or resulting entity is equal to or greater than the net
worth of the Tenant immediately prior to such consolidation or merger, or (iii)
to the subleasing or licensing by Tenant of not more than a total of 4500 square
feet of space within the Premises for sale by vendors of items consistent with
Tenant's intended use of the Premises hereunder, provided any such use is not in
conflict with the terms of any other lease in the Center. No consent of Landlord
shall be required with respect to a public or private offering, sale or
placement of equity or debt securities of Tenant or to the trading or sale of
such securities on public exchanges or in private placements.
(b) To the extent Landlord's consent is required under this Lease, if the
Tenant shall desire to sublet all or any portion of the Premises, it shall first
submit in writing to the Landlord, the name and address of the proposed
subtenant; the terms and conditions of the proposed subletting; the nature and
character of the business of the proposed subtenant; banking, financial and
other credit information relating to the proposed subtenant reasonably
sufficient to enable Landlord to determine the proposed subtenant's financial
responsibility. If the nature and character of the business of the proposed
subtenant, and the proposed use and occupancy of the Premises by the proposed
subtenant, is in keeping and compatible with the dignity and character of the
Center, then Landlord agrees not to unreasonably withhold or delay its consent
to any such proposed subletting, providing that Tenant shall, by notice in
writing as described above, advise Landlord of its intention to sublease all or
any part of the Premises, on and after a stated date which shall not be less
than sixty (60) days after the date on which Tenant's notice is given. In the
event the proposed use of the Premises by the proposed subtenant differs in any
material manner from that of the then existing Tenant, Landlord shall thereupon
have the right, to be exercised by giving written notice to Tenant within thirty
(30) days after Landlord's receipt of Tenant's notice, to recapture the
Premises. Such recapture notice shall, if given, cancel and terminate this Lease
with respect to the space therein described as of the date thirty (30) days
following the date set forth in Tenant's notice, or thirty (30) days after
Tenant shall have surrendered possession of the Premises, whichever is later,
with no further obligation due by Tenant with respect to such space after said
date. In the event less than all of the Premises are sublet or recaptured,
Tenant or any permitted sublessee shall be obligated to construct and erect such
partitioning and means of ingress and egress as may be required to sever the
space retained by Tenant from the space recaptured or sublet. If this Lease
should be cancelled pursuant to the foregoing with respect to less than the
entire Premises, the Basic Rent and Additional Rent and Tenant's Proportionate
Share shall be proportionately adjusted, and this Lease, as so amended, shall
continue thereafter in full force and effect. Notwithstanding any other
provision herein, Landlord shall receive any rent or other consideration due
under any sublease approved by Landlord to the extent same exceeds the Rent due
and payable pursuant to the terms of this Lease.
(c) Any subletting or assignment of this Lease shall not in any event
release or discharge Tenant of or from any liability, whether past, present or
future, under this Lease, and Tenant shall remain liable hereunder with respect
to the entire Premises, except as otherwise provided herein or by law. The
subtenant or assignee shall also agree in writing, to assume, comply with, and
be bound by all of the terms, covenants, conditions, provisions and agreements
of this Lease; and Tenant shall deliver to Landlord promptly after execution, an
executed duplicate original copy of such sublease or assignment and an agreement
of assumption by the subtenant or assignee. With respect to any assignment or
sublease which requires Landlord's consent and which involves a proposed
assignee or sublessee having a net worth of less than $200,000.00, Landlord
expressly reserves the right, as a condition to its consent to any proposed
assignment or sublease, to require the personal guarantee of payment and
performance of the Tenant's obligations hereunder from the principals of any
proposed assignee or sublessee.
(d) Any assignment or sublease must provide that it is subject to all
of the terms and conditions of this Lease and any sublease must provide that in
the event of the expiration or other termination of this Lease for any reason
whatsoever whether voluntary, involuntary or by operation of law, prior to the
expiration date of such sublease, the proposed subtenant agrees, but only if
requested by and at the option of Landlord, to make full and complete attornment
to Landlord for the balance of the term of the sublease. Such attornment shall
be evidenced by an agreement in form and substance satisfactory to Landlord,
which the proposed subtenant agrees to execute and deliver at any time within
five (5) days after request of Landlord, its successors and assigns, and the
proposed subtenant waives the provisions of any law now or hereafter in effect
which may give the proposed subtenant any right of election to terminate the
sublease or to surrender possession of the Premises in the event any proceeding
is brought by Landlord under this Lease to terminate this Lease.
SECTION 21. INDEMNITY AND TENANT'S INSURANCE.
(a) Tenant shall indemnify and hold harmless Landlord, its invitees,
employees or assigns from and against any and all claims, liability, losses,
damages, costs and expenses arising from Tenant's use of the Premises and any
other part of the Center, or from the conduct of Tenant's business or from any
activity, work or things done, permitted or suffered by Tenant in or about the
Premises, the Common Areas or elsewhere, and shall further indemnify and hold
harmless Landlord from and against any and all claims, losses and damages
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from any
negligence of the Tenant, or any of Tenant's agents, contractors, invitees or
employees and from and against all costs, reasonable attorney's fees, expenses
and liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises arising from any cause and Tenant hereby waives all claims in
respect thereof against Landlord. Provided, however, Tenant shall not be
obligated to indemnify Landlord from any liability caused by or resulting from
the negligence of Landlord, its agents or employees.
Landlord shall indemnify and hold Tenant harmless from and against all
claims, actions, damages, expenses and judgments for loss, damage or injury to
property or person resulting or occurring by reason of the willful misconduct or
negligence of Landlord or any of Landlord's agents, contractors, or employees,
or by reason of Landlord's breach or default in the performance of any
obligation on Landlord's part to be performed under the terms of this Lease. If
Tenant shall, without fault on its part, be made a party to any litigation
commenced by or against Landlord by reason of the willful misconduct or
negligence of Landlord or any of Landlord's agents, contractors, or employees,
Landlord shall protect and hold Tenant harmless and pay all reasonable costs,
expenses and reasonable attorney's fees incurred or paid by Tenant in connection
with such litigation. Provided, however, Landlord shall not be obligated to
indemnify Tenant from any liability, costs or expenses caused by or resulting
from the negligence of Tenant, its agents or employees.
Nothing contained herein shall limit or restrict or be deemed to limit or
restrict Landlord's or Tenant's rights against any other party, person or
entity.
(b) Tenant shall pay, provide and keep in force during the Term hereof,
Comprehensive General Liability Insurance against claims for bodily injury,
death or property damage occurring on, in or about the Premises or any
appurtenances thereto, arising out of the ownership, operation and control of
the Premises by Tenant, including, but not limited to, contractual liability in
connection with the indemnification of Landlord herein, in total limits
(including the amount of any umbrella liability coverage maintained by Tenant)
of not less than $3,000,000.00 in respect to bodily injury or death to any one
person, and $3,000,000.00 in respect to any one occurrence, accident or
disaster, and property damage with limits of not less than $500,000.00 or such
other amounts as may from time to time be reasonably required by Landlord, or
the holder of the first mortgage. Tenant shall cause Landlord and any mortgagee
of the Center to be named as an additional named insured on said liability
insurance.
(c) Tenant covenants and represents, said representation being specifically
designed to induce Landlord to execute this Lease, that Tenant's personal
property, fixtures and all improvements, alterations and additions made by
Tenant, and any other items which Tenant may bring to the Premises which may be
subject to any claim for damages or destruction due to Landlord's negligence
shall be fully insured by a policy of insurance covering all risks with no
deductible, which policy shall specifically provide for a waiver of subrogation
for Landlord without regard to whether or not same shall cost an additional
premium and notwithstanding anything to the contrary contained in this Lease.
(d) Tenant shall provide and keep in force such other insurance and in such
amounts as may, from time to time, be reasonably required by Landlord, or any
mortgagee, wherein Landlord is named as an additional named insured, or by the
holder of any mortgage to which this Lease is subject, against such other
insurable hazards as at the time are normally insured against in cases of
premises similarly situated and similarly used.
(e) All insurance required to be provided by Tenant by the provisions of
this Section shall be carried in favor of Landlord, Tenant, and any mortgagee,
as their respective interests may appear, in such responsible companies licensed
in New Jersey and in such form as shall be reasonably satisfactory to Landlord.
All policies referred to hereunder, and required to be procured by Tenant, shall
be paid for by Tenant and shall be non-assessable and shall require thirty (30)
days prior notice by the insurer by registered mail to Landlord, of any
cancellation thereof or change therein affecting the coverage thereunder.
Landlord agrees that the insurance coverage required of Tenant hereunder may be
carried under a blanket policy covering other locations of Tenant and by
umbrella addition.
(f) Tenant shall procure policies for all said insurance for periods of not
less than one (1) year and shall deliver to Landlord such policies and evidence
of the payment of premiums thereon within ten (10) days after the date hereof
(but in any event before Tenant commences occupancy of the Premises for any
purpose, including for the purpose of commencing construction of Tenant's Work),
and shall procure renewals thereof from time to time, delivering certificates of
said renewals to the Landlord at least thirty (30) days before the expiration
thereof, together with such evidence of payment as is provided by the insurance
carrier.
SECTION 22. FAILURE TO OBTAIN FIRE INSURANCE.
(a) Tenant shall not do or suffer anything to be done in the Premises which
will increase the rate of fire insurance on the Center. If any of the policies
of insurance as in this Lease provided to be obtained and maintained by Tenant
or Landlord cannot be obtained and/or kept in force through Tenant's fault, and
Tenant shall fail to commence to cure, remedy and correct the condition which
makes it impossible to obtain and keep in force said policies within fifteen
(15) days after written notice from Landlord, and Tenant fails, neglects or
refuses to proceed diligently to cure such condition, Landlord may terminate
this Lease by giving at least fifteen (15) days notice of such termination to
Tenant, and this Lease shall terminate at the expiration date fixed by Landlord
in said notice with the same force and effect as if that were the original
expiration date hereof, and Tenant shall be and remain liable to Landlord for
all damages and losses suffered by Landlord in the same manner as if this Lease
were terminated for any other default by Tenant. In lieu of exercising such
right of termination, Landlord may, at its option, obtain such policies at
regular or increased rates and pay premiums therefor, and Tenant shall reimburse
Landlord for the amount of such premium (with respect to any policy required to
be carried by Tenant under this Lease), or increase in premium (with respect to
any policy carried by Landlord), upon demand, and if not paid, the amount
thereof, together with interest at twelve (12%) percent per annum, to accrue
from the date of demand by Landlord, shall be added to the amount of the rent
next coming due, as Additional Rent.
(b) If because of Tenant's occupancy, it shall be impossible to obtain fire
insurance on the buildings and improvements in the Center in an amount and in
form reasonably required by Landlord, and in fire insurance companies licensed
in the State of New Jersey, the Landlord may, at is option, terminate this Lease
on not less than thirty (30) days written notice to Tenant, and the term hereof
shall terminate and come to an end as of the date set forth in Landlord's notice
to Tenant.
SECTION 23. RIGHT TO INSPECT AND EXHIBIT.
Landlord may enter the Premises, but shall not be obligated to do so
(except as required by any specific provision of this Lease), at any reasonable
time on reasonable notice to Tenant (except that no notice need be given in case
of emergency) for the purpose of making such repairs, replacements or additions,
in, to, and about the Premises or the Center, as Landlord deems necessary in its
reasonable judgment, for the safety and/or preservation of the Premises and the
Center; to inspect or protect the same; to effect compliance with any law, order
or regulation of any governmental authority having jurisdiction; to take all
required materials into the Premises for such purposes; to erect, use and
maintain pipes and conduits in and through the Premises; provided, in all cases,
Landlord shall use its best efforts to minimize any interference with Tenant's
business operations in the Premises. Except as otherwise expressly provided in
this Lease, in no event shall Tenant have any claims against Landlord for
necessary and reasonable interruptions of Tenant's business, or for any other
consequential damages sustained by Tenant in the course of such repairs,
replacements or restoration, however occurring (except for Landlord's willful
misconduct), nor shall any of the foregoing constitute an actual or constructive
eviction of Tenant or subject Landlord to any liability or impose upon Landlord
any obligation, responsibility or liability whatsoever, for the care,
supervision or repair of the Center of which the Premises are a part, or any
part thereof, other than as specifically provided in this Lease, or entitle
Tenant to any compensation or diminution or abatement of the rent reserved.
Landlord shall enter the Premises in such instances and do such work in a manner
so as to cause the least possible interference with the operation of Tenant's
business at the Premises.
Landlord shall have the right to exhibit the Premises to prospective
purchasers or lenders. For twelve (12) months prior to the expiration of the
Term, Landlord, or its agents, may exhibit the Premises to prospective tenants.
SECTION 24. NO LIABILITY OF LANDLORD.
Landlord and its agents, and employees, shall not be liable for any loss or
damage to Tenant's property or otherwise, nor shall Landlord, its agents and
employees be liable for any injury or damage to persons or property resulting
from fire, explosion, falling plaster, steam, gas, electricity, water, rain or
snow or leaks from any part of the Center or from the pipes, appliances or
plumbing works or from the roof, street or sub-surface or from any other place
or by dampness or by any other cause of whatsoever nature, unless caused by and
due to the willful misconduct of Landlord or the negligent act or omission of
Landlord, its agents or employees. Nothing contained herein shall be deemed to
impose on the Tenant liability for any of the foregoing unless caused by Tenant.
SECTION 25. LANDLORD'S EXCULPATION.
Notwithstanding the requirements of any provision of this Lease, Landlord
shall not be liable for failure to furnish any services when such failure is due
to Force Majeure, provided Landlord shall furnish same as soon as possible using
due diligence. Landlord shall not be liable, under any circumstances, for loss
of, or injury to, Tenant or Tenant's business or property however occurring,
through or in connection with or incidental to the furnishing of, or failure to
furnish, any services, except for the willful misconduct or negligent act or
omission of Landlord, its agents and employees, in which event Tenant shall be
entitled to a pro rata reduction in rent for the failure or interruption of such
services for a period in excess of 48 consecutive hours. In any event, Landlord
shall use reasonable efforts to eliminate the cause of any such service
stoppage.
SECTION 26. UTILITIES, SERVICES, TAXES, ETC., AND HVAC.
(a) The Tenant shall furnish heat and air conditioning at its own cost and
expense.
(b) Tenant shall repair all utility, ventilating, heating, air
conditioning, electrical, gas and other utility lines within the Premises,
except if damage outside of the Premises is caused by the negligence, acts or
omissions of the Tenant, its agent, servants or employees, in which event Tenant
shall likewise repair same outside of the Premises. If the repair is required as
a result of the negligence, acts or omissions of Landlord, its agents, servants
or employees, Tenant shall notify Landlord, and Landlord shall have the option
to (a) make the repairs at its sole cost and expense, or (b) have Tenant make
the repairs, in which event Landlord will reimburse Tenant for the reasonable
cost thereof. Tenant shall replace, at its own expense, any and all glass which
may be broken in and on the Premises.
Tenant shall be responsible for the repair and replacement of all heating
and air conditioning equipment serving the Premises, except Landlord represents
and agrees that the heating, ventilating and air conditioning systems serving
the Premises shall be in good working condition at the commencement of the Term.
(c) Tenant shall pay all costs for electricity, water, standby sprinkler
charges, repairs to the sprinkler system, gas and other utilities and services
consumed by it. Tenant shall also be responsible for making any sprinkler system
installation, modification or alteration arising directly out of Tenant's use of
the Premises, or as a result of any alterations, installations or additions made
by Tenant in the Premises.
(d) In the event that any utility deposits are necessary, Tenant shall pay
said deposits to the utility company.
(e) Tenant shall enter into and maintain during the Term hereof, a
maintenance agreement with a qualified firm to service the heating, ventilating
and air conditioning systems servicing the Premises, at Tenant's sole cost and
expense. Tenant shall provide Landlord with proof that such agreement is in
effect upon request from Landlord.
SECTION 27. INSOLVENCY OF TENANT.
If at any time during the term of this Lease the Tenant shall make any
assignment for the benefit of creditors, or be decreed insolvent or bankrupt
according to law, or if a receiver is appointed for the Tenant, and the same is
not dismissed within sixty (60) days, then the Landlord may, at its option,
terminate this Lease, exercise of such option to be evidenced by written notice
to that effect served upon the assignee, receiver, trustee or other person in
charge of the Tenant's estate or the liquidation of the Tenant's property. Such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued, or any liability then accrued by reason of any agreement or
covenant herein contained on the part of Tenant or Tenant's legal
representatives.
SECTION 28. DEFAULTS.
(a) In the event that Tenant defaults in the payment of any Basic Rent
or any Additional Rent and such default continues for five (5) days after notice
to Tenant, TIME BEING OF THE ESSENCE; or if Tenant defaults in fulfilling any of
the covenants or agreements of this Lease on its part to be kept or performed
and such default is not cured within fifteen (15) days after written notice from
Landlord or its agent or if such default is of such nature that it cannot be
completely cured within such period, Tenant does not commence such curing within
fifteen (15) days and thereafter fails to proceed with due diligence and in good
faith to cure such default; or if this Lease is transferred to or devolves by
merger, consolidation or operation of law upon any person, firm or corporation
other than Tenant, except as maybe specifically permitted by this Lease; or if
Tenant abandons the Premises or Tenant fails to take possession of the Premises
within fifteen (15) days after the Commencement Date; then and in any of such
events, Landlord or its agent, may give Tenant a written notice specifying a day
not less than five (5) days thereafter whereupon the Term shall end, and on the
day specified the Term shall expire as if that day were the day herein fixed for
the expiration of the Term, and Tenant shall then quit and surrender the
Premises to Landlord and Tenant shall remain liable as herein provided.
(b) Upon the occurrence of any of the events specified above, Landlord may
re-enter the Premises and remove Tenant by summary proceedings or otherwise. In
case of any such re-entry, expiration of the Term and/or dispossess by summary
proceedings or otherwise, the Basic Rent and Additional Rent shall become due
and payable up to the time of such re-entry, dispossess and/or expiration,
together with such reasonable expenses as Landlord may incur in obtaining
possession of the Premises (including but not limited to reasonable attorneys'
fees, brokerage fees and/or the cost of putting the Premises in good order, and
for preparing the same for re-rental) but Tenant shall not be responsible for
substantial "build to suit" types of expenses. Landlord may relet the Premises
or any part or parts thereof, for a term or terms which may at Landlord's option
be less than or exceed the period which may otherwise have constituted the
balance of the Term and may grant reasonable concessions, or free rent and
Tenant shall not be credited therewith; and Tenant or the legal representatives
of Tenant shall also pay Landlord as liquidated damages for the failure of
Tenant to observe and perform said Tenant's covenants herein contained, any
deficiency between all Basic Rent and Additional Rent hereby reserved and/or
covenanted to be paid and the net amount, if any,of the basic and additional
rents collected on account of the lease of the Premises for the period which
would otherwise have constituted the balance of the Term. Any such liquidated
damages shall be paid in monthly installments by Tenant on the rent days
specified in the Lease, until Landlord or Tenant shall elect to accelerate the
payment of such liquidated damages, in which event Tenant shall pay Landlord,
within ten (10) days after Landlord's demand, an amount equal to such deficiency
above discounted to present value by allowing interest at the rate of four (4%)
percent per annum. Any suit brought to collect the amount of such deficiency for
any month shall not prejudice in any way the rights of Landlord to collect the
deficiency for any subsequent month by a similar proceeding. Landlord shall not
be liable for inability to relet the Demised Premises. The words "re-enter" or
"re-entry" as used in this Lease shall not be restricted to their technical
legal meaning. Tenant shall not be entitled to any surplus accruing to Landlord
as a result of any reletting and no such reletting shall constitute a surrender
and acceptance or be deemed evidence thereof. Tenant hereby waives all rights of
redemption to which Tenant or any person under Tenant might be entitled by any
law now or hereafter in force.
(c) In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions of this Lease, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein provided for.
Mention in this Lease of any particular remedy shall not preclude Landlord from
any other remedy, in law or in equity.
(d) If Tenant shall default, after applicable notice and cure periods
provided for in this Lease, in the performance of any provision, covenant or
condition on its part to be performed under this Lease, Landlord may, at its
option, perform the same for the account and at the expense of Tenant. If
Landlord at any time shall be compelled to pay or elects to pay any sum of money
or do any act which requires the payment of any sum of money by reason of the
failure of the Tenant to comply with any provision of this Lease, or if Landlord
incurs any expense including reasonable attorneys fees in prosecuting or
defending any action or proceeding by reason of any default of Tenant under this
Lease,the sums so paid by Landlord with interest at the rate of twelve (12%)
percent per annum, together with costs and damages shall be due from and be paid
by Tenant to Landlord on demand as additional rent hereunder.
SECTION 29. REAL ESTATE TAXES.
(a) In addition to the Basic Rent, Tenant shall pay its Proportionate Share
of Real Estate Taxes imposed on the Center, to be included as part of Landlord's
Operating Costs payable pursuant to Section 4 of this Lease. Notwithstanding the
above, Landlord may invoice Tenant separately for Tenant's Proportionate Share
of Real Estate Taxes, provided such Real Estate Taxes are not otherwise included
in Tenant's share of Operating Costs for the applicable period. For the purposes
of this Section, "Real Estate Taxes" shall mean the real estate taxes, water and
sewer charges, assessments and other governmental charges imposed upon the
Center and the improvements thereon. If and to the extent that due to a change
in the method of taxation or assessment, any franchise, capital stock, capital
gains, rent, income, profit or any other tax or charge shall be substituted in
whole or in part for the current ad valorem taxes now or hereafter imposed upon
the real estate, such franchise, capital stock, capital gains, rent, income,
profit or other tax or charge shall be deemed included in the term Real Estate
Taxes for the purpose of this Section.
(b) If Landlord shall institute a tax appeal, and said tax appeal shall
result in a reduction in taxes, then the Tenant shall pay to Landlord its
Proportionate Share of Landlord's costs of said appeal, but in no event shall
that amount exceed the reduction in taxes, and Tenant shall receive or be
credited with its Proportionate Share of any refund or reduction.
SECTION 30. SIGNS.
Landlord agrees that Tenant shall have the right to place a sign on the
front facade of the Premises, at Tenant's sole cost and expense, subject to the
provisions hereof. No sign shall be affixed to or placed upon any exterior part
of the Premises or the Center by the Tenant, except in such manner, and of such
size, design and color as shall be approved in advance by the Landlord in
writing. Landlord hereby approves Tenant's signage as set forth in Schedule C
annexed hereto. Landlord agrees that Tenant shall have the right to place a sign
on the pylon sign for the Center located at the intersection of Route 18 and
Lake Avenue, in such location and of such design to be approved by Landlord in
advance, which approval shall not be unreasonably withheld, and provided that
the size of Tenant's sign shall not exceed fifty (50%) percent of the total area
of the pylon sign. Tenant shall be responsible for complying with any and all
applicable laws, rules and regulations relating to any signage erected or
installed by Tenant. SECTION 31. OUTSIDE STORAGE.
Tenant shall not store any goods, other than temporarily in connection with
the delivery of any item, outside of the Premises or any place in the Center.
SECTION 32. FINANCIAL STATEMENTS.
Tenant shall, if required by Landlord's mortgagee or any future mortgagee,
or prospective mortgagee or prospective purchaser, submit to Landlord, any
prospective mortgagee or purchaser, without cost to the Landlord, a copy of
Tenant's current financial statement which shall be considered "confidential" by
the recipient. Tenant shall also, without cost to Landlord, submit to any
prospective mortgagee or purchaser such prior statements as it may have, as and
when required by Landlord or Landlord's mortgagee or prospective mortgagee or
prospective purchaser but in no event for more than two (2) years before the
current financial statement's year.
SECTION 33. MERCHANTS' ASSOCIATION.
In the event that a Merchants' Association is established, Tenant agrees to
abide by the By-Laws of the Association, and shall pay its proportionate share
of any dues, assessments, or costs incurred by the Association, not to exceed
Five Hundred ($500.00) Dollars per annum. Tenant shall become and remain a
member of the Association so long as one exists. Landlord represents that no
merchants association currently exists for the Center.
SECTION 34. SUBORDINATION; PRIORITY OF FEE MORTGAGES.
This Lease, any amendments, extensions, options (if any) and any other
rights granted to Tenant hereunder shall be subject and subordinate at all times
in lien and priority to any and all present and future ground and underlying
leases affecting all or any part of the Center and to any and all mortgages
which may now or hereafter be placed on or affect such leases, and/or the
Center, and to all renewals, modifications, consolidations, and extensions
thereof, without the necessity of any further instrument or act on the part of
Tenant. Tenant shall execute and deliver upon demand any further instrument or
instruments confirming the subordination of this Lease to the lien of any such
ground and/or underlying lease or mortgage if requested to do so by Landlord,
and any further instrument or instruments of attornment that may be reasonably
desired by any such mortgagee or Landlord. Notwithstanding the foregoing, any
mortgagee may at any time subordinate its mortgage to this Lease without
Tenant's consent, by giving notice in writing to Tenant, and thereupon this
Lease shall be deemed prior to such mortgage without regard to their respective
dates of execution and delivery, and in that event, such mortgagee shall have
the same rights with respect to this Lease as though this Lease had been
executed prior to the execution and delivery of the mortgage and had been
assigned to such mortgagee. Landlord agrees to use its best efforts to obtain a
nondisturbance agreement from any existing mortgagee, and from any future
mortgagee of the Center or from any ground lessee of the Center. Landlord
represents that there are no ground leases currently in effect with respect to
the Center.
SECTION 35. MORTGAGEE PROTECTION CLAUSE.
Tenant agrees to give all mortgagees and/or trust deed holders, by
certified mail, a copy of any notice of default served on Landlord, provided
that prior to such notice Tenant has been notified, in writing (by way of notice
of assignment of rents and leases or otherwise), of the name and address of such
mortgagees and/or trust deed holders. The mortgagees and/or trust deed holders
shall have the same time within which to cure such default as is given to
Landlord under this Lease. Failure to provide such notice within any specified
period of time shall not constitute a waiver by Tenant of its rights with
respect to such default; however, Tenant may not exercise any rights against
Landlord until the mortgagees and/or trust deed holders have been given the
notice and opportunity to cure provided for above.
SECTION 36: WATER, STANDBY SPRINKLER, SPRINKLER
ALARM AND SEWER (IF ANY) CHARGES:
Tenant shall pay as Additional Rent (and not as part of Operating Costs)
its Proportionate Share of water, standby sprinkler, sprinkler alarm, and sewer
(if any) charges for the Common Areas or which are billed to Landlord for the
entire Center. Tenant shall pay to Landlord in monthly installments on the first
day of each month its estimated Proportionate Share of such charges. Upon
receipt of a final bill or bills for such charges for each year of the Term,
each party agrees to pay the other on demand, such amount as may be necessary to
adjust the amount paid hereunder to the actual amount paid to the entity
providing such service and/or utility; provided, however, should Landlord owe
Tenant, such amount may be treated as a credit to Tenant's next succeeding
payments for such charges. The monthly installments of such charges shall be
increased or decreased on account of such final bill or bills.
SECTION 37. BUSINESS HOURS.
The Tenant agrees to conduct its business and remain open Monday to Friday,
9:30 a.m. to 9:00 p.m., Saturday, 9:30 a.m. to 7:00 p.m., and Sunday, 10:00 a.m.
to 6:00 p.m., except that Tenant may close on July 4, New Year's Day,
Thanksgiving Day, Christmas Day, Mother's Day, Easter Sunday, Memorial Day, and
Labor Day, Rosh Hashanoh and Yom Kippur. In the event that Tenant does not
remain open as aforesaid it shall pay Landlord, as Additional Rent, $250.00 per
day for each day or part thereof that it is closed. Nothing contained herein
shall be deemed to restrict or prevent Tenant from opening for business at
additional times, subject to applicable laws, ordinances, rules and regulations.
Tenant need not remain open because of severe inclement weather, or by reason of
fire or other casualty at the Premises, or by reason of force majeure.
SECTION 38. CENTER.
(a) The Center shall include the parcel(s) of land and improvements
generally depicted as the Center whether owned in fee or ground leased by
Landlord, and as more particularly described in Schedule A annexed hereto.
Landlord reserves the right to add to or sever the ownership of or title to any
portion of the Center at any time, provided however, the exercise of such right
shall in no way reduce the Tenant's rights or Landlord's obligations hereunder,
or increase Tenant's obligations under the terms of this Lease, or interfere
with Tenant's use of the Premises, parking area or other Common Areas. Except as
otherwise expressly set forth in this Lease, it is agreed that the depiction of
the Center does not constitute a representation, covenant or warranty of any
kind by Landlord. Subject to the terms, provisions and restrictions set forth in
this Lease, Landlord reserves the right to change the size and dimensions of the
Center, the number and location of buildings, building dimensions, the number of
floors in any of the buildings, store dimensions, identity, number and type of
other stores and tenancies, and the Common Areas, and provided same does not
unreasonably interfere with Tenant's use of the Premises, or increase Tenant's
obligations hereunder, and does not adversely affect the ingress or egress to
the Premises or the visibility of the Premises. This Lease shall not be affected
or impaired by any change to, or easements or other rights granted in, any
lawns, sidewalks, driveways, curb cuts or streets adjacent to or around the
Center, except as otherwise provided in this Lease.
(b) In the event that the Landlord exercises its rights pursuant to
paragraph (a) above, Operating Costs shall be determined pursuant to Section 8
hereof on the basis of the redefined Center.
(c) Landlord shall have the right to convert the Premises and/or the Center
into condominiums and in connection therewith Landlord shall be permitted to
assign this Lease to the owner of a condominium which includes the Premises,
provided the foregoing shall in no way reduce the Tenant's rights or Landlord's
obligations hereunder, or increase Tenants obligations (financial or otherwise)
under the terms of this Lease, or interfere with Tenant's use of the Premises or
the Common Areas, or require Tenant to purchase or otherwise incur any expenses
or to change or alter the Premises. In such event, the Tenant agrees to attorn
to the owner of such condominium as Landlord under this Lease.
SECTION 39. CONTROL OF TENANT.
If Tenant under this Lease is a corporation, other than a public
corporation, and if at any time during the Term of this Lease a majority of such
corporation's shares of capital stock shall be transferred to a related entity
or corporation, Tenant shall so notify Landlord. If Tenant is a corporation, and
more than fifty (50%) percent of the stock ownership or voting control of Tenant
is transferred to a non-related person, entity or corporation, same shall be
deemed an assignment of this Lease and shall be governed by the provisions of
Section 20 of this Lease.
SECTION 40. PROCESSING CHARGE.
Tenant agrees to reimburse Landlord for reasonable attorneys' fees and
accounting fees incurred by Landlord when Landlord's consent or approval is
requested by Tenant or is required by this Lease in connection with the
processing and documentation of any assignment, subletting, license, concession,
creation of a security interest, granting of a collateral assignment, change of
ownership or other transfer required by Tenant, to the extent same specifically
relate to the Premises. Such amount is to be paid no later than the next monthly
Basic Rent installment date.
SECTION 41. RIGHT OF FIRST REFUSAL.
In the event that any or all of Tenant's interest in the Demised Premises
and/or this Lease is transferred by operation of law to any trustee, receiver,
or other representative or agent of Tenant, or to Tenant as a debtor in
possession, and subsequently any or all of Tenant's interest in the Demised
Premises and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver, or other representative or agent of Tenant as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor"), for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Landlord (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm, or entity; and as to each such
Disposition the Grantor shall give written notice to Landlord in reasonable
detail of all of the terms and conditions of such Disposition within twenty (20)
days next following its determination to accept the same but prior to accepting
the same, and Grantor shall not make the Disposition until and unless Landlord
has failed or refused to accept such right of first refusal as to the
Disposition, as set forth herein. The parties agree that the right of first
refusal set forth in this Section 41 shall only apply in the event a petition in
bankruptcy, receivership, assignment for the benefit of creditors or similar
insolvency proceeding is filed by or against Tenant.
Landlord shall have sixty (60) days next following its receipt of the
written notice as to such Disposition in which to exercise the option to acquire
Tenant's interest by such Disposition, and the exercise of the option by
Landlord shall be effected by written notice to that effect sent to the Grantor
by certified or registered mail; but nothing herein shall require Landlord to
accept a particular Disposition or any Disposition, nor does the rejection of
any one such offer of first refusal constitute a waiver or release of the
obligation of the Grantor to submit other offers hereunder to Landlord. In the
event Landlord accepts such offer of first refusal, the transaction shall be
consummated pursuant to the terms and conditions of the Disposition described in
the notice to Landlord. In the event Landlord rejects such offer of first
refusal, Grantor may consummate the Disposition with such other person, firm, or
entity; but any decrease in price of more than two (2%) percent of the price
sought from Landlord or any change in the terms of payment for such Disposition
shall constitute a new transaction requiring a further option of first refusal
to be given to Landlord hereunder.
In the event this Lease is assigned or transferred to an entity unrelated
to Tenant as part of or in connection with any bankruptcy or other insolvency
proceeding commenced by or against Tenant, the monthly credit against Basic Rent
due to Tenant pursuant to the terms of Section 2(a) of this Lease shall
terminate and shall be of no further force or effect as of the effective date of
the assignment or transfer.
SECTION 42: ENVIRONMENTAL CLEAN-UP RESPONSIBILITY ACT/ISRA
At all times during the Term of this Lease, Tenant shall handle hazardous
substances and waste, if any, as defined in the New Jersey Environmental
Clean-Up Responsibility Act ("ECRA"), as such law has been amended by the
Industrial Site Recovery Act ("ISRA"), and may from time to time hereinafter be
amended, which are brought into or placed in the Premises by Tenant or any of
its agents, employees, contractors, licensees or invitees, in such fashion as to
avoid any discharge of hazardous substances or wastes at the Premises. Tenant
represents and warrants that the business operations which it shall conduct at
the Premises do not constitute the operation of an industrial establishment as
defined in ECRA/ISRA or, on the other hand, if it is or at any time shall become
such an industrial establishment, Tenant will comply with all requirements
during operations and at the time of closing, terminating or transferring the
operations, at its sole cost and expense. Tenant shall cooperate with Landlord,
at no cost or expense to Tenant, in any effort of Landlord to obtain all
approvals under ISRA which are necessary to the completion of any transaction
respecting the Landlord or the Premises, whether or not Tenant is a party to
such transaction; provided, however, that Tenant shall be obligated to incur no
expense in connection with a sale of the Center by Landlord, wherein Tenant has
had no ISRA-related activity at the Premises. Notwithstanding anything herein to
the contrary, the provisions of this section shall survive the termination of
the tenancy under this Lease. Tenant's SIC Number is 7999. The Tenant agrees not
to store any hazardous substances or waste as defined by ECRA/ISRA on the
Premises, other than in de minimus amounts required in connection with cleaning
or normal consumer uses.
Tenant agrees to indemnify, defend and hold Landlord and its officers,
employees and agents harmless from any and all claims, judgments, damages,
fines, penalties, liabilities, costs and expenses (including reasonable
attorney's fees, consultant fees and expert fees) which arise during or after
the Term of this Lease in connection with the presence or suspected presence of
toxic or hazardous substances or wastes in the soil, groundwater on or under the
Center or in the Premises caused by the acts of Tenant, its officers, employees,
agents, contractors or invitees. Notwithstanding anything herein to the
contrary, the provisions of this section shall survive the termination of the
tenancy under this Lease.
(b) In the event there is any hazardous or toxic substances located or
contained within the Premises or the Center, Landlord shall be responsible, at
its cost and expense, for the prompt removal of the such materials, all in
accordance with the requirements of applicable law, and for any related
alterations, additions, installations, repairs or improvements to the Premises
or the Center, except to the extent any such material has been brought into or
onto the Premises or the Center by Tenant, its agents, employees, contractors or
invitees, in which case, Tenant shall be responsible for the prompt removal
thereof in accordance with applicable laws and for such related alterations,
additions, installations, repairs or improvements. Nothing contained herein
shall limit or restrict or be deemed to limit or restrict Landlord's rights or
remedies as to any third party, at law or in equity. Landlord represents that to
the best of its knowledge, there are no hazardous or toxic substances located or
contained within the Premises or the Center. Tenant agrees to notify Landlord of
the presence of any such materials in the Premises immediately upon becoming
aware thereof. Landlord agrees to indemnify, defend and hold Tenant and its
officers, employees and agents harmless from any and all claims, judgments,
damages, fines, penalties, liabilities, costs and expenses (including reasonable
attorney's fees, consultant fees and expert fees) which arise during or after
the Term of this Lease in connection with a breach of the foregoing
representation and/or the presence or suspected presence of hazardous or toxic
substances in the soil, groundwater on or under the Center or the Premises
caused by the acts of Landlord, its officers, employees, agents, contractors or
invitees, except to the extent such substances are present as the result of the
willful misconduct or affirmative act of Tenant, its officers, employees,
agents, contractors or invitees. Notwithstanding anything herein to the
contrary, the provisions of this Subsection shall survive the termination of the
tenancy under this Lease.
SECTION 43. MODIFICATIONS REQUESTED BY MORTGAGEE.
In the event that any existing or prospective mortgagee of the Center shall
request a change in the language of the terms of this Lease, or the execution of
any document in connection therewith, Tenant agrees to make such change or
execute such document provided the same shall not increase Tenant's obligations
or liabilities under this Lease, decrease its rights hereunder, reduce
Landlord's obligations or liabilities under this Lease, or unreasonably
interfere with Tenant's normal business operations.
SECTION 44. QUIET ENJOYMENT.
Landlord represents that it has title to the Center and has the full right
and power to execute and perform this Lease and to grant the estate demised
herein. Landlord covenants and agrees that if and so long as Tenant pays the
rent herein reserved, and performs and observes the covenants, conditions and
agreements hereof upon the part of the Tenant to be performed and observed,
Landlord shall do nothing to affect Tenant's right to peaceably and quietly
have, hold and enjoy the Premises for the term herein mentioned, subject to the
provisions of this Lease.
SECTION 45. ESTOPPEL CERTIFICATE.
Tenant and Landlord agree, at any time, and from time to time, upon not
less than ten (10) days' prior notice to the other, to execute, acknowledge and
deliver to the other, a statement in writing, addressed to the other and to any
mortgagee, prospective mortgagee, or any other party specified by Tenant or
Landlord, certifying that this Lease is unmodified and in full force and effect
(or, if there have been modifications, describing them), and stating that
Landlord has delivered and Tenant has accepted possession; the dates to which
basic rent, additional rent and other charges have been paid, the date on which
the term of the Lease commenced and stating whether or not to the knowledge of
the signer of such certificate, there exists any default by either party in the
performance of any covenant, agreement, term, provision or condition contained
in this Lease, and, if so, specifying each such default of which the signer may
have knowledge, and stating any other fact or certifying any other condition
reasonably requested by Landlord or Tenant or reasonably required by any
mortgagee, prospective mortgagee or purchaser or assignees of such mortgagee or
of Landlord or Tenant, it being intended that any such statement delivered
pursuant hereto may be relied upon by Landlord and Tenant or a purchaser of
Landlord's or Tenant's interest and by any mortgagee or prospective mortgagee or
other party requesting same hereunder.
SECTION 46. HOLDING OVER.
In the event that Tenant shall remain in occupancy of the Premises for any
period beyond the expiration of the term of this Lease or any renewals or
extensions thereof, such occupancy shall be deemed to be a month-to-month
tenancy at a monthly rental equal to twice the sum of the Basic Rent and
Additional Rent payable for the last month of the Term, and Tenant shall be
liable for any additional damages that might be suffered by Landlord. The
acceptance of rent by Landlord shall not be deemed to create a new or additional
tenancy other than as aforesaid. Nothing contained herein shall be deemed to
limit or restrict Landlord's rights at law or in equity, in the event Tenant
remains in occupancy of the Premises upon the expiration of the Term without
Landlord's consent.
SECTION 47. NO WAIVER; ENTIRE AGREEMENT; NO SURRENDER.
(a) The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of any covenant, agreement, term, provision or
condition of this Lease, or any of Landlord's Rules and Regulations shall not
constitute a waiver thereof and Landlord shall have all remedies provided herein
and by applicable law with respect to any act, which would have originally
constituted a default. The receipt by Landlord of Basic Rent or Additional Rent
with knowledge of the breach of any covenant, agreement, term, provision or
condition of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to bill or collect rent in a timely fashion shall not be construed
as a waiver of Landlord's right to collect rent at any time during the Term or
any time thereafter.
(b) This Lease with the schedules, riders and exhibits, if any, annexed
hereto contains the entire agreement between Landlord and Tenant, and any
agreement hereafter made between Landlord and Tenant shall be ineffective to
change, modify, waive, release, discharge, terminate or effect a surrender or
abandonment of this Lease, in whole or in part, unless such agreement is in
writing and signed by the party against whom enforcement is sought.
(c) No employee of Landlord or of Landlord's agents shall have any power to
accept the keys of the Demised Premises prior to the termination of the Lease.
The delivery of keys to any employee of Landlord or of Landlord's agents shall
not operate as a termination of the Lease or a surrender of the Premises. In the
event of Tenant at any time desiring to have Landlord sublet the Premises for
Tenant's account, Landlord or Landlord's agents are authorized to receive the
keys for such purposes without releasing Tenant from any of the obligations
under this Lease. Tenant hereby relieves Landlord of any liability for loss or
damage to any of Tenant's effects in connection with such subletting.
(d) No payment by Tenant or receipt by Landlord of an amount less than the
Rent stipulated in this Lease shall be deemed to be other than on account of the
earliest stipulated Rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided in this Lease or by law.
SECTION 48. REIMBURSEMENT OF LEGAL EXPENSES.
Tenant agrees to pay to Landlord upon demand, as additional rent, a sum
equal to all costs and expenses (including reasonable attorney's fees) incurred
by Landlord during or after the Term in enforcing all or any of Landlord's
rights under this Lease because of a breach by Tenant as determined by a court
of competent jurisdiction.
Landlord agrees to pay to Tenant, upon demand, all costs and expenses
(including reasonable attorney's fees) incurred by Tenant during or after the
Term in enforcing Tenant's rights under this Lease resulting from a breach of
this Lease by Landlord as determined by a court of competent jurisdiction.
SECTION 49. BROKER.
Tenant and Landlord warrant and represent to each other that there are no
brokers who negotiated or brought about this transaction other than R.J.
Brunelli & Co., Inc. Landlord shall be responsible for payment of any commission
due to said named broker pursuant to separate agreement. Tenant and Landlord
shall indemnify, defend and hold each other harmless from and against any and
all claims for any brokerage commissions or other compensation asserted by any
other broker or person in connection with this Lease, arising from the
respective acts of Tenant or Landlord in breach of this representation and
warranty, including but not limited to any costs and expenses (including
reasonable attorneys fees) related thereto.
SECTION 50. OPTION TO RENEW.
Tenant is hereby granted two (2) options to renew this Lease upon the
following terms and conditions:
(a) At the time of the exercise of each option to renew and at the time of
the said renewal, Tenant shall not be in default beyond applicable grace periods
in accordance with the terms and provisions of the Lease, and Tenant or any
permitted assignee or sublessee shall be in possession of the Premises pursuant
to this Lease.
(b) Notice of exercise of each option shall be sent to Landlord, in
writing, at least nine (9) months before expiration of the term of this Lease,
as same may have been previously extended.
(c) The renewal terms shall each be for a term of five (5) years to
commence at the expiration of the term of this Lease, as same may have been
previously extended, and all of the terms and conditions of this Lease, other
than the Basic Rent shall apply during any such renewal term.
(d) The Basic Rent to be paid during such renewal terms shall be as
follows:
(i) The Basic Rent to be paid during the first renewal term shall be
payable in the annual amounts and monthly installments as set forth on Schedule
B annexed hereto and made a part hereof; and
(ii) The Basic Rent to be paid during the second renewal term shall be
payable in the annual amounts and monthly installments as set forth on Schedule
B annexed hereto and made a part hereof.
SECTION 51. EXECUTION BY LANDLORD.
The submission of this Lease Agreement for examination does not constitute
a reservation of or option for the Premises and this Lease shall be of no force
and effect whatsoever unless it shall have been executed by the Landlord and
Tenant and copies thereof shall have been received by the parties or their
respective attorneys.
SECTION 52. RECORDATION.
Tenant covenants not to place this Lease or the Commencement Date
certificate referred to in Section 10(a) on record. At the request of Landlord
or Tenant, the other party will execute a memorandum of lease for recording
purposes containing references to the material provisions of this Lease as
Landlord and Tenant shall mutually deem necessary. If requested by Landlord,
Tenant shall execute a recordable discharge of the memorandum of lease and
deliver same to Landlord's attorney prior to recording the memorandum, to be
held in escrow until expiration or termination of this Lease in accordance with
its terms.
SECTION 53. NOTICES.
Any notice, request or demand permitted or required to be given by the
terms and provisions of this Lease, or by any law or governmental regulation,
either by Landlord to Tenant or the Tenant to Landlord, shall be in writing, and
shall be delivered by overnight courier service with receipt acknowledged, or
mailed by registered or certified mail, return receipt requested, addressed if
to Tenant, to Attention: Dan Catalfumo, 290 Wild Avenue, Staten Island, NY
10314, and if to Landlord, to Attention: Joseph Harary, 1411 Broadway, 36th
Floor, New York, NY 10018, with a copy to Richard A. Epstein, 100 Plainfield
Avenue, Edison, New Jersey 08817. Such notice, request or demand shall be deemed
given when actually delivered or if mailed, when received by the addressee as
evidenced by the return receipt, or if refused, the date on which delivery was
first attempted as evidenced by the postal records. Either party may from time
to time, by notice as aforesaid, designate a different address for notices,
requests or demand.
SECTION 54. PERSONS BOUND.
The covenants, agreements, terms, provisions and conditions of this Lease
shall bind and inure to the benefit of the respective heirs, distributees,
executors, administrators, successors, assigns and legal representatives of the
parties hereto with the same effect as if mentioned in each instance where a
party hereto is named or referred to, but nothing herein contained shall be
construed to give Tenant the right to assign this Lease. The covenants and
obligations on the part of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Center, by operation of law or otherwise, and in the event
of such transfer or any subsequent transfer Tenant agrees to look solely to the
transferee for the performance of Landlord's covenants and obligations, but only
with respect to the period beginning with such transfer and ending with a
subsequent transfer of such interest, and all acts, covenants or obligations due
on the part of Landlord during its ownership shall survive any act of transfer
of the fee title to or leasehold interest in the Center.
SECTION 55. PARTIAL INVALIDITY.
If any provision of this Lease or any application thereof to any person or
circumstance shall be determined to be invalid or unenforceable, the remaining
provisions of this Lease or the application of such provision to persons or
circumstances other than those to which it is held invalid or unenforceable
shall not be affected thereby and shall be valid and enforceable to the fullest
extent permitted by law.
SECTION 56. CONSENTS.
Except as expressly set forth in this Lease, all consents and approvals
required of Landlord shall not be unreasonably withheld or delayed, provided
Tenant shall not make or assert any claim for, and Tenant hereby waives any
claim for money damages by way of setoff, counterclaim or defense, or otherwise,
based upon any claim or assertion by Tenant that Landlord has unreasonably
withheld or unreasonably delayed any consent or approval. Tenant's sole and
exclusive remedy shall be an action or proceeding for specific performance,
injunction or declaratory judgment. This Section shall not be applicable in the
event a court of competent jurisdiction determines that Landlord has acted in an
arbitrary or capricious manner. This Section shall also not apply to any
diminution in the rental value of the Premises to Tenant resulting from Landlord
having unreasonably withheld or delayed its consent or approval, provided the
Tenant's damages shall not exceed the amount of Rent payable by Tenant for the
period so affected.
SECTION 57. LANDLORD'S LIEN.
To secure the payment of all of the rents, taxes, charges, penalties and
damages herein covenanted to be paid by Tenant, and for the purpose of securing
all of the Tenant's obligations under this Lease, Tenant hereby gives to
Landlord an express lien on and security interest in all property, equipment,
chattels and fixtures which may be placed in or on the Premises and also on any
proceeds of insurance which may accrue to Tenant by reason of damages to or
destruction of any such property. This lien and security interest may be
foreclosed by public or private sale upon ten (10) days notice of sale to tenant
and the Landlord shall have the right to become the purchaser upon being the
highest bidder at such sale.
SECTION 58. MISCELLANEOUS.
(a) As used in this Lease, the term "Force Majeure" shall mean fire,
catastrophe, casualty, strikes or labor trouble, civil commotion, acts of God or
the public enemy, governmental prohibitions or regulations, or inability in
obtaining materials, or any other causes beyond Landlord's or Tenant's control.
(b) Tenant agrees that neither Landlord, nor Landlord's agents, employees
or representatives nor any other party has made, and Tenant does not rely on,
any representations, warranties or promises with respect to the Center, the
Premises or this Lease, except as herein expressly set forth.
(c) The Section headings of this Lease are for convenience only and shall
not limit or define the meaning or content hereof. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identity of the person or persons may require.
(d) Anything elsewhere to the contrary notwithstanding, Tenant shall look
solely to the estate of Landlord in the Center for the satisfaction of each and
every remedy of Tenant in the event of any default or breach by Landlord with
respect to any of the terms, covenants and conditions of this Lease to be
observed and/or performed by Landlord, and no other property or assets of
Landlord or any general partner of Landlord or their respective successors and
assigns shall be subject to levy, execution or other enforcement procedure for
the satisfaction of Tenant's remedies, such exculpation of liability to be
absolute and without any exceptions whatsoever.
(e) If Tenant is a corporation, each individual executing this Lease on
behalf of said corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation in accordance with a
duly adopted resolution of the Board of Directors of said corporation or in
accordance with the by-laws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms. If Tenant is a corporation,
Tenant shall, upon execution of this Lease, deliver to Landlord a certified copy
of a resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
(f) This Lease shall be governed by the laws of the State in which the
Center is located.
SECTION 58. LEASE CONTINGENCY.
Landlord and Tenant hereby agree that this Lease Agreement and their
respective obligations hereunder are conditioned on the Landlord obtaining,
within thirty (30) days after the signing hereof, a written waiver from the
owner of the Burger King in the Center of its restaurant exclusive as to
Tenant's intended use of a portion of the Premises for the sale of food and
beverages or other proof, satisfactory to the Tenant in its reasonable judgment,
that such restaurant exclusive is of no force or effect as to Tenant's intended
sale of food and beverages in the Premises, including but not limited to any
court order determining the issue.
In the event Landlord is unable to obtain such waiver or such other
satisfactory proof within such thirty (30) day period, and any extended period
agreed to in writing by the parties, either party may thereafter terminate this
Lease upon written notice to the other party, but only before such waiver or
other satisfactory proof is obtained, without further obligation of the parties.
The parties further agree that the time frames for Tenant to apply for and
to obtain any required governmental approvals and building permits in accordance
with Section 10(c) of this Lease shall not commence to run until Tenant's
receipt of the required waiver or such other proof satisfactory to establish
that the Burger King restaurant exclusive is of no force or effect as to
Tenant's intended sale of food and beverages in the Premises.
IN WITNESS WHEREOF, this Lease has been executed and delivered as of the
31st day of December, 1996.
ATTESTED: FUN TYME CONCEPTS OF EAST
BRUNSWICK, INC. (Tenant)
By:_________________________ By:______________________________
President
WITNESS: HARARY GROUP (Landlord)
____________________________ By:_______________________________
JOSEPH HARARY, Partner
<PAGE>
SCHEDULE A
The Premises
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Payment of Basic Rent
Lease Year(s) Annual Rent Monthly Installment
<S> <C> <C>
1 $183,240.00 $15,270.00
2 $183,240.00 $15,270.00
3 $183,240.00 $15,270.00
4 $183,240.00 $15,270.00
5 $183,240.00 $15,270.00
6 $206,145.00 $17,178.75
7 $206,145.00 $17,178.75
8 $206,145.00 $17,178.75
9 $206,145.00 $17,178.75
10 $206,145.00 $17,178.75
First Renewal Term
11 $231,951.00 $19,329.25
12 $230,888.00 $19,329.25
13 $230,888.00 $19,329.25
14 $230,888.00 $19,329.25
15 $230,888.00 $19,329.25
Second Renewal Term
16 $260,964.00 $21,747.00
17 $260,964.00 $21,747.00
18 $260,964.00 $21,747.00
19 $260,964.00 $21,747.00
20 $260,964.00 $21,747.00
</TABLE>
<PAGE>
SCHEDULE C
Tenant's Approved Signage
<PAGE>
TABLE OF CONTENTS
SECTION 1. TERM.
SECTION 2. BASIC RENT.
SECTION 3. PROPORTIONATE SHARE.
SECTION 5. INTENTIONALLY OMITTED.
SECTION 6. INTENTIONALLY OMITTED.
SECTION 7. INTENTIONALLY OMITTED.
SECTION 8. OPERATING COSTS.
SECTION 9. COMMON AREAS.
SECTION 10. COMMENCEMENT OF TERM.
SECTION 11. SECURITY DEPOSIT.
SECTION 12. NET LEASE.
SECTION 13. PURPOSE, TRADE NAME, RESTRICTIONS.
SECTION 14. LANDLORD'S OBLIGATIONS.
SECTION 15. CONDITION OF PREMISES; REPAIRS.
SECTION 16. ALTERATIONS.
SECTION 17. COMPLIANCE WITH RULES AND REGULATIONS; COMPLIANCE WITH LAW.
SECTION 18. DAMAGES TO CENTER; WAIVER OF SUBROGATION.
SECTION 19. EMINENT DOMAIN; CONDEMNATION.
SECTION 20. ASSIGNMENT, SUBLETTING.
SECTION 21. INDEMNITY AND TENANT'S INSURANCE.
SECTION 22. FAILURE TO OBTAIN FIRE INSURANCE.
SECTION 23. RIGHT TO INSPECT AND EXHIBIT.
SECTION 24. NO LIABILITY OF LANDLORD.
SECTION 25. LANDLORD'S EXCULPATION.
SECTION 26. UTILITIES, SERVICES, TAXES, ETC., AND HVAC.
SECTION 27. INSOLVENCY OF TENANT.
SECTION 28. DEFAULTS.
SECTION 29. REAL ESTATE TAXES.
SECTION 30. SIGNS.
SECTION 31. OUTSIDE STORAGE.
SECTION 32. FINANCIAL STATEMENTS.
SECTION 33. MERCHANTS' ASSOCIATION.
SECTION 34. SUBORDINATION; PRIORITY OF FEE MORTGAGES.
SECTION 35. MORTGAGEE PROTECTION CLAUSE.
SECTION 36: WATER, STANDBY SPRINKLER, SPRINKLER
ALARM AND SEWER (IF ANY) CHARGES.
SECTION 37. BUSINESS HOURS.
SECTION 38. CENTER.
SECTION 39. CONTROL OF TENANT.
SECTION 40. PROCESSING CHARGE.
SECTION 41. RIGHT OF FIRST REFUSAL.
SECTION 42: ENVIRONMENTAL CLEAN-UP RESPONSIBILITY ACT/ISRA.
SECTION 43. MODIFICATIONS REQUESTED BY MORTGAGEE.
SECTION 44. QUIET ENJOYMENT.
SECTION 45. ESTOPPEL CERTIFICATE.
SECTION 46. HOLDING OVER.
SECTION 47. NO WAIVER; ENTIRE AGREEMENT; NO SURRENDER.
SECTION 48. REIMBURSEMENT OF LEGAL EXPENSES.
SECTION 49. BROKER.
SECTION 50. OPTION TO RENEW.
SECTION 51. EXECUTION BY LANDLORD.
SECTION 52. RECORDATION.
SECTION 53. NOTICES.
SECTION 54. PERSONS BOUND.
SECTION 55. PARTIAL INVALIDITY.
SECTION 56. CONSENTS.
SECTION 57. LANDLORD'S LIEN.
SECTION 58. MISCELLANEOUS.
SECTION 59. LEASE CONTINGENCY.
EXHIBITS: SCHEDULE A: THE PREMISES
SCHEDULE B: RENT SCHEDULE
SCHEDULE C: TENANT'S APPROVED SIGNAGE
<PAGE>
Exhibit 10.30
Lease Agreement for Edmonton Canada Fun Bubble.
THIS INDENTURE made the day of , 19 .
BETWEEN:
SUN LIFE ASSURANCE COMPANY OF CANADA, a body Corporate incorporated
under the laws of Canada having its head office in the Municipality of
Metropolitan Toronto, Ontario,
(hereinafter called the "Landlord")
OF THE FIRST PART
-and-
FUN TYME CONCEPTS OF EDMONTON INC.
(hereinafter called the "Tenant")
OF THE SECOND PART
ARTICLE I
SECTION 1.00 DEFINITIONS
In this Lease the following terms have the following meanings:
(a) "Building" means the building or buildings now or hereafter
erected on the Lands;
(b) "Commencement Date" means the 1st day of April, 1997;
(c) "Deposit" means the sum of $29,725.67 as referred to in
Section 3.03, to the twelfth, twenty-fourth and last months
Minimum Rent, Operating Expenses, Taxes and GST;
(d) "Lands" means all and singular those certain lands
described in Schedule "A"attached hereto;
(e) "Landlord's Address" means
"for payment of rent" as referred to in Article III:
P.O. Box 4104, Station "A"
City of Toronto
Province of Ontario, M5W 2P1;
"for service" as referred to in Section 14.07:
#440, 10123 - 99th Street
City of Edmonton
Province of Alberta, T5J 3H1
;
or such other address as the Landlord may advise the Tenant
from time to time;
(f) "Lease" means this Indenture and all Schedules attached
hereto.
(g) "Lease Year" means each consecutive twelve (12) calendar
month period during the Term commencing on the first day of
January provided that the first Lease Year shall commence
-------
on the Commencement Date and end on the day immediately
preceding the commencement of the next following Lease Year
and the last Lease Year shall expire on the expiry or
sooner termination of the Term provided that, the Landlord
may from time to time, by notice to the Tenant, specify an
annual date from which each subsequent Lease Year for the
purposes of any of the articles, sections or other
<PAGE>
provisions of this
Lease is to commence, and, the then current Lease Year for that
purpose or purposes, will terminate on the date immediately
preceding the commencement of that new Lease Year;
(h) "Minimum Rent" means
a) the annual sum of Seventy Three Thousand, Two Hundred
Dollars ($73,200.00) payable in advance in equal, consecutive
monthly instalments of Six Thousand, One Hundred Dollars
($6,100.00) for the first thirty (30) months of the Term being
April 1, 1997 to the last day of September 1999;
b) the annual sum of Seventy Nine Thousand, Two Hundred Ninety
Six Dollars ($79,296.00) payable in advance in equal,
consecutive monthly instalments of Six Thousand, Six Hundred
Eight Dollars ($6,608.00) for the second thirty (30) months of
the Term being October 1, 1999 to
the last day of March 2002 and;
c) the annual sum of Eighty Five Thousand, Four Hundred Four
Dollars ($85,404.00) payable in advance in equal, consecutive
monthly instalments of Seven Thousand, One Hundred Seventeen
Dollars ($7,117.00) for the thirty (30) months of the Term
being April 1, 2002 to the last day of September 2004 and;
d) the annual sum of Ninety One Thousand, Five Hundred Dollars
($91,500.00) payable in advance in equal, consecutive monthly
instalments of Seven Thousand, Six Hundred Twenty Five Dollars
($7,625.00) for the last thirty (30) months of the Term being
October 1, 2004 to
the last day of March 2007 and;
(i) "Operating Expenses" means the total of all costs and expenses incurred by
or on behalf of the Landlord in respect of or in connection with the operating,
managing, maintaining, insuring and repairing (including structural repairs not
the responsibility of the Landlord herein) of the Building, the Lands and the
improvements thereon, including any loading dock and spur track, such as are in
keeping with maintaining the standard of a first class industrial complex
including without limitation, cost of all repairs and replacements (including,
at the Landlord's option, the amortization of such costs, on a basis consistent
with generally accepted accounting principles), the costs of painting interior
areas not normally rented to tenants and the costs of painting and otherwise
maintaining the outside of the Building, other than those parts for which the
Tenant is responsible, the costs of maintaining, repairing and replacing the
roadways, driveways, loading and parking areas, the cost of snow removal,
landscape maintenance, refuse removal and other costs in connection with the
repair, replacement and maintenance of outside areas and facilities, sprinkler
protection, depreciation and notional interest costs (equal to the Stipulated
Rate determined at the time of acquisition) with respect to machinery,
equipment, facilities, systems or property installed in or used in connection
with the Building if the principal purpose or intent of such use or installation
was to reduce the cost of other items included in Operating Expenses, the cost
of fire, casualty, liability, rental, boiler, extended perils and plate glass
insurance and all such other insurance against casualties, perils and losses as
the Landlord may elect to insure against from time to time (and, if the Landlord
elects to self-insure, in whole or in part, the amount of reasonable contingency
reserves not exceeding the amount of premiums which would otherwise have been
incurred in respect of the risks undertaken), security protection, the cost of
service contracts with independent contractors, spur track rental, all
electricity, gas, water (hot and cold), sewer and other utility charges incurred
by the Landlord, cost of heating, cooling and ventilating all space including
both rentable and non-rentable areas, the amount of all salaries, wages and
fringe benefits paid to employees engaged in the maintenance or operation of the
Building or the Lands, and all other expenses paid or payable by the Landlord in
connection with the operation of the Building,
improvements and the Lands (but shall not include Taxes, interest on debt or
capital retirement of debt or any amounts directly chargeable by the Landlord to
any tenant or tenants as provided in their respective leases) and an allowance
of fifteen percent (15%) of the aggregate of (i) the aforesaid amounts, and (ii)
Taxes, for building management and overhead expenses of the Landlord;
(j) "Permitted Use" means an indoor playground, recreational and
educational facility for children. The Permitted Use may
also include the operation of a snack bar and/or a food
service counter.
(k) "Premises" means that portion of the Building as shown,
outlined and described in Schedule "B" attached hereto and
Premises shall be deemed to include all facilities,
structures, improvements, erections, additions, alterations
and equipment therein from time to time but shall exclude
the exterior, sub-floors, foundation and roof of the
Building;
(l) "Proportionate Share" means the fraction which has as its
numerator the floor area of the Premises and as its
denominator the rentable floor area of the Building;
(m) "Rent" means all Minimum Rent, additional rent and all other
monies payable by the Tenant under or pursuant to this
Lease;
(n) "Stipulated Rate" means the annual rate equal to three
percentage (3%) points over the annual rate of interest
charged and published from time to time by the main branch
of the Landlord's bank in the City in which the Lands are
situate, as its most favourable rate of interest to its most
creditworthy and substantial commercial customers on large
loans, commonly known as its "prime rate";
(o) "Taxes" means an amount equivalent to all taxes, rates,
duties, levies and assessments whatsoever whether municipal,
provincial,
parliamentary, school or otherwise, charged, levied, imposed
or assessed against or upon or in respect of the Building,
the Lands or any improvements now or hereafter erected
thereon or any part thereof or any one or more thereof or
upon the Landlord on account thereof including all taxes,
rates, duties, levies and assessments for education and
local improvements (excluding any tax assessed separately or
charged directly to the Tenant which has been attracted by
the Tenant's improvements and equipment and excluding any
corporate, income, profits and excess profits taxes assessed
upon the income of the Landlord) and shall also include any
and all taxes which may in future be levied in lieu of or,
in addition to, Taxes as hereinbefore defined whether in
existence at the Commencement Date or not. Any costs and
expenses (including legal costs on a solicitor and his own
client basis) incurred by the Landlord in contesting,
resisting or appealing the Taxes or any part thereof shall
be added to and included in the amount of such Taxes. Taxes
shall be deemed to include an amount equal to all taxes,
levies and impositions paid or payable by the Landlord which
are based upon or computed by reference to the Landlord's
interests, ownership of, or capital employed in the Lands or
Building, or both, determined as if the Lands and Building
were the only real property owned by the Landlord;
(p) "Term" means One Hundred Twenty (120) months unless sooner
terminated pursuant to the provisions of this Lease;
(q) "Landlord's Architect" means the independent professional
architect, or engineer or quantity surveyor selected by the
Landlord from time to time for the purposes of making
determinations hereunder.
ARTICLE II
SECTION 2.00 DEMISE
In consideration of the rents, covenants, conditions and
agreements herein reserved and contained on the part of the Tenant to be paid,
observed and performed, the Landlord hereby demises and leases unto the Tenant
the Premises.
SECTION 2.01 TERM
TO HAVE AND TO HOLD the Premises for and during the Term
commencing on the Commencement Date.
SECTION 2.02 POSSESSION
The Landlord shall not be liable for failure to give possession
of the Premises on the Commencement Date by reason of the fact that the Building
or the Premises are not ready for occupancy, or due to a prior tenant wrongfully
holding over or any other persons wrongfully occupying the Premises. In such
event, payment of the rent under this Lease shall not commence until possession
is given or is available but the Term shall nevertheless commence on the
Commencement Date. If the Tenant shall have occupied the Premises or any part
thereof prior to the Commencement Date (which the Tenant shall not be entitled
to do except with the prior written consent of the Landlord) such occupancy
shall deem to have been subject to this Lease and the rent for the duration of
such occupancy shall be at the rate herein provided and be due and payable in
advance as of the first day of each month until the Commencement Date on a per
diem basis.
SECTION 2.03 EXAMINATION OF PREMISES
The Tenant will examine the Premises and the Building before
taking possession of the Premises and such taking of possession will be, in the
absence of an agreement signed by the Landlord in writing to the contrary,
conclusive evidence as against the Tenant that at the time thereof the Premises
and the Building were in good order, ready for occupancy and in satisfactory
condition and no further work or improvements are required to be made or done
and that there exists no promise of the Landlord to alter, remodel, decorate or
improve the Premises or the Building and no warranty or representation
whatsoever respecting the Premises or the Building have been made by the
Landlord or its agents or employees other than those expressly contained herein.
ARTICLE III
SECTION 3.00 MINIMUM RENT
(a) YIELDING AND PAYING therefor yearly and every year during the Term unto the
Landlord, the Minimum Rent to be paid in advance in equal consecutive monthly
instalments on the first day of each and every month during the Term commencing
on the Commencement Date.
(b) If the Term commences on any day other than the first or ends on any day
other than the last day of a calendar month, rent for the fractions of a month
at the commencement and at the end of the Term shall be adjusted pro rate on a
per diem basis based on a period of three hundred and sixty-five (365) days and
payable on the Commencement Date and the first day of the last month of the
Term, respectively.
(c) The Tenant will deliver to the Landlord on or before the commencement of
each Lease Year a series of monthly post-dated cheques for each month of such
Lease Year in respect of the monthly payments of Minimum Rent and additional
rent payable to the Landlord during such Lease Year. SECTION 3.01 Operating
Expenses
(a) The Tenant covenants and agrees to pay to the Landlord, during each Lease
Year, as additional rent, in advance, in equal consecutive monthly instalments
and payable on the dates the monthly instalment of Minimum Rent is payable, the
Proportionate Share of Operating Expenses.
(b) The amount of such Proportionate Share of Operating Expenses may be
estimated by the Landlord for each Lease Year and the Landlord shall furnish to
the Tenant an estimate of such Proportionate Share of Operating Expenses and the
Tenant shall pay to the Landlord such estimated Proportionate Share of Operating
Expenses in monthly instalments in advance as aforesaid during such Lease Year.
The Landlord may, if during the course of any such Lease Year there shall be any
increase or decrease in the Landlord's estimate of such Proportionate Share of
Operating Expenses for such Lease Year, adjust its estimate and upon the Tenant
being notified of such adjustment the Tenant's monthly instalments of such
estimated Proportionate Share of Operating Expenses from and including the
instalment next due after the giving of notice of adjustment shall be adjusted
in accordance with the Landlord's notice. Provided the Lease is in good standing
and the Tenant is not in default of any of its covenants an/or obligations, the
Landlord shall not adjust the Tenant's estimated Proportionate Share of
Operating Expenses during the course of a Lease Year in the event the such
adjustment represents a variance of less than 10.0% of the original estimation
of Operating Expenses for that Lease Year.
(c) When the Operating Expenses for such Lease Year are finally determined by
the Landlord, the Landlord shall furnish the Tenant with a statement showing the
actual amount of the Operating Expenses for such Lease Year and the Landlord and
Tenant covenant and agree each with the other that if an overpayment of such
Operating Expenses has been made by the Tenant the Landlord shall credit such
amount to such Operating Expenses for the next following Lease Year and if there
is no such next following Lease Year such amount shall be paid to the Tenant and
if an amount remains owing to the Landlord in respect of such Operating Expenses
the Tenant shall forthwith pay such amount to the Landlord.
(d) Neither party may claim a readjustment of a Proportionate Share of Operating
Expenses based upon an error of estimation, determination or calculation of the
Proportionate Share or of the Operating Expenses unless claimed in writing
before one year after the end of the Lease Year to which the claim relates.
(e) Once each Lease Year, the Tenant may at its sole cost and expense, examine
the Landlord's records which were used by the Landlord to ascertain the
Operating Expenses for the previous Lease Year. The examination of such records
shall take place in the location where the Landlord keeps the said records.
SECTION 3.02 TAXES
(a) The Tenant covenants and agrees to pay to the Landlord during the Term, as
additional rent, in advance, in equal consecutive monthly instalments and
payable on the dates the monthly instalments of the Minimum Rent are payable, a
certain share of the Taxes determined as follows:
(i) the Tenant will pay the amount determined when the appropriate mill rate for
Taxes is applied to the Assessment for the Premises; "Assessment" in this
subsection 3.02 means the assessed value upon which business assessments are
calculated, or would be calculated if a business were being conducted in the
Premises in respect of which the assessed value is determined;
(ii) the Tenant will also pay its Proportionate Share of any amounts determined
by applying the appropriate mill rate for Taxes against any separate Assessments
for the non-rentable areas of the Lands and Building or any part thereof, and
(iii) if there is not or if there ceases to be a separate Assessment for the
Premises or if there ceases to be a separate Assessment for any part of the
Lands or Building, for which there was one previously during the Term, or,
otherwise if the Landlord so elects, the Tenant will pay its Proportionate Share
of Taxes.
(b) The amount of such share of Taxes may be estimated by the Landlord for each
Lease Year and the Landlord shall furnish to the Tenant an estimate of such
share of Taxes and the Tenant shall pay to the Landlord such estimated share of
Taxes in monthly instalments in advance as aforesaid during such Lease Year. The
Landlord may, if during the course of any such Lease Year there shall be any
increase or decrease in the Landlord's estimate of such share of Taxes for such
Lease Year, adjust its estimate and, upon the Tenant being notified of such
adjustment, the Tenant's monthly instalments of such estimated share of Taxes
from and including the instalment next due after the giving of notice of
adjustment shall be adjusted in accordance with the Landlord's notice. Provided
the Lease is in good standing and the Tenant is not in default of any of its
covenants an/or obligations, the Landlord shall not adjust the Tenant's
estimated Proportionate Share of Taxes during the course of a Lease Year in the
event the such adjustment represents a variance of less than 10.0% of the
original estimation of Taxes for that Lease Year.
(c) When the Taxes for such Lease Year are finally determined by the Landlord,
the Landlord shall furnish the Tenant with a statement showing the actual amount
of the Taxes for such Lease Year and the Landlord and Tenant covenant and agree
each with the other that if an overpayment of such Taxes has been made by the
Tenant the Landlord shall credit such amount to such Taxes for the next
following Lease Year and if there is no such next following Lease Year such
amount shall be paid to the Tenant and if an amount remains owing to the
Landlord in respect of such Taxes the Tenant shall forthwith pay such amount to
the Landlord.
(d) The Tenant covenants and agrees to reimburse the Landlord throughout the
Term and at the times and in the manner specified by the Landlord from time to
time, the full amount of any tax, sales tax, goods and services tax, value added
tax, multi-stage sales tax, business transfer tax or any other similar tax
levied, rated, charged, imposed or assessed in respect of the rent, additional
rent or any other amounts payable pursuant to this Lease or in respect of the
space demised under this Lease.
(e) Once each Lease Year, the Tenant may at its sole cost and expense, examine
the Landlord's records which were used by the Landlord to ascertain the Taxes
for the previous Lease Year. The examination of such records shall take place in
the location where
the Landlord keeps the said records.
SECTION 3.03 DEPOSIT
The Landlord acknowledges receipt of the Deposit which the
Landlord may use, retain or apply all or part of to the extent required for the
payment of any rent or any other sums as to which the Tenant is in default or as
compensation on account for any loss or damage arising from the breach or
default by the Tenant of any provision of this Lease. If the Landlord uses,
retains or applies all or part of the said sum for other than the last month's
Minimum Rent as provided above, the Tenant will, upon notification by the
Landlord, pay to the Landlord the amount required to reimburse it for the
amounts so applied. SECTION 3.04 PAYMENTS TO LANDLORD
(a) All payments required to be made by the Tenant under or in respect of this
Lease shall be made in lawful money of Canada without any set-off, abatement,
demand, compensation or deduction whatsoever to the Landlord at the Landlord's
Address for payment of rent or to such agent or agents of the Landlord as the
Landlord shall from time to time direct in writing to the Tenant. The Tenant
shall pay to the Landlord, as additional rent, interest at the Stipulated Rate
on all payments of rent which has become overdue so long as such payments remain
unpaid.
(b) All sums of money payable to or incurred by the Landlord, which ought to
have been paid or incurred by the Tenant, or for which the Landlord hereunder is
entitled to be paid or to be reimbursed by the Tenant may be recovered by the
Landlord together with costs (including legal fees on a solicitor and his own
client basis and all fees and costs related to recovery or collection of such
sums) and interest at the Stipulated Rate, as rent, by any and all remedies
available to it for the recovery of rent in arrears.
SECTION 3.05 NET LEASE
The Tenant acknowledges and agrees that it is intended that this
Lease shall be a completely carefree net lease for the Landlord, except as
expressly herein set out, that the Landlord shall not be responsible during the
Term for any costs, charges, impositions, taxes, expenses or outlays of any
nature whatsoever arising from or relating to the Premises, or the use and
occupancy thereof or the contents thereof, or the business carried on therein,
and the Tenant shall pay all charges, impositions, taxes, costs and expenses of
every nature and kind relating to the Premises and its Proportionate Share of
all charges, impositions, costs and expenses of every nature and kind relating
to those parts of the Building not intended for leasing.
ARTICLE IV
SECTION 4.00 QUIET ENJOYMENT
The Landlord covenants that the Tenant upon duly and regularly paying
the rent and performing and observing the covenants and agreements herein on the
Tenant's part contained, shall and may peaceably possess and enjoy the Premises
for the Term without any interruption or disturbance from the Landlord or any
other person lawfully claiming by, from or under the Landlord subject,
nevertheless, to the terms, covenants, agreements and conditions of this Lease.
The Landlord will operate and maintain the Building and Lands
(excluding the Premises or other leased or leasable areas) as would a prudent
Landlord of comparable buildings in the City of Edmonton, having regard to the
size, age, location, nature, character and use of the Building.
ARTICLE V
SECTION 5.00 PERFORM COVENANTS
The Tenant shall pay the rent at the times and in the manner
herein provided and shall observe and perform all the covenants,
agreements and conditions on its part to be observed and performed
in accordance with this Lease.
SECTION 5.01 BUSINESS TAX
The Tenant shall pay, as additional rent, to the lawful taxing
authority, when due, all business taxes and all other taxes, rates, levies,
licence fees and charges levied or assessed in respect of the use or occupancy
of the Premises or the equipment, machinery, or fixtures brought therein or
belonging to the Tenant, or to anyone occupying the Premises with the Tenant's
consent, and to pay to the Landlord upon demand the portion of any tax, rate,
duty, fee, levy or charge levied or assessed upon the Lands and the Building or
any part thereof that is attributable to any Tenant's improvements or fixtures
on the Premises constructed by or on behalf of or belonging to the Tenant,
including penalties for late payment thereof. The Tenant shall not appeal any
assessment of any of the foregoing without the consent of the Landlord which, if
given, shall be deemed to be on the express understanding that the Tenant will
at the same time, appeal, as agent for the Landlord, the assessment of the
Landlord's interest in the Premises and the Tenant shall indemnify the Landlord
against any costs suffered, incurred or imposed on the Landlord and not
recoverable from other tenants by reason of such appeal.
SECTION 5.02 UTILITIES
The Tenant shall pay promptly to the Landlord, or as it otherwise
directs from time to time, when due, as additional rent, all rates, levies and
charges (including installation charges) for water, gas, sewer and electric
light and electrical power, telephone or other utilities supplied to or used in
the Premises as separately metered or separately invoiced by the supplier and,
if not so metered or invoiced, the Proportionate Share of such rates, levies and
charges provided however if the Tenant is an excessive user (in the Landlord's
opinion acting reasonably) of any such utilities the Tenant shall be charged
accordingly as the Landlord shall determine acting reasonably and the Tenant
shall pay all costs of making such determination including, without limitation,
the cost of the purchase and installation of a meter or other special equipment.
SECTION 5.03 EVIDENCE OF PAYMENTS
The Tenant shall produce to the Landlord from time to time at the
request of the Landlord satisfactory evidence of the due payment by the Tenant
of all payments required to be made by the Tenant under this Lease.
SECTION 5.04 NO NUISANCE
The Tenant shall not at any time during the Term, use, exercise or
carry on or permit or suffer to be used, exercised or carried on, in, about or
upon the Premises or any part thereof any waste or any noxious, noisome or
offensive act, trade, business, occupation or calling, and no act, matter or
thing whatsoever shall at any time during the Term be done in, about or upon the
Premises or any part thereof which shall or may be or grow to the annoyance,
nuisance, damage or disturbance of the occupiers, tenants or owners of the
Building or adjoining land and properties.
SECTION 5.05 COMPLY WITH LAWS AND REGULATIONS
The Tenant shall comply promptly at its expense with all laws,
ordinances, regulations, requirements and recommendations, which may be
applicable to the Tenant or to the use, operation or occupation of the Premises
or the making by the Tenant of any repairs, alterations, changes or improvements
therein, of any and all federal, provincial, civic, municipal and other
authorities or association of insurance underwriters (including, without
limitation, the rules and regulations of the Canadian Board of Fire Underwriters
and the Insurer's Advisory Organization and any successor bodies) or agents and
all notices in pursuance of same and whether served upon the Landlord or the
Tenant. Without having made any enquiries, the Landlord is unaware of any
violations relating to the Tenant's proposed operation or occupation of the
Premises. SECTION 5.06 COMPLY WITH RULES
The Tenant agrees that the rules and regulations endorsed on this Lease
or attached hereto as Schedule "C" with such reasonable variations,
modifications, amendments and additions as shall from time to time be made by
the Landlord and any other and further reasonable rules and regulations that may
be made by the Landlord and communicated to the Tenant in writing shall be
observed and performed by the Tenant and its agents, invitees, clerks, servants
and employees and all such rules and regulations now in force or hereafter put
in force shall be read as forming part of the terms and conditions of this Lease
as if the same were embodied herein; all such rules and regulations shall be
deemed to be a part of this Lease.
SECTION 5.07 GOODS, CHATTELS AND FIXTURES NOT TO BE REMOVED
The Tenant agrees that all goods, chattels, equipment and trade
fixtures when moved into the Premises shall not, except in the normal course of
business, be removed from the Premises until all rent due or to become due
during the Term is paid in full.
SECTION 5.08 PEACEFUL SURRENDER
(a) The Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto the Landlord the Premises, together with
all fixtures and improvements which at any time during the Term shall be made
therein or thereon, in as good condition and repair as the Tenant is required to
maintain the Premises throughout the Term and the Tenant shall deliver to the
Landlord all keys to the Premises which the Tenant has in its possession and
inform the Landlord of all combinations of locks, safes and vaults.
(b) Without limiting the foregoing the Tenant shall immediately before the
expiration or sooner termination of the Lease strip, seal and wax all tile
flooring, strip and seal all concrete flooring, steam clean or shampoo all
carpeted flooring, wash all glass, doors, woodwork, light fixtures and
washrooms, fill all holes and repaint all painted wall surfaces of the Premises
to the reasonable specifications and satisfaction of the Landlord. The Tenant
further covenants that the Tenant will not upon such expiration or sooner
termination leave in, on, about or upon the Premises or Lands any Environmental
Hazards (as hereinafter defined) or any rubbish or waste material and will leave
the Premises in a clean and tidy condition.
SECTION 5.09 CARE OF PREMISES
(a) The Tenant shall take good care of the Premises and keep same in a tidy,
clean and good condition.
(b) The Tenant shall, at its own expense, be responsible for and shall maintain
and replace from time to time as may reasonably be necessary during the Term all
light fixtures, light bulbs, fluorescent tubes, ballasts and starters in the
Premises. The Landlord shall have the right to attend to such maintenance and
replacements at the Tenant's expense which shall be payable as additional rent
by the Tenant forthwith on demand.
(c) The Tenant shall, at its own expense, replace or repair, under the direction
and to the reasonable satisfaction of the Landlord, the glass, locks and
trimmings of the doors and windows in or upon the Premises which become damaged
or broken.
(d) The Tenant shall properly heat the Premises, at its own expense, during the
Term hereof at all times to the extent necessary to prevent damage thereto by
frost or other causes.
(e) The Tenant shall maintain (including, without limitation, the performance of
regular and periodic servicing, maintenance and inspections as a prudent owner
would) in good operating condition
and to the satisfaction of the Landlord, all pipes, wiring and electrical
apparatus and all plumbing fixtures and heating, ventilating and air
conditioning equipment and all other mechanical systems and electrical systems
in or about the Premises and shall keep the same in clean and good working order
and repair. It is understood and agreed that in case the said fixtures, systems
and equipment or any part thereof shall be damaged or destroyed or become
incapable of performing their function the Tenant shall forthwith repair or
replace (as the Landlord may require) the same to the satisfaction of the
Landlord. The Landlord shall have the right to service, maintain or inspect, or
any one or more of them, the said fixtures, systems and equipment or cause same
to be maintained or inspected, or both, at the Tenant's expense, the costs of
which shall be payable as additional rent by the Tenant forthwith on demand
together with an administrative fee equal to fifteen (15%) percent of all such
costs.
(f) The Tenant shall keep well painted the painted portions of the
interior of the Premises.
(g) The Tenant shall keep and maintain the washrooms in a sanitary
condition.
(h) The Tenant shall not do or suffer or permit any Environmental Hazards to
exists on, in or about the Premises or any waste or damage, disfiguration or
injury to the Premises or the fixtures and equipment thereof or permit or suffer
any overloading of any floors thereof and shall not place in, on or about the
Premises any fixtures, equipment, machinery, or materials of a weight beyond the
capacity for which the Building is designed, or to the extent that will cause
damage to the Building or cause excessive vibration; and that the Tenant will
repair any damage done to the Premises or the Building by reason of any
excessive weight placed in the Premises, or excessive vibration caused in the
Premises.
(i) The Tenant shall not use water for any purpose other than sanitary or
drinking without the prior written consent of the Landlord.
SECTION 5.10 ACCESS
(a) The Tenant shall not permit any vehicles belonging to the Tenant, its
employees, contractors or agents to cause obstruction on any roads, driveways or
parking areas about the Building, or prevent the ingress and egress by any other
tenant in the Building or any adjoining buildings, and will use its best
endeavours to ensure that persons doing business with the Tenant shall not
permit any vehicles to cause such obstruction as aforesaid.
(b) The Tenant shall not stack any materials in the yard or yards of the
Building, adjacent driveways, or common areas and shall cause no obstruction to
vehicles operating on the roads, driveways or parking areas.
ARTICLE VI
The Tenant covenants with the Landlord that:
SECTION 6.00 USE OF PREMISES
The Premises shall not be used for any other purpose than the Permitted
Use and then subject to the other provisions of this Lease. Notwithstanding the
Permitted Use, the Premises shall not be used in any way which may impair the
efficient or proper operation of the sprinkler system or any mechanical,
plumbing or electrical systems or heating, ventilating or air conditioning
equipment within or about the Building. SECTION 6.01 NUISANCE, WASTE
The Tenant shall not cause or suffer or permit the manufacturing,
transportation, storage, discharge or disposal of any contaminant or waste,
flammable, explosive, radioactive corrosive or poisonous material or substance,
urea formaldehyde foam insulation, asbestos, PCBs or pollution or other
environmentally hazardous, dangerous or noxious substances or materials
including those declared or determined by the standards established by relevant
governmental statutes, by-laws or regulations to be hazardous or toxic
(collectively called "Environmental Hazards") in, on or from the Premises.
SECTION 6.02 ACTS CONFLICTING WITH INSURANCE
The Tenant shall not do, omit to do or permit to be done or omitted to
be done any act or thing which may render void or voidable or conflict with the
requirements of any policy or policies of insurance, including any regulations
of fire insurance underwriters applicable to such policy or policies, whereby
the Premises or the Building or the contents of the premises of any tenant in
the Building are insured or which may cause any increase in premium to be paid
in respect of any such policy. In the event that any such policy or policies is
or are cancelled or are threatened to be cancelled by reason of any act or
omission of the Tenant, the Landlord shall have the right, at its option, to
terminate this Lease forthwith by giving notice of termination to the Tenant,
and in the event that the premium to be paid in respect of any such policy is
increased by any act or omission of the Tenant, including the Permitted Use, the
Tenant shall pay to the Landlord the amount by which said premium shall be so
increased.
SECTION 6.03 AUCTION
The Tenant shall not at any time during the Term permit any sale by
auction to be held within the Premises or upon the Lands or any part thereof.
SECTION 6.04 RAIL SPUR
If the Premises do now or hereafter have access to a railway spur or are now or
hereafter served by a railway spur the Tenant shall forthwith execute and
deliver any agreements in respect thereof which are required by the railway
company or other authority operating the said railway or required by the
Landlord, and the Tenant shall reimburse to the Landlord or pay directly to the
railway company or other authority operating the said railway all payments and
compensation whatsoever which are required to be paid by the Tenant or the
Landlord including, without limitation, any prepayments for the use of the
railway facilities and other materials or otherwise and the costs of repairs and
replacements of the rail lines, track bed, ties and any other apparatus (but
excluding any amounts included in the Operating Expenses and paid by the Tenant
under section 3.01 hereof), and the Tenant shall observe and perform all terms,
conditions, covenants and obligations under the said agreements and any and all
requirements whatsoever of the railway company or other authority operating the
said railway or the Landlord. The Tenant shall indemnify and save harmless the
Landlord from and against any and all loss, cost, expense, damage, claims and
liability whatsoever in respect of the use of the railway spur by the Tenant and
in respect of the said agreements and all requirements of the railway company or
other authority operating the said railway or the Landlord.
ARTICLE VII
SECTION 7.00 TENANT'S REPAIRS
(a) The Tenant shall at all times during the Term repair, maintain, decorate,
operate, amend and keep the Premises, with the appurtenances thereto and all
equipment and fixtures therein, as a prudent owner would, when, where and so
often as the need shall be, reasonable wear and tear, structural repair for
which the Landlord is responsible pursuant to section 7.01 hereof and damage by
fire not due to the negligence or wilful act or omission of the Tenant or those
for whom the Tenant is legally responsible, lightning and tempest (hereinafter
collectively referred to as "Tenant Repair Exceptions") only excepted and the
Tenant will, upon notice in writing, reimburse the Landlord as additional rent
for the costs, plus interest at the Stipulated Rate until repaid together with
an administration fee equal to fifteen (15%) percent of the aggregate of the
foregoing costs, of repairing or restoring any damage (including structural
repair referred to in section 7.01 hereof) caused by the negligence or wilful
acts or omissions of the Tenant or those for whom the Tenant is legally
responsible, to the Building or the Lands.
(b) The Landlord and its agents shall have the right at all reasonable times
during the Term, to enter the Premises to examine the condition thereof, and
further, that all want of reparation that upon such a view shall be found, and
for the amendment of which notice is given, the Tenant shall well and
sufficiently repair and make good accordingly within fifteen (15) days from the
date of such notice. Provided the Landlord does not require immediate access to
the Premises as the result of an emergency, the Landlord shall provide the
Tenant with one days advance notice of its intention to enter the Premises.
SECTION 7.01 LANDLORD'S REPAIRS
Subject to Article IX, the Landlord shall be responsible only for
structural repairs necessarily required to correct inherent defects in design or
construction of the following components of the Building:
(a) the roof deck (excluding the protective system above the deck
surface);
(b) the bearing walls (excluding perimeter caulking of walls, doors and windows,
tuckpointing of bricks and blocks, parging repairs and waterproofing of exterior
wall surfaces), and
(c) the floor and foundation, save and except damage caused by the negligence or
wilful acts or omissions of the Tenant, its employees, invitees, licensees,
agents, servants or other persons from time to time on or about the Premises,
the Building or the Lands with the express or implied consent, approval or
invitation of the Tenant or its subtenant.
As at the Commencement Date, the Landlord is not aware of inherent defects in
the design or construction of the Building's roof deck, bearing walls, floor or
foundation.
ARTICLE VIII
SECTION 8.00 ALTERATIONS
(a) The Tenant shall not without the prior written consent of the Landlord,
which consent shall not be unreasonably withheld, make any installations,
additions, partitions, alterations or improvements to the Premises. The Tenant
shall submit to the Landlord detailed plans and specifications of any such work
or installation when applying for consent, and the Landlord reserves the right
to recover from the Tenant the cost of having its architects or engineers
examine such plans and specifications which costs shall be paid by the Tenant,
as
additional rent, forthwith on demand. The Landlord may require that any or all
work to be done, or materials to be supplied hereunder be done or supplied by
the Landlord's contractors or workmen or by contractors or workmen engaged by
the Tenant but first approved by the Landlord. Any work performed by the Tenant
shall be performed by competent workmen whose labour union affiliation is not
incompatible with those of any workmen who may be employed in the Building by
the Landlord, its contractors or subcontractors. In any event, any or all work
to be done or materials to be supplied hereunder shall be at the sole cost and
expense of the Tenant and shall be done and supplied and paid for in the manner
and according to such terms and conditions, if any, as the Landlord may
prescribe. Any connections of apparatus to the electrical system other than a
connection to an existing base receptacle, or other connection or apparatus to
the plumbing lines shall be deemed to be an alteration within the meaning of
this Lease.
(b) The Tenant covenants with the Landlord that the Tenant shall promptly pay or
cause to be paid all charges incurred by or on behalf of the Tenant or any
subtenant or occupant of the Premises or any part thereof, for any work,
materials or services that may be done, supplied or performed in respect of the
Premises and shall forthwith discharge any liens in respect of same at any time
filed against the Lands or Building or any part thereof and keep the Lands and
Building free from liens and in the event that the Tenant fails to do so, the
Landlord may, but shall be under no obligation to, pay into court the amount
required to obtain a discharge of any such lien in the name of the Tenant, or
subtenant or occupant, and any amount so paid together with all disbursements
and costs in respect of such proceedings on a solicitor and his own client basis
and interest at the Stipulated Rate on all such monies from the date of payment
by the Landlord to the date of reimbursement by the Tenant together with an
administrative fee of fifteen (15%) percent of the aggregate of all of the
foregoing sums, shall be forthwith due and payable by the Tenant to the Landlord
as additional rent. The Tenant shall allow the Landlord to post and keep posted
on the Premises any notices that the Landlord may desire to post under the
provisions of the construction, mechanic's or builder's lien legislation or
other legislation.
(c) If required by the Landlord, the Tenant shall not commence to make or permit
to be commenced to be made, any installations, alterations, additions,
partitions or improvements until the Tenant delivers to the Landlord an
indemnity bond, in a form and for an amount acceptable to the Landlord, of a
duly incorporated surety company licensed to carry on in the Province in which
the Lands are situate the business of indemnity insurance, insuring the Landlord
against any loss, costs or damages of the Landlord arising out of or due to any
default in the payment of the cost of such installations, alterations,
additions, partitions or improvements. The Landlord shall not require an
indemnity bond in the event the estimated cost of any installations,
alterations, additions, partitions or improvements does not exceed $50,000.
(d) The Tenant shall not without prior written consent of the Landlord put up
any window drapes, blinds, awnings or other similar things or cover the floors
with anything other than loose rugs.
(e) In making any installations, additions, partitions, alterations or
improvements, the Tenant will not alter or interfere with any installations
which may have been made by the Landlord and in no event whatsoever shall the
Tenant alter or interfere with or affect the structural elements or the strength
or outside appearance of the Building.
SECTION 8.01 LANDLORD'S RIGHT TO DO WORK
(a) The Tenant covenants and agrees with the Landlord that the Landlord has
retained and reserved the sole and exclusive right to use or to lease to others
for their own use the roof or exterior walls of the Building and to construct
upon the Lands any other building or buildings or structures as the Landlord may
wish.
(b) The Landlord shall have the right to make additions (including free standing
structures separate and apart from any existing building on the Lands) to and
improvements or installations in and repairs to the Building and the outside
areas or the Lands or either one or more of them and whenever reference is made
in this Lease to the "Building," it shall mean the building or buildings as the
same may be changed, added to or improved from time to time and in relation to
any such additions, improvements, installations, or repairs the Landlord may
cause such reasonable obstructions of and interference with the use or enjoyment
of the Building or the Premises or both as may be reasonably necessary for the
purposes aforesaid and may interrupt or suspend the supply of electricity, gas,
water or other services when necessary and until said additions, improvements,
installations or repairs shall have been completed and there shall be no
abatement in rent nor shall the Landlord be liable by reason thereof provided
that all such additions, improvements, installations or repairs shall be made as
expeditiously as reasonably possible.
(c) The Landlord and any persons authorized by the Landlord shall have the right
to use, install, maintain or repair or any one or more of them, pipes, wires,
ducts or other installations in, under or through the Premises for or in
connection with the supply of any services to the Premises or any other premises
in the Building. Such services include without limiting the generality of the
foregoing, electricity, water, gas, sanitation, telephone, heating,
air-conditioning and ventilation.
(d) The Landlord and any persons authorized by the Landlord shall have the right
to enter upon the Premises to make such reasonable decorations, repairs,
alterations, improvements or additions as it may deem advisable and the Landlord
or any persons authorized by the Landlord shall be allowed to take all material
into and upon the Premises that may be required therefore. The rent shall in no
way abate while such decorations, repairs, alterations, improvements or
additions are being made by reason of loss or interruption of the business of
the Tenant because of the prosecution of any such work.
(e) Nothwithstanding the contents of Section 8.01 (b), (c) and (d), in the event
more than 50% of the Premises are render wholly unfit for the Tenant's use for
more than fourteen (14) consecutive days as a result of the Landlord's
decorations, repairs, alterations, improvements or additions (provided that the
Landlord's decorations, repairs, alterations, improvements or additions are not
the result of the negligence, default or wilful act or omission of the Tenant or
its agents, servants, employees, workmen or invitees or other persons from time
to time on or about the Premises, the Building or the Lands with the expressed
or implied consent, approval or invitation of the Tenant), then the rent payable
under this Lease shall abate until the Premises may be once again used by the
Tenant.
(f) Notwithstanding the above, Landlord will use reasonable efforts
not to interfere with Tenant's business.
SECTION 8.02 REMOVAL OF FIXTURES
Subject to Section 5.07 hereof, the Tenant may at or prior to the
expiration of the Term hereby granted, take, remove and carry away from the
Premises any of its fixtures, fittings, shelving, counters or other articles
upon the Premises in the nature of trade or tenants' fixtures, but the Tenant
shall in such removal do no damage to the Premises, or shall make good any
damage which the Tenant may occasion thereof; provided further that the Tenant
shall not remove or carry away from the Premises any building or any plumbing,
heating, air-conditioning or ventilating plant or equipment or other Building
services; and further notwithstanding anything contained in this Lease, the
Landlord shall have the right to require the Tenant upon the termination of this
Lease by affluxion of time or otherwise to remove any installations,
alterations, additions, partitions and fixtures or anything in the nature of
leasehold improvements made or installed by or on behalf of the Tenant or any
subtenant or occupant of the Premises, or by the Landlord on behalf of the
Tenant or by any previous tenant or occupant of the Premises or any part
thereof, and to make good any damage caused to the Premises by such removal. Any
installations, alterations, additions, partitions and fixtures and anything in
the nature of the leasehold improvements not removed by the Tenant or required
to be removed by the Landlord, shall become the absolute property of the
Landlord without any cost to the Landlord or compensation to the Tenant, any
subtenant or occupant of the Premises, free and clear of all liens, charges and
encumbrances whatsoever.
SECTION 8.03 SIGNS
The Tenant shall not paint, display, inscribe, place or affix any sign,
picture, advertisement, notice, lettering or direction, or any window blinds or
awnings, on any part of the outside of the Building or visible from the outside
of the Building, or in any corridor, hallway, entrance or any other public part
of the Building, without the prior written approval of the Landlord; provided
that the Landlord may prescribe a uniform pattern for identification signs for
tenants to be placed on the outside of the Premises. Provided that, at the
request of the Tenant and at the Tenant's expense, the Landlord shall, at its
option, either permit such sign to be placed or, cause such a sign to be placed,
in position in the form of lettering, style and design and in the size and
position as directed by the Landlord in writing. Provided that on the expiration
or sooner termination of this Lease, the Tenant shall cause any signs as
aforesaid to be removed or obliterated at its own expense and in a good and
workmanlike manner. The Tenant will indemnify and save harmless the Landlord
from and against any loss, suit, action, damage, injury or claim suffered by any
person, firm or corporation arising out of or by reason of the erection, or
presence of any such sign(s) or awnings, or the removal of same and whether or
not the Tenant, its officers, employees, agents, invitees or servants have been
negligent with respect to the same.
ARTICLE IX
The parties hereto agree each with the other as follows:
SECTION 9.00 DAMAGE OR DESTRUCTION OF PREMISES
(a) If, during the Term, the Premises shall be damaged or destroyed by a peril
or perils which would be covered by a standard fire insurance policy with an
extended coverage endorsement thereto, the Minimum Rent shall abate in the
proportion that the part of the Premises rendered unfit for occupancy bears to
the whole of the Premises until the Premises are rebuilt; and the Landlord
agrees that it will with reasonable diligence repair the Premises unless the
Lease is terminated in accordance with the provisions herein, except for:
(i) any repair the Tenant is obligated to make under the terms
hereof, and
(ii) the property of the Tenant or any occupant of the Premises, or
any part thereof, and any improvements installed by or on behalf
of the Tenant, any previous tenant, or any occupant of the
Premises, or any part thereof, all of which the Tenant agrees
to repair and restore, in each such case, to substantially the
condition same were in immediately before such destruction or
damages occurred, but in any event subject always to the
provisions of paragraphs 9.00(b), 9.00(c), 9.00(d) and 9.00(e)
hereof.
(b) If the Premises are damaged or destroyed by any cause whatsoever and if, in
the opinion of the Landlord's Architect, the Premises cannot be rebuilt or made
fit for the purposes of the Tenant within one hundred and twenty (120) days of
the damage or destruction, the Landlord instead of rebuilding or making the
Premises fit for the Tenant as provided in Section 9.00(a) above, may at its
option, terminate this Lease by giving the Tenant within thirty (30) days of
such damage or destruction notice of termination and thereupon the rent shall be
apportioned and paid to the date of such damage or destruction and the Tenant
shall immediately deliver up possession of the Premises to the Landlord.
(c) If the Building or part thereof shall be damaged or destroyed and such
damage or destruction shall, in the opinion of the Landlord's Architect,
materially interfere with the enjoyment of the Premises by the Tenant, the
Minimum Rent in respect of the Premises shall abate in proportion to such
interference during the period of such interference.
(d) If the Building shall, in the opinion of the Landlord's Architect, be
damaged to the extent that no less than FORTY (40%) per cent of the area of the
Building requires repair or reconstruction (and whether or not there shall be
any damage to the Premises), the Landlord instead of rebuilding or repairing the
Building as provided in Section 9.00(a) above, may at its option, terminate this
Lease by giving the Tenant, within thirty (30) days of such damage or
destruction, notice of termination and the Tenant shall immediately deliver up
possession of the Premises to the Landlord.
(e) Provided always that there shall be no cessation or abatement of rent if
damage to the Premises or the Building or any part thereof shall have been the
result of the negligence, default or wilful act or omission of the Tenant or its
agents, servants, employees, workmen or invitees or other persons from time to
time on or about the Premises, the Building or the Lands with the expressed or
implied consent, approval or invitation of the Tenant.
SECTION 9.01 NOTICE OF ACCIDENTS, DEFECTS OR DAMAGES
The Tenant shall immediately advise the Landlord, and promptly
thereafter by notice confirm such advice to the Landlord of any accident to or
defect in the plumbing, gas pipes, water pipes, heating, ventilating and air
conditioning apparatus, electrical equipment, conduits, or wiring, or of any
damage or injury to the Premises, or any part thereof, howsoever caused;
provided that nothing herein shall be construed so as to require repairs to be
made by the Landlord, except as expressly provided in this Lease.
SECTION 9.02 DAMAGE TO BUILDING BY TENANT
The Tenant shall reimburse the Landlord forthwith on demand for all
costs incurred by the Landlord in making good any damage caused to the Building,
the Lands, the improvements thereon, or any part thereof, including the
furnishings and amenities thereof as a result of the negligence or wilful act or
omission of the Tenant, its employees, invitees, licensees, agents, servants or
other persons from time to time in or about the Premises, the Building or the
Lands with the express or implied consent of the Tenant.
ARTICLE X
SECTION 10.00 ASSIGNING OR SUBLETTING
(a) The Tenant shall not suffer or permit any other person to use or to occupy
the Premises and shall not mortgage this Lease or any right hereunder or
interest herein and shall not assign this Lease or sublet the Premises or any
part thereof (all of the foregoing being hereinafter collectively referred to as
a "Transfer") without the prior consent in writing of the Landlord, which
consent shall not be unreasonably withheld. This prohibition against any
Transfer shall be construed to include a prohibition against any Transfer by
operation of law. The Tenant shall not assign the Lease with respect to part of
the Premises only.
(b) The Tenant shall, at the time the Tenant requests the consent of the
Landlord to any Transfer, deliver to the Landlord such information in writing
(herein called the "required information") as the Landlord may reasonably
require respecting the proposed occupier, user, assignee, mortgagee or subtenant
(all of the foregoing being hereinafter collectively referred to as the
"Transferee") including the name, address, nature of business, reputation,
financial responsibility and standing of such Transferee and the terms,
conditions and rental rate of such Transfer. After receiving the tenant's
request, the Landlord shall have the right, at its option, in lieu of consenting
to the Transfer, to terminate the Lease if the Transfer relates to all of the
Premises or, if the Transfer relates to a portion only of the Premises, to
terminate the Lease with respect to such portion, by giving within fifteen (15)
days after receiving the required information, on not less than thirty (30) nor
more than sixty (60) days written notice of termination to the Tenant. In the
event of such termination, the Tenant shall surrender the Premises or portion
thereof, as the case may be, in accordance with the said notice and the
provisions of this Lease relating to surrender of the Premises at the expiration
of the Term and the rent shall be adjusted to the date of termination and, if
the Lease is terminated in respect of only a portion of the Premises, the rent
shall be abated proportionately.
(c) If such consent of the Landlord shall be given, the Tenant shall Transfer
only to the Transferee named and upon the terms, conditions and at the rental
rate provided to the Landlord as part of the required information and such
Transferee shall enter into an agreement, in form and content determined by the
Landlord, covenanting and agreeing with the Landlord to comply with and perform
all the obligations, covenants and agreements in this Lease contained on the
part of the Tenant to be complied with or performed and shall covenant and agree
directly with the Landlord not to mortgage or assign any lease or sublet in
whole or in part, its premises without the consent of the Landlord and the
provisions of this Article X shall apply mutatis mutandis. In the event that the
Tenant has not completed such Transfer within thirty (30) days after the consent
of the Landlord is given, such consent of the Landlord shall be null and void
and the Tenant shall not be permitted to Transfer without again conforming to
all of the provisions of this Article X.
(d) In no event shall any Transfer to which the Landlord may have consented
release or relieve the Tenant from its obligations to fully perform all the
terms, covenants and conditions of this Lease on its part to be performed for
the entire Term and any renewal or extension thereof, and in any event, the
Tenant shall be liable for the Landlord's costs incurred in connection with the
Tenant's request for consent whether or not the Landlord consents to any request
to a Transfer. Notwithstanding any consent of the Landlord to any Transfer, the
Landlord's consent shall be required for any further or other Transfer and the
provisions of this Article X shall apply to each and every Transfer and any
consent of the Landlord shall not act as a waiver of any of the provisions of
this Article X.
(e) If the Tenant is a corporation or if the Landlord has consented
to any Transfer to a corporation, any transfer or issue by sale,
assignment, bequest, inheritance, operation of law or other
disposition, or by subscription, from time to time of all or any part of the
corporate shares of the Tenant or of any parent or subsidiary corporation of the
Tenant or any corporation which is an associate or affiliate of the Tenant (as
those terms are defined pursuant to the Canada Business Corporations Act S.C.
1974-75, c. 33 and amendments thereto), which results in any change in the
effective voting control of the Tenant by the person holding such voting control
at the Commencement Date (or at the date any Transfer to the corporation is
consented to by the Landlord) and which does not receive the prior written
consent of the Landlord in each instance, which consent may be unreasonably
withheld, notwithstanding any statutory provision to the contrary, entitles the
Landlord to terminate this Lease upon five (5) days' written notice to the
Tenant. If the Landlord elects to cancel this Lease as aforesaid, the Tenant
shall have the right to advise the Landlord within five (5) days after written
notice of the Landlord's election that the Tenant elects to have this Lease
reinstated by the transfer, sale, assignment or other disposition (the
"Re-Transfer") from the shareholders of the Tenant after such change in control
to the shareholders of the Tenant existing as at the Commencement Date (or at
the date that any Transfer to the corporation was consented to by the Landlord).
If the Tenant effects such Re-Transfer within thirty (30) days following the
Landlord's election, and forthwith thereafter provides the Landlord with
evidence satisfactory to the Landlord of such Re-Transfer, this Lease will be
reinstated as of the date of the termination by the Landlord as aforesaid. If
this Lease is terminated as aforesaid, the Landlord may re-enter and take
possession of the Premises whereupon the Landlord's rights and remedies
contained in Section 12.00 hereof shall apply. The Tenant shall make available
to the Landlord, or its lawful representatives, all corporate books and records
of the Tenant for inspection at all reasonable times, in order to ascertain
whether there has been any change in control of the Tenant corporation. However,
this Section 10.00(e) shall not apply to the Tenant if and so long as the Tenant
is a public corporation whose shares are traded and listed on any recognized
stock exchange in Canada or the United States, so long as prior to or as soon as
reasonably possible after any such change of control of the Tenant, the Landlord
receives assurances satisfactory to the Landlord that there will be a continuity
of the existing management of the Tenant, and of its business practices and
policies notwithstanding any such change of control.
(f) Any Transfer in breach of Article X shall, until and unless the Landlord
shall have otherwise have consented, be invalid and of no force or effect but
shall nevertheless constitute a default hereunder.
(g) The Landlord's consent to any Transfer shall not be effective unless given
by the Landlord in writing and no such consent shall be deemed or presumed by
any act or omission of the Landlord other than an express consent in writing;
without limiting the generality of the foregoing, the Landlord may collect rent
and any other amounts from the Transferee and apply the net amount collected to
the rent and other amounts payable pursuant to this Lease and the collection or
acceptance of such amounts shall not be deemed to be a waiver of the Landlord's
rights under this Article X nor an acceptance of or consent to any such
Transfer.
(h) If pursuant to a Transfer consented to by the Landlord, a Transferee has
sublet all or part of the Premises from the Tenant and has agreed to pay the
Tenant a rent (which shall be deemed to include any premiums, bonuses, key money
or lump sum payments made by the Transferee to the Tenant, or as the Tenant may
direct, that may reasonably be considered to be for the use of all or part of
the Premises, or amounts payable for the purchase or use of leasehold
improvements or chattels in excess of their fair market value, lump sums to be
amortized over the term of the sublease for the purposes of calculating the
rent) or other amount in respect of its use of the Premises or any part of the
Premises that exceeds the rent payable by the Tenant to the Landlord (or a
pro-rated portion of such rent in the case of a Transfer of less than the entire
Premises), the Tenant will pay to the Landlord monthly, as additional rent,
together with Minimum Rent, an amount equal to the excess rent received or
receivable by the Tenant from the Transferee. (i) Notwithstanding the above,
Tenant has right to sublet up to 20% of the Premises to a third party for the
operation of a service currently provided by the Tenant, provided that the
Tenant will be held responsible for the obligations of the Lease.
ARTICLE XI
SECTION 11.00 TENANT'S INSURANCE
(a) The Tenant shall at its own expense, provide and maintain
in force during the Term:
(i) plate glass insurance, for the benefit of the
Landlord, any and all mortgagees of the Landlord (the
"Mortgagee") and the Tenant, covering all plate glass
in the Premises, including plate glass windows and
doors, in an amount equal to the full insurable value
thereof;
(ii) comprehensive general public liability (covering
personal and bodily injury, death and property
damage) on an occurrence basis with respect to all
construction, installation and alteration done in the
Premises by the Tenant, the business carried on, in
or from the Premises, any private rail crossing
servicing the Lands and the Tenant's use and
occupancy thereof and of the Premises, of not less
than Five Million Dollars ($5,000,000.00) (or such
greater amount as the Landlord may reasonably require
provided any change is consistent with market rates
for comparable uses in comparable facilities);
(iii) insurance in such amounts as may be reasonably
required by the Landlord in respect of fire and such
other perils as are from time to time defined in the
usual extended coverage endorsement covering the
Tenant's trade fixtures and the furniture and
equipment of the Tenant and all leasehold
improvements of the Tenant, and which insurance shall
contain a waiver of subrogation clause in favour of
the Landlord and such insurance shall include the
Landlord and the Mortgagee as named insureds as the
Landlord's and the Mortgagee's interest may appear
with respect to insured leasehold improvements and
provide that any proceeds recoverable in the event of
loss to leasehold improvements shall be payable to
the Landlord and the Mortgagee jointly but the
Landlord and Mortgagee shall agree to make available
such proceeds toward the repair or replacement of the
insured property if this Lease is not terminated
pursuant to any provision hereof;
(iv) Tenant's legal liability insurance (for the full
replacement cost of the Premises),
(v) any other form of insurance as the Landlord, acting
reasonably, requires from time to time for risks
against which a prudent tenant would insure and in
respect of which insurance is available.
(vi) business interruption insurance in such amounts as
will reimburse the Tenant for direct or indirect loss
of earnings attributable to the perils to be insured
against by the Tenant hereunder and any other perils
commonly insured against by prudent tenants or
attributable to loss of access to the Premises or the
Building or the Lands as a result of such Perils.
(b) All insurance required to be maintained by Tenant hereunder shall be in
amounts and on terms satisfactory to Landlord and the Mortgagee. Such insurance
shall be by policies in form and content satisfactory from time to time to the
Landlord and the Mortgagee and
with insurers acceptable to Landlord and the Mortgagee and shall provide that
such insurers shall provide to Landlord and the Mortgagee thirty (30) days prior
written notice of cancellation or material alteration of such policies. Each
policy shall name the Landlord and the Mortgagee as additional insureds except
for coverage for Tenant's fixtures and furnishings and equipment but including
coverage for leasehold improvements in respect of Landlord's and the Mortgagee's
insurable interests therein, and shall contain a waiver of subrogation in favour
of Landlord and the Mortgagee and shall protect and indemnify the Landlord, the
Mortgagee and Tenant. The Tenant shall furnish to the Landlord certificates, or,
if required by Landlord or the Mortgagee, the original policies (signed by the
insurers) of the insurance from time to time required to be effected by Tenant
and evidence acceptable to Landlord of their continuation in force.
(c) In the event that the Tenant shall fail to insure and keep insured as
hereinbefore provided in this Section 11.00, the Landlord upon five (5) days
prior notice in writing to the Tenant, shall be free to effect such insurance
and the costs thereof, together with a sum equal to fifteen (15%) percent of
such costs as an administration fee together with interest on all such costs at
the Stipulated Rate from the date of payment by the Landlord to the date of
reimbursement by the Tenant, to be due and payable forthwith on demand as
additional rent hereunder.
(d) In the event that the Landlord, the Mortgagee and the Tenant have claims to
be indemnified under any such insurance, the indemnity shall be applied first to
the settlement of the claim of the Mortgagee and then the Landlord and the
balance, if any, to the settlement of the claim of the Tenant.
SECTION 11.01 INDEMNITY TO LANDLORD
The Tenant shall, notwithstanding Section 11.00 hereof, indemnify
and save harmless the Landlord from any and all liabilities, damages, expenses,
costs, fees (including legal fees on a solicitor and his own client basis),
claims, suits or actions arising from or growing out of the following, which may
have occurred after the Commencement Date:
(a) any breach, violation, or non-performance of any covenant,
condition or agreement in this Lease set forth and contained on the
part of the Tenant to be fulfilled, kept, observed and performed;
(b) any damage to property occasioned by the use or occupation
of the Premises or any part thereof;
(c) any injury to any person or persons including death resulting at any time
therefrom, occurring in, upon or about the Premises or any areas used in
connection with the Premises, or any part thereof arising out of the use or
occupation of the Premises or any part thereof;
(d) any act or omission of the Tenant, its agents, employees, licensees,
servants, invitees or other persons from time to time in, on or about the
Premises, the Building or the Lands with the express or implied consent,
approval or invitation of the Tenant, or
(e) any Environmental Hazards caused by or permitted by the
Tenant or any subtenant of the Tenant or any other party occupying
or using the Premises or any part thereof,
and this indemnity shall survive the expiry or sooner termination of
this Lease.
<PAGE>
ARTICLE XII
The parties hereto agree each with the other as follows:
SECTION 12.00 RE-ENTRY
(a) If and whenever the rent or any part thereof or any other monies payable by
the Tenant under this Lease, shall be unpaid when the same ought to have been
paid, and said rent remains unpaid five (5) days after the Landlord provides
Notice of such arrears, or in case of the breach or non-performance of any of
the covenants or agreements (other than for the payment of rent and other
monies) herein contained on the part of the Tenant and said breach or
non-performance remains uncured ten (10) days after the Landlord provides Notice
of same, or if the Premises are vacated or become vacant or remain unoccupied
for five (5) days or are not used for the purpose specified then, and in any of
such cases, the then current month's rent together with the rent for the next
three months next ensuing shall immediately become due and payable, and it shall
be lawful for the Landlord at any time thereafter without notice or any form of
legal process whatever, to re-enter into and upon the Premises or any part
thereof, in the name of the whole, and the same to have again, repossess and
enjoy, as of the Landlord's former estate, anything herein contained to the
contrary notwithstanding, whereupon this Lease shall terminate forthwith,
anything herein contained to the contrary notwithstanding whereupon this Lease
shall terminate forthwith, anything contained herein or in any statute or law to
the contrary notwithstanding, provided however such termination shall be wholly
without prejudice to the right of the Landlord to recover arrears of rent and
damages for any antecedent breach of covenant on the part of the Tenant.
Notwithstanding such termination, the Landlord may subsequently recover from the
Tenant all losses, damages, costs (including legal fees on a solicitor and his
own client basis) and expenses whatsoever suffered by reason of this Lease
having been prematurely determined. For greater certainty, the Landlord shall
not be required to provide notice of its intention to re-enter the Premises in
the event the Premises are vacated or become vacant or remain unoccupied for
five (5) days.
(b) The Tenant further agrees with the Landlord that in any of the cases above
described in Section 12.00(a), the Landlord, in addition to the other rights
hereby reserved to it, shall have the right to enter the Premises or otherwise
without being liable for any prosecution therefor and to re-lease or sublet, as
the Tenant's agent, the Premises or any part thereof, and to apply the proceeds
of such re-leasing or sub-leasing on account of rent due or in satisfaction of
the breach of any covenant or agreement herein contained and the Tenant shall
remain liable for the deficiency, if any. SECTION 12.01 INSOLVENCY
If the Term hereby granted shall be at any time seized or taken in
execution or in attachment by any creditor of the Tenant or any if the Tenant or
any guarantor or indemnifier of this Lease or of the Tenant's obligations
hereunder, shall make any assignment for the benefit of creditors, or become
bankrupt or insolvent or shall take the benefit of any Act that may now or
hereafter be or become in force, for bankrupt or insolvent debtors or file a
proposal or a receiver or receiver and manager is appointed for all or a portion
of the Tenant's property or any steps are taken or any action or proceeding is
instituted by the Tenant or any other party, including without limitation, any
court or governmental body, for the dissolution, winding up, liquidation or
other termination of the corporate existence of the Tenant or any guarantor or
indemnifier of this Lease or their respective assets, then and in any such case
the Term shall, at the option of the Landlord, immediately become forfeited and
void and the then current month's rent and the rent for the three (3) months
next following shall immediately become due and payable as liquidated damages to
the Landlord and in such case it shall be lawful for the Landlord at any time
thereafter to re-enter into and upon the Premises or any part thereof, in the
name of the whole, and the same to have again, repossess and enjoy as of its
former estate anything herein contained to the contrary notwithstanding.
SECTION 12.02 LANDLORD MAY PERFORM TENANT'S COVENANTS
If the Tenant shall fail to perform or cause to be performed any of the
covenants or obligations of the Tenant in this Lease contained, on the part of
the Tenant to be observed or performed, the Landlord shall have the right (but
shall not be obligated) to perform or cause the same to be performed, and to do
or cause to be done such things as may be necessary or incidental thereto
(including without limiting the foregoing, the right to make repairs,
installations, erections and expend monies) and all payments, expenses, costs,
charges, fees (including all legal fees on a solicitor and his own client basis)
and disbursements incurred or paid by or on behalf of the Landlord in respect
thereof shall be paid by the Tenant to the Landlord, as additional rent,
forthwith together with a sum equal to fifteen (15%) percent of the aggregate of
all payments, expenses, costs, charges, fees and disbursements as an
administration fee together with interest on all such sums at the Stipulated
Rate from the date incurred until repaid by the Tenant.
SECTION 12.03 FOLLOW CHATTELS
Provided that in case of removal by the Tenant of the goods and
chattels of the Tenant from off the premises, the Landlord may follow the same
for thirty (30) days.
SECTION 12.04 WAIVER OF EXEMPTIONS
That in consideration of the leasing and letting by the Landlord to the
Tenant of the Premises for the Term (and it is upon that express understanding
that these presents are entered into) that notwithstanding anything contained in
any statute or in any statute which may hereafter be passed, none of the goods
or chattels of the Tenant at any time during the continuance of the Term on the
Premises shall be exempt from levy by distress for rent in arrears by the Tenant
as provided for in any such statute or any amendment or amendments thereto, and
that upon any claim being made for such exemption by the Tenant or on distress
being made by the Landlord this covenant and agreement may be pleaded as an
estoppel against the Tenant in any action brought to test the right to the
levying upon any such goods as are named as exempted in any such statute or
amendment or amendments thereto; the Tenant waiving as the Tenant hereby does
all and every benefit that could or might have accrued to the Tenant under and
by virtue of any such statute or any amendment or amendments thereto but for
this covenant.
SECTION 12.05 OVERLOOKING AND CONDONING
Any condoning, excusing or overlooking by the Landlord of any default,
breach or non-observance by the Tenant at any time or times in respect of any
covenant, proviso or condition herein contained shall not operate as a waiver of
the Landlord's rights hereunder in respect of any subsequent default, breach or
non-observance nor so as to defeat or affect in any way the rights of the
Landlord hereunder in respect of any subsequent default, breach or
non-observance. The subsequent acceptance of rent by the Landlord shall not be
deemed to be a waiver of any preceding breach by the Tenant of any term,
covenant or condition of this Lease regardless of the Landlord's knowledge of
such preceding breach at the time of acceptance of such rent.
SECTION 12.06 FORCIBLE RE-ENTRY
In the event that the Landlord shall be entitled under the terms of
this Lease or by law to enter the Premises, then the Landlord shall be at
liberty to effect such re-entry forcibly, and for such purpose the Landlord, or
its servants or agents duly authorized in writing may break open locks, doors,
windows, or otherwise, as may be deemed necessary for such purposes, without in
any way incurring any liability of becoming responsible for damages or otherwise
to the Tenant.
SECTION 12.07 REMEDIES GENERALLY
Mention in this Lease of any particular remedy of the Landlord in
respect of the default by the Tenant does not preclude the Landlord from any
other remedy in respect thereof, whether available at law or in equity or by
statute or expressly provided for in this Lease. No remedy shall be exclusive or
dependent upon any other remedy, but the Landlord may from time to time exercise
any one or more of such remedies generally or in combination, such remedies
being cumulative and not alternative. Whenever the Tenant seeks a remedy in
order to enforce the observance or performance of one of the terms, covenants,
agreements and conditions contained in this Lease on the part of the Landlord to
be observed or performed, the Tenant's only remedy, if any, shall be for such
damages as the Tenant shall be able to prove in a court of competent
jurisdiction that it has suffered as a result of a breach (if established) by
the Landlord in the observance of any of the terms, covenants, agreements and
conditions contained in this Lease on the part of the Landlord to be observed or
performed.
ARTICLE XIII
The parties hereto agree each with the other as follows:
SECTION 13.00 LANDLORD NOT RESPONSIBLE FOR
INJURIES, LOSS OR DAMAGE
Except with respect to any Excess Claim, the Landlord shall not
be responsible in any way or under any circumstances whatsoever for any injury
to any person (including death) however caused or for any loss of or damage to
any property belonging to the Tenant, any subtenant, or to other occupants of
the Premises or to their respective invitees, licensees, agents, servants or
other persons from time to time attending at the Premises while such person or
property is in, upon, at or about the Building or the Lands or any parking
areas, sidewalks, steps, truckways, railway siding, platforms, corridors,
stairways, including without limiting the foregoing, any loss of or damage to
any such property caused by theft or breakage, or failure to keep the Premises,
the Building or the Lands in repair and free from refuse, obnoxious odours,
vermin or other foreign matter, defective wiring, plumbing, gas, sprinkler,
steam, sewer, water or other pipes or fixtures, the bursting, leaking, running
or clogging of any heating, ventilating or air-conditioning equipment or other
mechanical systems (including elevator system, if any), cistern tank, sprinkler
system, boiler, washstand, closet or wastepipe, discharge of the sprinkler
system, water, snow, ice or other foreign matter being upon or coming through
the roof, skylight, trap-doors, doors, windows or from any part of the Building
or any adjacent or neighbouring lands and premises or otherwise, acts or
negligence of guests, invitees or employees of the Tenant or other occupants of
the Premises, the Building or the Lands, acts or negligence of any owners or
occupants of adjacent or contiguous premises or property or their guests,
invitees or employees, acts of God, acts or negligence of any person or for any
loss whatsoever with respect to the Premises and/or any business carried on
therein.
"Excess Claim" means any claim arising from any injury to any person (including
death) or any loss of or damage to any property belonging to the Tenant, or its
invitees, in, upon at or about the Building or the Lands or parking areas,
sidewalks, steps, truckways, platforms, corridors, or stairways caused by the
negligence of the Landlord or by the breach by the Landlord of its covenants
contained in this lease except for and to the extent any such claim is or would
be covered by or insured under any policy of insurance the Tenant has placed or
is obligated to place pursuant to Section 11.00 hereof.
SECTION 13.01 NO LIABILITY FOR INDIRECT DAMAGES
Under no circumstances whatsoever shall the Landlord be liable
for indirect or consequential damage or damages for personal discomfort or
illness by reason of the non-performance or partial performance of any covenants
of the Landlord herein contained.
SECTION 13.02 UNAVOIDABLE FAILURE OR DELAYS BY LANDLORD
Whenever and to the extent that the Landlord shall be unable to
fulfil or shall be delayed or restricted in the fulfilment of any obligation
hereunder in respect of the supply or provision of heating, air-conditioning or
any service or any utility or the doing of any work by reason of being unable to
obtain the material, goods, equipment, service, utility or labour required to
enable it to fulfil such obligation or by reason of any statute, law or
order-in-council or any regulation or order passed or made pursuant thereto or
by reason of the order of direction of any administration controller or board of
any governmental department or officer or other authority or by reason of not
being able to obtain any permission or authority required thereby or by reason
of any other cause beyond its control whether of the foregoing character or not,
the Landlord shall be relieved from the fulfilment of such obligation and the
Tenant shall not be entitled to compensation for any inconvenience, nuisance or
discomfort thereby occasioned. There shall be no deduction from the rent by
reason of any such failure or cause. In the event the Landlord is unable to
fulfil or shall be delayed or restricted in the fulfilment of any obligation
hereunder, and the Tenant has the ability to remedy any such inconvenience,
nuisance or discomfort they occasion, the Tenant may correct any such
circumstance at their own expense, provided the Tenant acts within all legal
parameters and any work the Tenant carries out is performed by qualified
tradespeople.
ARTICLE XIV
The parties hereto agree each with the other as follows:
SECTION 14.00 SALE OF PREMISES
Notwithstanding section 14.14 of this Lease, in the event of a sale or
conveyance by the Landlord of the Building or assignment of this Lease by the
then current Landlord, the same shall operate to release the Landlord from any
future liability upon any of the covenants, agreements or conditions, express or
implied, herein contained on the part of the Landlord, and in such event the
Tenant agrees to look solely to the successor in interest of the Landlord. If
any security is given by the Tenant to secure performance of the Tenant's
covenants hereunder, the Landlord may transfer such security to the purchaser of
the reversion and thereupon the Landlord shall be discharged from any further
liability in reference thereto.
SECTION 14.01 EXHIBITING PREMISES
Provided the Landlord has delivered one days prior written notice to
the Premises, any person or persons may inspect the Premises and all parts
thereof at all reasonable times. The Landlord shall have the right to place upon
the Lands a notice of reasonable dimensions and reasonably placed so as not to
interfere with the business of the Tenant, stating that the Premises are for
sale or for rent and further provided that the Tenant will not remove such
notice or permit the same to be removed.
SECTION 14.02 OVERHOLDING
If at the expiration of the Term of this Lease the Tenant shall hold
over, the tenancy of the Tenant thereafter shall, in the absence of written
agreement to the contrary, be from month to month only at a rental per month
equal to one-sixth (1/6th) of the Minimum Rent payable for the calendar year
immediately preceding such expiration, payable monthly in advance on the first
day of each month and shall be subject to all other terms and conditions of this
Lease except as to duration and any option to renew or extend the Term.
SECTION 14.03 CALCULATIONS
In the event any calculation, estimation or determination of the area
of the Premises or the Building or of the Operating Expenses or the Taxes or of
Proportionate Share, is disputed or called into question, it shall be calculated
or determined by the Landlord's Architect, quantity surveyor or accountant (any
one or more of whom may be an employee of the Landlord), as the case may be,
whose certificate shall be conclusive. All measurements of area shall be taken
from the exterior wall surface in the case of outside walls and from the centre
line of all walls in case of interior dividing walls and no deduction shall be
made for doorways, columns, shafts, stairs or other interior obstruction,
construction or equipment.
SECTION 14.04 SUBORDINATION
If required by the Landlord so to do, the Tenant shall subordinate this
Lease to any mortgages, including any deed of trust and mortgage and all
indentures supplemental thereto, which now or hereafter during the Term affect
or relate to this Lease, the Premises and to all modifications or renewals
thereof. The Tenant agrees to execute promptly, from time to time any assurance
which the Landlord may require to confirm this subordination and hereby
constitutes the Landlord, the agent or attorney of the Tenant for the purpose of
executing any such assurance and of making application at any time and from time
to time to register postponement of this Lease in favour of any such mortgage in
order to give effect to the provisions of this clause. In the event the Landlord
obtains mortgage financing on the Lands and Building, the Landlord shall make a
good faith effort to obtain a non-disturbance agreement in favour of the Tenant,
provided the Lease is in good standing and the Tenant is not in default of its
covenants and obligations hereunder.
SECTION 14.05 CERTIFICATE OF STATUS
Whenever requested from time to time by the Landlord or any actual or
proposed purchaser, mortgagee or encumbrancer of the Building, the Tenant shall
promptly execute and deliver, to the party requesting the same, a certificate or
acknowledgement as to the status and validity of this Lease and the state of the
rental account herein, and such other information as may reasonably be required.
SECTION 14.06 LEASE ENTIRE RELATIONSHIP
The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions expressed or implied, collateral or
otherwise forming part of or in any way affecting or relating to this Lease save
as expressly set out in this Lease and that this Lease constitutes the entire
agreement between the Landlord and the Tenant and may not be modified except by
subsequent agreement in writing of equal formality executed by the Landlord and
the Tenant.
SECTION 14.07 NOTICES
(a) Any notice herein provided for or given hereunder if given by the Tenant to
the Landlord shall be given in writing and shall be sufficiently given if mailed
by registered mail, postage prepaid to the Landlord at the Landlord's Address
for service.
(b) Any notice herein provided for or given hereunder, if given by the Landlord
to the Tenant, shall be in writing and shall be sufficiently given if delivered
or mailed by registered mail, postage prepaid to the Tenant at the Premises or
left at the Premises. In the event the Landlord delivers notice pursuant to
Section 12.00 (a) herein, the Landlord shall also deliver notice to the Tenant's
Head Office at:
Fun Tyme Concepts of Edmonton Inc.
c/o Fun Time Concepts Incorporated
290 Wild Avenue
Staten Island, New York
10314
Phone: (718) 761-6100
Fax: (718) 761-6448
(c) Any notice mailed as aforesaid shall be conclusively deemed to have been
given on the third business day following the day on which such notice is mailed
as aforesaid . In the event of any existing or threatened disruption in postal
services, service by mail shall not be an acceptable means of delivery until ten
(10) days after normal postal service has commenced. The Landlord may at any
time give notice in writing to the Tenant of any change of address of the
Landlord and from and after the giving of such notice the address therein
specified shall be deemed to be the address of the Landlord for service. The
word "notice" in this section 14.07 shall be deemed
to include any request, demand, direction or statement in writing in this Lease
provided or permitted to be given by the Landlord to the Tenant or by the Tenant
to the Landlord.
SECTION 14.08 ACCORD AND SATISFACTION
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of rent and additional rent herein stipulated is deemed
to be other than on account of the earliest stipulated rent and additional rent
nor is any endorsement or statement on any cheque or any letter accompanying any
cheque or payment as rent or additional rent deemed an acknowledgement of full
payment or an accord and satisfaction, and the Landlord may accept and cash such
cheque or payment without prejudice to the Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.
SECTION 14.09 GOVERNING LAW
This Lease shall be construed and governed by the laws of the Province
in which the Lands are situate. All of the provisions of this Lease are to be
construed as covenants and agreements as though the words importing such
covenants and agreements were used in each separate section and paragraph hereof
and all of such covenants and agreements shall be deemed to run with the Lands
and the reversion therein. Should any provision of this Lease be illegal or not
enforceable they shall be considered separate and several from the
Lease and its remaining provisions shall remain in force and be binding upon the
parties hereto as though the illegal or unenforceable provisions had never been
included. The schedules shall form part of this Lease.
SECTION 14.10 FRUSTRATION
The Landlord and Tenant agree that notwithstanding the occurrence or
existence of any event or circumstance or the non-occurrence of any event or
circumstance and so often and for as long as the same may occur or continue
which, but for this paragraph, would frustrate or void this Lease, the
obligations and liabilities of the Tenant hereunder shall continue in full force
and effect as if such event or circumstance had not occurred or existed.
SECTION 14.11 TIME OF ESSENCE
Time shall be of the essence of this Lease.
SECTION 14.12 REGISTRATION
The Tenant shall not register this Lease provided that the Tenant may
register a notice thereof with the prior consent of the Landlord.
SECTION 14.13 CAPTIONS
The headings, captions, section numbers, article numbers and indices
appearing in this Lease have been inserted as a matter of convenience and for
reference only and in no way define, limit, construct or enlarge the scope or
meaning of this Lease or any provisions hereof.
SECTION 14.14 BINDING EFFECT
This Lease and everything herein contained shall enure to the benefit
of and be binding upon the heirs, executors, administrators, successors, assigns
and other legal representatives, as the case may be, of each of the parties
hereto, subject to the granting of consent by the Landlord as provided in
Article X to any assignment or sublease, and every reference herein to any party
hereto shall include the heirs, executors, administrators, successors, assigns
and other legal representatives of such party, and where there is more than one
Tenant or there is a female party or corporation, the provisions hereof shall be
read with all grammatical changes thereby rendered necessary and all covenants
shall be deemed joint and several.
ARTICLE XV
SPECIAL PROVISIONS
15.01 Free Minimum Rent
Notwithstanding anything herein contained, the Tenant shall
receive a total of three (3) months of free Minimum Rent, being the months of
April 1997, May 1997 and June 1997. During these three months with free Minimum
Rent, the Tenant shall be required to pay all Operating Expenses and Taxes.
15.02 Exclusivity
Provided the Lease is in good standing and the Tenant is not in
default of any of its covenants and/or obligations, the Landlord shall not lease
space in the Building to any other tenant whose main use would be the operation
of a children's indoor playground within the Building..
IN WITNESS WHEREOF the parties hereto have executed this
Indenture on the day and year set forth above.
SUN LIFE ASSURANCE COMPANY OF CANADA
Per: ___________________________________
Authorized Signing Officer
Per: ___________________________________
Authorized Signing Officer
FUN TYME CONCEPTS OF EDMONTON INC.
Per:____________________________________
c/s
Per:____________________________________
Schedules
Schedule A - Lands
Schedule B - Premises
Schedule C - Rules and Regulations
<PAGE>
SCHEDULE "A"
The Landlord is the Registered owner of the Lands, Building and Premises
described as follows:
Lot: Thirteen (13)
Block: Five (5)
Plan: 6207 K.S. Strathcona Industrial Park
Containing three and one-hundredths (3.01) acres, more or less,
excepting thereout; fifty-one hundredths (0.51) of and acre, more or less.
Municipally known as:
3904 - 91 Street, Edmonton, Alberta
Consisting of:
12,200 square feet, more or less. The Tenant's Proportionate
Share is 33.3%.
Initials of Tenant:
Initials of Landlord:
<PAGE>
SCHEDULE "C"
Rules and Regulations Referred to in Annexed Lease
1. The Tenant shall not perform any acts or carry on any
practice which may injure the lands or be a nuisance to any other
tenants of the building.
2. The Tenant shall not burn any trash or garbage in or about
the demised premises or anywhere within the confines of the lands.
3. The Tenant shall not keep or display any merchandise on
or otherwise obstruct any part of the lands except as is specifically
permitted in the Lease.
4. Floors shall not be overloaded. Floor loading shall not
exceed the maximum load permitted by the building specifications.
5. All loading and unloading of merchandise, supplies, materials, garbage,
refuse and other chattels shall be made only through or by means of such
doorways as the Landlord shall designate in writing from time to time.
6. The Tenant shall in connection with its advertising in relating to the
business carried on in the demised premises use and promote the name of the
building or such other name as the landlord may from time to time designate and
in using such name in any advertisement, sign, poster, printing or other writing
the Tenant will print, write or designate the same in a manner to be determined
from time to time by the landlord and in no other manner. The Tenant shall not
use such name in regard to any business other than its business upon the demised
premises. The Tenant agrees that it will not carry on or permit to be carried on
any business in the demised premises under a name or style other than its own
name or call or permit the premises or any business carried on therein to be
called any name other than its own name, without the prior written consent of
the Landlord.
7. The Tenant shall, upon written notice from the Landlord, within five (5) days
furnish the Landlord with the current Provincial License Number of any vehicle
owned or used by employees of the Tenant.
8. The Tenant shall not bring upon its premises any equipment,
motor or other thing which might damage the building.
9. Garbage or refuse shall be placed in containers of a type approved by the
Landlord inside the demised premises and shall be removed only at such time or
times as the Landlord shall from time to time advise the Tenant.
10. No merchandise, supplies, materials, garbage, refuse or
other chattels shall be allowed to remain on any loading dock or
common area.
Initials of Tenant:
Initials of Landlord:
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA
MULTI-TENANT
STANDARD INDUSTRIAL LEASE FORM
- i -
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
ARTICLE I
<S> <C> <C>
Section 1.00 Definitions 1
ARTICLE II
Section 2.00 Demise 4
2.01 Term 4
2.02 Possession 4
2.03 Examination of Premises 4
ARTICLE III
Section 3.00 Minimum Rent 5
3.01 Operating Expenses 5
3.02 Taxes 6
3.03 Deposit 7
3.04 Payments to Landlord 7
3.05 Net Lease 7
ARTICLE IV
Section 4.00 Quiet Enjoyment 8
ARTICLE V
Section 5.00 Perform Covenants 8
5.01 Business Tax 8
5.02 Utilities 8
5.03 Evidence of Payments 9
5.04 No Nuisance 9
5.05 Comply with Laws and
Regulations 9
5.06 Comply with Rules 9
5.07 Goods, Chattels and Fixture
Not to be Removed 9
5.08 Peaceful Surrender 9
5.09 Care of Premises 10
5.10 Access 11
ARTICLE VI
Section 6.00 Use of Premises 11
6.01 Nuisance, Waste 11
6.02 Acts Conflicting with
Insurance 11
6.03 Auction 12
6.04 Rail Spur (deleted) 12
ARTICLE VII
Section 7.00 Tenant's Repairs 12
7.01 Landlord's Repairs 13
ARTICLE VIII
Section 8.00 Alterations 13
8.01 Landlord's Right to
Do Work 14
8.02 Removal of Fixtures 15
8.03 Signs 15
<PAGE>
-ii-
ARTICLE IX
Section 9.00 Damage or Destruction
of Premises 16
9.01 Notice of Accidents,
Defects, or Damages 17
9.02 Damage to Building by Tenant 17
ARTICLE X
Section 10.00 Assigning or Subletting 17
ARTICLE X1
Section 11.00 Tenant's Insurance 19
11.01 Indemnity to Landlord 20
ARTICLE XII
Section 12.00 Re-Entry 21
12.01 Insolvency 22
12.02 Landlord May Perform
Tenant's Covenants 22
12.03 Follow Chattels 22
12.04 Waiver of Exemptions
(deleted) 23
12.05 Overlooking and
Condoning 23
12.06 Forcible Re-Entry 23
12.07 Remedies Generally 23
ARTICLE XIII
Section 13.00 Landlord Not Responsible
for Injuries, Loss
or Damage 23
13.01 No Liability for Indirect
Damages 24
13.02 Unavoidable Failure
or Delays By Landlord 24
ARTICLE XIV
Section 14.00 Sale of Premises 25
14.01 Exhibiting Premises 25
14.02 Overholding 25
14.03 Calculations 25
14.04 Subordination 25
14.05 Certificate of
Status 26
14.06 Lease Entire
Relationship 26
14.07 Notices 26
14.08 Accord and
Satisfaction 27
14.09 Governing Law 27
14.10 Frustration 27
14.11 Time of Essence 27
14.12 Registration 27
14.13 Captions 27
14.14 Binding Effect 27
ARTICLE XV - SPECIAL PROVISIONS
Section 15.01 Free Minimum Rent 28
15.02 Exclusivity 28
</TABLE>
<PAGE>
Exhibit 21.0
List of all Company Subsidiaries.
LIST OF ALL COMPANY SUBSIDIARIES
1. Fun Tyme of New Brunswick, Inc.
2. Fun Tyme of Edmonton, Inc.
<PAGE>
Exhibit 22.0
Inspector of Elections Report for April 24,1997 Annual Meeting.
FUN TYME CONCEPTS, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 24, 1997
REPORT OF INSPECTORS OF ELECTION
To the Secretary of the Annual Meeting of
Stockholders of Fun Tyme Concepts, Inc.
The undersigned, having been duly appointed inspector of election at
the Annual Meeting of Stockholders of Fun Tyme Concepts, Inc., held at the
offices of Klarman & Associates, 14 West 60th Street, New York, New York on
April 24, 1997, does hereby report and certify as follows:
1. Pursuant to such appointment, we executed the oath of office and duly
delivered the same to the Chairman of the meeting.
2. We inspected the certified list of stockholders of Common Shares
prepared by the Company's transfer agent, and we certify that the number of
Common Shares of the Company issued, outstanding and entitled to vote at such
Annual Meeting was 2,676,000 shares.
3. We tallied the number of stockholders of Common Shares present at such
meeting, in person and by proxy, and we certify that there were present at such
meeting, in person and by proxy, stockholders holding 1,884,684 Common Shares of
the Company, thus constituting a quorum.
4. The following persons who received the votes set forth opposite their
names were duly elected directors by the holders of the Shares of the Company's
Common Stock to serve until the next annual meeting of stockholders and until
their respective successors shall have been elected and shall have qualified,
each having received at least a plurality of the votes cast:
<TABLE>
<CAPTION>
Votes Cast Withhold
Nominees For Authority to Vote
- -------- ---------- -----------------
<S> <C> <C>
Daniel Catalfumo 2,186,457 28,534
Richard Rosso 2,186,457 28,534
Dan Buchanan 2,186,457 28,534
</TABLE>
<PAGE>
5. The proposal to authorize the Corporation to ratify on the proposal
to reverse-spilt the Corporation's outstanding shares on a 1 for 3 basis.
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
<S> <C> <C> <C>
1,059,137 1,144,854 11,000
</TABLE>
IN TESTIMONY WHEREOF, I have hereunto set my hand this 24th day of
April, 1997.
/s/ Marie Elena Cocchiaro
Inspector of Election
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.01
Financial Data Schedule
FUN TYME CONCEPTS, INC.
EXHIBIT 27.01
FINANCIAL DATA SCHEDULE
This schedule contains summary information extracted from the Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 7, of this Form 10 -KSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> mar-31-1997
<PERIOD-END> mar-31-1997
<CASH> 2,155,465
<SECURITIES> 0
<RECEIVABLES> 5,236
<ALLOWANCES> 0
<INVENTORY> 32,020
<CURRENT-ASSETS> 2,284,674
<PP&E> 1,294,367
<DEPRECIATION> 249,488
<TOTAL-ASSETS> 3,413,625
<CURRENT-LIABILITIES> 143,075
<BONDS> 0
0
0
<COMMON> 2,676
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,413,625
<SALES> 949,910
<TOTAL-REVENUES> 949,910
<CGS> 138,790
<TOTAL-COSTS> 1,381,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,892
<INCOME-PRETAX> 0
<INCOME-TAX> 10,795
<INCOME-CONTINUING> (509,693)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (509,693)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
<PAGE>
</TABLE>
