-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R4pTmfkgbwTFpaIAQ0hHfMLeG4SHOBC0TPv3am2JuX0So/JpYAeDRjBMaIGsPgPF XxOoSiDgb7NWyjxaHJ/dCA== 0000950169-00-000320.txt : 20000404 0000950169-00-000320.hdr.sgml : 20000404 ACCESSION NUMBER: 0000950169-00-000320 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20000102 FILED AS OF DATE: 20000403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILVER DINER INC /DE/ CENTRAL INDEX KEY: 0000923134 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 043234411 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-24982 FILM NUMBER: 592723 BUSINESS ADDRESS: STREET 1: 11806 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 BUSINESS PHONE: 6176304400 MAIL ADDRESS: STREET 1: 11806 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 FORMER COMPANY: FORMER CONFORMED NAME: SILVER DINER DEVELOPMENT INC /MD/ DATE OF NAME CHANGE: 19960509 FORMER COMPANY: FORMER CONFORMED NAME: FOOD TRENDS ACQUISITION CORP DATE OF NAME CHANGE: 19941114 10-K 1 SILVER DINER U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 2000 Commission file number 0-24982 Silver Diner, Inc. (Exact name of the registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 04-3234411 (I.R.S. employer identification no.) 11806 Rockville Pike Rockville, Maryland 20852 301-770-0333 (Address and telephone number of the registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.0074 Par Value Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 15, 2000, the registrant had 11,792,034 shares of common stock (the "Common Stock") outstanding, and the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $6,729,847. The aggregate market value was determined based on the closing price of the Common Stock on the NASDAQ Stock Market(SM) on March 15, 2000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement for its Annual Meeting of Shareholders in 2000 are incorporated by reference into Part III. PART I Item 1. Business. General Silver Diner, Inc. (the "Company" or "Silver Diner") was incorporated in Delaware in April 1994 under the name Food Trends Acquisition Corporation ("FTAC"). In March 1996, a subsidiary of the Company merged with Silver Diner Development, Inc., a Virginia corporation ("SDDI"), which was formed in and operated Silver Diner restaurants since 1987. Silver Diner Limited Partnership ("SDLP"), of which SDDI was the general partner, operated the first three Silver Diner restaurants. In June 1996, the Company acquired all of the limited partner interests in SDLP for a purchase price of $2.472 million and 84,000 warrants to purchase shares of the Common Stock at $8.00 per share. Unless the context otherwise requires, references to the Company or Silver Diner also include FTAC, SDDI and their wholly owned subsidiaries. The Company's executive offices are located at 11806 Rockville Pike, Rockville, Maryland 20852 and its telephone number is (301) 770-0333. The Company's Common Stock trades on The Nasdaq Stock Market(SM) under the symbol "SLVR." Business The Company currently operates 11 Silver Diner restaurants, 10 in the Washington/Baltimore Metropolitan Area and one in Cherry Hill, New Jersey, serving breakfast, lunch, dinner and late night meals. The Company targets the growing number of customers tired of traditional fast food whose need for a quick, high-quality, reasonably priced meal is not being adequately served by existing family or casual theme restaurants; the Company capitalizes on the timeless diner theme to uniquely address this need. By attracting a broad range of customer segments, and maintaining extended operating hours, a diverse menu and convenient locations, the Company is able to compete effectively in the fast food, family and casual dining segments of the restaurant industry, contributing to the significant sales volumes of its units. The Company also offers Silver Diner To Go, which features a range of carry out/delivery options targeting the growing "home meal replacement" market, as well as specialty coffee drinks and expanded bakery selections. The restaurants typically are open for business from 7:00 a.m. to midnight on weekdays and from 7:00 a.m. to 3:00 a.m. on weekends. The Silver Diner menu strategy is to serve generous portions of made-from-scratch cooking at prices competitive with traditional family dining restaurants. The average check per customer is approximately $7.75 and the average dining time is approximately 40 minutes. For the last fiscal year the Silver Diner restaurants had sales ranging from $2.1 million to $4.3 million with average unit sales of $2.6 million on an average of 222 seats. Management attributes the significant sales volumes of its units to its ability to attract a broad range of customer segments, extended operating hours, diverse menu and convenient locations. Management believes it has established a strong company mission and culture by emphasizing a sense of ownership and entrepreneurship in its employees and by providing frequent training, recognition and development of its management. Diners have been indigenous to the United States for more than 100 years. Since opening the first Silver Diner restaurant in 1989, the Company has capitalized on the diner restaurant theme to uniquely address the customers' need of where to go for quick, high quality meals at reasonable prices. Key elements that differentiate Silver Diner restaurants from other restaurants include: . Broad and diverse menu combining "traditional diner" items with contemporary regional specialties - The menu includes a broad range of made- from-scratch meal choices featuring traditional home-style diner fare and all- day breakfast, as well as more contemporary "heart healthy" selections and regional specialty items. Each Silver Diner restaurant bakes all of its pies and cakes on the premises and features a carryout section offering its full menu. 1 . Classic, readily recognizable diner exterior, in combination with a comfortable diner interior decor and atmosphere - The visually striking exterior of the Silver Diner restaurants is both familiar and distinctive, combining polished stainless steel, glass block and neon lighting traditional to old-style diners with more contemporary tile, accent colors and a 25-foot clock tower. Similarly, the Silver Diner restaurants' interior combines traditional diner motifs such as a counter area with seating, booths and tabletop old style juke boxes with a contemporary open kitchen and ambient dining room lighting. The result of these contrasting elements produces a high energy, fun, nostalgic atmosphere which is also comfortable. . Extended operating hours with four meal periods - Silver Diner's breadth of entree selection, its beer and wine service and night time ambiance allow it to generate close to 50% of its business at dinner and late night, the most profitable meal periods. Additionally, the Silver Diner's extended hours and diverse menu affords it two extra meal periods - breakfast and late night. Together, these four meal periods provide the Silver Diner the opportunity to generate significantly greater customer counts per facility than traditional two- or three-meal period full-service restaurants. . Rapid meal service resulting in a table turnover rate significantly above industry averages for full service restaurants - Silver Diner's menu, food preparation techniques and kitchen engineering account for its rapid meal service. The Silver Diner's physical plant and kitchen layout allow it to serve the majority of meals in approximately 10 minutes, providing quick turnover and further improving productivity. The Silver Diner employs a food preparation and storage process which incorporates a type of "sous vide" production technique enabling it to efficiently make a wide range of scratch-cooking recipes with reduced labor hours, kitchen preparation and raw ingredient storage area. As a result, Silver Diner restaurants are able to achieve high quality, consistency and excellent productivity despite the broad menu. . Generous portions and moderate prices with entrees from $6.99 and up - Management believes the Silver Diner delivers outstanding value by providing generous portions of fresh, high quality food at affordable prices. Appetizers from $4.99, entrees range from $5.99 to $12.99, and full meals are available at moderate prices including a 10% senior citizen discount and "blue plate specials." 2 Restaurants. The following sets forth certain information regarding the Company's existing restaurants.
Approximate Approximate Number Operating Locations Date Opened Square Feet of Seats - ------------------- -------------- ----------- ----------- Rockville, Maryland February 1989 5,500 256 Laurel, Maryland September 1990 4,680 153 Potomac Mills, Virginia October 1991 4,675 164 Towson, Maryland September 1992 5,250 194 Fair Oaks, Virginia April 1995 5,675 240 Tysons Corner, Virginia December 1995 5,675 240 Clarendon, Virginia December 1996 5,675 240 Merrifield, Virginia February 1997 5,675 240 Springfield, Virginia April 1997 5,675 240 Reston, Virginia June 1997 5,675 240 Cherry Hill, New Jersey November 1997 5,675 240
The Company leases its corporate offices at 11806 Rockville Pike, Rockville, Maryland, which is the location of the original Silver Diner restaurant, as well as the majority of its operating units. The Company owns the Reston, Virginia location. Management believes the greater Washington/Baltimore area can support twelve to fifteen Silver Diner restaurants and it will continue to penetrate this market area while avoiding market overlap in order to take advantage of increased name recognition and economies of scale in advertising, management and overhead. Management believes that there are numerous other major metropolitan areas throughout the United States that can support a similar concentration of Silver Diner restaurants and intends to pursue expansion in these markets in a manner similar to Washington/Baltimore. The Company opened its first restaurant in a new geographical market, specifically the Philadelphia-Southern New Jersey area in November 1997. At January 2, 2000, the Company had entered into lease agreements for two new restaurants, Virginia Beach, Virginia and Lakeforest Mall in Gaithersburg, MD, which are expected to open in the second and third quarters of 2000, respectively. The Company has been pursuing locations in a new geographical market, specifically in the Mid-Atlantic area from North Carolina to Southern New Jersey. To that end, management is presently involved in active negotiations with prospective landlords at several locations for additional Silver Diner sites. Expansion into any markets outside of the Mid-Atlantic region may include area joint-ventures or franchises. There is no assurance that the Company's expansion plans will be realized or that future Silver Diner restaurants will be favorably received. Marketing. Management focuses on providing its customers with superior food quality, service and perceived value in a distinctive atmosphere and has relied primarily on its eye-catching appearance, customer satisfaction and word of mouth to obtain repeat customers as well as to attract new clientele. Since 1998, the Company has focused its marketing efforts on direct marketing, which allows the Company to target customers and create a relationship in the neighborhoods surrounding each restaurant. The Company's penetration in its core Washington Metro market has generated economies of scale and shown significant results as measured by increased comparable store sales. 3 Menu. The Silver Diner menu includes a broad range of dining alternatives featuring traditional diner fare, including soups, sandwiches, hamburgers, "blue plate specials" as well as more contemporary "heart healthy" items, salads, grilled chicken, seafood, pasta and regional specialties. Silver Diner's full breakfast menu, including omelets, pancakes and waffles, is available throughout the day and night. The menu includes numerous entrees that rotate on a seasonal basis, as well as signature homemade pies and cakes baked on premises. High- quality ingredients are used for all menu items, including Silver Diner's own unique gravies, sauces and dressings. Silver Diner's recipes are prepared for the way management believes people eat today with an emphasis on fresh ingredients, low salt and cholesterol-free oil. In addition, Silver Diner's "heart healthy" menu features several low-fat popular items formulated to exceed USDA "heart healthy" dietary guidelines. Silver Diner restaurants also serve beer and wine in all locations except Cherry Hill, New Jersey, and non-alcoholic specialty beverages. Purchasing. The Company purchases items on a centralized basis and negotiates directly with suppliers for food and beverage products to ensure consistent quality and freshness of products as well as to obtain competitive prices. Food and supplies are shipped directly to the Silver Diner restaurants. All shipments are inspected for quality and freshness by a kitchen manager or supervisor upon receipt. The Company does not maintain a central product warehouse or commissary. The Company's food and supplies are available from a wide number of suppliers. Therefore, Silver Diner is not dependent on any particular source of supplies. Customer Satisfaction/Quality Control. The Company has a variety of programs to measure its customer satisfaction, including comment cards, a mystery shopper program, exit interviews, and frequent visits by supervisory management. Through the use of these techniques, senior management receives valuable feedback from customers and through prompt action, demonstrates a continued interest in meeting customer needs and desires. In addition, Silver Diner staff perform a variety of quality checks and are authorized to not serve any products which do not meet Silver Diner's quality standards. Competition The restaurant industry is intensely competitive with respect to price, service, location and food quality. With respect to quality and cost of food, size of food portions, decor and quality service, Silver Diner restaurants compete with fast food and family style restaurants with ready to cook food and take-out. Silver Diner restaurants are located in areas of high concentration of such restaurants. There are many well-established food service competitors with substantially greater financial and other resources than the Company and with substantially longer operating histories. These competitors will also compete with the Company in obtaining premium locations for restaurants (e.g., shopping malls and strip shopping centers) and in attracting and retaining employees. In addition, one or more national food service chains or other companies could introduce a multi-unit chain of food service establishments that use one or more food service concepts which resemble one or more of the food service concepts used by the Company. The restaurant business is also affected by changes in consumer tastes and eating patterns of the general public; national, regional or local economic conditions; demographic trends; traffic patterns; as well as the type, number and location of competitors. In addition, factors such as inflation, increased food, labor and benefit costs and a lack of experienced management and hourly employees may adversely affect the restaurant industry in general and the Company in particular. The Company believes that its distinctive diner concept, attractive price- value relationship and quality of food and service enable it to differentiate itself from its competitors. While the Company believes that its restaurants are distinctive in design and operating concept, it is aware of restaurants that operate with similar concepts. The Company believes that its ability to compete effectively will continue to depend upon its ability to offer high-quality, moderately priced food in a full-service distinctive dining environment. 4 Employees As of January 2, 2000, the Company had 803 employees, 13 of whom are corporate personnel, 68 of whom are restaurant management personnel (including 4 managers-in-training), and the remainder of whom are hourly restaurant personnel. None of the Company's employees are covered by a collective bargaining agreement. The Company considers its employee relations to be good. The management staff of a typical Silver Diner restaurant consists of one Operating Partner (general manager) and four assistant managers, including a kitchen manager and a service manager. Each Silver Diner restaurant also employs approximately 75 associates on a part-time and full-time basis. Restaurant Personnel. The Company has established a strong company mission focusing on culture and values and emphasizing a sense of ownership and entrepreneurship that empowers its people to achieve professional and personal excellence. Management believes that its people are its most valuable asset and has a variety of programs to provide training, recognition and development of its management and associates to their full potential. Non-management employees' performance is tracked daily through productivity measurements that are established as an integral part of a system of frequent incentive awards. Restaurant Operating Partner Program. To attract and retain talented management, the Company's compensation program is very competitive. Management believes that a key component for long-term success is for each restaurant to be led by a general manager who lives in the community and has a long-term commitment to that restaurant's success. Accordingly, management has established a Restaurant Operating Partner Program. Under the Program, the Operating Partner receives an annual salary and a periodic, profit based, cash bonus award which equals a percentage of the restaurant's operating income. In addition, each general manager is required to purchase 8,000 shares of Common Stock at market value and can potentially receive an annual award up to $10,000 of Common Stock, dependent upon achievement of performance criteria as established and evaluated by the Board. This Program is the successor to the Restaurant Owner Operator Plan and contains similar plan elements. Also, all assistant managers received an annual grant of 500 Common Stock options with a market exercise price at the grant date. The stock awards under these plans are awarded at the discretion of the Company's Board of Directors. Selection, Training and Supervision. Management has developed specific profiles and protocols used to interview and select its management and associate staff. Management personnel are required to participate in an 8- to 12-week training program emphasizing the Company's operating procedures as well as management development programs. Each associate also participates in a standardized training program ranging from two to five days (depending on position) which utilizes testing results to ensure all associates achieve a specified standard of performance. Government Regulations The Company is subject to numerous federal, state and local laws affecting health, sanitation and safety standards as well as to state and local licensing regulation of the sale of alcoholic beverages. The Company has appropriate licenses from regulatory authorities allowing it to sell beer and wine (except in Cherry Hill, New Jersey where the Company does not sell beer or wine), and has food service licenses from local health authorities. The Company's licenses to sell alcoholic beverages must be renewed annually and may be suspended or revoked at any time for cause, including violation by the Company or its employees of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum age of patrons or employees, advertising, wholesale purchasing and inventory control. The Company's failure to obtain or retain liquor or food service licenses would have a material adverse effect on its operation. To reduce this risk, each restaurant is operated with procedures in accordance with complete compliance with applicable code and regulations. There can be no assurance, however, that such approvals and licenses for new restaurants will be obtained and, if obtained, will be renewed or not revoked. 5 The Company is subject in certain states to "dram-shop" statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. The Company carries liquor liability coverage as part of its existing comprehensive general liability insurance. The Company has never been named as a defendant in a lawsuit involving "dram-shop" statutes. The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. The Company's operations are also subject to federal and state minimum wage laws governing such matters as working conditions, overtime and tip credits and other employee matters. Management believes it is in compliance with all current applicable regulations relating to restaurant accommodations for the disabled including the Federal Americans With Disabilities Act of 1992. Trademarks Management believes that its trademarks and servicemarks are valuable to the marketing of its restaurants and that it has substantial rights in such trademarks and servicemarks for the Silver Diner name, based upon the Company's actual usage and constructive usage derived from its U.S. trademark. The Company intends to aggressively protect its marks from infringement and competing claims. However, there can be no assurance that the Company's marks, even as, and if, registered do not or will not violate the proprietary rights of others, that the marks will be upheld if challenged, or that the Company will not be prevented from using the marks, any of which could have a material adverse effect on the Company. Management's policy is to pursue registration of its marks whenever possible and to oppose vigorously any infringements of its marks, the success of which cannot be assured. Executive Officers of the Company The name, age, period of service and position held of each of the executive officers of the Company are as follows:
Name Age Served Since/(1)/ Position(s) Held - ------------------------------------------------------------------------------------------------------------------------- Robert T. Giaimo 48 1987 Chairman of the Board, President and Chief Executive Officer Ype Hengst 49 1987 Director, Vice President, Executive Chef and Corporate Secretary Patrick Meskell 47 1996 Senior Vice President, Human Resources Craig Kendall 48 1998 Vice President, Finance Timothy Cusick/(2)/ 34 1996 Area Director of Operations
/(1)/ Includes service with SDDI. /(2)/ Mr. Cusick has given notice he will be leaving the Company in May 2000. Mr. Jon Abbott will join the Company in April 2000 and will replace Mr. Cusick after his employment terminates. All of the officers have had the principal occupation indicated under "Position(s) Held" for the previous five years except as follows: Mr. Meskell was an independent consultant to financial institutions, specializing in the areas of risk management systems design and implementation from 1988 to 1992 and Director of Organizational Development & Management & Operations Training for the Student Loan Marketing Association from 1992 to 1995; and Mr. Kendall who joined the Silver Diner management team in November of 1998. Previously, from 1988 to 1998, Mr. Kendall was corporate controller for Team Washington, Inc., one of the largest Domino Pizza franchises, which operates in the Washington, D.C. metropolitan, area with annual sales exceeding $40 million. Mr. Cusick was a general manager for the Company from 1994 to 1996. 6 Item 2. Property. Information concerning the registrant's property is set forth under "Restaurants" in Item 1 of Part I. Item 3. Legal Proceedings. On May 20, 1996, the Company was named as a defendant in a proceeding instituted in the Circuit Court for Prince George's County, Maryland. The plaintiff alleges that sexual assault by the general manager of a Silver Diner restaurant. The general manager was terminated promptly following the occurrence of the event in November 1994. The plaintiff sought recovery of $500,000 for each count. It was not clear if the counts were in the alternative or cumulative. The Company's insurance carrier was defending the claim with reservation of rights. The Company is insured up to $1,000,000 with respect to the above mentioned claims. In September 1998 the court granted summary judgement in favor of the Company as to all claims brought against them in this case. No final judgement can be entered at this time due to a Bankruptcy filing by the former general manager, the co-defendant in the case, prior to the decision of the court to grant summary judgement on behalf of the Company. Item 4. Submission of Matters to a Vote of Security-Holders. Not Applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Market Information. Since March 27, 1996, the Common Stock has been listed on The NASDAQ Stock MarketSM under the symbol SLVR. Before that date, the Common Stock was quoted on the OTC Bulletin Board under the symbol FDTR. The following table sets forth the high and low closing prices for the Common Stock for the periods indicated:
Quarter High Low ------- -------- ------ 1998 First $2-9/16 $1-1/8 Second $1-15/32 $1 Third $1-7/8 $7/8 Fourth $1-1/16 $5/8 1999 First $1-15/32 $3/4 Second $1-1/8 $3/4 Third $1-1/32 $25/32 Fourth $1-7/32 $25/32
Dividends. Since the Company's inception, no dividends have been paid on the Common Stock. Holders. As of January 2, 2000, there were approximately 518 record holders of the Common Stock. 7 Item 6. Selected Financial Data.
Fiscal Years Ending/(i)/ ------------------------------------------------------------------------------------- January 2, January 3, December 28, December 29, December 31, 2000 1999 1997 1996 1995 Statement of Operations Data: Net sales $29,157,366 $28,561,422 $24,259,156 $16,550,468 $13,350,255 Restaurant costs and expenses: Cost of sales 7,609,271 7,920,808 6,929,221 4,526,286 3,655,254 Labor 9,850,921 9,449,685 7,999,812 5,464,896 4,452,134 Operating 5,234,014 5,211,704 4,037,198 2,536,609 2,015,668 Occupancy 2,866,935 2,777,932 2,534,210 1,931,866 1,588,527 Depreciation and amortization 1,172,397 1,648,134 1,499,125 882,843 715,426 ----------- ----------- ----------- ----------- ----------- Total restaurant costs and expenses 26,733,538 27,008,263 22,999,566 15,342,500 12,427,009 ----------- ----------- ----------- ----------- ----------- Restaurant operating income 2,423,828 1,553,159 1,259,590 1,207,968 923,246 General and administrative expenses 3,133,073 2,921,299 3,065,436 2,705,940 2,077,735 Depreciation and amortization 339,725 267,171 263,484 183,928 97,351 Write off of abandoned site costs - 32,455 172,618 - - ----------- ----------- ----------- ----------- ----------- Operating loss (1,048,970) (1,667,766) (2,241,948) (1,681,900) (1,251,840) ----------- ----------- ----------- ----------- ----------- Interest expense 23,826 40,639 10,702 180,293 334,086 Investment income, net (100,917) (151,967) (294,231) (432,721) (83,021) ----------- ----------- ----------- ----------- ----------- Net loss before minority interest and cumulative effect of a change in accounting principle (971,879) (1,556,438) (1,958,419) (1,429,472) (1,502,905) Minority interest in net loss of SDLP - - - - 180,175 ----------- ----------- ----------- ----------- ----------- Net loss before cumulative effect of a change in accounting principle (971,879) (1,556,438) (1,958,419) (1,429,472) (1,322,730) Cumulative effect of a change in accounting principle - (326,868) - - - ----------- ----------- ----------- ----------- ----------- NET LOSS $ (971,879) $(1,883,306) $(1,958,419) $(1,429,472) $(1,322,730) =========== =========== =========== =========== =========== Basic and diluted net loss per common share before cumulative effect of a change in accounting principle $ (0.08) $ (0.13) $ (0.17) $ (0.15) $ (0.26) Cumulative effect of a change in accounting principle - (0.03) - - - ----------- ----------- ----------- ----------- ----------- Net loss per common share $ (0.08) $ (0.16) $ (0.17) $ (0.15) $ (0.26) =========== =========== =========== =========== =========== Weighted average common shares outstanding 11,586,512 11,591,822 11,609,400 9,545,681 5,013,319 =========== =========== =========== =========== ===========
8
As of/(i)/ ------------------------------------------------------------------------------------- January 2, January 3, December 28, December 29, December 31, 2000 1999 1997 1996 1995 ---------- ---------- ------------ ------------ ------------ Balance Sheet Data: Working capital (deficiency) $ 460,049 $ 625,043 $ 1,332,141 $ 6,669,761 $(4,961,352) Total assets 20,594,533 21,638,497 23,646,765 25,864,375 10,794,469 Current liabilities 2,024,801 2,227,222 2,207,891 3,174,262 6,975,363 Long-term liabilities 1,295,338 1,173,280 1,317,667 749,396 2,584,832 Stockholders' equity 17,274,394 18,237,995 20,121,207 21,940,717 1,234,274
/(i)/ Selected financial data as of and for the year ended January 2, 2000 was obtained from the Company's audited financial statements. Selected financial data as of and for the years ended January 3, 1999, December 28, 1997, December 29, 1996 and December 31, 1995 were obtained from the Company's financial statements audited by another accounting firm whose opinion was unqualified. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward Looking Disclosure Certain information included herein contains statements that are forward- looking, such as statements relating to plans for future expansion and other business development activities as well as operating costs, capital spending, financial sources and the effects of competition. Such forward-looking information is subject to changes and variations which are not reasonably predictable and which could significantly affect future results. Accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These changes and variations which could significantly affect future results include, but are not limited to, those relating to development and construction activities, including delays in opening new diners, acceptance of the Silver Diner concept, increased competition in the restaurant industry, weather conditions, the quality of the Company's restaurant operations, the adequacy of operating and management controls, dependence on discretionary consumer spending, dependence on existing management, inflation and general economic conditions, and changes in federal or state laws or regulations. General The following discussion includes comments and data relating to the Company's financial condition and results of operations for the three-year period ended January 2, 2000. As of this date, the Company operates 11 diners, 10 in the Washington/Baltimore metropolitan area and one in Cherry Hill, New Jersey. As of March 15, 2000, there are two additional Silver Diners under construction, one in the Washington/Baltimore metropolitan area and one in the Southern Virginia region. The Company is pursuing additional locations throughout the Mid-Atlantic region for restaurant openings. The Company plans to expand the Silver Diner chain nationwide through additional openings of Company- owned restaurants and possibly through the development of franchise or joint venture relationships. The following table reflects the growth in number of restaurants over the three-year period.
Restaurants 1997 1998 1999 ----------- -------- -------- -------- In operation, beginning of year 7 11 11 Newly opened 4 0 0 -------- -------- -------- In operation, end of year 11 11 11 -------- -------- --------
9 The Company was incorporated in Delaware in April 1994 under the name FTAC. In March 1996, a subsidiary of the Company merged with SDDI, a Virginia corporation, which was formed in and operated Silver Diner restaurants since 1987. SDLP, of which SDDI was the general partner, operated the first three Silver Diner restaurants. In June 1996, the Company acquired all of the limited partner interests in SDLP for a purchase price of $2.472 million and 84,000 warrants to purchase shares of the Common Stock at $8.00 per share. Unless the context otherwise requires, references to the Company or Silver Diner also include FTAC, SDDI and their wholly owned subsidiaries. The Company currently operates 11 Silver Diner restaurants, 10 in the Washington/Baltimore Metropolitan Area and one in Cherry Hill, New Jersey, serving breakfast, lunch, dinner and late night meals. The Company targets the growing number of customers tired of traditional fast food whose need for a quick, high-quality, reasonably priced meal is not being adequately served by existing family or casual theme restaurants; the Company capitalizes on the timeless diner theme to uniquely address this need. By attracting a broad range of customer segments, and maintaining extended operating hours, a diverse menu and convenient locations, the Company is able to compete effectively in the fast food, family and casual dining segments of the restaurant industry, contributing to the significant sales volumes of its units. The Company also offers Silver Diner To Go, which features a range of carry out/delivery options targeting the growing "home meal replacement" market, and expanded bakery selections. Effective January 1, 1994, the Company adopted a 52 or 53-week fiscal year that ends on the Sunday nearest December 31. Fiscal quarters consist of accounting periods of 16, 12, 12 and 12 or 13 weeks, respectively. Fiscal years 1999, 1998 and 1997 were comprised of 52, 53 and 52 weeks, respectively and ended on January 2, 2000, January 3, 1999 and December 28, 1997, respectively. 10 Results Of Operations The following table sets forth the percentage relationship to net sales of items included in the consolidated statements of operations for the periods indicated:
Fiscal Years Ended --------------------------------------------------------------- January 2, January 3, December 28, 2000 1999 1997 ---------- ---------- ------------ Net sales 100.0% 100.0% 100.0% Restaurant costs and expenses: Cost of sales 26.1% 27.7% 28.6% Labor 33.8% 33.1% 33.0% Operating 18.0% 18.3% 16.6% ----- ----- ----- Restaurant operating margin 22.1% 20.9% 21.8% Occupancy 9.8% 9.7% 10.4% Depreciation and amortization 4.0% 5.8% 6.2% ----- ----- ----- Restaurant operating income 8.3% 5.4% 5.2% General and administrative expenses 10.7% 10.2% 12.6% Depreciation and amortization 1.2% 0.9% 1.1% Write off of abandoned site costs - 0.1% 0.7% ----- ----- ----- Operating loss (3.6%) (5.8%) (9.2%) Interest expense 0.1% 0.0% 0.0% Investment income, net (0.3%) (0.5%) (1.1%) ----- ----- ----- Loss before cumulative effect of a change in accounting principle (3.4%) (5.3%) (8.1%) Cumulative effect of a change in accounting principle - (1.2%) - ----- ----- ----- Net loss (3.4%) (6.5%) (8.1%) ===== ===== =====
Year Ended January 2, 2000 Compared to the Year Ended January 3, 1999 Net sales for the fiscal year ended January 2, 2000 ("Fiscal 1999") of $29,157,366 increased approximately $600,000 compared to the fiscal year ended January 3, 1999 ("Fiscal 1998"). Fiscal 1998 included 53 weeks, adding approximately $591,000 to net sales. On a 52-week comparative basis, total sales increased approximately $1.2 million or 4.2%. Comparable Company sales (sales for Silver Diner restaurants open throughout both periods being compared, excluding the initial six months of operations during which sales are typically higher than normal) increased 5.8% (3.9% inclusive of the Fiscal 1998 53rd week sales). Same store customer counts were up 2.8%, while average guest check increased 2.2%. The Company believes the increase in same store sales was generated through continued focus and improvement in operational excellence as measured by exit interviews with customers, which have continued to improve throughout Fiscal 1999. 11 Average unit sales increased $102,818 or 4.2% from $2,547,852 in Fiscal 1998 to $2,650,670 in Fiscal 1999; primarily as a result of the increased customer traffic and increased average check driven by a carefully focused marketing campaign and supported by operational execution. Cost of sales, consisting primarily of food and beverage costs, decreased from 27.7% of net sales in Fiscal 1998 to 26.1% of net sales in Fiscal 1999 due primarily to continued management focus on cost control, purchasing agreements, refinement of food preparation and delivery systems and less extensive seasonal menu changes. Labor, which consists of restaurant management and hourly employee wages and bonuses, payroll taxes, workers' compensation insurance, group health insurance and other benefits increased 0.7% to 33.8% of net sales for Fiscal 1999, resulting primarily from a highly competitive labor market causing upward pressure on average wage rates and continued cost escalation of health benefits. Operating expenses, which consists of all restaurant operating costs other than cost of sales, labor, occupancy and depreciation, including supplies, utilities, repairs and maintenance and advertising decreased .3% to 18.0% of net sales for Fiscal 1999, compared to 18.3% for Fiscal 1998. Reduced supply and maintenance costs accounted for savings of 0.9% and was offset by an increase of 0.6% in advertising and promotional costs. Occupancy, which is composed primarily of rent, property taxes and property insurance, increased $89,003 for Fiscal 1999 compared to Fiscal 1998. As a percentage of net sales occupancy expenses increased 0.1% in Fiscal 1999 to 9.8% compared to 9.7% in Fiscal 1998. Additionally, the Company owns the Reston, Virginia site and consequently does not absorb any rent expense on this location. Restaurant depreciation and amortization decreased $475,737 to $1,172,397 for Fiscal 1999. The decrease was primarily the result of depreciation associated with an evaluation of unit operational processes, menu engineering, and a comprehensive unit equipment assessment resulting in the Company writing off equipment in the fourth quarter of 1998. General and administrative expenses include the cost of corporate administrative personnel and functions, multi-unit management and restaurant management recruitment and initial training. Such expenses were $3,133,073 for Fiscal 1999, an increase of $211,774, or 7.2%, compared to Fiscal 1998. As a percentage of net sales, general and administrative expenses increased to 10.7% for Fiscal 1999 from 10.2% for Fiscal 1998. The increase was principally related to higher legal and accounting fees during the first sixteen weeks of Fiscal 1999, coupled with the continued cost escalation of recruiting and training restaurant management talent. The Company's administrative overhead as a percentage of net sales remains above the industry average primarily due to the cost of the corporate management team required to support the Company's intermediate and long-term growth plans. The Company earned $100,917 in investment income for Fiscal 1999, compared to investment income of $151,967 for Fiscal 1998. The decrease is primarily a result of reduced levels of cash available for investment. Interest expense was $23,826 for Fiscal 1999 and $40,639 for Fiscal 1998. Net loss for Fiscal 1999 was $971,879 or $0.08 per share, compared to a loss of $1,883,306 or $0.16 per share in Fiscal 1998. Weighted average shares outstanding remained essentially unchanged at 11,586,512 in 1999 versus 11,591,822 in 1998. Management expects that the Company will continue to incur quarterly losses until such time as revenue generation from increased market penetration is sufficient to absorb new unit start-up costs and the increased general and administrative infrastructure costs currently in place to support the Company's growth plans. 12 Year Ended January 3, 1999 Compared to the Year Ended December 28, 1997 Net sales for the fiscal year ended January 3, 1999 ("Fiscal 1998") of $28,561,422 increased $4.3 million compared to the fiscal year ended December 28, 1997. Silver Diners opened during Fiscal 1997 in Northern Virginia and Cherry Hill, New Jersey contributed significantly to the incremental sales. Additionally, Fiscal 1998 included 53 weeks, adding approximately $591,000 to net sales. Comparable Company sales (sales for Silver Diner restaurants open throughout both periods being compared, excluding the initial six months of operations during which sales are typically higher than normal) increased 3.6% (1.5% exclusive of the 53rd week sales). Same store customer counts were up 1.4%, while average guest check increased 2.0%. The Company believes the increase in same store sales was generated through continued focus and improvement in operational excellence as measured by exit interviews with customers, which have improved by approximately 50% from year-end 1997 to year- end 1998. The vehicle to achieve this was the development, implementation and continued focus on the Company's 110% guarantee program. The 110% guarantee initiative provides for a 10% discount on the customer's current meal and a coupon for a free entree if not completely satisfied with the dining experience. Additionally, a direct mail campaign increased customer traffic. Average unit sales, measured on an effective restaurants open basis, decreased 3.9% from $2,651,274 in fiscal 1997 to $2,547,852 in Fiscal 1998; primarily as the result of the "honeymoon sales period" of four new unit openings throughout Fiscal 1997 and increased penetration of the Northern Virginia market reducing the trade area of existing diners. Cost of Sales, consisting primarily of food and beverage costs, decreased from 28.6% of net sales in Fiscal 1997 to 27.7% of net sales in Fiscal 1998 due primarily to operational improvements, purchasing efficiencies on high cost, high turnover items and a significant menu re-engineering, that included recipe reformulation as well as basic menu redesign and layout. The maturation of new units also contributed favorably to improved cost of sales performance. Labor, which consists of restaurant management and hourly employee wages and bonuses, payroll taxes, workers' compensation insurance, group health insurance and other benefits increased 0.1% to 33.1% of net sales for Fiscal 1998, resulting from a decrease in average unit volume. An analysis of this dollar cost element indicates an overall per unit dollar expenditure decrease in effective unit direct labor of 3.6%, driven by a 5.6% decrease in hourly wages, a 26.2% reduction in training labor and partially offset by modest increases in unit management compensation and escalating benefit costs. Operating expenses, which consists of all restaurant operating costs other than cost of sales, labor, occupancy and depreciation, including supplies, utilities repairs and maintenance and advertising increased 1.6% to 18.3% of net sales for Fiscal 1998, compared to 16.6% for Fiscal 1997. All but .2% of the increase was attributable to the higher marketing costs associated with the 110% guarantee program and the related direct mail campaign. Fiscal 1998 expenditures for these initiatives totaled $410,000. The remainder of the margin variance resulted from increased supply and maintenance costs reflecting management's commitment under the 110% guarantee to ensure a quality dining experience to its customers. Occupancy, which is composed primarily of rent, property taxes and property insurance, increased $243,722 for Fiscal 1998 compared to Fiscal 1997, principally due to a full year of expense recognition on units opened in Fiscal 1997. As a percentage of net sales occupancy expenses decreased 0.7% in Fiscal 1998 to 9.7% compared to 10.4% in Fiscal 1997. Additionally, the Company owns the Reston, Virginia site and consequently does not absorb any rent expense on this location. Restaurant depreciation and amortization increased $149,009 to $1,648,134 for Fiscal 1998. The increase was the result of depreciation associated with the new unit openings throughout Fiscal 1997 totaling $112,000, plus $372,734 in depreciation and amortization incurred in connection with an evaluation of unit operational processes, menu engineering, and a comprehensive unit equipment assessment resulting in the Company writing off equipment in the fourth quarter of 1998. This increase in restaurant depreciation and amortization was offset by a $326,886 reduction for the expensing of all preopening costs capitalized as of December 28, 1997 and recording of a 13 cumulative effect of a change in accounting principle in the first quarter of 1998. During the First Quarter of 1998, the company elected early adoption of SOP No. 98-5, "Reporting on the Costs of Start-Up Activities." SOP No. 98-5 requires that costs associated with start-up activities, such as opening a new restaurant, be expensed as incurred. Prior to the First Quarter 1998, the Company had capitalized all preopening expenses and amortized these costs over a 12-month period. General and administrative expenses include the cost of corporate administrative personnel and functions, multi-unit management and restaurant management recruitment and initial training. Such expenses were $2,921,299 for Fiscal 1998, a decrease of $144,137, or 4.7%, compared to Fiscal 1997. As a percentage of net sales, general and administrative expenses decreased to 10.2% for Fiscal 1998 from 12.6% for Fiscal 1997. The decrease was a direct result of management's efforts to reduce overhead and leverage increased sales to improve overall margin performance. The Company's administrative overhead as a percentage of net sales remains above the industry average primarily due to the cost of the corporate management team required to support the Company's intermediate and long-term growth plans. Write off of abandoned site costs decreased from $172,618 in Fiscal 1997 to $32,455 in Fiscal 1998. The Fiscal 1998 write off related to a suburban Maryland site, which was abandoned during the fourth quarter. The Company earned $151,967 in investment income for Fiscal 1998, compared to investment income of $294,231 for Fiscal 1997. The decrease is a direct result of cash being used to construct and open four Silver Diners since Fiscal 1996. Interest expense was $40,639 for Fiscal 1998 and $10,702 for Fiscal 1997. The issuance of debt in the second quarter of 1997 and interest charges on non- financing transactions caused interest expense to increase to $40,639 from $10,702 in the prior year. Net loss for Fiscal 1998 was $1,883,306 or $0.16 per share, compared to a loss of $1,958,419 or $0.17 per share in Fiscal 1997. Weighted average shares outstanding remained substantially unchanged at 11,591,822 in 1998 versus 11,609,400 at December 28, 1997. Management expects that the Company will continue to incur quarterly losses until such time as revenue generation from increased market penetration is sufficient to absorb new unit start-up costs and the increased general and administrative infrastructure costs currently in place to support the Company's growth plans. Income Taxes. No current or deferred income tax benefit has been provided in the Company's consolidated financial statements due to the Company's history of net operating losses for income tax purposes. At January 2, 2000, the Company has a net operating loss carryforward of approximately $6,663,000 for income tax purposes that expires in 2008 through 2014, which may be used to reduce future income tax expense and tax liabilities. New Accounting Pronouncement In June, 1998 the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Adoption of SFAS No. 133 is not expected to have a material impact on the Company's financial statement presentation or disclosures. Liquidity and Capital Resources The Silver Diner's operations are subject to significant external influences beyond its control. Any one, or any combination of such factors, could materially impact the actual results of the Diner's operations. Those factors include, but are not limited to: (I) changes in general economic conditions, (II) changes in consumer spending habits (III) changes in the availability and cost of raw materials, (IV) changes in the availability of capital resources, (V) changes in the prevailing interest rates, (VI) changes in the competitive environment and (VII) changes in the Federal or State laws governing the business. 14 At January 2, 2000, cash and cash equivalents were $1.12 million, short- term investments were $810,000, working capital was $460,000, the Company had no long-term debt and stockholders' equity was $17.27 million. Cash and cash equivalents decreased $490,000 during Fiscal 1999, due primarily to cash used to finance the purchases of property and equipment including the purchase of Point- of-Sale computer systems. The Company's principal future capital requirement is expected to be the development of restaurants. Currently, the typical building, equipment (including smallwares) and site development cost of a new Silver Diner prototype is expected to be approximately $1.3 to $1.5 million. However, due to above average site costs and architectural and design costs, the five Silver Diner locations opened since December 1995 have averaged approximately $1.8 million for building, equipment and site costs. The Company is currently in the process of executing the new prototype design to decrease the cost of a Silver Diner restaurant. There is no assurance that the Company's prototype redesign plans will produce significant savings in the prototype costs. Land generally will be leased. When land is purchased, management may pursue a sale-leaseback or debt financing strategy following the restaurant's opening. At January 2, 2000, the Company had entered into lease agreements for two new restaurants, Virginia Beach, Virginia, which is currently under construction, and Lakeforest Mall in Gaithersburg, MD, which are expected to open in the second and third quarters of 2000, respectively. The Company has been pursuing locations in a new geographical market, specifically in the Mid- Atlantic area from North Carolina to Southern New Jersey. To that end, management is presently involved in active negotiations with prospective landlords at several locations for additional Silver Diner sites. Management believes that the Company's current capital resources and expected 2000 cash flow will be adequate to construct up to two units. The Company has entered into a loan agreement with its lead bank to extend a $3 million line of credit in October 1999 that is sufficient to fund at least two additional diners. A replacement loan agreement is presently being negotiated. Pending execution of the replacement loan agreement, it is unclear whether the Company could advance any funds under the existing loan agreement. Additional financing will be required to finance growth in 2000 beyond the next two diners. The Company may forced to limit unit growth, if it is unable to meet or exceed certain financial and operating criteria defined in the formal loan documents. Seasonality and Quarterly Results Although the Company's limited operating history, geographic concentration and small number of existing Silver Diners make future trends difficult to predict, Silver Diner restaurants have generally experienced higher average weekly net sales in the second and third quarters. The timing of new Silver Diner restaurant openings and extreme weather, especially during the winter months, may also affect sales and quarterly results. Accordingly, quarter-to- quarter comparisons of the Company's results of operations may not be meaningful, and results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. The first fiscal quarter includes 16 weeks of operations as compared to 12, 12 and 12 or 13 weeks for each of the subsequent three-quarters, respectively. As a result, despite higher average weekly sales, net sales from comparable Silver Diners can be expected to be lower in the second quarter as compared to the first quarter of each year. Year 2000 Issue and Compliance In connection with the Company's efforts to ensure that its information technology systems and non-information technology systems were Year 2000 compliant, the Company incurred costs of approximately $17,000 during Fiscal 1999. Additionally, the Company was concurrently upgrading its point-of-sale systems with a vendor that had been assessed as Year 2000 compliant. These efforts and the related costs were necessary to ensure the Company did not experience any significant system failures or other adverse effects on the routine operation of the Diners. As a result the Company has not suffered any system failures to date. Management continues to monitor its technology-based systems for any undiscovered issues. 15 Impact of Inflation Management does not believe that inflation has materially affected the Company's operating results. Substantial increases in costs and expenses, particularly food, supplies, labor and operating expenses, could have a significant impact on the Company's operating results to the extent that such increases cannot be passed along to customers. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. 16 Item 8. Financial Statements PAGE INDEPENDENT AUDITORS' REPORT 18 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF JANUARY 2, 2000 AND JANUARY 3, 1999 20 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 2, 2000, JANUARY 3, 1999 AND DECEMBER 28, 1997 21 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE FISCAL YEARS ENDED JANUARY 2, 2000, JANUARY 3, 1999 AND DECEMBER 28, 1997 22 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED JANUARY 2, 2000, JANUARY 3, 1999 AND DECEMBER 28, 1997 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25 17 INDEPENDENT AUDITORS' REPORT To the Board of Directors Silver Diner, Inc. and Subsidiary We have audited the accompanying consolidated balance sheet of Silver Diner, Inc. and Subsidiary (the "Company") as of January 2, 2000, and the related consolidated statement of operations, changes in stockholders' equity, and cash flows for year then ended. The consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of Silver Diner, Inc. as of and for the years ended January 3, 1999 and December 28, 1997 were audited by other auditors whose reports, dated March 8, 1999 and March 6, 1998, respectively, expressed an unqualified opinion on those statements. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Silver Diner, Inc. and Subsidiary as of January 2, 2000 and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Reznick Fedder & Silverman ______________________________ Bethesda, Maryland March 2, 2000 18 INDEPENDENT AUDITORS' REPORT To the Stockholders of Silver Diner, Inc.: We have audited the accompanying consolidated balance sheet of Silver Diner, Inc. and subsidiaries (the "Company") as of January 3, 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for years ended January 3, 1999 and December 28, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Silver Diner, Inc. and subsidiaries as of January 3, 1999, and the results of their operations and their cash flows for the years ended January 3, 1999 and December 28, 1997 in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, the Company changed its method of accounting for preopening costs during the year ended January 3, 1999 to conform with the American Institute of Certified Public Accountants Statement of Position No. 98-5. /s/ Deloitte & Touche LLP _________________________ Washington, DC March 8, 1999 19 Silver Diner, Inc. and Subsidiary CONSOLIDATED BALANCE SHEETS
ASSETS January 2, January 3, 2000 1999 ---------------------------------------- Current assets: Cash and cash equivalents $ 1,122,755 $ 1,611,757 Marketable securities available for sale 813,452 746,597 Inventory 134,698 139,039 Prepaid rent 158,447 182,796 Incentive rebates 108,928 61,410 Prepaid and other current assets 146,570 110,666 ------------- ------------- Total current assets $ 2,484,850 $ 2,852,265 Property, equipment and improvements, net 15,583,903 16,117,417 Due from related parties 142,293 126,516 Goodwill, net 2,114,587 2,299,082 Deposits and other 268,900 243,217 ------------- ------------- Total assets $ 20,594,533 $ 21,638,497 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,757,801 $ 1,960,222 Note payable 267,000 267,000 ------------- ------------- 2,024,801 2,227,222 Long-term liabilities: Deferred rent liability 1,295,338 1,173,280 ------------- ------------- Total liabilities 3,320,139 3,400,502 ------------- ------------- Commitments and contingencies - - Stockholders' equity: Preferred stock, $.001 par value, 1,000,000 shares authorized; none issued - - Common stock, $.00074 par value, 20,000,000 shares authorized; at January 2, 2000, 11,592,691 shares issued and outstanding at January 3, 1999, 11,585,510 shares issued and outstanding 8,563 8,558 Additional paid-in capital 30,773,262 30,688,714 Unearned compensation (227,489) (252,453) Treasury stock (165,802 shares of common stock at cost) (101,239) - Accumulated deficit (13,178,703) (12,206,824) ------------- ------------- Total stockholders' equity 17,274,394 18,237,995 ------------- ------------- Total liabilities and stockholders' equity $ 20,594,533 $ 21,638,497 ============= =============
The accompanying notes are an integral part of these financial statements 20 Silver Diner, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal years ended ------------------------------------------------------------------ January 2, January 3, December 28, 2000 1999 1997 ------------ -------------- -------------- Net sales $ 29,157,366 $ 28,561,422 $ 24,259,156 ------------ -------------- -------------- Cost of sales 7,609,271 7,920,808 6,929,221 Labor 9,850,921 9,449,685 7,999,812 Operating 5,234,014 5,211,704 4,037,198 Occupancy 2,866,935 2,777,932 2,534,210 Depreciation and amortization 1,172,397 1,648,134 1,499,125 ------------ -------------- -------------- Total restaurant costs and expenses 26,733,538 27,008,263 22,999,566 ------------ -------------- -------------- Restaurant operating income 2,423,828 1,553,159 1,259,590 General and administrative expenses 3,133,073 2,921,299 3,065,436 Depreciation and amortization 339,725 267,171 263,484 Write-off of abandoned site costs - 32,455 172,618 ------------ -------------- -------------- Operating loss (1,048,970) (1,667,766) (2,241,948) Interest expense 23,826 40,639 10,702 Investment income, net (100,917) (151,967) (294,231) ------------ -------------- -------------- Loss before cumulative effect of a change in accounting principle (971,879) (1,556,438) (1,958,419) Cumulative effect of a change in accounting principle - (326,868) - ------------ -------------- -------------- NET LOSS $ (971,879) $ (1,883,306) $ (1,958,419) ============ ============== ============== Basic and diluted net loss per common share Loss per common share before cumulative effect of a change in accounting principle $ (0.08) $ (0.13) $ (0.17) Cumulative effect of a change in accounting - (0.03) - ------------ -------------- -------------- Net loss per common share $ (0.08) $ (0.16) $ (0.17) ============ ============== ============== Weighted average common shares outstanding $ 11,586,512 $ 11,591,822 $ 11,609,400 ============ ============== ==============
The accompanying notes are an integral part of these financial statements 21 Silver Diner, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Fiscal years ended January 2, 2000, Janaury 3, 1999 and December 28, 1997
Common Stock Treasury Stock ------------ -------------- Additional Unearned Shares Amount Shares Cost Paid-in Capital Compensation ------ ------ ------ ---- --------------- ------------ Balance at December 29, 1996 11,520,473 $8,526 - $ - $30,423,561 $ (126,271) Issuance of common stock 130,117 96 - - 467,404 (315,000) Issuance of stock awards - - - - 920,000 (920,000) Common stock purchased (83,606) (62) - - (186,938) 52,500 Stock options exercised 35,419 26 - - 15 - Stock options issued - - - - 61,865 - Repurchase of outstanding options - - - - (40,500) 20,250 Cancellation of outstanding options - - - - (40,470) 40,470 Amortization of unearned compensation - - - - - 79,253 Net loss - - - - - - ----------- ------ --------- --------- ----------- ----------- Balance at December 28, 1997 11,602,403 8,586 - - 31,604,937 (1,168,798) ----------- ------ --------- --------- ----------- ----------- Issuance of common stock 17,392 13 - - 24,987 (12,500) Issuance of stock awards - - - - 206,250 (206,250) Common stock purchased (42,746) (47) - - (93,801) 43,753 Stock options exercised 8,461 6 - - 79 - Cancellation of outstanding options - - - - (1,053,738) 1,026,757 Amortization of unearned compensation - - - - - 64,585 Net loss - - - - - - ----------- ------ --------- --------- ----------- ----------- Balance at January 3, 1999 11,585,510 8,558 - - 30,688,714 (252,453) ----------- ------ --------- --------- ----------- ----------- Issuance of common stock 15,050 11 - - 10,878 - Issuance of stock awards - - - 158,243 (158,243) Common stock purchased (7,869) (6) - - (9,994) - Purchase of treasury stock - - (165,802) (101,239) - - Stock options issued - - - - 37,789 (6,774) Cancellation of outstanding options - - - - (112,368) 87,764 Amortization of unearned compensation - - - - - 102,217 Net loss - - - - - - ----------- ------ --------- --------- ----------- ----------- Balance at January 2, 2000 11,592,691 $8,563 (165,802) $(101,239) $30,773,262 $ (227,489) =========== ====== ========= ========= =========== =========== Accumulated Deficit Total ------- ----- Balance at December 29, 1996 $ (8,365,099) $21,940,717 Issuance of common stock - 152,500 Issuance of stock awards - - Common stock purchased - (134,500) Stock options exercised - 41 Stock options issued - 61,865 Repurchase of outstanding options - (20,250) Cancellation of outstanding options - - Amortization of unearned compensation - 79,253 Net loss (1,958,419) (1,958,419) ------------ ----------- Balance at December 28, 1997 (10,323,518) 20,121,207 ------------ ----------- Issuance of common stock - 12,500 Issuance of stock awards - - Common stock purchased - (50,095) Stock options exercised - 85 Cancellation of outstanding options - (26,981) Amortization of unearned compensation - 64,585 Net loss (1,883,306) (1,883,306) ------------ ----------- Balance at January 3, 1999 (12,206,824) 18,237,995 ------------ ----------- Issuance of common stock - 10,889 Issuance of stock awards - - Common stock purchased - (10,000) Purchase of treasury stock - (101,239) Stock options issued - 31,015 Cancellation of outstanding options - (24,604) Amortization of unearned compensation - 102,217 Net loss (971,879) (971,879) ------------ ----------- Balance at January 2, 2000 $(13,178,703) $17,274,394 ============ ===========
The accompanying notes are an integral part of these financial statements 22 Silver Diner, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended ----------------------------------------------------------------- January 2, January 3, December 28, 2000 1999 1997 -------------------- ----------------------- ------------------ Cash flows from operating activities Net loss $ (971,879) $(1,883,306) $(1,958,419) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 1,512,122 1,915,305 1,762,609 Development and abandoned site costs - 32,455 172,618 Compensation expense - stock options and deferred compensation 108,627 37,604 141,118 Cumulative effect of change in accounting principle principles - 326,868 - Termination of note receivable - - 123,329 Changes in operating assets and liabilities Inventory 4,341 57,404 (48,462) Prepaid rent 24,349 (182,796) - Incentive rebates (47,518) 17,623 - Prepaid and other current assets (35,904) 7,509 4,873 Preopening expenses - - (660,325) Deposits and other (25,683) (13,936) 100,585 Accounts payable and accrued expenses (204,377) (247,669) (262,323) Deferred rent liability 122,058 122,613 301,271 Due from related parties (15,777) (115,916) - ---------- ----------- ----------- Net cash provided by (used in) operating activities 470,359 73,758 (323,126) ---------- ----------- ----------- Cash flows used in investing activities Purchases of property and equipment (792,156) (497,407) (6,421,329) Maturities of short-term investments 750,000 2,900,000 4,030,907 Purchase of short-term investments (816,855) (2,424,514) (4,171,974) Advances to affiliates - - (67,372) ---------- ----------- ----------- Net cash used in investing activities (859,011) (21,921) (6,629,768) ---------- ----------- -----------
The accompanying notes are an integral part of these financial statements 23 Silver Diner, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended ----------------------------------------------------------------- January 2, January 3, December 28, 2000 1999 1997 -------------------- ----------------------- ------------------ Cash flows from financing activities Proceeds from issuance of common stock $ 10,889 $ 12,500 $ 152,500 Proceeds from exercise of stock options - 85 41 Purchase of common stock (10,000) (50,095) (134,500) Purchase of treasury stock (101,239) - - Proceeds from notes payable - - 267,000 Repurchase of employee stock options - - (20,250) Net cash provided by (used in) financing activities (100,350) (37,510) 264,791 ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents (489,002) 14,327 (6,688,103) Cash and cash equivalents, beginning of year 1,611,757 1,597,430 8,285,533 ---------- ---------- ----------- Cash and cash equivalents, end of year $1,122,755 $1,611,757 $ 1,597,430 ========== ========== =========== Supplemental disclosure of cash flow information: Interest paid $ 37,492 $ 25,523 $ 10,702 ========== ========== =========== Noncash investing and financing activities: Construction payables included in accounts payable and accrued expenses $ - $ - $ 350,604 ========== ========== ===========
The accompanying notes are an integral part of these financial statements 24 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 2, 2000 1. Organization Silver Diner, Inc. (the Company) and its subsidiary develop and operate the Silver Diner restaurant chain. At January 2, 2000, the Company owned and operated ten diners in the Washington/Baltimore metropolitan area and one in Cherry Hill, New Jersey. 2. Summary Of Significant Accounting Policies Basis of Presentation and Consolidation --------------------------------------- The consolidated financial statements include the accounts and operations of the Company and its subsidiary, Silver Diner Development, Inc. (SDDI). All significant intercompany balances and transactions have been eliminated in consolidation. Fiscal Year ----------- The Company operates on a 52- or 53-week fiscal year that ends on the Sunday nearest December 31. The fiscal quarters for the Company consist of accounting periods of 16, 12, 12, and 12 or 13 weeks, respectively. Fiscal years 1999, 1998 and 1997 were comprised of 52, 53 and 52 weeks, respectively, and ended on January 2, 2000, January 3, 1999 and December 28, 1997, respectively. Cash and Cash Equivalents and Marketable Securities --------------------------------------------------- All short-term investments are classified as available-for-sale. Those investments that are part of the Company's cash management portfolio with an original maturity of three months or less when purchased are reported as cash equivalents. The balance of short-term investments are classified as marketable securities. At January 2, 2000, marketable securities consists of investment-grade commercial paper. Cash and cash equivalents and marketable securities are stated at cost plus accrued interest, which approximates fair value. Inventory --------- Inventory consists of food and supplies and is stated at the lower of cost (first-in, first-out) or market. Property, Equipment and Improvements ------------------------------------ Property, equipment and improvements are recorded at cost. Buildings and leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the respective anticipated lease period including renewal options, ranging from 20 to 35 years, with a provision for salvage value for the Rockville building. Furniture and equipment are depreciated over the estimated useful lives of the related assets, ranging from two to ten years. Depreciation is computed using the straight-line method. Deferred Lease Costs -------------------- Deferred lease costs represent brokerage commissions, legal fees and zoning- related costs primarily related to leases on the land upon which the Company constructed its restaurants and are amortized on a straight-line basis over the life of the respective lease agreement. 25 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 2. Summary Of Significant Accounting Policies (Continued) Pre-opening Costs ----------------- On April 3, 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) No. 98-5, "Reporting on the Cost of Start-Up Activities." SOP No. 98-5 requires that costs associated with start-up activities, such as opening a new facility, be expensed as incurred. This SOP is effective for financial statements for fiscal years beginning after December 15, 1998; however, early application is encouraged. Prior to 1998, the Company capitalized preopening costs, including payroll, employee recruitment and advertising, incurred in the restaurant start-up and training period prior to the opening of each restaurant, and amortized these costs over 12 months from the date of opening. The Company elected early application of SOP 98-5 during the first quarter of 1998. As a result of the early application, all preopening costs capitalized as of December 28, 1997 were expensed and recorded as a cumulative effect of a change in accounting principle in the first quarter of 1998. Had preopening costs been accounted for in accordance with SOP No. 98-5 during the year ended December 28, 1997, the Company's net loss and net loss per share would have been the pro forma amounts indicated below: Net loss: As reported $(1,958,419) Pro forma $(2,157,873) Net loss per common share: As reported $ (0.17) Pro forma $ (0.19)
Goodwill -------- Cost in excess of fair value of net assets required related to the acquisition of the minority interest in SDLP (see note 3) is being amortized on a straight-line basis over 15 years. Deferred Rent ------------- Deferred rent is recorded and amortized to the extent the total minimum rental payments allocated to the current period on a straight-line basis exceed or are less than the cash payments required. Income Taxes ------------ The provision for income taxes is based on earnings reported in the financial statements. Deferred income taxes are provided for temporary differences between financial assets and liabilities and those reported for income tax purposes. 26 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 2. Summary of Significant Accounting Policies (Continued) Net Loss Per Common Share ------------------------- Net loss per common share is computed based upon the weighted average number of common shares outstanding during the period. The Company implemented Statement of Financial Accounting Standards (SFAS) No. 128, which requires presentation of basic and diluted earnings per share amounts and a reconciliation of the respective calculations. The Company incurred a net loss for the years ended January 2, 2000, January 3, 1999 and December 28, 1997; therefore, all potential common shares are antidilutive and not included in the calculation of diluted net loss per share. Evaluation of Long-Lived Assets ------------------------------- The Company evaluates the potential impairment of long-lived assets, including goodwill, based upon projections of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. During fiscal years 1999 and 1998, the Company wrote off $0 and $32,455, respectively, of deferred site costs including legal, design and development costs for potential restaurant sites that the Company is no longer pursuing or that the Company believes the probability of the site being procured is unlikely. During fiscal years 1999 and 1998, in connection with an evaluation of unit operational processes, menu engineering, and a comprehensive unit equipment assessment, the Company wrote off equipment with a net book value of $41,400 and $372,734, respectively, which is included in depreciation and amortization within the Statement of Operations. Management believes no additional material impairment of these assets exists at January 2, 2000. The write-off resulted from the elimination of the operational usefulness for certain equipment and the identification of obsolete or no longer in service equipment. Stock-Based Compensation ------------------------ Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," requires expanded disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on fair value of the equity instrument awarded (see note 11). The Company has chosen to continue to account for employee stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees, and Related Interpretations." Accordingly, compensation costs for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount the employee must pay to acquire the stock. Reclassification ---------------- Certain prior year balances have been reclassified to conform to the 1999 presentation. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 27 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 2. Summary of Significant Accounting Policies (Continued) Recent Accounting Pronouncement ------------------------------- In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Adoption of SFAS No. 133 is not expected to have a material impact on the Company's financial statement presentation or disclosures. 3. Acquisition of Minority Interest in Silver Diner Limited Partnership On June 13, 1996, the Company completed its purchase of all of the limited partnership interests in Silver Diner Limited Partnership (SDLP) from the original investors for $2,472,000 in cash and 84,000 warrants (New Warrants) to purchase common stock exercisable at $8.00 per share. The New Warrants were exercisable until the earlier of 30 days following a public offering of common stock or January 31, 1998. The offer was unanimously accepted by all of the limited partners. The acquisition was accounted for under the purchase method and the entire cost of the transaction, totaling $2.8 million, has been allocated to goodwill based on the Company's estimate that the fair value of the tangible assets acquired approximates book value. The goodwill is being amortized on a straight-line basis over 15 years and, as a result, amortization expense related to goodwill totaled $184,495, $183,751 and $184,977 in fiscal years 1999, 1998 and 1997, respectively. 4. Property, Equipment and Improvements The major components of property, equipment and improvements are as follows:
January 2, January 3, 2000 1999 ---------- ---------- Land $ 1,737,655 $ 1,737,655 Buildings and leasehold improvements 12,709,589 12,645,160 Furniture, fixtures and equipment 6,290,107 5,918,067 Deferred lease costs 760,074 607,107 ----------- ----------- Less accumulated depreciation and amortization (5,913,522) (4,790,572) ----------- ----------- $15,583,903 $16,117,417 =========== ===========
28 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 5. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following:
January 2, January 3, 2000 1999 ---------- ---------- Trade payables $1,038,230 1,381,805 Payroll and related taxes 584,485 443,623 Sales and use taxes 135,086 134,794 ---------- --------- $1,757,801 1,960,222 ========== =========
6. Note Payable In June 1997, the Company entered into a note agreement in the amount of $267,000 with a bank to purchase a parcel of land from the Company's president (note 8). The principal balance of the note, originally due in June 1999, was extended through June 2000. Interest is paid monthly at an annual rate of 9.25%. The note is collateralized by the land purchased. The Company incurred $23,826, $25,523 and $10,702 in interest expense related to the note for the years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. 7. Notes Receivable During 1997, the Company issued notes receivable totaling $132,000 to an outside party which owns and maintains the jukeboxes in four Silver Diner units. The Company receives principal and interest payments on these notes on a monthly basis. The outstanding balance, classified as deposits and other, was $97,899 for 1999 and $113,729 for 1998. Interest is calculated at an annual rate of 9% and the principal payments are based on the amount of monthly cash flow generated by the jukeboxes. For the years ended January 2, 2000 and January 3, 1999, the Company has received $15,830 and $9,300 in principal payments, respectively, and $11,587 and $11,000 in interest income, respectively. 8. Related Party Transactions Robert Giaimo Development, Inc. ------------------------------- On June 17, 1997, the Company purchased from Robert Giaimo Development, Inc., a corporation wholly-owned by the president of the Company, an undivided parcel of land representing a parking lot adjacent to the Silver Diner restaurant in Potomac Mills, Virginia. The total cost of the land was $408,000. The Company received a loan from a bank in the amount of $267,000 to purchase the property (note 6). The note is fully collateralized by the land. Silver Diner Potomac Mills, Inc. -------------------------------- The Company leases the diner at Potomac Mills pursuant to two lease agreements with Silver Diner Potomac Mills, Inc., a corporation wholly-owned by the president of the Company. The leases expire October 14, 2011 and include annual CPI adjustments to base rent and percentage rent based on gross receipts. The amount of property leased was reduced in 1997 by the land purchase described above. For the years ending January 2, 29 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 2000, January 3, 1999 and December 28, 1997, occupancy costs include $360,000, $355,000, and $350,000, respectively, in rent and related pass- through costs associated with the leases. Construction, Real Estate Consulting Services and Real Estate Management ------------------------------------------------------------------------ The Company has from time to time entered into contracts with a Director of the Company and certain affiliates of the Director to provide construction, real estate consulting and real estate management services to the Company. During the year ended January 2, 2000, the Company incurred costs totaling $74,036 for miscellaneous construction and renovation of existing diners, $23,547 for real estate consulting services and $180,496 for payment of rent and real estate taxes related to the Merrifield Silver Diner. At January 2, 2000, $2,565 is payable to the Director and affiliates of the Director. Keyman Life Insurance --------------------- The Company is paying premiums for three life insurance policies owned, respectively, by two officers. In 1996, the Company recorded notes receivable from the two officers, which were payable in full upon demand, were collateralized by the life insurance policies and were equal to the amount of premiums paid by the Company on such life insurance policies. The notes receivable were non-interest bearing. During 1997, the Company terminated these note receivable agreements and recorded the full amount of premiums paid in 1996 and 1997, less the cash surrender value of the policies, as expense. In 1999 and 1998, the Company recorded the full amount of premiums paid in 1998 and 1999, respectively, less the cash surrender value of the policies, as expense. As such, the Company recorded $84,596, $92,000 and $123,000 of expense for these insurance policies for the years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. Due from Related Parties ------------------------ In connection with entering into an employment continuity agreement during 1998, the Company made a $100,000 loan to an officer of the Company. The note, bearing interest at a rate of 5.25%, is secured by the Company's common stock holding of the officer. The loan and accrued interest is to be repaid by the officer through the application of annual bonuses in the amount of $20,000, plus accrued interest, by the officer over a five-year period. As of January 2, 2000 and January 3, 1999, $80,000 and $100,000 of principal remained due from an officer of the Company. 9. Commitments and Contingencies Operating Leases ---------------- The Company leases restaurant land and buildings under various noncancelable operating leases with terms expiring at various dates through 2017. Certain of these leases are with related parties (see note 8). These leases include minimum lease payments, reimbursable operating costs and real estate taxes. Also, certain of these leases contain renewal options for a maximum of 20 years beyond the original term, have provisions for additional rent based on sales at the individual locations and annual increases based on the consumer price index. The leases provide for certain rent holidays and escalations in payments over the lease terms. The effect of the holidays and escalations have been reflected in rent expense on a straight-line basis over the initial lease terms. The excess of expense over cash payments has been reflected in the consolidated financial statements as deferred rent. 30 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 9. Commitments and Contingencies (Continued) Operating Leases (continued) ---------------------------- Future minimum annual lease payments as of January 2, 2000 are: 2000 $ 2,370,000 2001 2,567,000 2002 2,630,000 2003 2,699,000 2004 2,737,000 Thereafter $21,717,000 Rent expense under the leases for fiscal years 1999, 1998 and 1997 was approximately $2,328,000, $2,236,000 and $2,033,000, respectively. Legal Proceedings ----------------- On May 20, 1996, the Company was named as a defendant in a proceeding instituted in the Circuit Court for Prince George's County, Maryland. The plaintiff alleges sexual assault by the general manager of a Silver Diner restaurant. The general manager was terminated promptly following the occurrence of the event in November 1994. The plaintiff sought recovery of $500,000 for each count. It was not clear if the counts were in the alternative or cumulative. The Company's insurance carrier was defending the claim with reservation of rights. The Company is insured up to $1,000,000 with respect to the above mentioned claims. In September 1998, the court granted summary judgment in favor of the Company as to all claims brought against them in this case. No final judgment can be entered at this time due to a Bankruptcy filing by the codefendant in the case, prior to the decision of the court to grant summary judgment on behalf of the Company. Employment Continuity Agreements -------------------------------- SDDI has entered into employment continuity agreements with certain executives. The agreements are for one to five years in length and provide for minimum salary levels, as adjusted for minimum percentage increases and include incentive bonuses based on specified management goals. The aggregate minimum commitment for future salaries, excluding bonuses, as of January 2, 2000 is approximately $1,860,000. 10. Income Taxes At January 2, 2000, the Company has a net operating loss carryforward of approximately $6,663,000 for income tax purposes, that expires in 2008 through 2014, which may be used to reduce future income tax expense and tax liabilities. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes. 31 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 10. Income Taxes (Continued) Significant components of the Company's deferred tax assets and liabilities are as follows:
January 2, January 3, 2000 1999 ---------- ---------- Net operating loss carryforwards $ 2,657,259 $ 2,420,534 Book over (under) tax depreciation/ Amortization (47,282) (83,841) Deferred rent 516,567 466,653 ----------- ----------- Deferred tax assets $ 3,126,544 2,803,346 Less: valuation allowance (3,126,544) (2,803,346) ----------- ----------- Net deferred tax asset $ - $ - =========== ===========
As a result of the Company's history of cumulative losses, a valuation allowance equal to the calculated deferred tax benefit has been recorded at January 2, 2000 and January 3, 1999, respectively. 11. Stock Compensation Plans The Company has the following stock-based compensation plans: 1996 Employee Stock Purchase Plan --------------------------------- The 1996 Employee Stock Purchase Plan was adopted in September 1996 by the Company's Board of Directors and approved by shareholders in June 1997, and continues in effect for a term of 10 years. The Company is authorized to issue 300,000 shares under the plan to employees who customarily work at least 20 hours per week and more than five months in a calendar year, and who have been continuously employed by the Company for six months. Under the terms of the plan, employees can choose each quarter to have up to 10 percent of their base earnings (not to exceed $21,250 annually) withheld to purchase the Company's common stock. The purchase price of the stock is 85% of the lower of its beginning-of-quarter or end-of-quarter market price. The Company implemented the plan in August 1998. During fiscal 1999, 15,050 shares were issued under the plan. 1996 Stock Option Plan ---------------------- The 1996 Stock Option Plan was adopted by the Company's Board of Directors in September 1996 and approved by the shareholders in June 1997, and continues in effect for 10 years. The plan provides for incentive stock options and nonqualified stock options. Options may be granted to any director, officer, key employee or outside consultant of the Company. Terms of the options are set by the Company's Board of Directors and range from seven to ten years, with the ability to accelerate vesting upon the Company achieving certain performance measurements, as predetermined by the Board. The Company has reserved 1,750,000 shares of common stock for issuance under the plan. A total of 600,400 and 1,143,500 options were granted under this plan during fiscal 1999 and 1998, respectively. 32 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 11. Stock Compensation Plans (Continued) Restaurant Operating Partner Program ------------------------------------ The Restaurant Operating Partner Program, which was adopted by the Company's Board of Directors in December 1996 for implementation in fiscal year 1997, provides for the general manager (Operating Partner) and the store manager team (Store Managers) of each of the Company's restaurants to share in the profits of their restaurant and to participate as equity owners of the Company. To participate in the program, employees who became Operating Partners prior to January 4, 1999 were required to make an initial investment in discounted Company common stock, which may not be sold or otherwise transferred by the Operating Partner for a period of five years from the date of purchase. Should the Operating Partner's employment terminate for any reason other than death or disability, the Company has the right to repurchase the stock from the Operating Partner for the amount of his or her investment. Employees who become Operating Partners beginning January 4, 1999 and thereafter are required to purchase 8,000 shares of Company common stock at market value and can potentially receive an annual award up to $10,000 of Common Stock, dependent upon achievement of performance criteria as established and evaluated by the Board. The plan also provides for annual restricted common stock awards to Store Managers; however, the Company has determined that no further stock awards will be provided to Store Managers subsequent to January 3, 1999. For employees who became Operating Partners and Store Managers prior to January 4, 1999, stock awarded at the end of the first year generally vests after the fourth anniversary of the award date. For each year thereafter, stock awards generally vest after the third anniversary of the award date. For employees who became Operating Partners beginning January 4, 1999 and thereafter, stock awarded at the end of the first year vests after the fifth anniversary of the award date, stock awarded at the end of the second year vests after the fourth anniversary of the award date, and stock awarded in each subsequent year vests after the third anniversary of each award date. The stock awards under these plans are awarded at the discretion of the Company's Board of Directors. The Company has reserved 415,000 shares of common stock for issuance under the plan. During fiscal 1999 and 1998, -0- and 17,392 shares, respectively, were issued under the plan. Associate Ownership and Profit Sharing Plan ------------------------------------------- The Associate Ownership and Profit Sharing Plan, which was adopted by the Company's Board of Directors in December 1999 for implementation in fiscal year 2000, provides for associates of each of the Company's restaurants to share in the profits of their restaurant and to participate as equity owners of the Company. All associates employed by the Company prior to January 1, 2000 will be awarded 100 shares of common stock. The common stock is restricted for a one-year period, whereby on January 1, 2001, all associates still employed by the Company will have all such restrictions removed. The Company has reserved 100,000 shares of common stock for issuance under the plan. 33 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 11. Stock Compensation Plans (Continued) 1996 Consultant Stock Option and Stock Purchase Plan ---------------------------------------------------- The 1996 Consultant Stock Option and Stock Purchase Plan was adopted by the Company's Board of Directors in September 1996, and continues in effect for a term of 10 years. The plan provides for the Company's consultants to purchase (i) options to purchase shares of common stock in the Company or (ii) shares of common stock in the Company, and apply a portion of the fees otherwise payable to them by the Company to pay the purchase price for such options or common stock. Options under the plan are granted with an exercise price at the fair market value of the common stock on the first day of each calendar quarter, and are exercisable at any time in whole or in part for a period of three years from date of grant and vest immediately. The Company records the transactions at the fair value of the options granted to the consultant, using the Black-Scholes methodology. The Company has reserved 100,000 shares of common stock for issuance under the plan. During fiscal 1999 and 1998, no options were issued to consultants under this plan. 1996 Non-Employee Director Stock Option Plan -------------------------------------------- The 1996 Non-Employee Director Stock Option Plan was adopted by the Company's Board of Directors in September 1996 and approved by shareholders in June 1997, and continues in effect for 10 years. Under the plan, each non-employee director shall be granted an option to purchase 1,000 shares of the Company's common stock at fair market value on the first day of each calendar quarter. Options granted under the plan are exercisable at any time in whole or in part for a period of three years from date of grant, and vest immediately. The Company has reserved 150,000 share of common stock for issuance under the plan. A total of 27,000 and 35,000 options were granted under this plan during fiscal 1999 and 1998, respectively. Second Amended and Restated 1991 Stock Option Plan -------------------------------------------------- The Second Amended and Restated 1991 Stock Option Plan for directors, officers, key employees and consultants provides for incentive and non- qualified stock options. The options generally expire 10 years from the date of grant and are exercisable over the period stated in each option. The Board of Directors determines the option price (not to be less than fair market value for incentive options) at the date of grant. Options under the plan are exercisable in full if the Company executes a merger agreement or consolidates with another company, if more than 50% of the Company's voting stock is acquired by another person or group in an other than capital stock transaction, or if Robert T. Giaimo ceases to by President of the Company. The plan expires in 2001. At January 2, 2000, no options were available for future grant under the plan. Second Amended and Restated Earned Ownership Plan ------------------------------------------------- The Second Amended and Restated Earned Ownership Plan for key employees provides for non-qualified stock options. The options generally expire 10 years from the date of grant, have an option price of $0.0003 and vest 20% at date of grant and 20% on each of the next four anniversaries following the grant date. Options under the plan are exercisable in full if the Company executes a merger agreement or consolidates with another company, if more than 50% of the Company's voting stock is acquired by another person or group in an other than capital stock transaction, or if Robert T. Giaimo ceases to be President of the Company. The plan has no fixed expiration date. At January 2, 2000, no options were available for future grant under the plan. 34 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 11. Stock Compensation Plans (Continued) The Company applies APB Opinion No. 25 and related Interpretations in accounting for its plans. The compensation cost that has been charged against income under the Company's plans was $108,627, $37,604 and $141,118 for the years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. Had compensation cost been determined in accordance with FASB Statement No. 123, the Company's net loss and net loss per share would have been the pro forma amounts indicated below:
Fiscal years ended ------------------------------------------------------------------------- January 2, 2000 January 3, 1999 December 28, 1997 --------------- --------------- ----------------- Net loss: As reported $ (971,879) $(1,883,306) $(1,958,419) Pro forma $(1,164,133) $(1,995,021) $(2,030,469) Net loss per common share: As reported $ (0.08) $ (0.16) $ (0.17) Pro forma $ (0.10) $ (0.17) $ (0.17)
Options granted during the year ended January 2, 2000 were issued pursuant to the 1996 Non-Employee Director Stock Option Plan and the 1996 Stock Option Plan. The fair value of each option grant under these plans is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0.0% and expected volatility of 46.48%. In addition, in estimating the fair value of the options granted under the 1996 Non-Employee Director Stock Option Plan and the 1996 Stock Option Plan, the following weighted average assumptions were used: risk free interest rate of approximately 6% and an expected life ranging from 3 to 10 years. Options granted during the year ended January 3, 1999 were issued pursuant to the 1996 Non-Employee Director Stock Option Plan and the 1996 Stock Option Plan. The fair value of each option grant under these plans is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumption: dividend yield of 0.0% and expected volatility of 50%. In addition, in estimating the fair value of the options granted under the 1996 Non-Employee Director Stock Option Plan and the 1996 Stock Option Plan, the following weighted average assumptions were used: risk free interest rate of 5.5% and an expected life of 6 years. Options granted during the year ended December 28, 1997 were issued pursuant to the 1996 Non-Employee Director Stock Option Plan, the 1996 Consultant Stock Option and Stock Purchase Plan and the 1996 Stock Option Plan. The fair value of each option grant under these plans is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0.0% and expected volatility of 49%. In addition, in estimating the fair value of the options granted under the 1996 Non-Employee Director Stock Option Plan and the 1996 Consultant Stock Option and Stock Purchase Plan, the following weighted average assumptions were used: risk-free interest rate of 5.7% and an expected life of two years. The fair value of options granted under the Incentive Stock Option Plan was estimated assuming a risk-free interest rate of 6.2% and an expected life of seven years. 35 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 11. Stock Compensation Plans (Continued) A summary of the status of the Company's stock option plans as of January 2, 2000, January 3, 1999 and December 28, 1997 and changes during the years ended on these dates is:
1999 1998 1997 ---------------------------- -------------------------- -------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ --------- ------ --------- ------ --------- Options outstanding, Beginning of year 1,691,291 $1.51 583,327 $2.55 689,220 $2.52 Granted 627,400 1.02 1,178,500 1.09 89,387 3.54 Exercised - - (8,461) 0.00 (35,421) 0.00 Forfeited (204,020) 1.63 (62,075) 3.45 (149,858) 3.78 Repurchased - - - - (10,001) 0.00 --------- ----- --------- ----- -------- ----- Options outstanding, end of year 2,114,671 $1.35 1,691,291 $1.51 583,327 $2.55 ========= ========= ======= Options exercisable at year end 950,607 687,954 396,809 Weighted-average fair value of options granted during the year $0.67 $0.41 $1.41
The following table summarizes information about stock options outstanding at January 2, 2000.
Options Outstanding Options Exercisable --------------------------------------------------------- --------------------------------- Weighted Weighted- Weighted- Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise Prices at 1/2/2000 Contractual Life Price at 1/2/2000 Price --------------- ----------- ---------------- --------- ----------- --------- Less than $0.01 192,873 4.1 years $0.00 192,873 $0.00 $0.63 to $1.25 1,649,900 7.3 years 1.04 547,425 1.14 $1.38 to $3.60 54,704 2.1 years 2.85 49,704 2.99 $4.05 217,194 5.9 years 4.05 160,605 4.05 --------- ------- $0.0003 to $4.05 2,114,671 6.8 years $1.30 950,607 $1.50 ========= =======
36 Silver Diner, Inc. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED January 2, 2000 12. Net Loss Per Common Share SFAS 128, "Earnings per Share," requires the disclosure of a reconciliation between the numerators and the denominators of the basic and diluted per- share computations for income from continuing operations. For the years ended January 2, 2000, January 3, 1999 and December 28, 1997, the Company incurred a net loss; therefore, all potential common shares are antidilutive and are not included in the calculation of the diluted net loss per common share. At January 2, 2000, January 3, 1999 and December 28, 1997, there were options to purchase 2,114,671, 1,691,291 and 583,327 shares, respectively, at the weighted average price of $1.35, $1.51 and $2.55, respectively. These options are antidilutive and thus not included in the computation of diluted net loss per share for the years ended January 2, 2000, January 3, 1999 and December 28, 1997. In addition, at January 2, 2000 and January 3, 1999 there were 80,713 and 25,919, respectively, restricted shares of common stock outstanding. These shares, which were issued during fiscal 1999 and 1998 pursuant to the Restaurant Operating Partner Program, are antidilutive and are not included in the computation of net loss per share for the years ended January 2, 2000 and January 3, 1999. 13. Employee Benefit Plan The Company sponsors a plan to provide retirement benefits under the provision of Section 401(k) of the Internal Revenue Code (the 401(k) Plan) for all employees who have completed one year of service. Company contributions may range from 0% to 100% of employee contributions, up to a maximum 6% of eligible employee compensation, as defined. Employees may elect to contribute up to 20% of their eligible compensation on a pretax basis. Benefits under the 401(k) Plan are limited to the assets of the 401(k) Plan. During the years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively, the Company made no contributions to the 401(k) Plan. 14. Subsequent Events On January 9, 2000, the Company, acting as an agent for the landlord of the Virginia Beach Silver Diner, entered into a construction contract with an affiliate of a Director of the Company. The contract is a fixed fee contract in the amount of $800,000. Pursuant to the lease agreement, the landlord is liable for all payments and terms under the construction agreement. On February 29, 2000, the Company entered into a construction contract with an affiliate of a Director of the Company for construction of the Lakeforest Silver Diner. The contract is a fixed fee contract in the amount of $735,200. The affiliate will act as the general contractor and will be paid a fee for coordinating and supervising the development of the facility. 37 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Previous Independent Accountant. Following Registrant's merger with and into Silver Diner Development, Inc. (SDDI), Registrant retained Deloitte & Touche LLP (Deloitte & Touche) to audit its financial statements for the years ended December 29, 1996, December 28, 1997 and January 3, 1999. Deloitte & Touche submitted a fee proposal to audit Registrant's financial statements for the year ended January 2, 2000. Based thereon, the Registrant's Board of Directors and Audit Committee, in an attempt to reduce substantially Registrant's audit costs, talked to a number of accounting firms and on September 29, 1999, the Registrant notified Deloitte & Touche of its dismissal as Registrant's independent auditors and reported the dismissal in a Current Report on Form 8-K dated September 29, 1999. Deloitte & Touche has not issued any reports on the current year financial statements. Deloitte & Touche's report on the financial statements of Silver Diner, Inc. and Subsidiary for the years ended December 29, 1996, December 28, 1997 and January 3, 1999 contained no adverse opinion or disclaimer of opinion and was not qualified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 29, 1996, December 28, 1997 and January 3, 1999 and through the date of termination on September 29, 1999, the Registrant has had no disagreements with Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, had they not been resolved, would have caused Deloitte & Touche to make reference to the subject matter of the disagreement in connection with its report. New Independent Accountant. On September 29, 1999, the Registrant engaged Reznick Fedder & Silverman P.C. to audit the financial statements of the Registrant for the year ending January 2, 2000 and reported such engagement in a Current Report on Form 8-K dated September 29, 1999. PART III Item 10. Directors and Executive Officers of the Company. The Directors, Executive Officers and key employees of the Company are as follows:
NAME AGE DIRECTOR SINCE POSITION Robert T. Giaimo 48 1996 Chairman of the Board, President, Chief Executive Officer, and Treasurer Catherine Britton 46 1996 Director Michael Collier 45 1999 Director Ype Von Hengst 49 1996 Director, Vice President, Executive Chef, and Secretary Edward H. Kaplan 61 1996 Director Louis P. Neeb 61 1996 Director Charles M. Steiner 58 1996 Director
ROBERT T. GIAIMO has been the Company's Chairman of the Board, President, Chief Executive Officer and Treasurer since March 1996. In 1987 Mr. Giaimo developed and popularized the Silver Diner concept with Ype Von Hengst after conducting a one year national tour of diner-style restaurants. Mr. Giaimo has been the Co-Founder, Director, President, Chief Executive Officer and Treasurer of Silver Diner Development, Inc. since its inception in 1987. Mr. Giaimo was president, chief executive officer and director of Monolith Enterprises, Inc. ("Monolith") from 1971 to January 1987. From 1972 through 1976, Mr. Giaimo co- founded and operated, through Monolith, Blimpies Restaurant in Georgetown. In 1977, Mr. Giaimo co-founded and operated, through Monolith, The American Cafe restaurant, an innovative, award-winning restaurant chain which was one of the first restaurants to promote "American cuisine" and helped popularize the croissant sandwich. In 1985, Mr. Giaimo sold The American Cafe to W.R. Grace & Co. Mr. Giaimo graduated from the Business School of Georgetown University in 38 1974 and Harvard University's Smaller Company Management Program in 1982. He is a member of the Young President's Organization and serves as a Director and Co- chairman of Development. In 1993, Mr. Giaimo received an "Entrepreneur of the Year" award from Inc. Magazine in conjunction with Ernst & Young and Merrill Lynch. Mr. Giaimo is married to Catherine Britton. CATHERINE BRITTON has been a Director since March 1996 and was a director of Silver Diner Development, Inc. from July 1995 until March 1996. She assisted with marketing and design of Silver Diner restaurants and has been involved with menu development and concept evolution since Silver Diner Development, Inc.'s inception. She also participated extensively in the development of Silver Diner restaurants. Ms. Britton graduated from Georgetown University in 1975, receiving a Bachelor of Arts degree in Philosophy. Ms. Britton earned a Masters Degree in Special Education from George Washington University in 1978. Ms. Britton is married to Robert T. Giaimo. MICHAEL COLLIER has been a Director since March 1999, when he was elected to fill the vacancy left by Clinton A. Clark's resignation. Mr. Collier is the President of Uniwest Group, Inc. and Uniwest Construction, Inc., companies which handle business in the area of real estate development and general contracting and which serve as the developer and general contractor for the Company's diners. He is also President of Atlantic Environmental Services, Incorporated, a full-service environmental company. YPE VON HENGST has been a Director, Vice President, Executive Chef and Secretary since March 1996 and co-founder, director, vice president of culinary operations, and executive chef of Silver Diner Development, Inc. since 1987. Mr. Hengst was a director of operations of "Dominiques" restaurant in Washington, D.C. from May through September 1987. From 1984 to 1987, Mr. Hengst was corporate executive chef and director for Food Service for The American Cafe and was responsible for the central kitchen and bake shop, menu changes, and food preparation for all seven American Cafe restaurants. From 1981 to 1984, Mr. Hengst was corporate executive chef for Restaurant Associates in New York, New York, where he supervised over fifteen diverse full-service restaurants. From 1976 to 1981, Mr. Hengst held executive chef positions in Charlotte, North Carolina, Cleveland, Ohio, Houston, Texas, and New York, New York. Prior to 1976, Mr. Hengst worked as a chef in Europe. EDWARD H. KAPLAN has been a Director since March 1996 and was a director of Silver Diner Development, Inc. from 1987 until March 1996. He is a real estate developer and investor and has served since 1983 as a Director of Palmer National Bank, Washington, D.C. and subsequently, its successor, George Mason Bankshares until April 2, 1998, when George Mason merged into United Bankshares and now serves on the board of directors of United Bankshares of Virginia. Mr. Kaplan received his B.A. from the University of Pennsylvania, Wharton School in 1961. Mr. Kaplan served as President of the United Jewish Appeal Federation of Greater Washington from 1989 to 1991, President of the United Jewish Endowment Fund from 1992 to 1997, and currently is a member of the Maryland Public Television Commission and the Maryland Public Television board of directors. LOUIS P. NEEB has been a Director since March 1996 and was a director of Silver Diner Development, Inc. from 1994 until March 1996. Mr. Neeb is currently the president of Neeb Enterprises, Inc., a corporation which provides management consulting services and oversees the operation of an affiliated restaurant company, and chairman of the board and chief executive officer of Mexican Restaurants, Inc., formerly Casa Ole Restaurants, Inc. He was the president and chief executive officer of The Spaghetti Warehouse, Inc. from July 1991 until January 1994 and of Geest Food USA from 1989 until 1991. From 1982 until 1987, he served as president and chief executive officer of Creative Food N Fun, a subsidiary of W.R. Grace & Co. From 1985 until 1987, be served as president and chief executive officer of a W.R. Grace & Co. affiliate, Taco Villa, Inc. Mr. Neeb was employed by The Pillsbury Company from 1973 until 1982. From 1980 to 1982, he served as an executive vice president of The Pillsbury Company and as chairman and chief executive officer of its affiliate, Burger King Corporation. In 1973, he was director of operations at Steak & Ale Restaurants, Inc. another affiliate of The Pillsbury Company. His leadership role with Steak & Ale Restaurants, Inc. continued until 1980, after serving as vice president of operations and eventually president and chief operating officer. Currently, Mr. Neeb serves as a director of CEC Entertainment and Franchise Finance Corporation of America, Inc., both publicly traded companies. Mr. Neeb received a BBA in marketing from Notre Dame University in 1961 and an MBA from George Washington University in 1969. CHARLES M. STEINER has been a Director since March 1996. Mr. Steiner was a director of Silver Diner Development, Inc. from 1987 until March 1996. He is the chief executive officer of Branch Group, Inc., an electric distributor. In 1975, Mr. Steiner founded IMARK, an electric cooperative, and in 1991 founded EDIC, a distribution 39 insurance company. He is a former director and officer of the National Association of Electric Distributors (NAED). He received a B.B.A. in Accounting from the University of Pittsburgh in 1963. There is no family relationship between any of the Company's directors or officers except that Catherine Britton is the wife of Robert T. Giaimo. There are no arrangements between any director of the Company and any other person pursuant to which he was selected as a director. NON-DIRECTOR EXECUTIVE OFFICERS TIMOTHY CUSICK has been Area Director of Operations since July 1996 and has been a member of the executive management since April 1998. Mr. Cusick joined the Company in October 1992 and served as a restaurant manager and owner operator until 1996. Mr. Cusick has over eight years of restaurant management experience. JON ABBOTT will join the Company in April 2000 and will assume the duties and responsibilities of Vice President of Operations following Mr. Cusick's departure in May 2000. Mr. Abbott has twenty years of operating experience in casual dining restaurant concepts, most recently with Damons International, Inc., where he served as Director of Operations from 1997 to 2000. Prior thereto, Mr. Abbott served as Regional Manager for Cooker Restaurant Corporation from 1985 to 1997. PATRICK MESKELL has been Senior Vice President, Human Resources since January 1996. Mr. Meskell was an independent consultant to institutions, specializing in the areas of risk management system design and implementation from 1988 to 1992 and Director of Organizational Development & Management & Operations Training for the Student Loan Marketing Association from 1992 to 1995. CRAIG KENDALL has been Vice President, Finance since November 1998. From 1988 to 1998, Mr. Kendall was a senior financial officer for Team Washington, Inc., one of the nation's largest Domino Pizza franchises, which operates in the Washington, D.C. metropolitan area. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE To the Company's knowledge, based solely upon a review of reports and other information furnished to it by its directors, officers, greater than 10% beneficial owners of the Company, and other persons subject to the reporting requirements (collectively, the "Reporting Persons"), all reports required to be filed by such Reporting Persons under Section 16(a) of the Securities Exchange Act of 1934, as amended, were duly filed during the year ended January 2, 2000. 40 Item 11. Executive Compensation The following table sets forth summary information concerning compensation paid by the Company with respect to fiscal years 1999, 1998 and 1997 to Robert T. Giaimo, the Company's Chairman of the Board, President, Chief Executive Officer and Treasurer, and to each of the Company's executive officers whose aggregate annual cash compensation exceeded $100,000 for fiscal year 1999. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS SECURITIES RESTRICTED UNDERLYING OTHER ANNUAL STOCK OPTIONS/ NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S) ($) SARS (#) Robert T. Giaimo 1999 258,315 0 18,000 0 0 Chairman of the Board, 1998 269,544 0 18,000 0 550,000 (1),(2) President, Chief Executive 1997 250,000 50,000 18,000 0 0 Officer and Treasurer Ype Von Hengst 1999 145,173 0 26,000 0 150,000 (4) Director, Vice President, 1998 129,144 0 6,000 0 205,000 (5),(6) Executive 1997 105,000 12,500 6,000 0 (2) Chef and Secretary 0 Patrick Meskell 1999 101,769 5,000 6,000 0 200,000 (8) Senior Vice President, Human 1998 103,579 5,000 6,000 0 155,000 (9),(6), Resources 1997 93,690 17,500 6,000 0 0 (2) Timothy Cusick 1999 101,769 0 6,000 0 0 Area Director of 1998 103,737 0 6,000 0 155,000 (9),(6), Operations 1997 94,792 12,500 6,000 0 0 (2) Craig Kendall 1999 120,192 0 6,000 0 100,000 (10) Vice President, 1998 17,875 10,000 0 0 55,000 (11),(6) Finance 1997 0 0 0 0 0
41 LONG-TERM COMPENSATION
PAYOUTS LTIP NAME AND PRINCIPAL POSITION PAYOUTS ($) ALL OTHER COMPENSATION ($) Robert T. Giaimo 0 57,061 (3) Chairman of the Board, 0 56,358 (3) President, Chief Executive 0 49,037 (3) Officer and Treasurer Ype Von Hengst 0 27,535 (7) Director, Vice President, 0 27,535 (7) Executive Chef and Secretary 0 25,573 (7) Patrick Meskell 0 0 Senior Vice President, 0 0 Human Resources 0 0 Timothy Cusick 0 0 Area Director of 0 0 Operations 0 0 Craig Kendall 0 0 Vice President 0 0 Finance 0 0
- ---------------------------- (1) Includes an option to purchase up to 400,000 Shares at $1.238 per Share through December 14, 2003, which vests, or has vested, except as provided in Note 2 below, as follows: (a) 120,000 on December 29, 1998, (b) 80,000 on December 29, 1999, (c) 80,000 on December 29, 2000, and (d) 120,000 on December 29, 2001. Also included is an option to purchase up to 150,000 Shares at $0.625 per Share through December 14, 2008, which was to vest 100% on September 15, 2008, except that 100% of the option could vest earlier under certain circumstances. Mr. Giaimo elected to cancel the foregoing option for 150,000 Shares during 1999. (2) An additional 18% of the option may vest earlier each time the market price of the Shares is initially greater than $5.00 per Share, $7.50 per Share and $10 per Share, with the option vesting 100% when the market price is greater than $12.00 per Share. (3) Includes the annual premiums the Company paid on a $3,000,000 split dollar life insurance policy on the life of Mr. Giaimo. The 1996 amount includes $12,000 in term life insurance premiums for Mr. Giaimo paid by SDDI. (4) Includes an option to purchase up to 150,000 Shares at $1.00 per Share through December 7, 2009, which vests or has vested 30,000 Shares annually commencing on January 1, 2000. (5) Includes an option to purchase up to 55,000 Shares at $0.625 per Share through December 14, 2008, which vests 100% at December 31, 2005, except as provided in Note 6 below. Also includes an option to purchase up to 150,000 Shares at $1.125 per Share through December 28, 2007, which vests or has vested, except as provided in Note 2 above, as follows: (a) 45,000 Shares on December 29, 1998, (b) 30,000 on December 29,1999, (c) 30,000 on December 29, 2000, and (d) 45,000 on December 29, 2001. (6) The Compensation Committee of the Board amended the performance criteria to provide that the option would vest to the extent of 20,000 Shares on December 31, 1999 if the Company's actual net income for 1999 exceeded the Company's budgeted net income by up to $100,000. However, the performance criteria for fiscal year 1999 were not achieved, and no Shares vested for such period. The Compensation Committee also provided that the option may vest earlier in fiscal year 2000, as follows: (a) 25,000 Shares 42 may vest immediately if the Company's actual net income for 2000 exceeds the Company's budgeted net income by at least $300,000; (b) 20,000 Shares may vest immediately if the Company's actual net income for 2000 exceeds budgeted net income by $200,000 or more but less than $300,000; (c)15,000 Shares may vest immediately if the Company's actual net income for 2000 exceeds budgeted net income by $100,000 or more but less than $200,000; and (d) 10,000 Shares may vest immediately if the Company's actual net income for 2000 exceeds budgeted net income by less than $100,000. The Board has the ability to set other performance criteria for accelerating the vesting of the option in future years. (7) Includes the annual premiums the Company paid on a $1,500,000 split dollar life insurance policy on the life of Mr. Von Hengst. (8) Includes an option to purchase up to 200,000 Shares at $1.00 per Share through December 7, 2009, which vests or has vested 40,000 Shares annually commencing on January 1, 2000. (9) Includes an option to purchase up to 55,000 Shares at $0.625 per Share through December 14, 2008, which vests 100% at December 31, 2005, except as provided in Note 6 above. Also includes an option to purchase up to 100,000 Shares at $1.125 per Share through December 28, 2007, which vests, except as provided in Note 2 above, as follows: (a) 30,000 Shares on December 29, 1998, (b) 20,000 on December 29,1999, (c) 20,000 on December 29, 2000, and (d) 30,000 on December 29, 2001. (10) Includes an option to purchase up to 100,000 Shares at $1.125 per Share through March 17, 2009, which vests or has vested, 20,000 Shares annually commencing on March 18, 2000. (11) Includes an option to purchase up to 55,000 Shares at $0.625 per Share through December 14, 2008, which vests 100% at December 31, 2005, except as provided in Note 6 above. STOCK OPTIONS Options for 450,000 Shares were granted to executive officers during the year ended January 2, 2000, and Mr. Giaimo elected to surrender an option for 150,000 Shares during 1999. The following table provides information as to grants of stock options made during the fiscal year ended January 2, 2000, and held by the following executive officers. No stock appreciation rights with respect to the Shares were outstanding at such date. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
SECURITIES UNDERLYING % OF TOTAL OPTIONS/SARS GRANTED TO OPTIONS/SARS GRANTED EMPLOYEES IN FISCAL YEAR ENDED EXERCISE OR BASE PRICE NAME (#) 01/02/00 (1) ($/SH) Robert T. Giaimo 0 -- -- Timothy Cusick 0 -- -- Craig Kendall 100,000 22.2 $1.125 Patrick Meskell 200,000 44.4 $1.000 Ype Von Hengst 150,000 33.3 $1.000
43
MARKET PRICE ON GRANT DATE NAME DATE OF GRANT DATE OF GRANT EXPIRATION DATE PRESENT VALUE $ Robert T. Giaimo -- -- -- -- Timothy Cusick -- -- -- -- Craig Kendall 03/18/99 $1.125 03/17/09 -- Patrick Meskell 12/08/99 $1.000 12/07/09 -- Ype Von Hengst 12/08/99 $1.000 12/07/09 --
- --------- (1) As of January 2, 2000 options for 1,592,900 Shares under the Stock Option Plan were outstanding. The following table provides information as to the number and value of options during the year ended January 2, 2000 held by the following executive officers. No stock appreciation rights with respect to the Shares were outstanding at such date. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES (1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS AT FISCAL YEAR END AT FISCAL YEAR END (2) SHARES ACQUIRED VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME ON EXERCISE REALIZED ($) (#) (#) ($) ($) Robert T. Giaimo 0 0 280,000 120,000 0 0 Ype Von Hengst 0 0 105,000 250,000 0 18,920 Patrick Meskell 0 0 163,862 291,254 24,221 18,920 Timothy Cusick 0 0 71,124 111,417 4,072 18,920 Craig Kendall 0 0 20,000 135,000 0 18,920
- --------- (1) Information pertains to options as there were no stock appreciation rights issued or outstanding during the period concerned for the named individuals. (2) Represents the difference between the fair market value of the Shares subject to the options, based on the closing price of $0.969 for the Shares on December 31, 1999 (the final trading day of the year ended January 2, 2000), and the exercise prices of the options. BENEFIT PLANS The Company provides insurance benefits to its officers and other employees, including health, dental, and life insurance, subject to certain deductibles and co-payments by employees. 44 EMPLOYMENT AGREEMENTS FOUNDER'S EMPLOYMENT AGREEMENT. The Company and Robert T. Giaimo entered into a Founder's Employment Agreement on August 28, 1995, effective as of March 27, 1996, and amended on November 9, 1998. The base compensation under the Founder's Employment Agreement is $240,000 per annum, increased annually at a minimum amount equal to the increase in the Consumer Price Index for the Washington, D.C., Maryland, and Virginia metropolitan area (the "Base Compensation"). Benefits under the agreement include four weeks paid vacation, health and dental insurance, life and disability insurance, director and officer liability insurance and a $3,000,000 "split-dollar" life insurance agreement. Perquisites include an up to $500 per month car allowance, an education fee of $1,000 per month, and free shift meals. The Founder's Employment Agreement had an initial term of five years and, starting on its first anniversary, was renewable for five years from each anniversary. If at any such anniversary the Board does not renew, the agreement will expire five years from such anniversary (the five-year period beginning on such anniversary is referred to as the "Expiration Term"). The Founder's Employment Agreement was renewed on December 15, 1999 and, as renewed, expires in March 2005. The Board will consider renewal of the Founder's Employment Agreement at its December 2000 Board meeting. During the Expiration Term, Mr. Giaimo may, upon at least sixty days prior written notice, terminate the Founder's Employment Agreement immediately and such termination shall be an "Involuntary Resignation." If an Involuntary Resignation occurs, Mr. Giaimo shall be entitled to a severance amount equal to: (i) his base compensation, including all bonuses, for the immediately preceding fiscal year (the "Annual Amount"), (ii) divided by 365, and (iii) multiplied by the number of days remaining in the Expiration Term, provided that the severance amount paid to Mr. Giaimo due to an Involuntary Resignation shall not exceed three times the Annual Amount. Mr. Giaimo may also terminate the agreement by reason of a material breach by the Company (as specified in the Founder's Employment Agreement). If Mr. Giaimo terminates the Founder's Employment Agreement within the first five years of the agreement for a material breach by the Company, he shall be entitled to receive the Annual Amount multiplied by ten. If the material breach occurs after the first five years of the agreement, the Annual Amount shall be multiplied by five. Additionally, if a termination for a material breach occurs prior to the earlier of (i) the end of the first five years of the agreement, or (ii) the completion of an underwritten public offering of the Company's Shares from which it realizes $15,000,000, then the Company shall be obligated, at the employee's option, to purchase all of Mr. Giaimo's Shares at fair market value. The Company may terminate the agreement upon the death or disability of Mr. Giaimo or for cause. If terminated for death, the Mr. Giaimo's estate shall be entitled to receive all accrued compensation plus a severance amount equal to one year's Base Compensation (as adjusted to the date of death). The decedent's family will also be provided health insurance for one year from date of death. If terminated for disability, Mr. Giaimo shall be entitled to receive all accrued compensation plus a severance amount equal to his then current Base Compensation for a period of five years, but reduced dollar for dollar by all amounts received by the employee under disability insurance. If terminated for cause, Mr. Giaimo shall be entitled to receive all accrued compensation. EXECUTIVE EMPLOYMENT AGREEMENT. The Company and Ype Von Hengst entered into an Employment Agreement effective as of November 9, 1998. The base salary under the Employment Agreement is $125,000 per annum through December 31, 1998, $150,000 per annum from January 1, 1999 through December 31, 1999, and increased annually at a minimum amount equal to the increase in the Consumer Price Index for the Washington, D.C., Maryland, and Virginia metropolitan area beginning January 1, 2000 (the "Base Salary"). Benefits under the agreement include health and dental insurance, life and disability insurance, and participation in stock options, bonus plans and other benefit plans customarily made available to executive employees of the Company. 45 In consideration of Mr. Von Hengst entering into the agreement, the Company extended a $100,000 non-recourse loan (the "Loan") to Mr. Von Hengst, subject to his execution of a promissory note and secured by his 182,881 Shares in the Company (the "Collateral"). Beginning December 31, 1999, Mr. Von Hengst is also entitled to an annual bonus of an amount equal to $20,000 plus accrued and unpaid interest on the Loan (the "Bonus"). The Bonus is not paid directly to Mr. Von Hengst, but is applied to repay the outstanding principal and interest under the Loan. The term of the Employment Agreement is from November 9, 1998 to December 31, 2003. Under the Employment Agreement, Mr. Von Hengst agrees, except as required by the performance of his duties, not to disclose or use any Confidential Information of the Company or its affiliates, which is defined as all information disclosed to him or known by him as a consequence of or through his employment with the Company where such information is not generally known in the trade or industry and where such information refers or relates in any manner to the business activities of the Company. During the term of the Employment Agreement and for a period of twelve consecutive months after the termination of the Employment Agreement, Mr. Von Hengst agrees, except as required by the performance of his duties, not to induce, attempt to induce, counsel, advise, solicit or encourage any person to leave the employ of the Company or, with respect to any person who had left the employ of the Company within the previous six months, not to engage in any of the above activities in connection with such former employee's acceptance of employment with any person or entity other than the Company. For a period of twelve consecutive months after the termination of the Employment Agreement for any reason other than a termination without cause, Mr. Von Hengst agrees not to (i) engage in the "diner business" anywhere in the United States; (ii) engage in competition with the Company within a 10 mile radius of any Company owned or franchised facility or planned facility; or (iii) directly or indirectly, either individually or in any other capacity, work for, consult with or otherwise assist Movenpick, its parent corporation, affiliates and subsidiaries, in the development of "diners." Mr. Von Hengst may terminate his Employment Agreement at any time upon sixty days written notice ("Voluntary Resignation"). Upon receipt of such notice, the Company may elect to relieve Mr. Von Hengst of any or all of his duties or terminate him immediately. The Company may terminate the agreement for cause (as that term is defined in the Employment Agreement), upon the death or disability of Mr. Von Hengst, or without cause. If the agreement is terminated by Voluntary Resignation or for cause, (i) the Company's obligation to pay the Base Salary, Bonus and medical benefits shall cease immediately on the date of termination; and (ii) the principal balance under the Loan shall be extinguished, and all right, title and interest in the Collateral shall vest immediately with the Company. If the agreement is terminated for death (i) the Company's obligation to pay the Base Salary, Bonus and medical benefits shall cease immediately on the date of termination; and (ii) the principal balance under the Loan shall be extinguished, and all right, title and interest in the Collateral shall vest with Mr. Von Hengst (or his estate or heirs). If terminated for disability, defined as the inability to perform the essential function of the job, with or without accommodation, for at least 180 consecutive days, (i) Mr. Von Hengst's right to the Base Salary and Bonus shall cease on the date of termination, (ii) the Company shall make the medical benefits available to Mr. Von Hengst for a period of eighteen months following termination, the costs of which shall be paid by the Company for the first twelve months of such period; and (iii) the principal balance under the Loan shall be extinguished, and all right, title and interest in the Collateral shall vest with Mr. Von Hengst (or his estate or heirs). If terminated without cause, (i) Mr. Von Hengst shall be entitled to the Base Salary, Bonus, and medical benefits for a one year period commencing with the date of termination; and (ii) the principal balance under the Loan shall be extinguished, and all right, title and interest in the Collateral shall vest with Mr. Von Hengst (or his estate or heirs). OFFICER EMPLOYMENT AGREEMENTS. The Company entered into letter agreements on March 4, 1999, with Craig Kendall, Timothy Cusick, and Patrick Meskell. Mr. Meskell's letter agreement on March 4, 1999, supersedes his letter agreement with the Company dated December 4, 1995. The agreements provide for Mr. Kendall's employment as Vice President, Finance with a base salary of $125,000 per annum, Mr. Cusick's employment as Area Director of Operations with a base salary of $104,000 per annum, and Mr. Meskell's employment as Senior Vice President, Human Resources with a base salary of $104,000, with future adjustments to each employee's base salary to be determined by the Board. In addition, each employee is entitled to (i) participate in bonus and stock option plans made available to executive employees of the Company; (ii) receive a $500 per month car allowance, (iii) receive life insurance coverage in the amount of $500,000; (iv) participate in group health and dental plans generally offered to employees of the Company; (v) receive long term disability insurance coverage in amount of approximately 60% of the employee's base salary per month, subject to a 90 day initial waiting period; 46 (vi) receive three weeks paid vacation that does not accrue or carry over from one year to the next; and (vii) receive sick leave and other benefits, in accordance with the Company's policies for its executives. Each employee agrees to enter into confidentiality and non-competition agreements with the Company. Each of the agreements are terminable at any time by either party thereto. However, if the Company terminates the agreement, the Company will pay the employee all base salary earned but unpaid on the date of resignation plus three months base salary. If the employee resigns after providing at least three months prior notice, the Company will pay the employee all base salary earned but unpaid on the date of resignation plus three months base salary payable after resignation on the same schedule as the salary that was paid before resignation. If the employee resigns without providing at least three months prior notice, (i) all stock options and all stock purchase rights granted under the Stock Option Plan to the employee (a) subsequent to March 1, 1999, (b) on December 15, 1997, and (c) to Mr. Cusick and Mr. Meskell on December 29, 1997 will be terminated on the date of resignation; and (ii) the employee will sell and the Company will purchase all Shares of the Company acquired by the employee pursuant to stock options or stock purchase rights within six months prior to the date of resignation at a purchase price equal to the price paid for the Shares. NON-EMPLOYEE DIRECTOR COMPENSATION During the year ended January 2, 2000, each of the Company's non-employee directors, other than Michael Collier, who became a director in March 1999 to fill the vacancy left by Clinton A. Clark, received an option to purchase 1,000 Shares on April 1, 1999 under the 1996 Non-Employee Director Stock Option Plan as in effect prior to its amendment in June 1999. Such options may be exercised at a price equal to 100% of the fair market value on the date of grant, are exercisable at any time in whole or in part for a period of three years from the date of grant, and vest immediately. On June 18, 1999, upon the amendment of the plan pursuant to the approval given by the stockholders at the annual stockholder meeting held on such date, all of the non-employee directors, including Mr. Collier, received an option to purchase 4,000 Shares. Such options may be exercised at a price equal to 100% of the fair market value on the date of grant, vest and become exercisable in whole or in part one year after the date of grant for a period of ten years from such date. Other than the option grants and the reimbursement of certain expenses, non-employee directors received no other compensation for service as directors for the year ended January 2, 2000. 47 Item 12. Security Ownership of Certain Beneficial Owners and Management. As of January 2, 2000, the Company had 11,592,691 Shares issued and outstanding. The following table sets forth, to the Company's knowledge as of January 2, 2000, the beneficial ownership of Shares by each person or entity beneficially owning more than 5% of the Shares, each director, each nominee, and certain executive officers, individually, and all directors and executive officers as a group.
AMOUNT AND NATURE OF NAME AND ADDRESS (1) OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (2) PERCENT(3) Catherine Britton 2,485,112 (4),(5) 21.4 Michael Collier 79,928 (6) * Robert T. Giaimo 1,480,006 (7) 12.5 Ype Von Hengst 308,498 (8) 2.6 Edward H. Kaplan 1,008,000 (9),(5) 8.7 Craig Kendall 42,222 (10) * Patrick Meskell 211,332 (11) 1.8 Louis P. Neeb 35,906 (12),(5) * Charles M. Steiner 628,729 (13),(5) 5.4 Timothy Cusick 82,936 (14) * All directors and executive officers as a group (12 persons) 5,988,480 (16) 48.6
"*" means less than 1% ________________________ (1) The address for each beneficial owner listed above is Silver Diner, Inc., 11806 Rockville Pike, Rockville, Maryland 20852. (2) Unless otherwise stated in Notes 4 through 14 below, all references to options are to options exercisable currently and within 60 days of January 2, 2000. (3) Each percentage of beneficial ownership is calculated using a different denominator, consisting of the total number of Shares outstanding (11,592,691) increased by the number of options owned by the beneficial owner that are exercisable within 60 days. The denominator used to calculate the percentage of beneficial ownership of all directors and executive officers as a group is the sum of the total number of Shares outstanding (11,592,691) and all outstanding options held by directors and executive officers that are exercisable within 60 days. (4) Includes: (a) 2,456,109 directly owned Shares; (b) options to purchase 9,000 Shares granted under the 1996 Non-Employee Director Stock Option Plan, exercisable at the prices set forth in Note 5 below; and (c) 20,003 Shares assigned to Ms. Britton by Robert T. Giaimo which are subject to an option held by Mr. Clinton A. Clark at an exercise price of $3.60 per Share through April 5, 2004. Of the 2,476,112 Shares directly owned by Ms. Britton, 1,000 are subject to the terms of a voting agreement described in clause (c) of Note 7. Does not include 1,480,006 Shares beneficially owned by Mr. Giaimo, Ms. Britton's spouse. Ms. Britton disclaims beneficial ownership of the Shares beneficially owned by Mr. Giaimo. (5) Each non-employee director other than Mr. Collier (five persons, excluding Mr. Collier) holds options for 9,000 Shares granted under the 1996 Non- Employee Director Stock Option Plan, exercisable at the following prices: (a) 1,000 at $3.4375 per Share; (b) 1,000 at $3.125 per Share; (c) 1,000 at $2.125 per Share; (d) 1,000 at $1.25 per Share; (e) 1,000 at $1.25 per Share; (f) 1,000 at $1.125 per Share; (g) 1,000 at $0.969 per Share; (h) 1,000 at $0.8125 per Share; and (i) 1,000 at $0.938 per Share. 48 (6) Includes: (a) 52,857 directly owned Shares; (b) options to purchase 26,071 Shares granted under the 1991 Stock Option Plan at an exercise price of $.003 per Share; and (c) options to purchase 1,000 Shares granted under the Non-Employee Director Stock Option Plan at an exercise price of $0.938 per Share. Of the 52,857 Shares directly owned by Mr. Collier, 31,672 are subject to the terms of a voting agreement described in clause (d) of Note 7. (7) Includes: (a) 421,565 directly owned Shares; (b) options to purchase 280,000 Shares granted under the Stock Option Plan at an exercise price of $1.238 per Share; (c) 223,436 Shares owned of record by five persons, two of whom were principals of the Company prior to March 27, 1996, and three of whom are transferees of Shares owned by two other principals of the Company prior to March 27, 1996, which are subject to a voting agreement; and (d) 555,005 Shares owned of record by stockholders of the Company that are subject to voting agreements. The voting rights described in clause (c) above were granted to Mr. Giaimo pursuant to the FTAC Voting and Lockup Agreement, as amended by an Addendum thereto, which provides that Mr. Giaimo has an irrevocable right to vote the Shares with respect to all matters in which stockholder approval is required under the Delaware General Corporation Law. The right survives until the earlier of (i) five years after March 27, 1996; (ii) the death of the stockholder; or (iii) the sale by Mr. Giaimo of 50% or more of his Shares. Notwithstanding the foregoing, up to a total of 50% of such Shares may be transferred free of the voting restrictions during the period commencing 48 months after March 27, 1996 and ending 60 months after such time. In addition, a security interest in the Shares may be granted at any time after 36 months after March 27, 1996 and in the event of a default with respect to such secured debt the Shares may be sold free and clear of such right. The voting rights described in clause (d) above were granted to Mr. Giaimo pursuant to the voting agreements that grant to Mr. Giaimo an irrevocable right to vote with respect to all matters in which stockholder approval is required under the Delaware General Corporation Law, including, without limitation, voting such stockholders' Shares in favor of nominees to the Board and for or against any and all matters that may come before the Company's stockholders for a vote. The appointment survives until the earliest of five years after March 27, 1996, the public offering of Shares by the Company from which the Company realizes $15 million or more, or the death of the stockholder. The 1,480,006 Shares beneficially owned by Mr. Giaimo do not include any Shares beneficially owned by Catherine Britton, Mr. Giaimo's spouse. Mr. Giaimo disclaims beneficial ownership of Shares beneficially owned by Catherine Britton. The 1,480,006 Shares beneficially owned by Mr. Giaimo also do not include Shares issuable upon the exercise of certain outstanding stock option agreements issued to employees of the Company ("Options") that will be subject to the terms of voting agreements between the holders of such Options and Mr. Giaimo ("Voting Agreements"). Pursuant to the Voting Agreements, Mr. Giaimo would have the sole power to vote the Shares issued upon the exercise of such Options until the earliest to occur of: (i) March 27, 2001; (ii) an underwritten public offering by the Company from which it realizes at least $15 million; or (iii) if applicable, termination of the optionee's employment with the Company as a result of death or incapacity. An aggregate of approximately 279,864 Shares issuable upon exercise of Options would be subject to the Voting Agreements. Of such Options, approximately 243,027 are currently exercisable through March 2, 2000 (including approximately 128,344 with an exercise price of less than $.01 per Share and approximately 114,683 with an exercise price between $2.25 and $4.05 per Share) and approximately 36,837 are not exercisable within such period (including 36,837 with an exercise price of between $2.25 and $4.05 per Share). Mr. Giaimo would have sole power to vote the approximately 243,027 Shares underlying the currently exercisable Options, if such Options were exercised. (8) Includes: (a) 203,498 directly owned Shares; (b) options to purchase 75,000 Shares granted under the Stock Option Plan at an exercise price of $1.125 per Share; and (c) options to purchase 30,000 Shares under the Stock Option Plan at an exercise price of $1.00 per Share. Of the 203,498 Shares directly owned by Mr. Von Hengst, 395 are subject to the terms of a voting agreement described in clause (c) of Note 7 and 182,881 are subject to the terms of a voting agreement described in clause (d) of Note 7. (9) Includes: (a) 994,000 directly owned Shares; (b) options to purchase 9,000 Shares granted under the 1996 Non-Employee Director Stock Option Plan, exercisable at the prices set forth in Note 5 above; and (c) options to purchase 5,000 Shares granted under the 1991 Stock Option Plan at an exercise price of $4.05 per Share. Of the 994,000 Shares directly owned by Mr. Kaplan, 158,241 are subject to the terms of a voting agreement described in clause (c) of Note 7. 49 (10) Includes: (a) 22,222 directly owned Shares; and (b) options to purchase 20,000 Shares granted under the Stock Option Plan at an exercise price of $1.125 per Share. (11) Includes: (a) 47,570 directly owned Shares; (b) options to purchase 25,004 Shares granted under the Earned Ownership Plan at an exercise price of $.0003 per Share; (c) options to purchase 48,758 Shares granted under the 1991 Stock Option Plan at an exercise price of $4.05 per Share; (d) options to purchase 50,000 Shares granted under the Stock Option Plan at an exercise price of $1.125 per Share; and (e) options to purchase 40,000 Shares granted under the Stock Option Plan at an exercise price of $1.125 per Share. (12) Includes: (a) 14,334 Shares held of record by Neeb Enterprises, Inc., a corporation wholly-owned by Mr. Neeb and of which Mr. Neeb is President and a Director; (b) options to purchase 12,572 Shares granted under the 1991 Stock Option Plan at the exercise price of $.003 per Share; and (c) options to purchase 9,000 Shares granted under the 1996 Non-Employee Director Stock Option Plan, exercisable at the prices set forth in Note 5 above. Of the 14,334 Shares directly owned by Neeb Enterprises, Inc., 1,000 are subject to the terms of a voting agreement described in clause (c) of Note 7. (13) Includes: (a) 564,729 Shares held of record by the Steiner Family Partnership (Mr. Steiner owns a 25% interest in and is the managing partner of The Steiner Family Partnership and, therefore, may be deemed to beneficially own all Shares held of record by such partnership (except to the extent of his 25% ownership interest in The Steiner Family Partnership, Mr. Steiner disclaims beneficial ownership of such Shares)); (b) 50,000 Shares held by the Branch Group, Inc. 401(k) Profit Sharing Plan (Mr. Steiner is sole trustee of the Branch Group, Inc. 401(k) Profit Sharing Plan and one of a number of beneficiaries thereof, holding an approximate 7% interest in the plan); (c) options to purchase 5,000 Shares under the 1991 Stock Option Plan at the exercise price of $4.05 per Share; and (d) options to purchase 9,000 Shares under the 1996 Non-Employee Director Stock Option Plan, exercisable at the prices set forth in Note 5 above. (14) Includes: (a) 11,812 directly owned Shares; (b) options to purchase 16,920 Shares granted under the 1991 Stock Option Plan at an exercise price of $4.05 per Share; (c) options to purchase 4,204 Shares granted under the Earned Ownership Plan at an exercise price of $.0003 per Share; and (d) options to purchase 50,000 Shares granted under the Stock Option Plan at an exercise price of $1.125 per Share. (15) The total Shares beneficially owned by all directors and executive officers as a group was calculated by taking the sum of all Shares beneficially- owned by each director and executive officer, as reflected in the table, and reducing that number to avoid double counting of those Shares which are subject to a proxy given to Mr. Giaimo, as follows: (a) 1,000 Shares held by Ms. Britton; (b) 31,672 Shares held by Mr. Collier; (c) 183,276 Shares held by Mr. Von Hengst; and (d) 158,241 Shares held by Mr. Kaplan. Item 13. Certain Relationships and Related Transactions. SILVER DINER POTOMAC MILLS, INC. Pursuant to lease agreements dated October 14, 1991 and May 27, 1992, the Company leases the Silver Diner restaurant in Potomac Mills, Virginia (the "Potomac Mills Restaurant") from Silver Diner Potomac Mills, Inc. ("SDPMI"), a corporation wholly owned by Robert T. Giaimo, the Chairman and President of the Company. The leases require the payment of an annual base rent, with annual adjustments based on the Consumer Price Index, and the payment of percentage rent based on gross receipts. The leases expire in late 2011. For the years ending January 3, 1999, December 28, 1997, and December 29, 1996, occupancy costs were $355,000, $350,000 and $389,000, respectively, in rent and related pass through costs associated with the leases. ROBERT GIAIMO DEVELOPMENT, INC. On June 17, 1997, the Company purchased from Robert Giaimo Development, Inc. ("RGDI"), a corporation wholly owned by Robert T. Giaimo, the Chairman and President of the Company, an undivided 70% interest in the parcel of land used as a parking lot for the Potomac Mills Restaurant. The total purchase price of the land was $408,000, of which $267,000 was borrowed from a bank, secured by the land, bearing interest of 9.25% annually, and due to mature in June 1999. 50 The Company assumed a management agreement entered into between RGDI with SDPMI (the "Management Agreement"), which provides that the Company is the exclusive manager of the Potomac Mills Restaurant, is entitled to receive all of the net profits (as defined in the Management Agreement) from the Potomac Mills Restaurant, and is responsible for paying all operating costs and expenses of the restaurant, including rent. The Management Agreement is unlimited in duration and can only be terminated by mutual agreement of the Company and SDPMI, or following notice that the Company failed to meet its management obligations and responsibilities. RGDI has granted the Company an option to purchase the Potomac Mills Restaurant for an amount equal the fair market value, on the date of purchase, as determined by an appraisal. LOAN TO YPE VON HENGST. In connection with his entering into an employment agreement with the Company on November 9, 1998, Ype Von Hengst, a Director and officer of the Company, received a $100,000 loan from the Company, secured by his 182,881 Shares in the Company and bearing interest at 5.25% annually. The loan and accrued interest is to be repaid annually by applying an annual bonus received by Mr. Von Hengst beginning December 31, 1999. MICHAEL COLLIER AND UNIWEST GROUP, INC. AND AFFILIATES The Company has from time to time entered into contracts with Michael Collier, a Director, and with Uniwest Group, Inc., a construction corporation and certain of its affiliates, a company of which Michael Collier is the President and a stockholder, as follows: the Company paid Michael Collier approximately $23,600 for real estate consulting services provided to the Company during fiscal year 1999; the Company paid Uniwest Management Inc., a company which manages the real estate operations, approximately $180,500, as rent on the Merrifield lease; and the Company paid Uniwest Construction, Inc. approximately $74,000 for miscellaneous construction and renovation to the existing diners. In 1995, the Company entered into a ground lease with 2909 Gallows LC, landlord, covering the Merrifield facility. The landlord is a partnership in which Michael Collier owns a significant limited partnership interest. The lease provides for minimum annual rent of $110,000 in 1998 with fixed escalations in rent payments over the lease term through 2012. Uniwest Construction, Inc. acted as the general contractor for the construction of the diner on the Merrifield property. Michael Collier was not a director of the Company when the lease and construction contract were entered into. In January 2000, as an agent for Interface Properties, Inc., the landlord, the Company entered into a construction contract with Uniwest Construction, Inc. for the construction of the Virginia Beach, VA Silver Diner. The contract is a fixed fee contract in the amount of $800,000. Uniwest Construction, Inc. acts as the general contractor and is paid a fee for coordinating and supervising the development of the facility. All work and materials will be provided by subcontractors whose prices are subject to bid. Pursuant to the lease agreement, the landlord is liable for all payments and terms under the construction contract agreement. In February 2000, the Company entered into a construction contract with Uniwest Construction, Inc. for the construction of the Lakeforest Mall Silver Diner. The contract is a fixed fee contract in the amount of $735,200. Uniwest Construction, Inc. acts as the general contractor and is paid a fee for coordinating and supervising the development of the facility. All work and materials will be provided by subcontractors whose prices are subject to bid. 51 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Lists of Documents Filed as Part of this Report 1. Financial Statements
Page Report of Independent Auditors................................................ 18 Consolidated Financial Statements: Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999........................................... 20 Consolidated Statements of Operations for the Fiscal Years Ended January 2, 2000, January 3, 1999 and December 28, 1997..... 21 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended January 2, 2000, January 3, 1999 and December 28, 1997..... 22 Consolidated Statements of Cash Flows for the Fiscal Years Ended January 2, 2000, January 3, 1999, and December 28, 1997.... 23 Notes to Consolidated Financial Statements.................................... 25
2. Schedules All Schedules are omitted because the required information is inapplicable or it is presented in the Consolidated Financial Statements or the notes thereto. 3. Exhibits Exhibit Number Description of Document - ------- ----------------------- 3. Articles of incorporation and bylaws 3.1.1. Registrant's Certificate of Incorporation as amended by Certificates of Amendment incorporated by reference to Exhibit 3.01 of the registrant's Form 8-K dated March 27, 1996. 3.2. Registrant's Bylaws incorporated by reference to Exhibit 3.3 of the registrant's Form S-4 (File No. 33-98844). 9.0 Form of Voting and Lockup Agreement with respect to Stock Option Agreements incorporated by reference to Exhibit 9.01 of the registrant's Form 8-K dated March 27, 1996. 9.1 Form of SDDI Voting and Lockup Agreement among SDDI, Robert T. Giaimo and certain shareholders of SDDI, together with Schedule of executed Voting and Lockup Agreements incorporated by reference to Exhibit 9.04 of the registrant's Form 8-K dated March 27, 1996. 9.2 FTAC Voting and Lockup Agreement dated as of September 15, 1995 by and among the registrant and George A. Naddaff, Douglas M. Suliman, Jr., Ralph J. Guarino and Charles A. Cocotas incorporated by reference to Exhibit 9.05 of the registrant's Form 8-K dated March 27, 1996. 52 9.3 Assumption of SDDI Voting and Lockup Agreement, SDDI Affiliate Lockup Agreement and Stockholder Lockup Agreement dated March 27, 1996, pursuant to Section 5.14(c) of merger agreement by and among FTAC, FTAC Transition Corporation and SDDI, incorporated by reference to Exhibit 9.06 of the registrant's Form 8-K dated March 27, 1996. 10. Material Contracts Material Contracts - Real Property Rockville, Maryland 10.1 Lease Agreement between Federal Realty Investment Trust (Landlord) and SDLP (Tenant) dated July 13, 1988 as amended by Lease Modification dated August 17, 1988, Second Lease Modification dated February 3, 1989, Third Amendment to Lease dated January 20, 1993, and Fourth Lease Modification Agreement dated October 17, 1994 incorporated by reference to Exhibit 10.01 of the registrant's Form 8-K dated March 27, 1996. Laurel, Maryland. 10.2 Lease between CG Beltsville Limited Partnership (Landlord) and SDLP (Tenant) dated January 26, 1990, as amended by Letter Agreement dated October 28, 1995 incorporated by reference to Exhibit 10.02 of the registrant's Form 8-K dated March 27, 1996. Dale City, Virginia (Potomac Mills) 10.3 Lease between RGDI (Landlord) and SDPMI (Tenant), dated June 10, 1991, as amended by First Amendment to Lease, dated October 14, 1991, as amended by Second Amendment to Lease dated October 30, 1995 incorporated by reference to Exhibit 10.03 of the registrant's Form 8-K dated March 27, 1996. Parking Lot (parcel 11-B-1A), Dale City, Virginia (located adjacent to Silver Diner Restaurant at Potomac Mills) 10.4 Lease between Robert Giaimo Development, Inc. ("RGDI") (Landlord) and SDPMI (Tenant) dated May 27, 1992, as amended by Amendment to Lease dated October 30, 1995 incorporated by reference to Exhibit 10.04 of the registrant's Form 8-K dated March 27, 1996. Towson, Maryland 10.5 Lease Agreement between Towson Town Center Associates (Landlord) and the registrant (Tenant) effective January 30, 1992 incorporated by reference to Exhibit 10.05 of the registrant's Form 8-K dated March 27, 1996. Fair Lakes, Virginia (Fair Oaks) 10.6 Ground Lease Agreement between F.L. Promenade L.P. (Landlord) and the registrant (Tenant) dated July 12, 1994, as amended by First Amendment to Ground Lease Agreement dated February 15, 1995, and Second Amendment to Ground Lease Agreement dated April 4, 1995 incorporated by reference to Exhibit 10.06 of the registrant's Form 8-K dated March 27, 1996. Tysons Corner, Virginia 53 10.7 Ground Lease between Lehndorff Tysons Joint Venture (Landlord) and the registrant (Tenant) dated December 29, 1994), as amended by First Amendment to Lease dated May 14, 1995 incorporated by reference to Exhibit 10.07 of the registrant's Form 8-K dated March 27, 1996. Springfield, Virginia 10.8 Springfield Mall Lease between Franconia Associates (Landlord) and the registrant (Tenant) effective May 1, 1996 incorporated by reference to Exhibit 10.08 of the registrant's Form 8-K dated March 27, 1996. Merrifield, Virginia 10.9 Agreement of Lease dated September 14, 1995 by and between 2909 Gallows LC (Landlord) and the registrant (Tenant) incorporated by reference to Exhibit 10.09 of the registrant's Form 8-K dated March 27, 1996. Reston, Virginia 10.10 Purchase and Sale Agreement dated December 29, 1995 by and between Reston Land Corporation (Seller) and the registrant (Buyer) incorporated by reference to Exhibit 10.10 of the registrant's Form 8-K dated March 27, 1996. Clarendon, Virginia 10.11 Lease dated February 12, 1996 between Wilson Limited Partnership (Landlord) and the registrant (Tenant) incorporated by reference to Exhibit 10.11 of the registrant's Form 8-K dated March 27, 1996. Kendall, Florida 10.12 Purchase Agreement dated October 4, 1996 by and between Documentation Corp. And Bersin Development Corp. (Sellers) and the registrant (Buyer). Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1996, is incorporated herein by reference. Cherry Hill, New Jersey 10.13 Lease Agreement dated September 30, 1996 by and between Cherry Hill Associates L.P. (Landlord) and the registrant (Tenant). Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1996 is incorporated herein by reference. Gaithersburg, Maryland 10.13.1 Composite of Lease dated November 2, 1999 by and between Lake ForestAssociates LLC (Landlord) and Silver Diner Development, Inc. (Tenant)* Virginia Beach, Virginia 10.13.2 Form of Lease dated August 11, 1999 between Interface Properties, Inc (Landlord) and Silver Diner Development, Inc. (Tenant)* Material Contracts - Stock Plans 54 10.14 SDDI Second Amended and Restated 1991 Stock Option Plan, together with forms of incentive stock option agreement and non- qualified stock option agreement incorporated by reference to Exhibit 10.14 of the registrant's Form 8-K dated March 27, 1996. 10.15 SDDI Second Amended and Restated Earned Ownership Plan, together with form of non-qualified stock option agreement incorporated by reference to Exhibit 10.15 of the registrant's Form 8-K dated March 27, 1996. 10.16 Silver Diner, Inc. 1996 Non-employee Director Stock Option Plan together with form of stock option agreement incorporated by reference to Exhibit 4(a) of the registrant's Form S-8 filed December 20, 1996. 10.17 Silver Diner, Inc. 1996 Consultant Stock Option and Stock Purchase Plan together with form of stock option agreement, form of stock purchase agreement, form of election to purchase common stock and form of election to purchase options, incorporated by reference to Exhibit 4(b) of the registrant's Form S-8 filed December 20, 1996. 10.18 Certificate and Agreement of Participation, Silver Diner, Inc. Restaurant Operating Partner Program and Addenda incorporated by reference to Exhibit 4 of the registrant's Form S-8 filed February 14, 1997. 10.19 Silver Diner, Inc. Stock Option Plan together with form of Stock Option Agreement. Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1996, is incorporated herein by reference. 10.20 Silver Diner, Inc. Employee Stock Purchase Plan together with form of Subscription Agreement and Notice of Withdrawal. Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1996, is incorporat ed herein by reference. 10.20.1 Form of Certificate and Agreement of Participation-Restaurant Operating Partner Program, as approved by the Board on December 15, 1998, incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.2 Form of Addendum to a Certain Certificate and Agreement of Participation in the Silver Diner, Inc. Restaurant Operating Partner Program (Version for 1997 Certificates issued after January 1, 1997), as approved by the Board on December 15, 1998, incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.3 Form of Addendum to a Certain Certificate and Agreement of Participation in the Silver Diner, Inc. Restaurant Operating Partner Program (Version for 1997 Certificates issued on January 1, 1997), as approved by the Board on December 15, 1998, incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.4 Silver Diner, Inc. Stock Option Plan (as amended March 4, 1998), incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.5 Form of Stock Option Plan Agreement between Silver Diner, Inc. and certain Executive Officers, Date of Grant: December 15, 1998, together with Performance Criteria for each of: Craig Kendall; Patrick Meskell; Timothy Cusick; and Ype Von Hengst, incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 55 10.20.6 Stock Option Plan Agreement between Silver Diner, Inc. and Robert T. Giaimo for grant of 400,000 Shares on December 15, 1998, incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.7 Form of Restated Stock Option Plan Agreement between Silver Diner, Inc. and Certain Executive Officers Granting Shares on December 29, 1997, incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.8 1996 Non-Employee Director Stock Option Plan, as amended March 4, 1998, incorporated by reference to Exhibit 10.41 to the Company'sAnnual Report on Form 10-K for the fiscal year ended January 3, 1999. 10.20.9 1996 Employee Stock Purchase Plan, as amended.* 10.20.10 1996 Non-Employee Director Stock Option Plan (as amended March 4, 1998 and March 18, 1999)*. 10.20.11 Form of Performance Criteria (for January 2, 1999-December 31, 1999), as amended by the Compensation Committee on December 8, 1999, for options granted December 15,1998 to each of: Craig Kendall; Patrick Meskell; Timothy Cusick; and Ype Von Hengst* 10.20.12 Form of Performance Criteria (for January 1, 2000-December 31, 2000), as adopted by the Compensation Committee on December 8, 1999, for options granted December 15,1998 to each of: Craig Kendall; Patrick Meskell; Timothy Cusick; and Ype Von Hengst* Material Contracts - Agreements with Executive Officers/Director 10.22 Letter Agreement dated December 4, 1996 between the registrant and Patrick Meskell regarding terms of employment, as amended by Letter Agreement dated March 26, 1996 incorporated by reference to Exhibit 10.19 of the registrant's Form 8-K dated March 27, 1996. 10.22.1 Letter Agreement dated March 4, 1999 between the Company and Patrick Meskell.* 10.23 Founder's Employment Agreement dated August 28, 1995 by and between the registrant and Robert T. Giaimo incorporated by reference to Exhibit 10.20 of the registrant's Form 8-K dated March 27, 1996. 10.24 Assumption of Founder's Employment Agreement dated March 27, 1996 pursuant to Section 5.14(b) of merger agreement by and among FTAC, FTAC Transition Corporation and SDDI, incorporated by reference to Exhibit 10.21 of the registrant's Form 8-K dated March 27, 1996. 10.25 Indemnity Agreement dated August 29, 1995 by and between Robert T. Giaimo, as indemnitee, and the registrant incorporated by reference to Exhibit 10.22 of the registrant's Form 8-K dated March 27, 1996. 10.25.1 Letter Agreement dated March 4, 1999 between the Company and Craig Kendall.* 10.25.2 Letter Agreement dated March 4, 1999 between the Company and Timothy Cusick.* 10.25.3 Employment Agreement dated November 9, 1998, between Silver Diner, Inc. and Ype Von Hengst, including Promissory Note in principal amount of $100,000, incorporated by reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K for thefiscal year ended January 3, 1999. 56 10.25.4 Letter Agreement dated November 9, 1998 between Robert T. Giaimo and Silver Diner, Inc. Re: Founder's Employment Agreement, incorporated by reference to Exhibit 10.40 of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. Material Contracts - Miscellaneous 10.26 Option to Purchase dated January 26, 1990 between CG Beltsville Limited Partnership (Optionor), and SDLP (Optionee) regarding land parcel on which the Silver Diner Restaurant in Laurel, Maryland, is located incorporated by reference to Exhibit 10.36 of the registrant's Form 8-K dated March 27, 1996. 10.27 Amendment No. 1 to the Stock Escrow Agreement dated as of March 26, 1996 among the Registrant, George A. Naddaff, Douglas M. Suliman, Jr., Ralph J. Guarino, Charles A. Cocotas and Continental Stock Transfer & Trust Company, together with letter dated March 27, 1996 from the Registrant to Continental Stock Transfer & Trust Company incorporated by reference to Exhibit 10.37 of the registrant's Form 8-K dated March 27, 1996. 10.28 Affiliate Warrant Exchange and Custodial Agreement dated September 15, 1996, by and among George A. Naddaff, Douglas M. Suliman, Jr. and Charles A. Cocotas, as Warrant Holders, SDDI and Douglas M. Suliman, Jr., as Custodian incorporated by reference to Exhibit 10.38 of the registrant's Form 8-K dated March 27, 1996. 10.29 Escrow Agreement dated as of February 1, 1996 by and between GKN Securities Corp., certain affiliates thereof, the SDDI and Arent Fox, as Escrow Agent incorporated by reference to Exhibit 10.39 of the registrant's Form 8-K dated March 27, 1996. 10.30 Option Agreement dated March 27, 1996 by and between RGDI and SDDI granting option to SDDI for the purchase of Potomac Mills real estate parcels incorporated by reference to Exhibit 10.34 of the registrant's Form 8-K dated March 27, 1996. 10.31 Agreement dated February 29, 2000 between Silver Diner Development, Inc. (Owner) and Uniwest Construction, Inc. (Contractor) for Silver Diner at Lakeforest Mall (Project)* 10.32 Letter Agreement dated January 7, 2000 between Uniwest and Silver Diner Development, Inc. regarding Silver Diner at Columbus Square East, Virginia Beach, Virginia, together with Agreement dated December 1, 1999 between the parties* 21. Subsidiaries of the Registrant. (a) Silver Diner Development, Inc., a Virginia corporation 22. Accountants Consent 23.1 Consent of Reznick Fedder & Silverman P.C.* (b) Reports on Form 8-K Current Report on Form 8-K dated September 29, 1999 regarding the change in the Company's certifying accountant. * Filed herewith. All other exhibits have been previously filed as indicated. 57 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Silver Diner, Inc. By:/s/ Robert T. Giaimo _______________________ Robert T. Giaimo President and Chief Executive Officer April 3, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Robert T. Giaimo President, Chief Executive April 3, 2000 ________________________ Officer and Director Robert T. Giaimo /s/ Craig Kendall Vice President, Finance April 3, 2000 ________________________ Craig Kendall /s/ Catherine Britton Director April 3, 2000 ________________________ Catherine Britton /s/ Ype Hengst Director April 3, 2000 ________________________ Ype Hengst /s/ Edward H. Kaplan Director April 3, 2000 ________________________ Edward H. Kaplan /s/ Michael Collier Director April 3, 2000 ________________________ Michael Collier /s/ Louis P. Neeb Director April 3, 2000 ________________________ Louis P. Neeb /s/ Charles Steiner Director April 3, 2000 ________________________ Charles Steiner 58 EX-10.13.1 2 COMP. LAKEFOREST/SILVER DINER LEASE EXHIBIT 10.13.1 COMPOSITE LAKEFOREST - SILVER DINER LEASE November 2, 1999 LAKEFOREST A Regional Retail Development CITY OF GAITHERSBURG, MARYLAND THIS LEASE made as of this 2nd day of November, 1999,m by and between LAKEFOREST ASSOCIATES LLC, a Delaware limited liability company, the address of which is 200 East Long Lake Road, P.O. Box 200, Bloomfield Hills, Michigan 48303-0200 (Landlord), and SILVER DINER DEVELOPMENT, INC., the address of which is11806 Rockville Pike, Rockville, MD 20852 (Tenant). All of the provisions of the Lease, including the Data Sheet, the standard provisions commencing with Article I and continuing through Article XXVII of the Lease (hereinafter at times referred to as the "text of the Lease" or the "Standard Form"), the Addendum, all exhibits, and riders, if any, are incorporated in full in this preamble as if fully set forth at this point. ARTICLE I. GRANT AND TERM SECTION 1.01. LEASED PREMISES. (a) Landlord, in consideration of the rent to be paid and the covenants to be performed by Tenant, does hereby demise and lease unto Tenant, and Tenant hereby rents and hires from Landlord, those certain premises in the regional retail development shown on Exhibit A, subject to covenants, restrictions and easements of record, the terms and provisions of certain reciprocal easement and/or operating agreements now or hereinafter entered into by Landlord with the owners or lessees of the Department Store Sites, and the terms and provisions of the underlying lease, if any. Landlord represents that the foregoing covenants, restrictions and easements of record and the terms of any such reciprocal easement and/or operating agreements will not materially adversely interfere (i) with Tenant's use of the leased premises generally in accordance with the provisions of Section 7.01 hereof nor (ii) with access to the leased premises. It is agreed that the term "regional retail development" as used herein shall mean and refer to the Department Store Sites and the Shopping Center, including the buildings located or to be located thereon, all as shown on the site plan which is set forth in Exhibit A attached hereto and made a part hereof, and that the term "Shopping Center" shall, except as otherwise specifically provided herein, mean and refer to the hatched and the shaded portions of such site plan which portions from time to time open directly on the enclosed Mall and which may vary at each level of the regional retail development, together with the enclosed Mall (whether or not shaded or hatched). The approximate location of the premises leased to Tenant hereunder is shown in Exhibit A. The legal description of the regional retail development or of the Shopping Center is set forth in Exhibit A or referenced in the Addendum attached hereto and made a part hereof. The leased premises (herein referred to as the "leased premises" or "premises") are described as set forth in the Data Sheet attached hereto. As used in this Lease, the term "State" shall mean the state in which the Shopping Center is located. (b) The exterior walls and the roof of the leased premises and the area beneath said premises are not demised hereunder, and the use thereof, together with the right to locate, both vertically and horizontally, install, maintain, use, repair and replace pipes, utility lines, ducts, conduits, flues, refrigerant lines, drains, sprinkler mains and valves, access panels, wires and structural elements leading through the leased premises serving other parts of the regional retail development, is hereby reserved unto Landlord. Landlord reserves an easement in, over and through the area occupied by the storefront of the leased premises, and an easement above Tenant's finished ceiling to the roof, or to the bottom of the floor deck above the leased premises, for general access purposes and in connection with the exercise of Landlord's other rights under this Lease. (c) The attached site plan of the regional retail development, Exhibit A, includes premises identified thereon as Department Store Sites, including the buildings located or to be located thereon, which sites are collectively hereinafter referred to as the "Department Store Sites" and/or "Department Stores," unless otherwise specifically set forth. It is agreed that, wherever the term "Shopping Center" is used herein, it shall be deemed to exclude the Department Store Sites (even if such Sites shall be within the hatched and/or shaded area shown on the site plan), except as otherwise specifically stated herein. In addition, said site plan includes other portions of the Shopping Center which Landlord may from time to time sell or lease for the purpose of construction and/or use by one or more department stores (as defined in Section 27.12 hereof), which portion(s) may thereupon, at Landlord's option, be referred to and treated as "Department Store Site(s)" and/or "Department Stores" upon occupancy thereof by a department store, and which, at Landlord's option, may be excluded from the Shopping Center. In the event Landlord elects to enlarge the regional retail development, any additional area may be included by Landlord in the definition of the Shopping Center for purposes of this Lease. Landlord shall also have the general right from time to time to include within and/or to exclude from the defined Shopp1trg Center any existing or future areas, and the floor area of the Shopping Center shall be accordingly adjusted. (1) Section 1.01: Leased Premises: Store Number 149, situated on the lower level of Building "E," having an irregular shape and consisting of approximately four thousand four hundred forty (4,440) square feet (inclusive of four hundred three (403) square feet of `pop out' area). SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM. The term of this Lease shall commence upon (a) the commencement date set forth in the Data Sheet, or (b) the date on which Tenant opens its store in the leased premises for business to the public, whichever of said dates is the first to occur, and shall end on the final day of the last lease year of the term or other specified date as set forth in the Data Sheet, unless sooner terminated as hereinafter provided. For the purpose of this Lease, the first "lease year" shall be a period commencing on the day the term of this Lease commences and ending on January 31 next following; after the first lease year, the term "lease year" shall mean a fiscal year of twelve (12) consecutive calendar months commencing on February 1 of each calendar year, except that the final lease year of the term shall be a period of less than twelve (12) consecutive calendar months in the event that an expiration date other than January 31 is set forth in the Data Sheet. Landlord shall exercise reasonable efforts to respond to drawings and specifications submitted by Tenant pursuant to this Lease within ten (10) business days following receipt of such drawings and specifications from Tenant. In the event of Landlord's failure to respond within such ten (10) day period, the commencement date as set forth in this Section 1.02 shall be extended by one (1) day for each day of additional delay. In the event Landlord elects to cause a physical expansion of the Shopping Center or the regional retail development which directly affects all or any portion of the leased premises, then Landlord upon one hundred eighty (180) days' prior notice in writing to Tenant may terminate this Lease. During the one hundred eighty (180) day period Landlord shall offer to Tenant such alternative and comparable location of approximately the same square footage, and with comparable access and visibility, as may exist in the Shopping Center from time to time. In the event there is no such alternative location available in the existing Shopping Center, then Landlord shall offer Tenant an alternative location of approximately the same square footage, and with comparable access and visibility, as may be available in any expansion area of the Shopping Center, provided such expansion area contains at least several stores of less than twenty thousand (20,000) square feet of floor area. In the event the parties agree on a specific location, then this Lease shall be amended by substituting the new location for the present location and minimum rental, the percentage breakpoint, and Merchants' Association or promotional charges shall be proportionately adjusted. Tenant shall complete the Tenant's Work, as described in Exhibit `B' attached hereto, in the new premises, in accordance with the plans and drawings originally approved by Landlord with respect to Tenant's Work in the original leased premises and Tenant shall, within one hundred fifty (150) days after delivery of the new premises to Tenant, open for business in the leased premises. Landlord shall reimburse to Tenant all reasonable costs of Tenant's Work in such new premises in accordance with the plans for the original leased premises as approved by Landlord, all of which costs shall be reimbursable as a Tenant reimbursement in the same manner as Tenant's initial Tenant reimbursement under Section 5.01 of this Lease. In the event of such relocation during the last five 2 (5) years of the then existing lease term Landlord may elect (during the 30 day -- period following the date Tenant is obligated to open in the new premises) to extend the lease term by a period of Landlord's choosing not to exceed five (5) years. In the event of such lease term extension, minimum rent and percentage rent shall be increased to the figures which would be applicable during the renewal term(s) had Tenant exercised its option(s) to extend the term of this Lease under section 1.02 of the Data Sheet Special Provisions or if (and to the extent) the extension period goes beyond such renewal term(s) then minimum rent shall be increased by Twenty Thousand Dollars ($20,000) per annum with a proportionate increase in Minimum Gross Sales. In the event Landlord and Tenant are unable to agree on an alternative location, or no such alternative location is available, this Lease shall terminate at the end of the said one hundred eighty (180) day period and Landlord shall be obligated to pay to Tenant an amount equal to the then unamortized cost of Tenant's leasehold improvements and restaurant equipment in the leased premises (provided in determining such unamortized cost there shall be subtracted from the total cost of Tenant's leasehold improvements and restaurant equipment the amount of any Tenant reimbursement paid by Landlord to Tenant pursuant to Section 5.01(b) of the Data Sheet Special Provisions) which amortization shall be determined on the basis set forth below, plus the sum of Two Hundred Thousand Dollars ($200,000.00), or alternatively, Five Hundred Thousand and 00/100ths Dollars ($500,000.00) if Landlord's one hundred eighty (180) day notice of termination is delivered during the thirty-six (36) months period following full execution and delivery of this Lease. In determining the unamortized cost of Tenant's leasehold improvements, the amortization shall be on the straight line basis over the shorter of the following periods: (i) twenty (20) years or (ii) the period in Tenant's books over which Tenant had been amortizing such costs. In determining the unamortized cost of Tenant's restaurant equipment, the amortization shall be on the straight line basis over the shorter of the following periods: (i) ten (10) years or (ii) the period in Tenant's books over which Tenant had been amortizing the cost of the equipment in question. Tenant shall furnish to Landlord such backup information as Landlord may reasonably require. Tenant shall deliver possession of the leased premises to Landlord on or before the termination and/or relocation date in the condition required in this Lease and subject to all charges which are due and owing or which shall be accrued up to such date (which charges shall be paid to Landlord within thirty [30] days of such date), Tenant shall be released from any and all further obligations pursuant to this Lease with respect to the vacated premises, however, in the event of relocation, Tenant shall remain liable for such charges accruing under this Lease after the date of such relocation. Landlord shall make the above- referenced payment to Tenant upon Tenant's vacating and delivery of possession of the Leased Premises to Landlord. In the event that Landlord has made a final determination that Landlord shall construct a building, parking deck or other improvement in the parking areas cross hatched on Exhibit D attached hereto (the "improvement") from the ring road or parking areas cross-hatched on Exhibit D which (a) materially and adversely interferes with access to or visibility of Tenant's exterior entrance and facade during the lease term or (b) results in the elimination of more than ten percent (10%) of the surface parking spaces located within the parking area cross hatched on Exhibit D attached hereto, for reasons other than compliance with laws, ordinances or regulations, not caused by Landlord's construction of a building as improvements in such cross-hatched area, or temporary repair, maintenance, replacement, then Landlord shall forward the one hundred eighty (180) day notice referenced above to Tenant and the provisions of this paragraph shall then become applicable as if the leased premises shall have been affected by an expansion of the Shopping Center. (2) Section 1.02: Commencement Date of Term: The later of: (i) the date three hundred (300) days following the date of Landlord's execution of this Lease or (ii) the date one hundred fifty (150) days following the date the leased premises are vacant and made available to Tenant. Length of Term: Ten (10) lease years SPECIAL PROVISIONS: Section 1.02: In the event Landlord and Tenant have not, on or before the ------------ date ten (10) days after full execution of this Lease, agreed in writing upon Leasehold Mortgage provisions which enable Tenant to obtain the financing it needs in order to construct its restaurant, then Landlord and Tenant 3 shall each have the right to terminate this Lease by providing written notice to the other party within ten (10) days after the date ten (10) days after full execution of this Lease. In the event that the "First Conditions" (as hereinafter defined) are not satisfied on or before the date ten (10) days after full execution of this Lease, then Landlord and Tenant shall each have the right to terminate this Lease by providing written notice to the other party within ten (10) following such date. The First Conditions shall mean: (i) completion of an exhibit approved by Landlord and Tenant describing the relocation and/or removal of trees from the vicinity of the exterior building storefront for the leased premises, (ii) approval by Landlord in writing of an exhibit submitted by Tenant setting forth Tenant's exterior building design and exterior building signage, (iii) approval by Landlord in writing of Tenant's Center Court icon kiosk, (iv) approval by Landlord in writing of an exhibit submitted by Tenant setting forth Tenant's interior mall storefront signage, (v) approval in writing of an exhibit setting forth all of the mall signage to be provided by Landlord pursuant to Section 9.01 of these Data Sheet Special Provision, (vi) consent by the occupants of the Department Store sites to any of the above items to the extent their content is required. In the event the 'Second Conditions' (as hereinafter defined) are not satisfied on or before the date which is five (5) months following the date of this Lease, then Landlord and Tenant shall each have the right to terminate this Lease by providing written notice to the other party within five (5) days following the end of such five (5) month period. Tenant's receipt of all building permits necessary for Tenant to commence construction of Tenant's Work and Tenant's receipt of Landlord's approval of Tenant's Store Design Drawings (with the exception of components of Store Design Drawings necessary to satisfy the First Conditions) shall constitute the 'Second Conditions." Tenant agrees to use all reasonable diligent efforts to satisfy the First Conditions and the Second Conditions, and Tenant shall keep Landlord apprised of Tenant's general efforts in connection with its attempts to obtain building permits and governmental approvals by promptly providing Landlord with copies of all documents and materials submitted by Tenant to local governmental authorities in connection therewith and by answering any questions from Landlord. Notwithstanding the foregoing, Tenant shall not have the right to terminate this Lease if Tenant shall have failed to substantially comply with Tenant's obligations under this paragraph. Landlord agrees to reasonably cooperate with Tenant to the extent cooperation is necessary for Tenant to obtain governmental approvals or Department Store operator consents for construction or signage which has been approved by Landlord, provided Landlord shall not be liable to Tenant for indirect or consequential damages resulting from Landlord's failure to reasonably cooperate. Examples of reasonable cooperation by Landlord shall include (without limitation) making joint application to governmental authorities for variances to ordinances (if joint application is necessary for the matter to be considered), making written request for consent to Department Store operators, and responding timely to questions from governmental authorities or Department Store operators which are directed to Landlord in connection with the approvals and consents being sought. Tenant's and Landlord's rights to terminate this Lease pursuant to this paragraph shall be null and void following the expiration of such ten (10) day periods. Tenant agrees to apply for its building permits within ten (10) days following its receipt of final approval of its construction plans by Landlord. The leased premises are presently leased to tenants whose lease terms have not expired. The commencement of the term hereof is subject to termination of such lease agreements with such tenants and such tenants in fact vacates the leased premises. Tenant's initial payment of minimum rent up to Twenty-Five Thousand Dollars ($25,000) shall be abated if Tenant provides evidence to Landlord that Tenant -- expended at least One Hundred Twenty-Five Thousand Dollars ($125,000) on pre- opening costs (exclusive of construction costs) for Tenant's operation at the leased premises. Tenant's audited profit and loss statement including such expenditures shall be sufficient evidence of such expenditure. Landlord and Tenant agree that no portion of the minimum rent paid by Tenant after the expiration of any period during which such rent was abated shall be allocated by Landlord or Tenant to such abatement period, nor is such rent intended by the parties to be allocable to any abatement period. Twenty-Five Thousand Dollars ($25,000) of the minimum rent payable during months thirteen (13) through fifteen (15) shall be abated if Tenant provides -- evidence to Landlord that Tenant expended at least Forty Thousand Dollars ($40,000) on advertising Tenant's business in the leased premises during the first twelve (12) months of the lease term (including, without limitation, direct distribution 4 advertising.) Tenant's audited profit and loss statement including such expenditures shall be sufficient evidence of such expenditure. Landlord and Tenant agree that no portion of the minimum rent paid by Tenant after the expiration of any period during which such rent was abated shall be allocated by Landlord or Tenant to such abatement period, nor is such rent intended by the parties to be allocable to any abatement period. At the end of the Section, insert "Provided that Tenant is not in default hereunder beyond applicable notice and cure periods, Tenant shall have the right to extend the term of this Lease for two (2) consecutive additional periods of five (5) years each. All of the covenants, agreements, terms and conditions of this Lease (except for the increase in minimum rent, as hereinafter provided) shall prevail and be fully performed by Landlord and Tenant during each extended term for which the option is exercised by Tenant. Written notice to renew this Lease must be delivered by Tenant to Landlord at least fifteen (15) months prior to the termination date hereof (provided if Tenant fails to timely exercise its option by such date, Tenant shall not lose the right to exercise such option unless Tenant fails to exercise such option within ten (10) days after Landlord has forwarded written notice to Tenant indicating to Tenant that Landlord has not received Tenant's notice of exercise and the period for exercise of Tenant's renewal option has expired). In the event that Tenant exercises the option hereinabove contained to extend the term of this Lease for the renewal term hereof, minimum rent and percentage rent shall be determined as follows: (i) During the first renewal term, minimum rent should be, the sum of One Hundred Seventy Thousand and 00/100ths Dollars ($170,000.00) annually, which sum shall be payable by Tenant in equal consecutive monthly installments of Fourteen Thousand One Hundred Sixty-Six and 67/100ths Dollars ($14,166.67); (ii) During the second renewal term, minimum rent shall be, the sum of One Hundred Ninety Thousand and 00/100ths Dollars ($190,000.00) annually, which sum shall be payable by Tenant in equal consecutive monthly installments of Fifteen Thousand Eight Hundred Thirty-Three and 33/100ths Dollars ($15,833.33) each. (i) During the first renewal term, percentage rent shall be, a sum equal to eight percent (8%) (the 'percentage rent factor') of all 'Gross Sales' resulting from business conducted in, on or from the leased premises during each lease year in excess of Three Million Ninety Thousand Nine Hundred Nine and 09/100ths Dollars ($3,090,909.09) ('Minimum Gross Sales'); (ii) During the second renewal term, percentage rent shall be, a sum equal to eight percent (8%) (the 'percentage rent factor') of all 'Gross Sales' resulting from business conducted in, on or from the leased premises during each lease year in excess of Three Million Four Hundred Fifty-Four Thousand Five Hundred Forty-Five and 46/100ths Dollars ($3,454,545.46) ('Minimum Gross Sales'). SECTION 1.03. OPENING. Tenant covenants and agrees to complete its construction within the leased premises in accordance with the provisions of this Lease and to open its store for business to the public not later than the date established for commencement of the term of this Lease pursuant to Section 1.02 hereof. ARTICLE II. RENT SECTION 2.01. MINIMUM RENT. (a) The minimum rent during the term of this Lease shall be the amount set forth in the Data Sheet attached hereto as adjusted pursuant to Section 2.04 or other provisions of this Lease (such as Articles XVII and XVIII and Section 27.12[a]), which sum shall be payable by Tenant in equal consecutive monthly installments in the sum set forth in the Data Sheet attached hereto, on or before the first day of each month, in advance, payable as set forth, and at the 5 address set forth, in the Data Sheet attached hereto under "Name and Address for Rent Payments," or such other place as the Landlord may designate in writing, such payments to be without any prior demand therefor and without any deductions or setoff whatsoever, except as otherwise expressly provided herein. (b) Should the term of this Lease commence on a day other than the first day of a calendar month, then the rent for such month shall be prorated on a daily basis based upon a thirty (30) day calendar month. Should any lease year contain less than twelve (12) calendar months, said annual rent shall be prorated. (3) Section 2.01 and Section 2.02: Name and Address for Rent Payments: Payments from Tenant shall be made payable to Lakeforest Associates LLC, and shall be sent to: Lakeforest Associates LLC Department 56001 P.O. Box 67000 Detroit, Michigan 48267-0560 (4) Section 2.01: Minimum Rent: (i) From the commencement of the term of this Lease and continuing through the fifth (5th) lease year of the term hereof, the sum of One Hundred Twenty- Five Thousand and 00/100ths Dollars ($125,000.00) annually, which sum shall be payable by Tenant in equal consecutive monthly installments of Ten Thousand Four Hundred Sixteen and 67/100ths Dollars ($10,416.67); (ii) Beginning with the sixth (6th) lease year of the term hereof and continuing throughout the balance of the lease term, the sum of One Hundred Forty-Five Thousand and 00/100ths Dollars ($145,000.00) annually, which sum shall be payable by Tenant in equal consecutive monthly installments of Twelve Thousand Eighty-Three and 33/100ths Dollars ($12,083.33) each. SECTION 2.02. PERCENTAGE RENT. (a) In addition to the payment of the minimum rent, as hereinbefore provided, Tenant shall pay to Landlord for each lease year of the term hereof, as percentage rent, an amount equal to the percentage rent factor (see Data Sheet) multiplied by all Gross Sales resulting from business conducted in, on or from the leased premises during such lease year in excess of the amount of Gross Sales set forth in the Data Sheet (hereinafter referred to as "Minimum Gross Sales"). Subsequent to the date upon which Tenant is initially obligated to open for business in the leased premises, in addition to any and all other remedies afforded to Landlord under this Lease by reason of default, "Minimum Gross Sales" shall be reduced by 1/360th for each day or portion thereof that Tenant does not operate its business pursuant to Section 7.02 hereof. If percentage rent hereunder shall be calculated on the basis of a split percentage arrangement, as defined in subsection (b) below, then the reduction required by the preceding sentence shall be applied to the minimum rent which would otherwise be deductible in the calculation of percentage rent with respect to all Gross Sales of Tenant (provided that such reduction shall be made solely for the purpose of the percentage rent calculation). The percentage rent shall be payable as set forth, and at the address set forth, in the Data Sheet attached hereto under "Name and Address for Rent Payments," or such other place as the Landlord may designate in writing, such payments to be without any prior demand therefor and without any deductions or setoff whatsoever, except as otherwise expressly provided herein. Notwithstanding the foregoing, if the commencement date of the lease term is other than February 1, then the percentage rental covering the first lease year shall be determined as follows: Tenant's Gross Sales in excess of Minimum Gross Sales shall be determined for the first twelve (12) calendar months following the commencement date of the lease term, and percentage rental shall be paid on such excess prorated as to the number of days which are included in said first lease year. Such percentage rental shall be payable on or before the last day of the thirteenth (13th) month next following the commencement date of the lease term. (5) Section 2.02(a): Percentage Rent: 6 (i) From the commencement of the term of this Lease and continuing through the fifth (5th) lease year of the term hereof, a sum equal to eight percent (8%) (the 'percentage rent factor') of all 'Gross Sales' resulting from business conducted in, on or from the leased premises during each lease year in excess of Two Million Five Hundred Thousand and 00/100ths Dollars ($2,500,000.00) ('Minimum Gross Sales'); (ii) Beginning with the sixth (6th) lease year of the term hereof and continuing throughout the balance of the lease term, a sum equal to eight percent (8%) (the 'percentage rent factor') of all 'Gross Sales' resulting from business conducted in, on or from the leased premises during each lease year in excess of Two Million Six Hundred Thirty-Six Thousand Three Hundred Sixty-Three and 64/100ths Dollars ($2,636,363.64) ('Minimum Gross Sales'). (b) Such percentage rent shall be paid in quarter-annual installments computed on all Gross Sales during each quarter-annual period of the term hereof in excess of one quarter (1/4) of annual Minimum Gross Sales provided that Tenant shall not be obligated to pay a quarter-annual installment of percentage rent for the fourth (4th) quarter of a lease year unless the sum of all Gross Sales for such lease year exceeds the applicable Minimum Gross Sales figure as set forth in Section 2.02(a) hereof, and provided further that Tenant's actual payment of quarter-annual installments of percentage rental for the first three (3) quarters of a lease year shall be credited against Tenant's obligation to pay any remaining balance of annual percentage rental following the fourth (4th) quarter of each lease year. Such quarter-annual periods during each lease year shall be measured as follows: February through April, May through July, August through October, and November through January. Such quarter-annual installments shall be payable within thirty (30) days after the expiration of each three (3) month period of each lease year. In the event that the total of the quarter- annual installments of percentage rent for any lease year does not equal the percentage rent computed on the total amount of Gross Sales for such lease year, in accordance with the formula set forth in the Data Sheet, then Tenant, at the time it submits the annual statement of Gross Sales required under Section 3.02, shall pay Landlord any deficiency, or Landlord shall credit any overpayment to the next installment of percentage rent due from Tenant, as the case may be. In no event, however, shall the aggregate of minimum rent and percentage rent to be paid by Tenant and retained by Landlord for any lease year be less than the minimum rent specified herein. If the commencement date of the lease term is other than February 1, then the percentage rent covering the first lease year hereunder shall be paid in the following manner: for the quarter-annual period during which the lease term commences, the percentage rent shall be equal to the product of the percentage rent factor and the amount of Gross Sales in excess of a prorated fraction of annual Minimum Gross Sales (with such prorated fraction to be calculated by taking the number of days remaining in such quarter annual period as of the date the leased premises are initially opened for business to the general public, dividing by 360, and multiplying the resulting quotient by the stated annual Minimum Gross Sales figure); for the balance of the first lease year, the percentage rent shall be equal to the product of the percentage rent factor and the amount of Gross Sales in excess of one-quarter (1/4) of annual Minimum Gross Sales during each subsequent quarter-annual period. If the expiration date of the lease term is other than January 31, then the percentage rent covering the final lease year hereunder shall be calculated in a like manner, with proration to occur in the quarter-annual period during which the lease term expires. (3) Section 2.01 and Section 2.02: Name and Address for Rent Payments: Payments from Tenant shall be made payable to Lakeforest Associates, and shall be sent to: Lakeforest Associates Department 56001 P.O. Box 67000 Detroit, Michigan 48267-0560 SECTION 2.03. GROSS SALES. The term "Gross Sales" as used herein shall be construed to include the entire amount of the actual sales price, whether for cash or otherwise, of all sales of merchandise or services and all other receipts whatsoever of all business conducted in or from the leased premises by Tenant, or by all concessionaires (as defined in Section 3.02 hereof) or otherwise, including, without limitation, mail, catalogue or telephone orders received or filled at the leased 7 premises, all deposits not refunded to purchasers, and orders taken, although said orders may be filled elsewhere. A "sale" shall be deemed to have been consummated for the purposes of this Lease, and the entire amount of the sales price shall be included in Gross Sales, at such time that (i) the transaction is initially reflected in the books or records of Tenant or a concessionaire (if a concessionaire makes the sale), or (ii) Tenant or such concessionaire receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs, irrespective of whether payment is made in installments, the sale is for cash or for credit, or otherwise, or all or any portion of the sales price has actually been paid at the time of inclusion in Gross Sales or at any other time. No deduction shall be allowed for direct or indirect discounts, rebates, or other reductions on sales to employees or others, unless generally offered to the public on a uniform basis. In addition, no deduction shall be allowed for uncollected or uncollectible credit accounts, or for trade-ins or other credits on sales to employees or others. The term "Gross Sales" shall not include, however, any sums collected and paid out by Tenant for any sales or excise tax imposed by and accounted for by Tenant to any duly constituted governmental authority, nor shall it include the exchange of merchandise between the stores of Tenant, if any, where such exchange of goods or merchandise is made solely for the convenient operation of the business of Tenant and not for the purpose of consummating a sale which has theretofore been made in or from the leased premises and/or for the purpose of depriving Landlord of the benefit of a sale which otherwise would be made in or from the leased premises, nor shall the term include the amount of returns to shippers or manufacturers, nor proceeds from the sale of trade fixtures. There shall also be excluded from Gross Sales (i) receipts from public telephones, cigarette vending machines and jukeboxes approved by Landlord, to the extent such receipts are paid to an unaffiliated third party owner of such machines; (ii) gift certificates or like vouchers until such time as the same shall have been redeemed; (iii) tips collected by employees of Tenant; and (iv) the amount of the discount allowed on employee meals, provided the same shall not exceed three percent (3%) of Tenant's Gross Sales during any lease year. There shall be deductible from Gross Sales the amount of any cash or credit refund made upon any sale in or from the leased premises, previously included in "Gross Sales" hereunder, not to exceed the sum so previously included, where the merchandise sold is thereafter returned by the purchaser and accepted by Tenant. The term "merchandise" as used in this Lease shall include food and beverages if Tenant is permitted to sell such items in Section 7.01 hereof. SECTION 2.04. RENT ADJUSTMENT. (a) Notwithstanding any provisions to the contrary contained in this Lease, Tenant shall pay to Landlord as minimum rent for the second lease year of the term of this Lease, and for each subsequent lease year of said term, but subject to further increase pursuant to this Section 2.04 and other provisions of this Lease, the greater of the amounts calculated according to the formulas set forth in Paragraphs (i) and (ii) below. (i) Minimum rent for the lease year in question shall be increased by the net percentage of change between the Base Index and the Index published for the first calendar month of such lease year (as such terms are defined below). (ii) Minimum rent for the lease year in question shall be increased by the amount of percentage rent payable for the immediately preceding lease year pursuant to Section 2.02 hereof. (b) For purposes of the foregoing calculations, the term "Base Index" shall be the Index (as defined in Section 27.20), for the month during which the term of this Lease commences (or, if the Index is not published for such month, then the Index published for the month closest, but prior, to the lease commencement date). Following any increase in minimum rent pursuant to Paragraph (a) above, the "Base Index" for future calculations shall be redefined as the Index published for the first calendar month of the lease year for which the minimum rent has last been increased pursuant to said Paragraph (a). The Index for the first calendar month of any given lease year, if the Index is not published for such month, shall be the Index published for the month closest, but prior, to the first calendar month of such lease year. For the purposes of this Section, the percentage rent payable by Tenant for any lease year consisting of less than twelve (12) full calendar months shall be calculated by dividing the percentage rent payable by Tenant for such lease year pursuant to Section 2.02 hereof by the actual number of days in such lease year, and by multiplying the resulting quotient by 360. Landlord shall notify Tenant of the increased minimum rent for each lease year following the determination of same 8 by Landlord, and Tenant shall pay such increased minimum rent for the applicable lease year in the manner set forth in Section 2.01 hereof. In the event that the increase in minimum rent results from the calculation set forth above in subsection (a)(ii), then the Minimum Gross Sales otherwise applicable for such period shall be increased by a percentage equal to the percentage increase in minimum rent made by reason of the percentage rent payable in the preceding lease year. If percentage rent under this Lease shall be calculated on the basis of a split percentage arrangement, as defined in Section 2.02(b) hereof, then, in the event of an increase in minimum rent resulting from the calculation set forth above in subsection (a)(i), only the minimum rent (not including such increase) which would otherwise be deducted shall be deductible from the percentage rent calculated with respect to all Gross Sales of Tenant. The minimum rent for any period as stated in Section 2.01 hereof, if different than that stated for the immediately preceding period, shall be adjusted by multiplying such different minimum rent ("Changed Rent") by the cumulative percentage increase in minimum rent pursuant to this Section from the commencement of the term of this Lease through and including the first lease year during which such Changed Rent would have become effective, with the resulting product to be added to such Changed Rent to yield the effective minimum rent for such period, subject to further adjustment as provided in this Section or elsewhere in this Lease. (c) Upon the opening of any department store within the regional retail development during the term of this Lease (if such department store was not open for business to the general public as of the commencement date of this Lease), the minimum rent and Minimum Gross Sales then in effect shall be immediately and automatically increased by fifteen percent (15%), subject to further increases pursuant to this paragraph, this Section and other provisions of this Lease. Section 2.04: The provisions of Section 2.04 shall not apply to Tenant. ------------ SECTION 2.05. TENANT'S TAX OBLIGATION. Tenant shall pay to Landlord its proportionate share of all taxes and assessments which may be levied or assessed by any lawful authority during the term of this Lease, or with respect to each fiscal tax year falling in whole or in part during the term of this Lease, against the land, buildings and improvements comprising the Shopping Center, and of all other taxes which Landlord becomes obligated to pay with respect to the regional retail development, irrespective of whether such taxes are assessed against real or personal property. The portion of such taxes and assessments allocated to the common areas of the Shopping Center, and the portion of such taxes allocated to the "net-building area" (gross building area less the sum of gross leasable floor area and common areas) of the Shopping Center, shall be deducted from the total of such taxes and assessments and charged to Tenant in accordance with the provisions contained in Section 8.03 of this Lease. Tenant's proportionate share of the remaining taxes and assessments (i.e., those ---- not charged under Section 8.03) shall be equal to the product obtained by multiplying such taxes and assessments by a fraction, the numerator of which shall be the number of square feet of floor area in the leased premises and the denominator of which shall be the total number of square feet of gross leased and occupied floor area in the Shopping Center. In the event that any present or future enactment of the State or any political subdivision thereof or any governmental authority having jurisdiction thereover either: (a) imposes a direct or indirect tax and/or assessment of any kind or nature upon, against or with respect to the rents payable by tenants or occupants in the regional retail development to Landlord derived from the regional retail development or with respect to the Landlord's (or the individuals' or entities' which constitute the partners of the partnership which is the Landlord, or which is the beneficiary of the Trust of which Landlord is Trustee, as applicable) ownership of the land and buildings comprising the regional retail development, either in addition to or by way of substitution for all or any part of the taxes and assessments levied or assessed against such land and such buildings, including, without limitation, any net profits tax or any comparable tax imposed on any portion of Landlord's revenues from the regional retail development; and/or (b) imposes a direct or indirect tax or surcharge of any kind or nature, upon, against or with respect to the parking areas or the number of parking spaces in the regional retail development, then in either or both of such events, Tenant shall be obligated to pay its proportionate share thereof as provided herein. For purposes of this Section, the term "regional retail development" shall be deemed to include the land upon which any parking facilities, temporary or permanent off-site utility systems and any wooded area, lake, shoreline thereof or island park serving the regional retail development are located with all improvements situated thereon. Notwithstanding anything to the contrary contained in this Lease, Tenant's obligation 9 hereunder shall not include the payment of any capital gains tax, corporate income tax, unincorporated business income tax, or other income tax of general applicability, any profit or excess profits tax, or any inheritance or gift tax, provided that Tenant shall be obligated for any such tax to the extent such tax is assessed in lieu of or in substitution for existing ad valorem taxes on real property which are hereafter modified, abolished or repealed in whole or in part. Tenant shall also not be responsible for any fines, penalties, and interest due by virtue of Landlord's late or non-payment of taxes. To the extent that real estate taxes and assessments are the obligation of Tenant pursuant to Section 8.03 hereof, the same shall not be includable in Tenant's proportionate share pursuant to this Section. Tenant's proportionate share of all of the aforesaid taxes and assessments levied or assessed for or during the term hereof, as determined by Landlord, shall be paid in monthly installments on or before the first day of each calendar month, in advance, in an amount estimated by Landlord in good faith; provided that Landlord in good faith shall have the right to initially determine monthly estimates and to revise the estimates from time to time, and shall have the right to apply such monthly installments to tax bills according to the formula being utilized by Landlord from time to time. Upon receipt of all tax bills and assessment bills attributable to any calendar or fiscal year during the term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of the taxes and assessments for such year. In the event no tax bill is available, Landlord will compute the amount of such tax. Upon written request, Landlord shall furnish Tenant with copies of such tax bills and Landlord's calculations of Tenant's proportionate share thereof. If the total amount paid by Tenant under this Section for any calendar or fiscal year during the term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within twenty (20) days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar or fiscal year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment of taxes and assessments due from Tenant to Landlord hereunder. All amounts due hereunder shall be payable to Landlord at the place where the minimum rent is payable. In the event Landlord contests any taxes levied or assessed during the term hereof upon, against or with respect to the Shopping Center or any portion thereof or interest therein, or in the event of Landlord's negotiation with respect to assessed valuation for the Shopping Center, Tenant shall pay its proportionate share of Landlord's costs, expenses and attorneys' fees in connection therewith calculated on the same basis as set forth above in this Section. For the calendar or fiscal years in which this Lease commences and terminates, the provisions of this Section shall apply, and Tenant's liability for its proportionate share of any taxes and assessments for such years shall be subject to a pro rata adjustment based on the number of days of said calendar or fiscal years during which the term of this Lease is in effect. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of taxes and/or assessments assessed or levied against the property to which such bill relates. Prior to or at the commencement of the term of this Lease and from time to time thereafter throughout the term hereof, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's monthly installments due hereunder. In the event Landlord elects to contest any real estate tax or assessment levied or assessed against the Shopping Center premises, then there shall be refunded to Tenant its pro rata share of any net reduction in taxes actually paid by the Tenant in excess of the finally determined taxes, less its proportionate share of expenses of Landlord in connection with obtaining such reduction. SECTION 2.06. PAYMENTS. Rent shall be defined in this Lease as (i) minimum rent, (ii) percentage rent and (iii) all other charges of whatever nature required to be paid by Tenant under this Lease, including the Exhibits hereto. The rent charges described in item (iii) of the preceding sentence shall, unless otherwise specified, be due and payable ten (10) days after demand, without any deductions or setoff whatsoever, in the manner and at the place where minimum rent is payable and Tenant's failure to pay rent shall carry with it the consequences set forth under Article (IX hereof. Landlord's rights and remedies pursuant to this Section shall be in addition to any and all other rights and remedies provided under this Lease or at law. Notwithstanding anything to the contrary contained in this Lease, Landlord's demand for any and all rent may be sent to Tenant by regular mail. Rent is specifically agreed by Tenant to be a minimum reasonable use and occupancy charge for the leased premises. In the event any sums required hereunder to be paid are not received on or before the tenth (10th) day after the same are due, then, for each and every such payment, Tenant shall immediately 10 pay, as additional rent, a service charge of five percent (5%) of the outstanding amount due, which service charge again shall be imposed for each month that such amount shall remain unpaid. In the event of Tenant's failure to pay the foregoing service charge, Landlord may deduct said charge from the deposit set forth in Section 26.01 hereof. The provisions of this Section shall not be construed to extend the date for payment of any sums required to be paid by Tenant under this Lease or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated, and neither the demand for, nor collection by Landlord of, late payment service charges pursuant to this Section shall be construed as a cure of any default in payment by Tenant. It is agreed that the said service charge is a fair and reasonable charge under the circumstances and shall not be construed as interest on a debt payment. In the event any charge imposed hereunder or under any other section of this Lease is either stated to be or construed as interest, then no such interest charge shall be calculated at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Lease. ARTICLE III. RECORDS AND BOOKS OF ACCOUNT SECTION 3.01. TENANT'S RECORDS. Tenant shall prepare and keep full, complete and proper books and source documents, in accordance with generally accepted accounting principles, of the Gross Sales, whether for cash, credit or otherwise, of each separate department at any time operated in the leased premises and of the operations of each subtenant, concessionaire, licensee and/or assignee, and shall require and cause all such parties to prepare and keep books, source documents, records and accounts sufficient to substantiate those kept by Tenant. The books and source documents to be kept by Tenant shall include, without limitation, true copies of all Federal, State and local tax returns and reports, records of inventories and receipts of merchandise, daily receipts from all sales and other pertinent original sales records and records of any other transactions conducted in or from the leased premises by Tenant and any other persons conducting business in or from the leased premises. Pertinent original sales records shall include, without limitation to the extent compiled by Tenant in the ordinary course of Tenant's business: (i) cash register tapes, including tapes from temporary registers, (ii) serially pre-numbered sales slips, (iii) the original records of all mail and telephone orders at and to the leased premises, (iv) settlement report sheets of transactions with subtenants, concessionaires, licensees and assignees, (v) original records indicating that merchandise returned by customers was purchased at the leased premises by such customers, (vi) memorandum receipts or other records of merchandise taken out on approval, (vii) detailed original records of any exclusions or deductions from Gross Sales, (viii) sales tax records, and (ix) such other sales records, if any, which would normally be examined by an independent accountant pursuant to accepted auditing standards in performing an audit of Tenant's sales. Tenant shall record at the time of each sale or other transaction, in the presence of the customer, all receipts from such sale or other transaction, whether for cash, credit or otherwise, in a cash register or cash registers having a cumulative total which shall be sealed in a manner approved by Landlord and which shall possess such other features as shall be required by Landlord. All of the foregoing books, source documents and records shall be retained for a period of at least four (4) years after the expiration of each lease year. SECTION 3.02. REPORTS BY TENANT. Tenant shall furnish to Landlord within forty-five (45) days after the expiration of each quarter-annual period of each lease year a complete statement ("quarterly report"), certified by Tenant, of the amount of Gross Sales, as defined in Article II, Section 2.03 of this Lease, made in, on or from the leased premises during said period. Failure of Tenant to timely submit quarterly reports as aforesaid shall entitle Landlord, after five (5) business days' written notice to Tenant, and an opportunity to submit the quarterly report within such five (5) day period, to estimate Gross Sales based upon available data (with a reconciliation upon receipt of the annual report), and Tenant shall be obligated to pay percentage rent, as set forth in Section 2.02, on such estimated Gross Sales. Tenant also agrees that it will furnish to Landlord within sixty (60) days after the expiration of each full lease year a complete statement, certified by an independent certified public accountant, showing in all reasonable detail the amount of such Gross Sales made by Tenant from the leased premises during the preceding lease year. Tenant shall in all events furnish to Landlord within five (5) days after the end of each month of the term of this Lease a written statement of Gross Sales covering the preceding month, the statement to be in such form and style and contain such details and 11 breakdown as the Landlord may reasonably require. Tenant shall require and cause all its concessionaires, if any, to furnish statements at the times and in the form and content specified in this Section, relating to their operations within the leased premises. All reports of Gross Sales submitted or caused to be submitted by Tenant to Landlord shall be conclusive and binding upon Tenant unless such reports are corrected within two (2) years after the date of issuance. The term "concessionaire" as used in this Lease shall mean and include any and all concessionaires, licensees, franchisees, department operators, subtenants, permittees or others directly or indirectly operating or conducting a business in or from the leased premises. Tenant utilized a 52/53 week fiscal year which ends on the Sunday closest to December 31st each year and consists of 13 four week reporting periods. For so long as Tenant remains on such fiscal year, the monthly and quarterly reporting periods described above shall be adjusted to coincide with Tenant's own reporting as described in this paragraph. ARTICLE IV. AUDIT SECTION 4.01. RIGHT TO EXAMINE BOOKS. Notwithstanding the acceptance by Landlord of payments of percentage rent, Landlord shall have the right to all rents and other charges actually due hereunder, and the right to examine, make extracts from and copy, at the leased premises or (at the option of Landlord) at the corporate headquarters office of Tenant in the United States, Tenant's and all concessionaires' books, source documents, accounts, records and sales tax reports filed with applicable government agencies in order to verify the amount of Gross Sales in and from the leased premises. Tenant shall make all such documents and records available at the leased premises (or at Tenant's corporate headquarters, if elected by Landlord) upon ten (10) business days' prior written notice from Landlord. SECTION 4.02. AUDIT. At its option, Landlord may at any time, upon ten (10) business days' prior written notice to Tenant, arrange for an auditor selected by Landlord to conduct a complete audit (including a physical inventory) of the entire records and operations of Tenant and/or any concessionaire concerning business transacted upon or includable in Gross Sales from the leased premises during the period covered by any statement issued by Tenant or a concessionaire as above set forth in Article III, provided no such audit shall cover periods which are more than three (3) years prior to the date Tenant receives notice of Landlord's intent to audit Tenant's records. Tenant shall make available to Landlord's auditor at the leased premises (or at Tenant's corporate headquarters, if elected by Landlord) within three (3) days following Landlord's notice requiring such audit, all of the books, source documents, accounts and records referred to in Section 3.01 of this Lease and any other materials which such auditor deems necessary or reasonably desirable for the purpose of making such audit. Tenant shall promptly pay to Landlord the amount of any deficiency in percentage rent payments disclosed by any such audit. If such audit shall disclose that Tenant's statement of Gross Sales is at variance to the extent of two percent (2%) or more, Landlord may bill to Tenant the amount of any deficiency and the cost of such audit, which shall be paid by Tenant within fifteen (15) days after Tenant's receipt of Landlord's invoice; in the event Tenant fails to pay such discrepancy and costs, Landlord may terminate this Lease as set forth below and/or shall have such other rights and remedies as may be provided herein or at law arising by virtue of Tenant's failure to pay rent. If such audit shall disclose that Tenant's statement of Gross Sales is at variance to the extent of four percent (4%) or more, then Landlord, in addition to the foregoing remedy and other remedies available to Landlord, shall have the option, upon at least thirty (30) days' notice to Tenant, to declare this Lease terminated and the term ended, in which event this Lease shall cease and terminate on the date specified in such notice with the same force and effect as though the date set forth in such notice were the date originally set forth herein and fixed for the expiration of the term, and Tenant shall vacate and surrender the leased premises but shall remain liable for all obligations arising during the balance of the original stated term as provided in this Lease. In the event Tenant shall be required to pay any charges to Landlord as a result of an audit of Tenant's records pursuant to this Section 4.02, Landlord shall provide Tenant with a copy of the auditor's report. In addition to the foregoing, and in addition to all other remedies available to Landlord, in the event Landlord or Landlord's auditor shall schedule a date for an audit of Tenant's records in accordance with this Section, and Tenant shall fail to be available or shall otherwise fail to comply with the requirements for such audit, Tenant shall pay all costs and expenses associated with the scheduled audit. 12 In addition to all other remedies available to Landlord, in the event that any such audit shall disclose that Tenant's records and other documents as referred to in Articles In and IV hereof and such other materials provided by Tenant to Landlord's auditor are inadequate, in the reasonable opinion of Landlord or Landlord's auditor (which, for the purposes of this paragraph, shall be an independent certified public accountant), to accurately disclose Tenant's Gross Sales, and Tenant fails to cure such inadequacy within five (5) business days after receipt of written notice thereof from Landlord, then Landlord shall be entitled to collect as additional rent from Tenant an amount equal to fifteen percent (15%) of the highest Effective Rent (minimum rent plus percentage rent) payable by Tenant in any of the three (3) preceding lease years. Landlord's exercise cf the foregoing remedy shall in no way limit or otherwise affect Landlord's ability to exercise other remedies available to it, nor shall Tenant's obligations pursuant to the terms, covenants and conditions of this Lease (including, without limitation, Tenant's obligation with respect to reporting Gross Sales and payment of percentage rent) be in any manner reduced or diminished by the exercise of such remedy. In the event that Tenant shall, following the exercise of such remedy, provide to Landlord all records and documentation as required to be provided pursuant to the terms of this Lease so as to permit Landlord's auditor to accurately establish Tenant's Gross Sales for the period in question, then Tenant shall be permitted a credit with respect to any amount of additional rent collected by Landlord from Tenant pursuant to this paragraph, with such credit to be applied first against the installment of percentage rent due from Tenant for the period in question, with any remaining credit to be applied against the next installment of percentage rent payable by Tenant. Neither the provisions of this Section 4.02 nor any other provisions in this Lease shall restrict Landlord's rights to discovery in any litigation or arbitration proceeding. ARTICLE V. CONSTRUCTION OF LEASED PREMISES SECTION 5.01. CONSTRUCTION OF LEASED PREMISES. (a) The leased premises shall be constructed substantially as set forth in Exhibit B, which is attached hereto and made a part hereof. Each of the parties hereto does hereby agree to perform the obligations imposed upon such party in said Exhibit B at the times and in the manner therein provided. All references in the text of the Lease to Exhibit B shall include Exhibit B-1. Minor changes from any plans or specifications covering Landlord's Work which may be, or which may have been, necessary or appropriate during construction of the Shopping Center or leased premises shall not affect or change this Lease or invalidate same. If this Lease is executed after the opening of the regional retail development or if the leased premises are in an expansion wing of the regional retail development which opened prior to the date of this Lease, the parties hereto acknowledge that the work to be performed by Landlord pursuant to Exhibit B has been fully performed, except to the extent specifically otherwise set forth in Exhibit B). Section 5.01 (a): Prior to Tenant's commencement of construction in the ---------------- area of the leased premises to be located outside of the existing building, Landlord agrees to remove the trees which are currently located in such area, which removal is identified in Exhibit F (subject to approval of governmental authorities and the Department Store operators.) (b) Tenant agrees, prior to the commencement of the term of this Lease, at Tenant's sole cost and expense, to provide all work of whatsoever nature in accordance with its obligations set forth in Exhibit B as "Tenant's Work." Tenant agrees to furnish to Landlord the Working Drawings and Specifications (and Demolition Drawings, as applicable) with respect to the leased premises prepared in the manner and within the time periods required in Exhibit B provided Tenant's Landlord-approved plans shall control in the event of an express conflict with the requirements of Exhibit B. If such Working Drawings and Specifications (and Demolition Drawings, as applicable) are not furnished by Tenant to Landlord within the required time periods in form to permit approval by Landlord, then Landlord may at its option at any time while Tenant is in default of this provision, following twenty (20) days' notice and an opportunity to resubmit drawings during such twenty (20) day period in addition to any and all other remedies provided in this Lease, by notice to Tenant, following twenty (20) days' notice and an opportunity to resubmit drawings during such twenty (20) day period declare 13 this Lease null and void and of no further force or effect, in which event this Lease shall terminate, but Tenant shall remain liable for all obligations arising during the original stated term as provided in this Lease, provided that Tenant shall not remain liable for the obligations arising during the initial term of this Lease if this Lease is terminated during the first five (5) months following the date hereof solely as a result of the inability to agree upon Store Design Drawings or Store Working Drawings and Specifications and not as a result of Tenant's failure to submit such Store Design Drawings and Working Drawings and Specifications within the required time periods. In addition, if Landlord determines that Landlord and Tenant are unable to agree upon Working Drawings and Specifications (and Demolition Drawings, as applicable), Landlord shall have the option, upon twenty (20) days notice to Tenant an opportunity for Tenant to cure during such twenty (20) day period, to declare this Lease null and void and of no further force or effect, in which event this Lease shall terminate on the date specified in such notice, in the same manner as provided in the preceding sentence. No deviation from the final set of plans and specifications, once approved by the Landlord, shall be made by Tenant without Landlord's prior written consent, which shall not, as to Tenant's original design, be arbitrarily withheld solely as to provided Tenant may make immaterial variances from the approved plans which do not change the overall appearance of the leased premises as approved by Landlord and which are consistent with the provisions of this Lease. In no event, however, shall Tenant be permitted to deviate from the sign or storefront design or any components of the leased premises visible from the exterior of the leased premises approved by Landlord without first obtaining Landlord's written approval. Approval of the plans and specifications by Landlord shall not constitute the assumption of any responsibility by Landlord or Landlord's architect for their accuracy, efficacy or sufficiency, and Tenant shall be solely responsible for such items. Unless Landlord otherwise directs in writing, Tenant shall not open the leased premises for business until all construction has been completed pursuant to the provisions of Exhibit B. Until such time as Tenant's final Working Drawings and Specifications (and Demolition Drawings, as applicable) have been approved in writing by Landlord, the right of Tenant to enter upon the leased premises shall be solely for the purpose of inspection, measurement and obtaining information necessary to prepare architectural drawings and construct its premises. Tenant shall not be deemed to have taken possession of the leased premises until, and Landlord shall be deemed to have delivered and Tenant shall be deemed to have taken such possession when, Tenant actually commences construction of its leasehold improvements following Landlord's approval of Tenant's final Working Drawings and Specifications (and Demolition Drawings, as applicable). Until Tenant is so deemed to have taken possession, in the event of a default by Tenant under this Article V, Landlord, upon twenty (20) days' notice to Tenant an opportunity for Tenant to cure during such twenty (20) day period shall have the right to declare this Lease null and void and of no further force or effect and thereafter may demise and lease the premises described in Section 1.01 free from any rights of Tenant. Tenant shall not open its store for business until Tenant's storefront sign is installed, the store is fully fixtured, lighted, stocked with merchandise in place and staffed, and Tenant is prepared to engage in the sale of goods and/or services to the public pursuant to Article VII. Landlord shall remove the storefront barricade (or Tenant shall remove the same if so directed in writing by Landlord) when Tenant is so prepared to open for business, and Tenant shall reimburse Landlord for all costs and expenses in connection with such removal (or Tenant shall pay for all such costs and expenses directly (including transportation of the barricade to storage in the regional retail development), if Tenant shall be directed by Landlord to perform such removal). If all or any part of the leased premises shall have been previously occupied, Tenant acknowledges that the Tenant's Work described in Exhibit B has been initially performed by a tenant previously occupying the leased premises and that Tenant accepts the leased premises in an "as is" condition without representation by the Landlord or any person, firm or corporation on behalf of Landlord as to the condition thereof. Tenant shall submit Working Drawings and Specifications and Demolition Drawings showing the work to be performed by Tenant to completely remodel and refurbish the leased premises and, subject to Landlord's approval, will cause such work to be performed prior to the commencement of the term of this Lease. All such additional work and permitted alterations, repairs and improvements shall be in accordance with the provisions of Exhibit B. In the event of an express conflict between Tenant's Landlord-approved plans, on the one hand, and the terms of this Lease, its exhibits and the Standard Project Details and Construction Information, on the other hand, Tenant's Landlord-approved plans shall control. Provided Tenant is not in default hereunder, Landlord shall pay to Tenant a Tenant reimbursement (solely to reimburse Tenant for costs paid by Tenant in constructing Tenant's leasehold improvements and trade fixtures and equipment) in the sum of Five Hundred Thousand and 00/100ths Dollars ($500,000.00). Four Hundred 14 Fifty Thousand and 00/100ths Dollars ($450,000.00) of such Tenant reimbursement shall be paid by Landlord to Tenant within fifteen (15) days following Tenant's (a) substantial completion of Tenant's Work in the leased premises (with punchlist items remaining) and Tenant's opening for business therein following issuance to Tenant of a Certificate of Occupancy, and (b) delivery to Landlord of (i) invoices marked paid by contractors, subcontractors and materialmen (provided materialmen shall be required to be listed only if the materialmen's contract exceeds Fifteen Thousand Dollars ($15,000.00) which performed work or provided materials for Tenant's Work, (ii) with contracts aggregating at least ninety (90%) of the total cost of Tenant's Work, (ii) unconditional waivers of lien from contractors, subcontractors and materialmen with contracts aggregating at least ninety percent (90%) of the total cost of Tenant's), and (iii) a sworn statement from Tenant and Tenant's general contractor listing all contractors, subcontractors and materialmen which have performed work or supplied materials with respect to Tenant's Work and certifying the amounts they have been paid. After payment of Four Hundred Fifty Thousand Dollars ($450,000) of the Tenant reimbursement the remaining Fifty Thousand and 00/100ths Dollars ($50,000.00) shall be paid within fifteen (15) days after Tenant's completion of punchlist items and submittal to Landlord of unconditional waivers of lien covering the remaining ten percent (10%) of the cost of Tenant's Work. Upon Landlord's payment of the Tenant reimbursement, title to Tenant's trade fixtures and restaurant equipment originally installed in the leased premises as part of Tenant's Work (excluding replacements, and new equipment and trade fixtures installed later) shall vest in Landlord (provided Tenant shall be obligated to repair and maintain same during the lease term). For purposes of tax and accounting treatment only, Tenant shall be deemed to own those leasehold improvements paid for by Tenant without use of the Tenant reimbursement payment. Upon written direction from Tenant, Landlord agrees to forward the Tenant reimbursement payments directly to Tenant's General Contractor, rather than to Tenant. In the event Tenant shall have satisfied all conditions to the payment of the Tenant Inducement and Landlord shall have failed to pay all or any portion of the same, then Tenant shall have the right to offset against rent and charges due hereunder the amount actually owed by Landlord to Tenant, provided that any wrongful offsetting against rent and charges due hereunder shall constitute a default for which Tenant is not entitled to any notice or cure rights. (6) Section 5.01(b): Design of Leased Premises: Tenant shall submit Store Design Drawings (in the manner and in accordance with the requirements set forth in Exhibit B-2D) containing the design proposed by Tenant for Tenant's store in the leased premises. The submission of such Store Design Drawings to Landlord, any resubmissions as may be required by Landlord, and Landlord's written approval of the Store Design Drawings shall be a precondition to the preparation of Working Drawings and Specifications by Tenant pursuant to the provisions of Section 5.01(b) and Exhibits B, B-1 and B-2D (and any further construction exhibits) of the Lease. The provisions of Section 5.01(b) of the Lease which are applicable to Working Drawings and Specifications (excluding provisions relating to "final" Working Drawings and Specifications) shall also be applicable to Store Design Drawings in the same manner as if separately recited therein. Store Design Drawings need not be submitted to Landlord sooner than November 10, 1999 and Working Drawings and Specifications need not be submitted to Landlord sooner than thirty (30) days after Landlord's approval of Tenant's Store Design Drawings. Tenant shall not be obligated to commence demolition or construction sooner than February 1, 2000. Tenant shall not be obligated to commence construction sooner than thirty (30) days after the leased premises are vacant and available to Tenant. (c) Upon execution of this Lease, Tenant shall pay to Landlord, as a reimbursement to Landlord for costs and expenses with respect to the leased premises, the sum set forth in the Data Sheet as "Tenant Reimbursement to Landlord." The payment of such sum by Tenant shall not in any manner reduce or limit the obligation of Tenant for payment of other charges under this Lease, including, without limitation, the charges set forth in the Exhibits attached hereto. (7) Section 5.01(c): Tenant Reimbursement to Landlord: N/A 15 SECTION 5.02. AVAILABILITY AND POSSESSION OF PRESSES FOR TENANT'S WORK. (a) The leased premises shall be considered available to Tenant when Landlord furnishes Tenant with a written notice to such effect (the "Notice of Availability"). The Notice of Availability shall be deemed given upon the date of Tenant's receipt of a fully-executed copy of this Lease. Upon receipt of such Notice of Availability, Tenant shall have only limited access to the premises for purposes of inspection and measurement verification. The Notice of Availability shall not constitute delivery of the premises, and Landlord (or a current occupant of the premises) will retain possession of the premises until delivery of possession is made to Tenant as provided below. Landlord may furnish the Notice of Availability at any time subsequent to Landlord's obtaining possession of the premises. If the leased premises are presently occupied by another tenant, Landlord will not make the premises available to Tenant until a date after Landlord regains possession of the leased premises from the tenant presently occupying the same. (b) Landlord covenants to deliver possession of the leased premises to Tenant upon written approval by Landlord of Tenant's Working Drawings, but only if said approval is subsequent to or simultaneous with a furnishing to Tenant of a Notice of Availability. Upon receiving actual possession, Tenant shall have access to the leased premises for all purposes set forth under this Lease. (c) Upon delivery of possession, Tenant accepts the premises and acknowledges that the premises are in the condition required by this Lease, subject to all field conditions existing at the time of delivery of possession. Failure of Landlord to deliver possession of the leased premises in the manner and condition as provided for in this Lease will not give rise to any claim for damages by Tenant against Landlord, or against Landlord's contractor, or permit Tenant to rescind or terminate this Lease. SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION. If for any reason the leased premises are not ready for Tenant's Work on the date eighteen (18) months following the date of this Lease, then, for a period of thirty (30) days thereafter, Tenant shall have the option, and for a period of forty-five (45) days following such eighteen (18) month period, Landlord shall have the option, of cancelling and terminating this Lease by not more than sixty (60) days' written notice, one to the other, and, in the event that either party shall exercise such option, this Lease shall terminate with neither party being liable to the other in damages or otherwise, and any money deposited pursuant to Section 26.01 hereof shall be returned to Tenant. In the event that neither Tenant nor Landlord gives such written notice of cancellation, then said options shall be null and void and of no further force or effect, and this Lease shall be considered as continuing in full force and effect. In addition, if another tenant is presently in possession of the leased premises, and Landlord shall not have delivered possession of the leased premises to Tenant by the lease commencement date (as specifically identified in the Data Sheet), then Landlord shall have the right to thereafter terminate this Lease at any time prior to delivery of possession to Tenant by written notice to Tenant, with like result as set forth in the first sentence of this paragraph. If as of the date of this Lease the leased premises are (i) in a regional retail development, or in an expansion wing of a regional retail development, which development or wing, as applicable, has not initially opened for business to the public, or (ii) presently occupied by another entity, then the foregoing eighteen (18) month period under this Section 5.03 (and the four (4) year period set forth in Section 5.04) shall be modified to commence as of (i) the currently projected date of such initial opening, or (ii) the currently projected date of Landlord's repossession of the leased premises from such present entity, as applicable. Section 5.03: Notwithstanding the provisions of this Section 5.03, Tenant ------------ may (prior to the date the leased premises are vacant and available to Tenant) terminate this Lease if the leased premises are not vacant and available to Tenant by April 1, 2000 and Landlord may (prior to the date the leased premises are vacant and available to Tenant) terminate this Lease if the leased premises are not vacant and available to Tenant by July 1, 2000 provided Landlord shall not have such termination right if Landlord shall not have used all reasonable diligent efforts to cause the existing tenants to vacate the leased premises. If the leased premises are not vacant and available to Tenant by April 1, 2000, then Tenant's initial payments of minimum rent shall be abated in an amount equal to one (1) day's minimum rent for each day beyond March 1, 2000 and prior to June 1, 2000 that the leased premises are not vacant and available to Tenant. In the event either party terminates this Lease due to the failure 16 of either of the current occupants of the leased premises to vacate the leased premises, then Landlord shall promptly (following receipt of reasonable back-up documentation) reimburse to Tenant the costs paid by Tenant for plan preparation and other pre-construction obligations, provided such reimbursement shall not exceed Seventy-Five Thousand Dollars ($75,000.00). SECTION 5.04. ULTIMATE COMMENCEMENT DATE. Notwithstanding anything to the contrary contained herein, if for any reason whatsoever (including without limitation, excusable delay) the term of this Lease shall not have commenced prior to such date as shall be four (4) years from the date of this Lease (subject to extension as set forth in Section 5.03), then this Lease shall be automatically terminated without further act of either party hereto, and the parties hereto shall be released from all obligations hereunder. ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS SECTION 6.01. INSTALLATION BY TENANT. Tenant shall not make or cause to be made any alterations, additions or improvements to the leased premises (for example, but without limiting the generality of the foregoing, Tenant shall not install or cause to be installed any signs, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies or awnings, electronic detection devices, antennas, mechanical, electrical or sprinkler systems, or make any changes to the storefront) without the prior written approval of Landlord in each instance. Tenant shall present to Landlord plans and specifications for such work at the time approval is sought, in accordance with criteria and procedures as provided in Exhibit B. Notwithstanding the foregoing, Tenant shall be permitted to make minor, nonstructural alterations to the interior of the leased premises not to exceed Thirty Thousand and 00/100ths Dollars ($30,000.00) during any twelve (12) month period, provided that such alterations shall not change the original design of the leased premises as originally approved by Landlord, and further provided, Tenant shall not be permitted to make any alterations whatsoever to the storefront, signage or configuration or size of the sales area without Landlord's prior written approval. Tenant shall give Landlord fifteen (15) days' written notice prior to undertaking any alterations which Tenant is permitted to make pursuant to this paragraph, provided no such prior notice shall be required for repairs which Tenant determines must be undertaken sooner. Tenant shall also be permitted to replace kitchen fixtures and trade fixtures not visible from the exterior of the leased premises with kitchen equipment and trade fixtures of the same character and quality. Landlord shall not unreasonably withhold its consent to the replacement of trade fixtures which are visible from the exterior of the leased premises with trade fixtures which are substantially similar to those being replaced. Tenant shall be permitted to replace all trade fixtures with identical trade fixtures. SECTION 6.02. REMOVAL BY TENANT. All alterations, decorations, additions, trade fixtures and improvements made by Tenant, including those made pursuant to Exhibit B, shall be deemed to have attached to the leasehold and to have become the property of Landlord upon such attachment. Upon expiration or earlier termination of the term of this Lease, Tenant shall not remove any of such alterations, decorations, additions, trade fixtures or improvements. Landlord may, however, designate by written notice to Tenant those alterations, decorations, additions, improvements, or trade fixtures which shall be removed by Tenant at the expiration or earlier termination of the Lease, and Tenant shall promptly remove the same and repair any damage to the leased premises caused by such removal. Landlord shall have the right to padlock or otherwise secure the leased premises upon the expiration or earlier termination of the term of the Lease. Landlord shall also have the right, at any time during the term of this Lease, and upon expiration or earlier termination of the term of this Lease, to immediately enter the leased premises in order to remove any items which shall be determined by Landlord to be a violation of existing health, safety, security or other similar codes or regulations affecting or applicable to the leased premises or the regional retail development. Landlord shall attempt to provide prior notification to Tenant of such removal, subject to the then existing circumstances. 17 Notwithstanding the provisions of this Section to the contrary, upon expiration of the lease term Tenant shall be permitted to remove all of the furniture and restaurant equipment (excluding HVAC and exhaust facilities) which either were placed within the leased premises after the date of Tenant's initial opening of its restaurant or are replacements for the furniture and restaurant equipment located in the leased premises on the date of Tenant's initial opening, provided Tenant shall repair any damage to the leased premises caused by removal. SECTION 6.03. CHANGES AND ADDITIONS. Landlord, for itself and for the underlying lessor, if any, hereby reserves the right at any time, and from time to time, to make alterations to, and to build additional stories on the building in which the leased premises are located, and to construct other buildings and improvements in the regional retail development, including any modifications of the common areas in connection therewith, to enlarge or reduce the Shopping Center or the regional retail development, to add decks or elevated parking facilities, and to sell or lease any part of the land comprising the regional retail development, as shown on the site plan attached hereto as Exhibit A, for the construction thereon of a building(s) to be occupied by a Department Store(s) which may or may not be part of the regional retail development. Landlord also reserves for itself and for the underlying lessor, if any, the right at any time, and from time to time, to change, modify, or abolish any temporary off-site utility or any storm sewer or retention pond system (if applicable) serving the regional retail development. The purpose of Exhibit A is to show the approximate location of the leased premises within the Shopping Center and Landlord reserves for itself and for the underlying lessor, if any, the right at any time to relocate, enlarge, or reconfigure the various buildings, parking areas and other common areas on said site plan. Tenant hereby consents to the exercise by Landlord of the rights set forth in this Section 6.03 and agrees that the exercise of such rights by Landlord or by the underlying lessor, if any, shall not diminish Tenant's obligations under this Lease. Landlord agrees that in the event Landlord elects to exercise any of the options available to it pursuant to this Section 6.03, Landlord shall use reasonable efforts to avoid material adverse interference with access to and visibility of the leased premises from the interior of the Shopping Center building. The provisions of this Section 6.03 are subject to the provisions of the last sentence of Section 1.02 of the Rider. Section 6.04: Security Interest: In consideration of Landlord's agreement ------------- ----------------- to enter into this Lease, and for other valuable consideration, the receipt and adequacy of which is hereby acknowledged, and as security for the payment of rent and other charges becoming due hereunder, Tenant hereby grants to Landlord a continuing security interest in the following described collateral, which it now owns or shall hereinafter acquire or create, immediately upon the acquisition or creation thereof, to the extent that such collateral is Tenant's property and is not Landlord's property pursuant to Section 6.02 hereof, in addition to Landlord's ownership of the aforesaid property: (a) all equipment and other personal property, including (without limitation) trade fixtures, placed in the leased premises at any time prior to or during the term of this Lease (whether or not same shall be subsequently removed from the leased premises and the proceeds thereof and accessions thereto, provided Landlord agrees from time to time to subordinate its interest (to that of an equipment lessor or third party lender) in those trade fixtures or equipment (excluding HVAC and exhaust facilities) which are (i) placed in the leased premises after Tenant's initial opening in the leased premises and (ii) are leased from an equipment lessor or are acquired by Tenant as part of a financing with a third party lender (any such subordination shall be pursuant to a Landlord subordination of lien agreement prepared in good faith by Landlord); and (b) liquor licenses and other licenses or permits issued in connection with the business at the leased premises and the proceeds thereof and accessions thereto; provided Landlord agrees from time to time to subordinate its interest in same to that of a third party lender of Tenant pursuant to a Landlord subordination of lien agreement prepared in good faith by Landlord. Tenant agrees within ten (10) days after request therefor by Landlord, to execute in proper form and deliver to Landlord all necessary and desirable instruments and financing statements, in writing, evidencing that Landlord possesses a fully-effective security interest with respect to the foregoing collateral. Tenant also agrees to make appropriate entries on its books and records disclosing 18 Landlord's security interest in the collateral. Such security interest shall be a first and prior security interest as and against the claims of any other creditors of Tenant and Tenant so warrants to Landlord. Except for the sale of inventory and goods in the ordinary course of Tenant's business, Tenant shall not sell, assign, transfer, pledge or otherwise dispose of or encumber any of the collateral to a party other than Landlord while this Security Agreement is in effect. Failure of Tenant to execute any such statements or instruments as may be necessary or desirable to effectuate the provisions of this Section 6.04, within such ten (10) day period, shall constitute a breach of this Lease. In the event of such failure, Landlord, in addition to any other rights or remedies it may have, shall have the right by not less than ten (10) days notice to Tenant to declare this Lease terminated and the term ended, in which event this Lease shall cease and terminate on the date specified in such notice with the same force and effect as though the date set forth in such notice were the date originally set forth herein and fixed for the termination of the term; upon such termination, Tenant shall vacate and surrender the leased premises, but Tenant shall remain liable for the balance of the original stated term as provided in this Lease by reason of said breach as if the Lease had remained in full force and effect. Further, Tenant hereby irrevocably appoints Landlord as attorney-in- fact for Tenant with full power and authority, and as holding a power coupled with an interest, to execute and deliver in the name of Tenant any such statements or instruments. Upon the happening of: (1) default by Tenant in the payment of rent or other charges or the performance of any of the terms, covenants, conditions or provisions contained in this Lease, and the continuance of same beyond any applicable grace or cure period, (2) the making of any levy, seizure or attachment of the collateral, or (3) the occurrence of any of the events referred to in Section 20.02 of this Lease, thereupon or at any time thereafter while such default has not been cured, Landlord shall have all the remedies of a secured party under the laws of the State, including, without limitation, the right to take possession of the collateral, and, for that purpose, Landlord may enter upon the leased premises and remove the same therefrom. Landlord hereby agrees to give Tenant prior notice of any public sale of the collateral or of the date after which any private sale or any other intended disposition thereof is to be made, and, at such sale, Landlord may purchase the collateral. This Security Agreement, and the security interest created in such collateral hereby, shall be terminated if all rental due herein is paid in full and Tenant is not otherwise in default hereof upon the natural expiration of the term hereof; otherwise, this Security Agreement, and the security interest created in such collateral hereby, shall survive termination of this Lease. Tenant agrees, in the event of exercise by Landlord of Landlord's security interest in Tenant's liquor license issued by the State, that Tenant will transfer the same to Landlord, subject to the consent and approval of the State. Tenant hereby consents that Landlord shall have the additional right, without notice to Tenant, to cause a receiver to be appointed by a court of competent jurisdiction to take possession of the liquor license until transfer of the said license has been approved by the State. All expenses for receivership and all of the costs and expenses incurred by Landlord in enforcing its rights under this security agreement shall be the obligation of Tenant. ARTICLE VII. CONDUCT OF BUSINESS BY TENANT SECTION 7.01. USE OF PREMISES. Tenant shall continuously use and occupy the entire leased premises during the term of this Lease, which use and occupancy shall be solely for the purpose of conducting the business specifically set forth in the Data Sheet and for no other purpose or purposes. It is agreed that the use specified in the Data Sheet has been, and is, a material inducement to Landlord in entering into this Lease with Tenant, and that Landlord would not enter into this Lease without this inducement. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the leased premises or if a failure to procure such a license or permit might or would in any way affect Landlord or the Shopping Center, then Tenant, at Tenant's expense, shall duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord. Tenant, at Tenant's expense, shall, at all times, comply with the requirements of each such license or permit. 19 (8) Section 7.01: Permitted Use: Waiter and waitress served full service high quality restaurant offering a wide variety of menu items and serving breakfast items, lunch and dinner. Tenant may serve beer, wine and liquor once all licenses and insurances have been obtained. Upon Tenant's initial opening for business in the leased premise, Tenant shall serve items from a menu which is substantially similar to the menu attached hereto and made a part hereof. If Landlord does not notify Tenant of any failure of Tenant to so open with a menu which is substantially similar to the menu attached hereto, within three (3) months following Tenant's initial opening for business in the leased premises, Tenant shall be deemed to have satisfied such requirement. After Tenant initially opens for business in the leased premises, Tenant shall have the right to make changes in Tenant's menu which are consistent with those made at a majority of other Silver Diner Restaurants in the Baltimore-Washington, D.C. metropolitan areas (and at least six [6] restaurants) (it being understood that prices and menu items are not required to be identical at all such restaurants) and which do not change the overall concept of the restaurant operated in the leased premises. In addition, provided that a majority of the Silver Diners located in the Baltimore-Washington D.C. metropolitan areas (and at least six (6) restaurants) are changing simultaneously to the same concept, Tenant may change the concept of the restaurant to another "American" themed restaurant without Landlord approval, however, if desired change is to an ethnic use which would compete with another use in the Shopping Center, it is subject to Landlord approval. SECTION 7.02. OPERATION OF BUSINESS. Tenant shall be open for business and operate continuously, during all days and hours established by Landlord, in all of the leased premises (provided Tenant shall be entitled to close sections of the leased premises, but in no event any substantial portion of the leased premises, during non-peak business hours and Tenant may close the leased premises to the extent closure is necessary for Tenant to undertake Landlord- permitted repairs or alterations) during the entire term of this Lease, and shall conduct its business at all times in a first class and reputable manner, maintaining at all times an adequate staff of employees and a full and complete stock of merchandise. Failure by Tenant so to be open for business and to operate shall entitle Landlord, in addition to other remedies provided in this Lease, to mandatory injunctive relief, and shall give Landlord the right to erect a storefront barricade in front of the leased premises at Tenant's expense, which barricade shall not be removed except upon Landlord's prior written consent and with Tenant paying the cost of such removal. The erection of such a barricade by Landlord shall not be construed as a re-entry by Landlord into the leased premises or as an acceptance by Landlord of any surrender of possession of the leased premises by Tenant. In the event the maximum hours during which the Shopping Center (or any separate part thereof) is legally permitted to be open to the public are regulated by any lawful authority, then Landlord shall be the sole judge of which days and hours shall be Shopping Center business days and hours (and the days and hours applicable to any such separate part). Tenant shall be permitted to open and operate for business, and the entrance to the Shopping Center nearest to the leased premises shall remain open, from 6:00 a.m. to midnight on Sundays through Thursdays and from 6:00 a.m. Fridays and Saturdays to 3:00 a.m. the following mornings. The lights illuminating the parking area identified on Exhibit E shall remain on for at least one (1) hour following Tenant's closing for business. Landlord has entered into an agreement with the Department Store operators which own that portion of the parking area cross-hatched on Exhibit D which is not identified on Exhibit E which agreement obligates such Department Store operators to illuminate such parking; Landlord agrees not to modify such agreement in a manner which reduces the obligations of such owners to illuminate such parking area. Tenant shall not be responsible for the costs of lighting or other additional costs incurred by Landlord solely as a result of Tenant being open for business during such extended hours. Tenant shall install and maintain at all times a display of merchandise in the display windows, if any, of the leased premises and shall keep the same well lighted during such hours as Landlord shall designate. Tenant, at Tenant's expense, shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction, affecting or applicable to the leased premises or the cleanliness, safety, occupancy and use of the same, whether or not any such law, ordinance, order, rule, regulation or requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate structural changes or improvements or interfere with the use and enjoyment of the leased premises. Tenant shall not do or permit anything to be done in or about the leased premises, or bring anything therein, which will in any way conflict with any such law, ordinance, order, rule, regulation or requirement affecting the occupancy or use of the leased premises or the regional retail development 20 which is or may hereafter be enacted or promulgated by governmental authorities, or in any way obstruct or interfere with the rights of others, nor shall Tenant use or allow the premises to be used for any improper, immoral or reasonably objectionable purposes as determined by Landlord. Tenant shall not cause or permit the use, generation, storage or disposal in or about the leased premises or the regional retail development of any substances, materials or wastes subject to regulation under any federal or state or local laws from time to time in effect concerning hazardous, toxic or radioactive materials unless Tenant shall have received Landlord's prior written consent, which Landlord may withhold or at any time revoke in its sole discretion. Tenant shall comply with all federal, state and local laws in effect from time to time prohibiting discrimination or segregation by reason of race, color, creed, age, religion, sex or national origin. No auction, liquidation, going out of business, fire or bankruptcy sales may be conducted or advertised by sign or otherwise in the leased premises. The quality of Tenant's operation within the leased premises shall be in accord with standards and practices generally acceptable in enclosed first-class, full-retail-price regional shopping centers. Tenant shall be obligated to permit returns of merchandise and shall allow cash refunds on such returns, except in connection with special sales and close outs. Tenant shall not offer any goods or services which Landlord determines, in its sole discretion, to be inconsistent with the image of a first-class, family-oriented regional retail development, nor shall Tenant display or sell any goods containing portrayals which Landlord determines, in its sole discretion, to be lewd, graphically violent or pornographic. Tenant agrees that it will conduct its business in good faith, and will not do any act tending to injure the reputation of the Shopping Center (or any part thereof) as determined by Landlord. Tenant shall not sell or display any paraphernalia used in the preparation or consumption of controlled substances. In the event Landlord has approved Tenant's remaining open for business after hours set forth in the Rider to this Section 7.02 (and/or any hours applicable to that part of the Shopping Center containing the leased premises), then such approval shall be conditioned upon Tenant's paying for all additional costs incurred by Landlord as a result thereof. Tenant shall not permit noise or odors in the leased premises which are objected to by Landlord and, upon written notice from Landlord, Tenant shall immediately cease and desist from causing such noise or odor, and failing of which Landlord may deem the same a material breach of this Lease. Notwithstanding the foregoing, odors and noises within the leased premises which are associated with the normal operation of Tenant's restaurant shall not be objected to by Landlord if same do not travel within other leased or occupied spaces in the regional mall development. Tenant shall not permit the operation of any coin operated or vending machines (provided Tenant may utilize telephones, juke boxes, cigarette machines and one gum ball machine to the extent and in the manner currently used at a majority other Silver Diner restaurants in the Baltimore/Washington metropolitan area as of the date this Lease is executed) or pay telephones on the leased premises, other than in the areas reserved solely for the use of Tenant's employees. Tenant shall not sell or display any merchandise within five feet (5') of the storefront leaseline or opening unless such sale or display shall be expressly approved on the Store Design Drawings or otherwise approved by Landlord, in writing, except that Tenant shall be permitted to display merchandise in the display windows, if any. Tenant shall not use the areas adjacent to the leased premises for business purposes. Tenant shall not store anything in service or exit corridors. Tenant agrees that all receiving and delivery of goods and merchandise, and all removal of merchandise, supplies, equipment, trash and garbage, and all storage of trash and garbage, shall be made only by way of or in the areas provided therefor by Landlord. Tenant shall not use or permit the use of any portion of the leased premises as sleeping quarters, lodging rooms, or for any unlawful purposes. Tenant shall not install any radio or television or other similar device exterior to the leased premises and shall not erect any aerial on the roof or exterior walls of any building within the regional retail development. Landlord may direct the use of all pest extermination contractors at the sole cost and expense of Tenant and at such intervals as Landlord may require. Failure of Tenant to employ the pest extermination contractor designated by Landlord shall entitle Landlord to employ such contractor with respect to Tenant's premises and Tenant shall reimburse Landlord for the cost thereof. Landlord shall have the option to provide pest extermination services for the Shopping Center or the regional retail development or-any part thereof, in which event Tenant shall pay to Landlord Tenant's proportionate share of the cost of such service, with such proportionate share to be calculated in the manner provided in Section 8.03 of this Lease. In the event that Tenant is permitted pursuant to this Lease to engage in the sale of food and beverages from the leased premises, then Tenant shall: (i) offer such food and beverages only in accordance with the use clause set forth in Section 7.01 of the Data Sheet to this Lease, (ii) serve its customers in ceramic containers or dishes, non-disposable glass or heavy plastic 21 drinking glasses, and metal utensils (except Tenant may utilize other containers for take out), and with utensils to be approved by Landlord, subject to change by Landlord from time to time, (iii) be solely responsible for prompt disposal within the premises of all trash, garbage and debris, and (iv) inspect and maintain all grease traps, pans and hood ventilators in good order, condition and repair, and shall contract for same if and as required by Landlord. The covenants of Tenant regarding hazardous, toxic or radioactive materials, as set forth in this Lease, shall survive the expiration or earlier termination of the term of this Lease. Without limiting any of the foregoing provisions, Tenant also shall be required to maintain, at all times, a minimum staff of two (2) employees for operation of the leased premises, and Tenant shall not permit the leased premises to be left unattended at any time. SECTION 7.03. RADIUS. During the term of this Lease, in the event Tenant, its parent corporation or subsidiary corporation, or its franchisor or franchisee, or its licensor or licensee, or any person, firm, corporation or other entity who or which controls or is controlled by Tenant, or by any person, firm, corporation or other entity which directly or indirectly controls or is controlled by Tenant, shall, directly or indirectly, either individually or as a partner or stockholder or otherwise, own, operate or become financially interested in any business similar to or in competition with the business of Tenant described in Section 7.01 within a radius of ten (10) miles from the leased premises, then the Gross Sales (as defined in this Lease) of any such business or businesses within said radius shall be included in the Gross Sales made from the leased premises and the percentage rent hereunder shall be computed upon the aggregate of the Gross Sales made from the leased premises and by any such other business or businesses then conducted within said radius and Tenant shall report and maintain records of such sales in the manner provided in Article III hereof. This Section 7.03 shall not apply to any such business or businesses open and being operated by Tenant within said radius as of the date of this Lease as long as such business or businesses shall continue to be operated in the same location(s) existing as of said date. If Tenant fails to make payments required pursuant to this Section 7.03, Landlord or Landlord's authorized representative or agent shall have the right at all reasonable times during the term hereof and for a period of at least three (3) years after the expiration of the term of this Lease, to inspect, audit, copy and/or make extracts of the books, source documents, records and accounts pertaining to such other business or businesses conducted within said radius, in accordance with the provisions of Article IV hereof, for the purpose of determining or verifying the additional rents due to Landlord pursuant to this Section. Moreover, in the event Tenant fails to supply to Landlord sales records with respect to any such similar or competing business, Landlord shall have the right to estimate the sales for such businesses based upon Tenant's Gross Sales in the leased premises, and the additional percentage rent generated from the inclusion of such estimated sales and Tenant's Gross Sales shall be deemed additional rent to be paid by Tenant in accordance with the provisions of Section 2.02 and 2.06 of this Lease. (9) Section 7.03: Radius: Seven (7) miles through the sixtieth (60th) month of the lease term and five (5) miles for the remainder of the lease term. The provisions of Section 7.03 shall be interpreted as having "seven (7) miles substituted for the reference to ten (10) miles through the sixtieth (60th) month if the lease term and "five (5) miles" substituted for the reference to "ten (10) miles" during the remainder of the lease term. SECTION 7.04. STORAGE, OFFICE SPACE. Tenant shall warehouse, store and/or stock in the leased premises only such goods, wares and merchandise as Tenant intends to offer for sale at retail at, in, from or upon the leased premises. This shall not preclude occasional emergency transfers of merchandise from the other stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the leased premises as is from time to time reasonably required for Tenant's business in the leased premises. SECTION 7.05. CARE OF PREMISES. Tenant, at Tenant's expense, shall at all times keep the leased premises (including the service areas adjacent to the premises, display windows and signs) orderly, neat, safe, clean and free from rubbish and dirt, and vermin, and shall store all trash, garbage and other solid waste within the leased premises. Tenant shall not burn any trash or garbage at any time in or about the regional retail development. Landlord may direct the use by Tenant at Tenant's expense of all solid waste disposal contractors at such intervals as Landlord may require. If Landlord shall provide or contract for any services or facilities for solid waste pickup or sewer cleaning, then 22 Tenant shall be obligated to use the same and shall pay a proportionate share of the expense thereof within twenty (20) days after being billed therefor. If Landlord does not provide such services, Tenant shall arrange for the regular pickup of all solid waste at Tenant's expense. ARTICLE VIII. COMMON AREAS SECTION 8.01. OPERATION AND MAIN1ENANCE OF COMMON AREAS. Landlord agrees to cause to be operated and maintained during the term of this Lease all common areas within the Shopping Center. The manner in which such areas and facilities shall be operated and maintained, and the expenditures therefor, shall be at the sole discretion of Landlord and the use of such areas and facilities shall be subject to such uniform regulations as Landlord shall make from time to time, provided that Landlord's regulations may distinguish between tenants engaged in different uses. Landlord shall use reasonable efforts to maintain the common areas in a neat, clean and orderly condition. SECTION 8.02. USE OF COMMON AREAS. The term "common area," as used in this Lease, shall mean (i) the following areas within the regional retail development: If Landlord imposes parking charges in the parking area cross- hatched on Exhibit D, then Tenant shall be entitled to reimbursement from Landlord for such charges imposed on Tenant's customers (through validation or otherwise) to the extent and on the same basis that any other restaurant tenant or Department Store Site operator is entitled to such reimbursement: parking areas and facilities as determined by Landlord (collectively "parking facilities"), roadways, pedestrian sidewalks and walkways, pedestrian plazas, pedestrian passage areas, driveways, public transportation loading and unloading facilities, truckways, loading docks, delivery areas, landscaped areas, community rooms, office facilities, the enclosed Mall, berms, elevators and escalators and stairs and ramps and vertical transportation facilities not contained within any leased premises, public restrooms and comfort stations, service areas, service and fire and exit corridors, passageways, retention ponds (if applicable), and other areas, amenities, facilities and improvements provided by Landlord, (ii) those areas within the regional retail development and areas adjacent to the regional retail development which from time to time may be provided by the owners of such areas for the convenience and use of Landlord, the tenants of the Shopping Center, the owners and occupants of the Department Store Sites, and their respective concessionaires, agents, employees, customers, invitees and all other licensees and others entitled to the use thereof and (iii) any other facilities or areas, whether within or outside the regional retail development, as may be designated by Landlord from time to time. The use and occupancy by Tenant of the leased premises shall include the use of the common areas in common with Landlord and with all others for whose convenience and use the common areas have been or may hereafter be provided by Landlord or by the owners of common areas not within the Shopping Center, subject, however, to rules and regulations for the use thereof as prescribed from time to time by Landlord or the owner of such common area, including, without limitation, the right of Landlord to determine the hours and mode of operation of the elevators, escalators and vertical transportation facilities serving the Shopping Center, and including the right of Landlord or such owner to impose parking charges, whether by meter or otherwise, with respect to any parking facilities. In no event, however, shall Tenant, its agents or employees, use the common areas for the display or sale of merchandise. Without limiting the generality of the foregoing, Landlord may include in common areas those portions of the Shopping Center presently or hereafter sold or leased to Department Stores, until the building thereon has been opened for business, at which time there shall be withdrawn from the common areas those areas not provided by the owner thereof for common use. Tenant and its employees and agents shall park their cars and other vehicles only in areas specifically designated from time to time by Landlord for that purpose, and shall not in any case park their vehicles in any private or non-public portions of the parking facilities. Tenant covenants that it will enforce the parking by its employees and agents in such designated areas and in only public areas. Automobile license numbers of employees' and agents' vehicles shall be furnished by Tenant to Landlord upon Landlord's request. In the event any vehicle is parked by Tenant or by an employee or agent of Tenant in a private or non-public parking area or in any portion of the parking facilities other than the area of such parking facilities as shall be designated by Landlord, Tenant shall be obligated to pay Landlord the sum of One Hundred Dollars ($100) per day for each such vehicle in order to partially compensate Landlord for the loss of percentage rent arising from the business lost to Tenant and to other tenants 23 in the Shopping Center due to the lack of available parking space in the said parking facilities, and Landlord shall have the right to cause the vehicle to be towed to a location designated by Landlord and Tenant shall be obligated to reimburse Landlord for all towing charges. Similarly, Landlord shall have the right to cause any vehicle to be towed if the parking charges, if any, or the per diem charge or reimbursement due to Landlord hereunder, with respect to such vehicle have not been paid; with any such vehicle to be towed to a location designated by Landlord and with Tenant being obligated to pay all parking charges, fines and towing charges imposed by Landlord with respect to such vehicles. Tenant further agrees to hold harmless Landlord and defend Landlord, its agents and employees against any and all claims of the employee, agent and/or owner of the vehicle towed. Landlord shall have the further option of prohibiting Tenant and its employees and agents from parking their cars or other vehicles in the parking facilities, and the violation of such prohibition shall be subject to the same provisions as set forth above. Landlord may at any time close temporarily any common area to make repairs or changes, to prevent the acquisition of public rights in such area, to discourage noncustomer parking, to use areas for attendant or valet parking, and may do such other acts in and to the common areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not provide, nor shall Tenant authorize any person or entity to provide, valet or attendant parking for Tenant's customers or others; Landlord shall have the exclusive right, but shall not be obligated, to provide valet or attendant parking at the regional retail development. If Landlord imposes parking charges in the parking area cross-hatched on Exhibit D, then Tenant shall be entitled to reimbursement from Landlord for such charges imposed on Tenant's customers (through validation or otherwise) to the extent and on the same basis that any other restaurant or Department Store Site operator is entitled to such reimbursement. SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES. (a) Tenant agrees to pay to Landlord in the manner hereinafter provided, but not more often than once each calendar month Tenant's proportionate share of: (1) all costs and expenses of every kind and nature paid or incurred by Landlord in operating, equipping, policing and protecting, lighting, heating, air conditioning, providing sanitation and sewer and other services, providing a music and public address system, insuring (including self-insurance and the payment of deductible amounts under insurance policies), repairing, replacing and maintaining (i) the common areas and (ii) all buildings and roofs within the Shopping Center and (iii) all other areas, facilities and buildings, including project offices, parking facilities, vertical transportation facilities, retention ponds (if applicable), and any and all facilities and improvements connecting the regional retail development to off-site buildings or areas, which are used in connection with the maintenance and/or operation of, and whether located within or outside of, the regional retail development (hereinafter collectively referred to as "project areas"); such costs and expenses shall include, but shall not be limited to, the full cost of: illumination and maintenance of regional retail development signs, whether located on or off the regional retail development; holiday and seasonal lighting, decorations and displays; refuse disposal, water, gas, sewage, electricity and other utilities (without limitation), including any and all usage, service, hook-up, connection, availability and/or standby fees or charges pertaining to same, and including all costs associated with the provision, maintenance and operation of any central telephone service for the regional retail development; the operation, maintenance, repair and replacement of all or any part of the parking facilities; snow removal; maintenance, operation, repair and replacement of any and all roads (temporary or otherwise) servicing the regional retail development, including, without limitation, any landscaping or other work related to such roads; maintenance and operation of any temporary or permanent utility, including a sewage disposal system, within or without the regional retail development, built, operated and/or maintained for the specific purpose of servicing the regional retail development, together with hook up or connection fees and service charges; compliance with laws, rules, regulations and orders of governmental authorities; maintenance for wooded areas, retention ponds, lakes and shoreline areas (if applicable); cleaning, lighting, striping and landscaping; curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals located on or adjacent to the regional retail development; premiums and all other costs with respect to liability, casualty, and property insurance, and compliance with insurance requirements; personal property taxes; licensing fees and taxes; audit fees and expenses; supplies; the cost and expense of supplying music to the regional retail development; all costs and expenses of enforcing the rules and regulations established by Landlord for the Shopping Center and handling of claims or other matters arising from the operation of the regional retail development; real estate taxes and assessments and substitutions and replacements 24 thereof levied or assessed by municipal, county, state, federal or other taxing or assessing authority upon, against or with respect to the common areas, the project areas and/or the land thereunder and the land on which the Shopping Center buildings are located, and all property (including any land upon which may be located any temporary or permanent utility, including a sewage disposal system, within or without the regional retail development built, operated and/or maintained for the purpose of servicing the regional retail development) provided by Landlord which may at any time comprise or serve the Shopping Center, whether located on or off the site of the Shopping Center, irrespective of whether the same is taxed or assessed as real or personal property; cost, lease payment or depreciation of any equipment, improvements or facilities used in the operation or maintenance of the common areas or project areas, including, without limitation, any imputed interest as may be applicable to costs paid or incurred by Landlord the full amount of which is not included under this Section 8.03 in the year so paid or incurred, and including any interest or other expense associated with any loans obtained by Landlord with respect to any cost or expense included or includable hereunder, including any portion of the long- term debt on the Shopping Center which has been incurred for such purposes; total compensation and benefits (including premiums for workers' compensation or any other insurance or other retirement or employee benefits, and including all costs incurred in providing such benefits) paid to or on behalf of employees involved in the performance of the work specified in this Section 8.03 or employees otherwise providing services to tenants or customers of the Shopping Center; and (2) an amount equal to fifteen percent (15%) of the total of all of the foregoing costs and expenses for the regional retail development. There shall be excluded from the foregoing costs and expenses the following: (i) ground rent or other rental payments made under any ground lease or other underlying lease; (ii) cost of painting or redecorating individual tenants' spaces; (iii) leasing commissions, legal expenses, architectural fees, and other expenses incurred in connection with obtaining tenants for the Shopping Center or with respect to existing tenants of the Shopping Center, provided that legal and other expenses shall be included in costs and expenses payable by Tenant pursuant to this Section 8.03 to the extent they relate to the common areas; (iv) tenant allowances, concessions, and other costs and expenses incurred in completing, fixturing, furnishing, renovating or otherwise improving, decorating or redecorating space for individual tenants (including Tenant), prospective tenants or other occupants or prospective occupants of the Shopping Center; (v) salaries, wages, or other compensation paid to employees of Landlord who are not assigned to the operation, management, maintenance or repair of the regional retail development (other than the fifteen percent [15%] administrative fee), provided that such expenses shall be includable in costs and expenses charged to Tenant under this Section 8.03 to the extent any employees are so assigned to the operation, management, maintenance or repair of the regional retail development; (vi) fines or penalties due to the violation by Landlord of any applicable law; (vii) any cost or expense for which Landlord actually receives reimbursement from insurance, condemnation awards, other tenants (other than as reimbursement for operating expenses) or any other source (other than reimbursement of operating expenses); (viii) costs incurred in connection with disputes with other tenants or occupants of the regional retail development, or prospective tenants of the regional retail development, except to the extent such disputes relate to the common areas; (ix) closing costs incurred in connection with the sale, financing, refinancing, or mortgaging of the Shopping Center; and (x) costs, fines, interest, penalties, legal fees or costs of litigation incurred due to the late payment of taxes and utility bills. In no event shall Tenant be obligated for the capital costs of initially constructing the buildings in the regional retail development or the capital costs of subsequent expansion construction for the regional retail development (i.e., adding new department stores to the development or expanding the Shopping - ----- Center or the common areas). In addition, Tenant shall not be charged for both the capital costs of replacing a particular item as well as the depreciation of such item (i.e., Tenant may be charged either for the replacement cost of such ---- item or for the depreciation of the same item, but not both, and the method of charging such a particular item to Tenant shall not prejudice Landlord's ability to charge future costs associated with replacing such item either on the basis of lump-sum replacement costs or on the basis of depreciation or amortization of such costs). The proportionate share to be paid by Tenant shall be that portion of the foregoing costs and expenses which the number of square feet of floor area in the leased premises bears to the total number of square feet of gross leased and occupied floor area of all buildings in the Shopping Center abutting on the enclosed Mall. The gross leased and occupied floor area in effect for the whole of any lease year shall be the average of the gross leased and occupied floor area in effect on the first day of each calendar month in such lease year. 25 (b) Tenant's proportionate share of such costs and expenses for each lease year shall be paid in monthly installments on the first day of each calendar month, in advance, in an amount estimated in good faith by Landlord from time to time. Subsequent to the end of each calendar or fiscal lease year (at Landlord's option), Landlord shall furnish Tenant with a statement, such statement to show the method of Landlord's computation, of the actual amount of Tenant's proportionate share of such cost and expenses for such period. If the total amount paid by Tenant under this Section for any such year shall be less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within ten (10) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section. Landlord may estimate the annual budget and charge the estimated share to the Tenant on a monthly basis subject to revision by Landlord of the budget from time to time and final annual adjustment based upon actual expenses. Neither the provisions of this Section, nor any of the other requirements or restrictions imposed upon Tenant under this Lease, shall excuse Tenant from its obligation to comply with laws and ordinances and other governmental requirements as set forth in Section 7.02 hereof. ARTICLE IX. SIGNS SECTION 9.01. SIGNS. Tenant shall affix a sign to the exterior surface of the storefront of the leased premises fronting on the enclosed Mall and shall maintain said sign in good condition and repair during the entire term of this Lease. Said sign shall conform to the criteria for signs contained in Exhibit B, and the size, content, design and location thereof shall be subject to the prior written approval of Landlord. Landlord agrees that in the event Tenant shall change the trade name under which the leased premises are operated in accordance with Tenant's rights as expressly set forth in this Lease, then Landlord shall not withhold approval of a new storefront sign reflecting such change of trade name solely as a result of such new trade name. Furthermore, if the design of Tenant's interior mall storefront signage changes and the design change is being implemented at all of Tenant's restaurants with the trade name permitted under Section 16.01, then Landlord shall not unreasonably withhold its approval of such design changes provided the requirements of Exhibit 'B' are satisfied and the sign is no larger than the prior sign approved by Landlord. Except as hereinabove mentioned, Tenant shall not place or cause to be placed, erected or maintained on any exterior door, wall, window or the roof of the leased premises, or on the glass of any window or door of the leased premises, or on any sidewalk or other location outside the leased premises, or within any display window space in the leased premises, or within five (5) feet of the front of the storefront leaseline or opening, whether or not there is a display window space in the leased premises, or within any entrance to the leased premises, or otherwise visible from the Mall, any sign (flashing, moving, hanging, handwritten, or otherwise), decal, placard, decoration, flashing, moving or hanging lights, lettering, or any other advertising matter of any kind or description. Moreover, Tenant is prohibited from utilizing any displays which are not part of the fixture plan approved in writing by Landlord for the leased premises. If Tenant places or causes to be placed or maintained any of the foregoing, the same may be removed by Landlord or Landlord's representative without notice and without such removal constituting a breach of this Lease or entitling Tenant to claim damages on account thereof. No symbol, design, name, mark or insignia adopted by Landlord for the Shopping Center shall be used without the prior written consent of Landlord. No illuminated sign located in the interior of the leased premises and which is visible from the outside thereof shall be permitted without the prior written approval of Landlord provided illuminated signs not to exceed two (2) square feet in area may be utilized to the extent and in the manner same are utilized in a majority of the other Silver Diner restaurants in the Baltimore/Washington Metropolitan area. All signs located in the interior of the leased premises shall be in good taste and professionally printed so as not to detract from the general appearance of the leased premises and the Shopping Center. Section 9.01: Landlord shall arrange for the mall directory located in ------------ Tenant's wing of the Shopping Center to contain Tenant's logo and Tenant's trade name with double sized lettering; the cost of installation incurred by Landlord shall be paid for by Tenant. Tenant shall also be permitted to 26 install a Silver Diner icon kiosk at Center Court indicating Tenant's trade name and the direction of the leased premises, which sign should be subject to the approval of Landlord in all respects. Tenant may maintain such kiosk in the Center Court during the entire lease term (as same may be extended) subject to Landlord's right to cause Tenant to relocate same within the Center Court from time to time. Also, during the ninety (90) day period following the commencement date, Tenant's trade name shall be included on all interior mall advertising sign holders (with Tenant to pay Landlord for production costs). ARTICLE X. MAINTENANCE SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE. Landlord shall keep and maintain the roof, structural portions of the leased premises and exterior surfaces of the exterior walls of the building in which the leased premises are located (exclusive of doors, door frames, door checks, other entrances, windows and window frames which are not part of common areas, and storefronts) and the common area utility, plumbing and sewer facilities serving the leased premises but located outside the leased premises (to the extent such utility lines and sewer facilities are Landlord's, as opposed to the utility provider's, responsibility) in good repair, except that Landlord shall not be called upon to make any such repairs occasioned by the act or negligence of Tenant, its agents, employees, invitees, licensees or contractors. Landlord shall not be called upon to make any other improvements or repairs of any kind upon the leased premises and appurtenances, except as may be required under Articles XVII and XVIII hereof, and nothing contained in this Section 10.01 shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs and replacement costs conferred elsewhere in this Lease. SECTION 10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE. (a) Except as provided in Section 10.01 of this Lease, Tenant, at Tenant's expense, shall keep and maintain in first-class appearance, in a condition at least equal to that which existed when Tenant initially opened the leased premises for business, some reasonable wear excepted, and in good order, condition and repair as determined by Landlord (including replacement of parts and equipment, if necessary) the leased premises and every part thereof and any and all appurtenances thereto wherever located, including, but without limitation, the interior surfaces of the exterior walls, the exterior and interior portion of all doors, door frames, door checks, other entrances, windows, window frames, plate glass, storefronts, all plumbing and sewage facilities within the leased premises, including free flow up to the main sewer line, fixtures, ventilation, heating and air conditioning and electrical systems exclusively serving the leased premises (whether or not located in the leased premises), sprinkler systems, walls, floors and ceilings, and all other repairs, replacements, renewals and restorations, interior and exterior, ordinary and extraordinary, foreseen and unforeseen, and all other work performed by or on behalf of Tenant pursuant to the exhibits attached hereto or Articles V or VI hereof or otherwise in accordance with the provisions of this Lease. Tenant shall remodel the leased premises as required in Exhibit B. (b) Tenant shall keep and maintain the leased premises in a clean, sanitary and safe condition in accordance with the laws of the State and in accordance with all directions, rules and regulations of the health officer, fire marshall, building inspector, or other proper officials of the governmental agencies having jurisdiction, and Tenant shall comply with all requirements of law, ordinances and otherwise, affecting the leased premises, all at the sole cost and expense of Tenant. At the time of t le expiration or sooner termination of the tenancy created herein, Tenant shall surrender the leased premises in good order, condition and repair, ordinary wear and tear excepted. (c) Tenant shall keep the leased premises and all other parts of the regional retail development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant, and agrees to bond against or discharge any such lien (including, without limitation, any construction, mechanic's or materialman's lien) within twenty (20) days after written request therefor by Landlord. Tenant shall give Landlord at least fifteen (15) days' notice (except in an emergency, or when repairs are required to be made promptly, in which event Tenant shall provide Landlord with such prior written notice as is practicable) prior to commencing or causing to be commenced any work on the leased premises the cost of which shall exceed Five Thousand and 27 00/100ths Dollars ($5,000.00) (whether prior or subsequent to the commencement of the lease term), so that Landlord shall have reasonable opportunity to file and post notices of non-responsibility for Tenant's work. In addition, prior to commencing or causing to be commenced any work on the leased premises, Tenant shall file a Notice of Commencement (or other similar instrument limiting lien rights related to Tenant's Work) as provided by applicable statutory provisions and shall deliver a copy of such Notice of Commencement (or similar instrument) to Landlord. Tenant shall reimburse Landlord for any and all costs and expenses which may be incurred by Landlord by reason of the filing of any such liens and/or the removal of same, such reimbursement to be made within fifteen (15) days after written notice from Landlord to Tenant setting forth the amount of such costs and expenses. (d) Tenant, at its own expense, shall install and maintain fire extinguishers, other fire protection devices as may be required from time to time by any agency having jurisdiction thereof. Should Landlord's insurance carrier require that Tenant's fire protection system be modified, Tenant shall commence making such modification at its sole expense within thirty (30) days after notice in writing by Landlord and complete the same within sixty (60) days after such notice from Landlord. Failure of Tenant to do so shall entitle Landlord to enter the leased premises and make such modification at the expense of Tenant. Tenant shall pay all charges billed by Landlord within fifteen (15) days after invoice. Tenant shall also be liable for any additional insurance premiums assessed to Landlord relating to the leased premises. (e) (1) Tenant agrees to operate its heating and its ventilating and air conditioning system(s) serving the leased premises during regular Shopping Center business hours so as to maintain comfort conditions. Temperatures in the leased premises shall be compatible with temperatures in the enclosed Mall. Tenant's installation of its heating and ventilating and air conditioning system shall be as set forth in Exhibit B, attached hereto and made a part hereof. Tenant shall be fully obligated for its maintenance and repair. Tenant shall not drain heat or ventilation or air conditioning from the enclosed Mall into the leased premises and Tenant shall at all times maintain adequate temperatures within the leased premises to prevent any such drainage; likewise, Tenant shall not discharge air from the leased premises into the enclosed Mall or other interior areas. Landlord shall not be obligated to Tenant for any damages or cost or expense resulting, directly or indirectly, from any failure or malfunction of any air conditioning supply system or condenser water system serving the Shopping Center or any component parts of any such system. (2) To the extent the leased premises shall be serviced by a central air conditioning or condenser water system, Tenant's obligation for connecting to, and all charges for, the central system, as well as Tenant's installation, operation and maintenance of its heating and ventilating and air conditioning portion of the system shall be as set forth in Exhibit B (and any separate exhibit relating to such central system) attached hereto and made a part hereof. Landlord shall not be obligated to Tenant for any damages or cost or expense resulting, directly or indirectly, from any failure or malfunction of the central air conditioning supply system (or central condenser water system, as applicable) or any component parts thereof. Tenants approved by Landlord for the installation of a separate heating, ventilating and air conditioning system, serving the leased premises, shall construct the same in accordance with Landlord's criteria. If Tenant shall install such a system, Tenant shall be fully obligated for its maintenance and repair. Section 10.02(e): The leased premises shall not be serviced by Landlord's ---------------- central ventilation and air conditioning supply system. (f) Tenant expressly waives all rights to make repairs at the expense of Landlord as provided for in any statute or law in effect during the term of this Lease. (g) In the event that Tenant fails, refuses or neglects to commence and complete repairs promptly and adequately, to remove any lien, to pay any cost or expense, to reimburse Landlord, or otherwise to perform any act or fulfill any obligation required of Tenant pursuant to this Section 10.02, Landlord may, but shall not be required to following ten (10) days' notice to Tenant (except in an emergency, in which event no notice shall be required), make or complete any such repairs, remove such lien (without inquiring into the validity thereof), pay such cost or perform such act or the like 28 without prior notice to, but at the sole cost and expense of, Tenant, and Tenant shall reimburse Landlord for all costs and expenses of Landlord thereby incurred within fifteen (15) days after receipt by Tenant from Landlord of a statement setting forth the amount of such costs and expenses. The failure by Tenant so to make repairs, to remove any lien, to pay any such cost or expense, or to so reimburse Landlord (in the case of reimbursement, within such fifteen-day period) shall constitute a default by Tenant under this Lease and shall carry with it the same consequences as failure to pay any installment of rent. Landlord's rights and remedies pursuant to this subsection (g) shall be in addition to any and all other rights and remedies provided under this Lease or at law. ARTICLE XI. INSURANCE AND INDEMNITY SECTION 11.01. TENANT'S INSURANCE. (a) Tenant, at its sole cost and expense, shall, at all times, commencing with the date upon which the leased premises shall be made available for Tenant's Work, procure, pay for and keep in full force and effect: (i) a commercial general liability policy (ISO form or equivalent), including insurance against assumed or contractual liability under this Lease with respect to the leased premises and the operations of Tenant and any subtenants of Tenant in, on or about the leased premises in which the limits with respect to personal liability and property damage shall be not less than Two Million Dollars ($2,000,000) per occurrence; (ii) all risk property insurance, including theft and, if applicable, boiler and machinery coverage, written at replacement cost value in an adequate amount to avoid coinsurance and a replacement cost endorsement insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all items of personal property of Tenant and including property of Tenant's customers located on or in the leased premises; (iii) workers' compensation coverage as required by law; (iv) with respect to alterations, improvements and the like required or permitted to be made by Tenant hereunder, contingent liability and builder's risk insurance, in amounts satisfactory to Landlord; (v) product liability coverage, including, without limitation (if this Lease covers leased premises in which food and/or beverages are sold and/or consumed), liquor liability coverage (if applicable to Tenant's business) and coverage for liability arising out of the consumption of food and/or alcoholic beverages on or obtained at the leased premises, of not less than Two Million Dollars ($2,000,000) per occurrence for personal injury and death and property damage; (vi) the insurance required under Exhibit B; and (vii) such insurance as may from time to time be required by city, county, state or federal laws, codes, regulations or authorities, together with such other insurance as is reasonably necessary or appropriate under the circumstances. The minimum limits of coverage as set forth in this paragraph may from time to time, at Landlord's option, be increased by not more than five percent (5%) per annum, on a cumulative basis, with such increase to occur not more often than once during each lease year during the term hereof and with no individual annual increase in coverage being greater than ten percent (10%). The deductibles under any of such insurance policies to be carried by Tenant shall not exceed Five Thousand Dollars ($5,000). (b) All policies of insurance required to be carried by Tenant pursuant to this Section 11.01 shall be written by responsible insurance companies authorized to do business in the State rated AXII or better by A.M. Best (or an equivalent rating by an equivalent rating service in the event A.M. Best shall cease to operate as a rating service) and reasonably acceptable to Landlord. Any such insurance required of Tenant hereunder may be furnished by Tenant under any blanket policy carried by it or under a separate policy therefor; provided, however, that: (1) any such blanket policy carried with respect to the insurance required under subparagraphs (i), (iv), (v), (vi) and (vii) of Section 11.01(a) shall contain a "per location" endorsement assuring that any aggregate limit under such blanket policy shall apply separately to the leased premises and that the insurer thereunder shall provide written notice to Landlord if the available portion of such aggregate is reduced to less than the minimum amounts required under Section 11.01(a) by either payment of claims or the establishment of reserves for claims (whereupon Tenant shall be obligated to take immediate steps to increase the amount of its insurance coverage in order to satisfy the minimum requirements set forth above), and (2) any such blanket policy carried with respect to the property insurance required under subparagraph (ii) of Section 11.01(a) shall contain an "agreed value" endorsement with respect to all of the items of property identified in such subparagraph. A copy of each paid- up policy evidencing such insurance (appropriately authenticated by the insurer) or a certificate of the insurer, certifying that such policy has been issued, providing the coverage required by this Section and containing provisions specified herein, shall be delivered to 29 Landlord prior to the commencement of the term of this Lease and, upon renewals, not less than thirty (30) days prior to the expiration of such coverage. Landlord may, at any time, and from time to time, inspect and/or copy any and all insurance policies required to be procured by Tenant hereunder. (c) Each policy evidencing insurance required to be carried by Tenant pursuant to this Section 11.01 shall provide coverage on an occurrence basis (and not on a "claims-made" basis) and shall contain the following provisions and/or clauses: (i) a cross-liability clause; (ii) a provision that such policy and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord, and that any coverage carried by Landlord shall be excess insurance; (iii) a provision including Landlord, the beneficial ownership entity of the Shopping Center (if any), the managing agent of the Shopping Center and any other parties in interest designated by Landlord or such beneficial ownership entity (if any), as additional insureds (except with respect to workers' compensation insurance); (iv) a waiver by the insurer of any right of subrogation against Landlord, the underlying lessor, if any, and their respective agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives; (v) a severability clause; (vi) a provision that the insurer will not cancel, materially change or fail to renew the coverage provided by such policy without first giving Landlord and the underlying lessor, if any, thirty (30) days' prior written notice; and (vii) a provision (to the extent available) that no act or omission of Landlord shall affect or limit the obligation of the insurer to pay the amount of any loss sustained. (d) In the event that Tenant fails to procure, maintain and/or pay for, at the times and for the durations specified in this Section 11.01, any insurance required by this Section, or fails to carry insurance required by law or governmental regulation, Landlord may (but without obligation to do so) at any time or from time to time, and without notice, procure such insurance and pay the premiums therefor, in which event Tenant shall repay to Landlord all sums so paid by Landlord together with interest thereon as provided elsewhere herein and any costs or expenses incurred by Landlord in connection therewith, within fifteen (15) days following Landlord's written demand to Tenant for such payment. (e) Tenant shall not carry any stock of goods or do anything in or about the leased premises which will in any way tend to increase the insurance rates on the Shopping Center, the regional retail development, the leased premises and/or the building of which they are a part and/or the contents thereof. If Tenant installs any electrical equipment that overloads the lines in the leased premises, Tenant shall at its own expense make whatever changes are necessary to comply with the requirements of the insurance underwriters and governmental authorities having jurisdiction. SECTION 11.02. LANDLORD'S INSURANCE. (a) Landlord agrees, during the term hereof, to provide, to the extent the same is available from Landlord's insurance carrier, in amounts and coverages determined by Landlord, with or without deductibles, insurance coverage against such risks as are from time to time included in a standard extended coverage endorsement, insuring the improvements to the leased premises provided by Tenant pursuant to this Lease (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and personal property of Tenant). Landlord may also carry at its option special extended coverage endorsements and other special insurance coverage (including, without limitation, earthquake coverage). Tenant shall submit to Landlord an itemized statement setting forth the cost of such improvements promptly after completion thereof and Tenant shall provide to Landlord, within thirty (30) days after the end of each lease year of the term hereof, a written appraisal of the then current replacement value of the leasehold improvements to the leased premises, which appraisal shall be certified by an independent insurance appraiser. In the event Tenant fails to provide such itemized statement or any such appraisal, Landlord shall have the right to estimate the value of said improvements, which estimate shall be binding upon Tenant. Tenant agrees to pay Landlord for the total cost of so insuring such improvements, including, without limitation, the payment of all applicable deductible amounts, such payments (other than deductible amounts) to be made in equal monthly installments on the first day of each calendar month, in advance, in an amount estimated in good faith by Landlord; provided, however, that Landlord may elect to bill Tenant for such costs on a basis less frequent than monthly. Deductible amounts shall be paid by Tenant upon notice from Landlord. Subsequent to the receipt by Landlord of an invoice for 30 such insurance premium, Landlord shall furnish Tenant with a written statement setting forth such cost. If the total amount paid by Tenant under this Section for any calendar, lease or fiscal year (at Landlord's option) shall be less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such calendar year shall exceed such actual amount due from Tenant for such calendar year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section 11.02. (b) Landlord agrees, during the term hereof, to carry rent interruption insurance, which insurance may be carried in amounts equal to Tenant's total minimum rent obligation for twelve (12) full months (or such other period as Landlord may elect) under this Lease plus the total of the estimated costs to Tenant of taxes, assessments, insurance premiums and common area maintenance costs for such twelve (12) month period (or such other period as Landlord may elect). Tenant agrees from time to time, to reimburse Landlord for the total cost of such insurance, such reimbursement to be made within twenty (20) days after receipt of a written statement from Landlord setting forth such cost. (c) Any insurance required of Landlord hereunder may be furnished by or for Landlord under any blanket policy carried by or for Landlord or under a separate policy therefor. The cost of the foregoing insurance under this Section 11.02 is a part of the cost of the property insurance which may be included in the costs and expenses set forth in Section 8.03 hereof. To the extent that the foregoing insurance costs shall be so included under Section 8.03 and Tenant shall pay its proportionate share of costs and expenses pursuant to said Section 8.03, such insurance costs shall not be separately charged to Tenant under this Section 11.02. SECTION 11.03. COVENANT TO HOLD HARMLESS. Tenant covenants to indemnify Landlord, the underlying lessor, if any, and their respective officers, directors, stockholders, beneficiaries, partners, representatives, agents and employees, and save them harmless (except for loss or damage resulting from the negligence of Landlord and not required to be insured against by Tenant pursuant to this Article XI) from and against any and all claims, actions, damages, liability, cost and expense, including reasonable attorneys' fees, in connection with all losses, including loss of life, personal injury and/or damage to property, arising from or out of any occurrence in, upon or at the leased premises or the occupancy or use by Tenant of the leased premises or any part thereof, or arising from or out of Tenant's failure to comply with any provision of this Lease or occasioned wholly or in part by any act or omission of Tenant, its concessionaires, agents, contractors, suppliers, employees, servants, customers or licensees. For the purpose of this Section 11.03, the leased premises shall include the service areas adjoining the same and the loading platform area allocated to the use of Tenant and the parking facilities servicing the Shopping Center. In case Landlord or any other party so indemnified shall, without fault, be made a party to any litigation commenced by or against Tenant, or if Landlord or any such party shall, in its sole discretion, determine that it must intervene in such litigation to protect its interest hereunder, including, without limitation, the incurring of costs, expenses, and attorneys' fees in connection with relief of Tenant ordered pursuant to the Bankruptcy Code (11 USC (S) 101 et. seq), then Tenant shall --- --- protect and hold them harmless by attorneys satisfactory to Landlord and shall pay all costs, expenses and reasonable attorneys' fees incurred or paid by such party in connection with such litigation. Landlord shall have the right to engage its own attorneys in connection with any of the provisions of this Section 11.03 or any other provision of this Lease, including, without limitation, any defense of Landlord or intervention by Landlord, notwithstanding any contrary provisions or court decisions of the State. The foregoing provisions of this Section shall survive the expiration or earlier termination of the term of this Lease. Landlord covenants to indemnify Tenant, and save it harmless (except for loss or damage resulting from the negligence of Tenant, its agents or employees) from and against any and all claims, actions, damages, liability and expense, including attorneys' fees, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence (other than any occurrence caused by Tenant, its agents or employees or arising in connection with Tenant's business operations) in the common areas of the Shopping Center. 31 ARTICLE XII. UTILITY CHARGES SECTION 12.01. UTILITY CHARGES. (a) Tenant shall be solely responsible for and shall promptly pay all necessary fees, deposits and charges, including use and/or connection fees, hook-up fees, standby fees, and/or penalties for discontinued or interrupted service, and the like, for water, gas, heat, electricity, centrally conditioned cold air supply, sewer and sanitation, solid waste disposal and any other service or utility used in or upon or furnished to the leased premises, irrespective of whether Landlord has paid for these services in advance, or otherwise. Landlord, at its sole option, may elect to furnish any or all of the above services on a "rent inclusion basis" without separate charge therefor to Tenant, by metering or otherwise, such charge to be included in the minimum rent payable hereunder, in which event the minimum rent specified in Section 2.01 shall be increased to reflect the value of such service(s) as provided in paragraph (h) below. Alternatively, Landlord, at its sole option, may provide for any or all of such services on a separate-charge basis, and in such event Tenant shall purchase such service(s) from Landlord, and within ten (10) days after Landlord bills Tenant for any such service Tenant shall pay Landlord such rates, charges and fees, upon terms and conditions as Landlord may establish; provided that, if the rates, charges or fees for any such service are regulated by a public agency, the rates, charges and/or fees to Tenant shall be computed using the rate schedules which would be applicable if Tenant were at the time a direct customer of the applicable public utility corporation without taking into account any discounts such as volume consumption or energy conservation discounts. If the cost of any such service for any month has not been made known to Landlord at the time of billing, Landlord shall have the right to estimate the amount thereof, and to base its billing to Tenant upon said estimated amount, and Landlord may 0adjust such billing when the actual amount is made known to Landlord. Landlord shall also have the right to periodically estimate the monthly amount required to be paid by Tenant to Landlord with respect to any or all of such services provided by Landlord and such estimated monthly amount or amounts shall be paid by Tenant on the first day of each calendar month, in advance, at the place and in the manner specified for payments of minimum rent hereunder. Landlord shall have the right to change such estimated amount or amounts at any time and from time to time, by notice to Tenant. If the total of the estimated monthly payments made by Tenant for any lease year or calendar year shall be less than the actual amount due from Tenant pursuant to the provisions of this Section, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due within ten (10) days after submission to Tenant of Landlord's statement and invoice therefor; and if the total of the estimated payments made by Tenant for any such year shall exceed the actual amount due from Tenant, the excess amount paid shall be credited against the next payment due from Tenant to Landlord under this Section. Landlord, at its sole option, may require Tenant to install separate, appropriate meters for measuring Tenant's consumption of water, electricity or the like, and may require Tenant to remove any or all such meters upon Landlord's discontinuing the service in question to Tenant. The failure by Tenant to pay when due any amount payable to Landlord under this Section 12.01 shall carry with it the same consequences as failure to pay any installment of rent when due. Notwithstanding the foregoing, if a separate exhibit describing applicable rates for a utility service is attached to this Lease, Tenant shall pay for such service pursuant to such exhibit. Notwithstanding the foregoing, Landlord and Tenant acknowledge that the leased premises are currently separately metered for electricity and Tenant's electrical charges shall be computed based upon such separate metering. Tenant shall be entitled to employ an electrical engineer to survey its actual consumption of electricity in the leased premises. In the event Tenant's electrical engineer does not agree with the electrical consumption component of the charge set forth by Landlord pursuant to this Section 12.01, then upon notice from Tenant's engineer in writing to Landlord, which such notice shall set forth the engineer's findings with respect to Tenant's consumption of electrical service, Landlord shall be entitled either to accept such findings and adjust its charge prospectively or within thirty (30) days thereafter to advise Tenant in writing that it disagrees with such findings. Upon receipt of such notice from Landlord, Tenant shall be entitled either to accept Landlord's conclusion or both Landlord's and Tenant's electrical engineers shall within fifteen (15) days thereafter select a third electrical engineer who shall have access to both the leased premises and the Shopping Center for purposes of computation of Tenant's consumption of electrical service. Such independent electrical 32 engineer shall render a decision within thirty (30) days after his appointment, which such decision shall be final and binding upon both Landlord and Tenant. It is understood and agreed, however, that Tenant shall be obligated to pay all charges billed by Landlord pursuant to this Section prior to and during the period of arbitration and until the independent electrical engineer's findings have been rendered in writing. It is further understood and agreed that, in the event Landlord shall furnish a check meter to compute actual usage, the results of such metering shall be final and conclusive with respect to charges billed pursuant to this Section." This paragraph shall not apply if the leased premises is located in Sunvalley. (b) In the event Landlord furnishes electricity on a rent inclusion basis as provided above, at such time as Tenant's lighting and electrical equipment has been completely installed, Landlord may, at Landlord's sole option (and to the extent permitted by applicable regulations), cause a survey of Tenant's usage of electricity to be made by an independent electrical consultant selected by Landlord. The consultant shall render a report to Landlord and Tenant showing the estimated amount of electricity which Tenant will consume, the value thereof, and the minimum rent reserved hereunder shall thereupon be increased to reflect such value. Tenant shall promptly pay to Landlord the difference between the minimum rent hereunder and the increased minimum rent as so determined for all months of the term of this Lease which have therefore elapsed, and each monthly installment of rent thereafter paid by Tenant shall be based upon such increased rent. Subject to applicable utility regulations, each party to this Lease shall thereafter have the right whenever such party believes there has been a material increase or decrease in Tenant's regular usage of electric current (that is, a change therein other than on a temporary basis) to request, by notice to the other party, a redetermination of the fair rent value of the electric service then furnished by Landlord. When any such request occurs, the redetermination shall be made as promptly as possible by an independent electrical consultant selected by Landlord, and, based upon its report, the minimum rent theretofore required to be paid hereunder shall thereafter be adjusted to reflect such new fair rent value. Any change or adjustment in such report shall be binding on both Landlord and Tenant. It is agreed that the cost of conducting the redetermination shall be borne solely by the party requesting same. Tenant agrees, on request of Landlord, to execute and deliver from time to time a supplement to this Lease, setting forth the new minimum rent, as then determined as above provided. After the making of the initial survey referred to above, Tenant shall not without prior written notice to Landlord make any alterations in or additions to the electrical equipment and/or appliances in the leased premises. Tenant shall promptly execute a separate utility letter or utility agreement if requested by Landlord or by the applicable utility company. (c) Any furnishing by Landlord of electric current to the leased premises shall be limited to the extent of the capacity of Landlord's existing feeders, switches, risers, wiring installations and other electrical system serving the leased premises (the "electric distribution system"). Tenant agrees that Tenant's use of electrical current will at no time exceed the capacity of the electric distribution system, and that Tenant will not make any alteration or addition to the electric distribution system without Landlord's prior written consent in each instance. (d) In the event that, at any time during the term of this Lease, Tenant desires to connect or install any additional electric fixtures, equipment or appliances to the electric distribution system and such fixtures, equipment or appliances require additional electric current which, in combination with Tenant's existing electrical requirements exceeds the capacity of the electric distribution system, then, provided that Landlord shall have consented in writing to such connections or installations, Landlord, upon the written request of Tenant and at the sole cost and expense of Tenant, will install any additional riser or risers (and all other equipment necessary and proper in connection therewith) to supply Tenant's electric requirements, but only if such riser or risers (and such other equipment) are necessary to supply Tenant with the electric current required by it and will not cause permanent damage or injury to the leased premises or the regional retail development of which the leased premises form a part or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations, repairs, expense or interference with or disturbance of other tenants or occupants of the regional retail development. Notwithstanding any provisions contained in this Section 12.01, Landlord shall not be obligated to provide any new 33 utility services or increased utility capacities to the leased premises to the extent that the leased premises shall have been previously occupied by another tenant, and, if the leased premises have not been previously occupied, Landlord shall not be obligated to provide any utility services or utility capacities other than as specifically set forth in Exhibit B. Tenant shall promptly advise Landlord of any increase in Tenant's connected load to the electric distribution system. Any additional utility services or any increase in utility capacities beyond that in existence if the leased premises shall have been previously occupied (or beyond the specifications set forth in Exhibit B if the leased premises have not been previously occupied) shall be subject to the prior written approval of Landlord, and such additional services or capacities shall be provided at the sole cost and expense of Tenant. (e) Tenant agrees further to provide and install, at Tenant's sole cost and expense, all lamps, tubes, bulbs, stainers, ballasts, transformers and the like items used or required in the leased premises. (f) At any time during the term hereof, Landlord may, upon the thirty (30) days' prior written notice to Tenant, discontinue furnishing electric current (or such other utility being furnished by Landlord) to the leased premises without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant, except that the minimum rent reserved herein shall be reduced by the amount then being paid by Tenant on account of Landlord's service of electricity (or such other utility) to the leased premises, determined as provided above (as the same may have been adjusted from time to time pursuant to other provisions of this Article), and Landlord shall no longer be obligated to furnish electric current (or such other utility) to the leased premises. If Landlord shall give Tenant notice of intention to cease furnishing electric current (or other utility) to the leased premises, Tenant may contract for and receive such electric current (or such other utility) directly from the public utility corporation then serving the Shopping Center, and if Tenant does so, Landlord shall permit Tenant, at Tenant's sole cost, to use Landlord's risers, wiring and electric installations (or other utility conduits, as applicable) then serving the leased premises for such purpose to the extent that the same are available, suitable and may be safely so used consistent with concurrent and anticipated future use by Landlord and other tenants. (g) If at any time after the date hereof, the electrical energy rates (or other utility; step) as filed by the public utility corporation then serving the Shopping Center shall be reduced or increased, or any tax shall be imposed thereon (or subsequently increased or decreased), then the minimum rent reserved herein shall be equitably adjusted as of the first day of the month next following the effective date of such rate change to reflect the resulting reduction or increase in the value of Landlord's service of providing Tenant with electric current (or other utility service) on a rent inclusion basis, but in no event shall the minimum rent be reduced below the amount stated in Article 11 hereof. (h) Notwithstanding any other provisions of this Lease, the value of, or (as applicable) the rate for, each utility furnished by Landlord, which utility shall be subject to regulation by a public agency, shall be computed for the purposes of this Lease in accordance with the rate schedules which would be applicable if Tenant were at the time a direct customer of the applicable public utility company serving the Shopping Center without taking into account any discounts such as volume consumption or energy conservation discounts (subject to any separate rate schedules for utility services as may be included in the exhibits to this Lease). The value of, or (as applicable) the rate for, any nonregulated utility service provided by Landlord shall be computed at the prevailing rates which would be paid by Tenant for direct comparable service from contractors in the local area, except to the extent that specific rates are otherwise set forth in this Lease. The public utility corporation referred to in this Section 12.01 shall be the utility company named in Exhibit C attached hereto (if any), or the successor to such company or such other company designated by Landlord. (i) Landlord shall not be liable to Tenant for any loss, damage or expense which Tenant may sustain if the quality or character of utilities used upon or furnished to the leased premises are no longer available or suitable for Tenant's requirements, or if said utilities are interrupted as a 34 result of actions by the public utility companies or any other cause and no such change, interruption, or cessation of service shall constitute an eviction of Tenant. In the event the supply of electricity to the leased premises is continuously interrupted for a period of over seventy-two (72) hours and such interruption in service is caused solely by the negligence of Landlord and, in fact forces Tenant to cease operations within the leased premises, then, from and after such seventy-two (72) hour period, and as Tenant's sole remedy, Tenant shall be entitled to an abatement of minimum rent due under this Lease until the date upon which electrical service to the leased premises is restored. (j) Any obligation of Landlord to furnish light, heat, conditioned air, or power or any utility service shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heat, lighting, air conditioning or other utility services within the regional retail development, including without limitation, the leased premises and the common areas, as required by any mandatory or voluntary fuel or energy saving allocation, or any similar statute, regulation, order or program without such action diminishing Tenant's obligations hereunder. ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION SECTION 13.01 ESTOPPEL STATEMENT. Tenant shall, without charge, at any time and from time to time, within ten (10) business days after receipt by Tenant of written request therefor from Landlord or from any mortgagee under any mortgage or any beneficiary under any deed of trust on the real property on which the building containing the leased premises is located or of which the leased premises are a part, deliver, in recordable form, a duly executed and acknowledged certificate or statement to the party requesting said certificate or statement or to any other person, firm or corporation designated by Landlord, certifying: (a) that this Lease is unmodified and in full force and effect, or, if there has been any modification, that the same is in full force and effect as modified, and stating any such modification; (b) the date of commencement of the term of this Lease; (c) that rent is paid currently without any off-set or defense thereto; (d) the dates to which the rent and other charges payable hereunder by Tenant have been paid, and the amount of rent and other charges, if any, paid in advance; (e) whether or not there is then existing any claim of Landlord's default hereunder and, if so, specifying the nature thereof; and (f) any other matters relating to the status of such Lease as shall be requested by Landlord or any such mortgagee or beneficiary from time to time; provided that, in fact, such facts are accurate and ascertainable. Any such certificate or statement by Tenant may, at the election of the requesting party, include Tenant's undertaking not to pay rents or other charges for more than a specified period in advance of the due dates therefor set forth herein. Landlord agrees that Landlord will execute a similar estoppel certificate upon Tenant's request (but in no event on more than one [1] occasion during any twelve [12] month period). SECTION 13.02. ATTORNMENT. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure of, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Landlord covering the leased premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the leased premises, this Lease shall remain in full force and effect and Tenant hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as the Landlord under this Lease. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the leased premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the leased premises. SECTION 13.03. SUBORDINATION. Tenant agrees that this Lease shall, at the request of Landlord, be subordinate to any underlying lease and to any mortgages or deeds of trust that are now, or may hereafter be, placed upon the leased premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof, 35 provided that the lessor under any such underlying lease or the mortgagees or beneficiaries named in said mortgages or trust deeds shall agree to recognize the interest of Tenant under this Lease in the event of foreclosure, if Tenant is not then in default beyond applicable notice and cure periods. Tenant also agrees that any underlying lessor or mortgagee or beneficiary may elect to have this Lease constitute a prior lien to its underlying lease or mortgage or deed of trust, and in the event of such election and upon notification by such underlying lessor or such mortgagee or beneficiary to Tenant to that effect, this Lease shall be deemed prior in lien to such underlying lease or mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said underlying lease or mortgage or deed of trust. Tenant agrees that upon the request of Landlord, or any mortgagee or beneficiary, Tenant shall execute whatever instruments may be required by Landlord or by any mortgagee or beneficiary to carry out the intent of this Section. SECTION 13.04. REMEDIES. Failure of Tenant to execute any statements or instruments necessary or desirable to effectuate the foregoing provisions of this Article, within ten (10) business days after written request so to do by Landlord, shall constitute a breach of this Lease. In the event that Tenant shall fail to execute said statements or instruments within five (5) business days after Tenant's receipt of a second notice from Landlord stating that Tenant has failed to execute such statements or instruments, Tenant shall pay to Landlord Five Hundred and 00/l00ths Dollars ($500.00) in order to partially compensate Landlord for the administrative costs and other damages arising from Tenant's failure. Such per diem amount shall be immediately due and payable as additional rent under this Lease. ARTICLE XIV. ASSIGNMENT AND SUBLETTING SECTION 14.01. NO ASSIGNMENT OR SUBLETTING. Notwithstanding any provision herein to the contrary or reference herein to concessionaires or subtenants or otherwise, Tenant agrees not to assign or in any manner transfer this Lease or any estate or interest therein, and not to lease or sublet the leased premises or any part or parts thereof or any right or privilege appurtenant thereto, and not to allow anyone to conduct business at, upon or front the leased premises (whether as concessionaire, franchisee, licensee, permitted subtenant, department operator or otherwise), or to come in, by, through or under it, in all cases either by voluntary or involuntary act of Tenant or by operation of law or otherwise. Without limiting any of the other provisions contained in this Section 14.01, the restrictions of this Section shall apply to any merger, consolidation or other reorganization of Tenant or of Tenant's Guarantor or of any corporate entity which directly or indirectly controls Tenant, and any such merger, consolidation or other reorganization shall be deemed to be an assignment of this Lease within the meaning of this Section 14.01. The sale, issuance or transfer of any voting capital stock of Tenant or Tenant's Guarantor or any voting capital stock of any corporate entity which directly or indirectly controls Tenant (if any one of such entities, Tenant or Tenant's Guarantor or any such controlling corporate entity, is a corporation the stock of which is not traded on the New York Stock Exchange, the NASDAQ over the counter markets, or the American Stock Exchange or any successor market thereto), or any interests in any noncorporate entity which directly or indirectly controls Tenant or Tenant's Guarantor which results in a change in the direct or indirect voting control (or a change in the identity of any person, persons, entity or entities with the power to vote or control at least fifty percent (50%) of the voting shares of any class of stock) of Tenant, or Tenant's Guarantor, or any corporate or noncorporate entity which directly or indirectly controls Tenant or Tenant's Guarantor shall be deemed to be an assignment of this Lease within the meaning of this Section 14.01. If Tenant is a partnership, trust or an unincorporated association, then the sale, issuance or transfer of a controlling interest therein, or the transfer of a majority interest in or a change in the rioting control of any partnership, trust, unincorporated association, or corporation which directly or indirectly controls Tenant, or the transfer of any portion of any general partnership or managing interest in Tenant or in any such entity, or any change or conversion of Tenant or of any such entity to a limited liability company, a limited liability partnership, or any other entity which possesses the characteristics of limited liability, shall be deemed to be a prohibited assignment of this Lease within the meaning of this Section 14.01. Any such prohibited act by Tenant or Tenant's Guarantor (or any attempt at same), either voluntarily or involuntarily or by operation of law or otherwise, 36 shall, at Landlord's option, terminate this Lease without relieving Tenant of any of its obligations hereunder for the balance of the stated term, and any such act shall be null and void. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, or the termination thereof by Landlord pursuant to any provision contained herein, shall not work a merger and shall, at the option of Landlord, terminate all or any existing franchises, concessions, licenses, permits, subleases, subtenancies, departmental operating arrangements or the like, or may, at the option of Landlord, operate as an assignment to Landlord of the same. Nothing contained elsewhere in this Lease shall authorize Tenant to enter into any franchise, concession, license, permit, subtenancy, departmental operating arrangement or the like, except pursuant to the provisions of this Section. Landlord has entered into this Lease with Tenant in order to obtain for the benefit of the entire regional retail development the unique attraction of Tenant's trade name set forth in Section 16.01 and the unique merchandising mix and product line associated with Tenant's business as described in Section 7.01, and Landlord has specifically relied on the identity and special skill of the Tenant in its ability to conduct the specific business identified in Section 7.01, and the foregoing prohibition on assignment or subletting or the like is expressly agreed to by Tenant as an inducement to Landlord to lease to Tenant. Tenant hereby acknowledges that the foregoing provisions of this Section 14.01 constitute a freely negotiated restraint on alienation. Without limiting any of the foregoing provisions, neither Tenant nor any other person having an interest in the possession, use, occupancy or utilization of the leased premises shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the leased premises which provides for rent or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales), and any such purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the leased premises. Notwithstanding the foregoing, Tenant shall have the right to assign this Lease to any entity which controls, is controlled by or is under common control with Tenant, or to an entity with which Tenant merges or is consolidated, or to an entity to which substantially all of the assets of Tenant are sold, provided that (i) the assignee or successor entity shall continue to own and operate the entire chain of restaurants operated under the trade name herein set forth, and (ii) Robert Giaimo and his wife collectively (a) continues to beneficially own at least twenty percent (20%) of the voting stock or general partnership interests in the assignee or successor entity, (b) is and continues to be the chief operating officer of such assignee or successor entity and (c) remains actively engaged in the operation of the assignee's or successor entity's business and at such time intends to continue future performance in such capacity, and (iii) the assignee or successor entity shall agree in writing for the benefit of Landlord to be bound by and to perform all of the terms and conditions of this Lease, and (iv) Tenant shall remain primarily liable, not merely as a surety, for the performance of all of the terms and conditions of this Lease. The sale, issuance or transfer of stock or partnership interests in Tenant, whether in one transaction or a series of transactions, which results in a change in control of Tenant shall not be deemed an assignment of the Lease if following such transaction Robert Giaimo and his wife collectively (i) continues to beneficially own at least twenty percent (20%) of the voting stock or general partnership interests in Tenant, (ii) is and continues to be the chief executive officer of Tenant and (iii) remains actively engaged in the operation of Tenant's business and at such time intends to continue future performance in such capacity. A transfer of stock or partnership interests in Tenant by (i) bequest, (ii) inheritance, or (iii) sale or assignment in the event of the total permanent disability of Robert Giaimo shall not constitute an assignment of this Lease, provided that such bequest, inheritance, sale or assignment of stock or partnership interests is to the immediate family of Robert Giaimo (i.e., his spouse, parents, brothers, sisters, children, or grandchildren, or their spouses) or Tenant's officers, directors, shareholders or partners, and, provided further, that the resulting managing officers, directors, shareholders or partners, or in the case of a minor, the trustee, shall have proven expertise in the operation of restaurant chains of similar size and nature. 37 In the event that the sale, issuance or transfer of stock or partnership interests in Tenant will result in a change in control of Tenant and Robert Giaimo shall not, following such sale, issuance or transfer of stock or partnership interests, continue to (i) own at least twenty percent (20%) of the voting stock or general partnership interests in Tenant and (ii) be the chief executive officer of Tenant and (iii) be actively engaged in the operation of Tenant's business and at such time intend to continue future performance in such capacity, or in the event that Tenant desires to assign or transfer this Lease other than as expressly permitted above, then Landlord shall not withhold its consent thereto provided that the following prior conditions are met: (a) a majority of the Silver Diner restaurants (but in no event less than six (6) restaurants) in the Baltimore-Washington D.C. metropolitan areas shall be assigned or transferred to the same assignee as part of the same transaction, or in the event of a change of control of Tenant, all such restaurants shall continue to be owned by Tenant; (b) On the date following the date of the transfer, the assignee shall have a net worth equal to or greater than the greater of (i) Eighteen Million and 00/100ths Dollars ($18,000,000.00) or (ii) Tenant's net worth on the date of this Lease; (c) Tenant's unexercised options to extend the term of this Lease, as set forth in Section 1.02 hereof, shall be null and void and of no further force and effect; (d) the assignee or successor entity shall agree in writing for the benefit of Landlord to be bound by and to perform all of the terms and conditions of this Lease; and (e) Tenant shall remain primarily liable, not merely as a surety, for the performance of all of the terms and conditions of this Lease. ARTICLE XV. WASTE SECTION 15.01. WASTE OR NUISANCE. Tenant shall not commit or suffer to be committed any waste upon the leased premises and shall not place a load upon any floor of the leased premises which exceeds the floor load per square foot which such floor was designed to carry. Tenant shall not commit or suffer to be committed any nuisance or other act or thing which may disturb the quiet enjoyment of any other occupant or tenant of the regional retail development. Tenant agrees that business machines and mechanical equipment used by Tenant which cause vibration or noise that may be transmitted to the building or buildings comprising the regional retail development or to the leased premises, to such a degree as to be reasonably objectionable to Landlord or to any occupant, shall be placed and maintained by Tenant at its expense in settings of cork, rubber or spring-type vibrato: isolators sufficient to eliminate such vibrations or noise. Tenant shall take such action as Landlord reasonably deems necessary to prevent or terminate any such nuisance or waste arising out of Tenant's business, including, without limitation, any nuisance created by employees, agents, contractors, invitees or licensees of Tenant. ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE SECTION 16.01. TRADE NAME. Tenant agrees (a) to operate its business in the leased premises under the name specifically set forth in the attached Data Sheet; (b) not to change the advertised name or character of the business operated in the leased premises; and (c) to refer to the Shopping Center by the name set forth in Section 1.01 for the regional retail development in designating the location of the leased premises in all advertising and in all other references to the location of the leased premises. Landlord shall have the right to include Tenant's trade name in any public relations, promotional or advertising materials or information. By its execution of this Lease, Tenant authorizes Landlord to utilize Tenant's trade name in the foregoing manner. Notwithstanding the foregoing, Tenant shall be entitled to change the name of its restaurant in the leased premises to the same trade name as Tenant is operating all of its other restaurants, including, 38 in any event, at least five (5) such restaurants. Tenant shall also be permitted to change the trade name under which the leased premises is operated following a permitted assignment under Section 14.01, provided that a majority of the other restaurants in the Washington, D.C.-Baltimore metropolitan areas which were formerly operated under the 'Silver Diner' trade name are changed to the same new trade name, and, provided that the trade name of at least six (6) other restaurants is being changed to such trade name. Section 16.01: Trade Name: "THE SILVER DINER" SECTION 16.02. SOLICITATION OF BUSINESS. Tenant and Tenant's employees and/or agents shall not solicit business in the parking areas or other common areas, or any part of the regional retail development other than in the leased premises, nor shall Tenant distribute any handbills or other advertising matter in the parking area, other common areas, or any part of the regional retail development other than in the leased premises. Tenant shall not give samples or approach customers outside the leased premises for purposes of soliciting sales. Moreover, and generally, Tenant shall not give away any promotional items which could create a nuisance or require Landlord to incur additional common area expenses. SECTION 16.03. PROMOTIONAL CHARGE. (a) Landlord shall provide or cause to be provided a program of advertising or promotional events which, in Landlord's sole judgment, will serve to promote the regional retail development. Landlord shall be compensated, out of promotional charges collected by Landlord during each year for promotional services provided, in an amount equal to twenty-five percent (25%) of the promotional charges so collected, on a non-cumulative basis. Landlord shall not be obligated to expend more than is actually collected. Any promotional services and personnel so provided shall be under the exclusive control and supervision of Landlord, who shall have the sole authority to employ and discharge personnel and to establish a budget. Tenant agrees to pay to Landlord, as Tenant's share of the cost of said advertising and promotional program, an annual promotional charge which originally shall equal the amount as shown in the Data Sheet for this Lease, which annual promotional charge shall, at Landlord's option, be payable by Tenant in equal monthly installments at the time and in the manner set forth for rent payments in this Lease. However, such annual promotional charge payable by Tenant will be adjusted commencing January 1st immediately succeeding the commencement date of the term of this Lease and annually thereafter, by a percentage equal to the percentage increase from the base period of the Index (as defined in Section 27.20) to the respective January 1st or the closest month thereto that the Index is published (but in no event shall Tenant pay less than the original promotional charge as specified above). The term "base period" shall refer to the month of adjustment in such annual promotional charge closest to and prior to the date of commencement of the term of this Lease (i.e., the most recent month prior to the commencement date during which such promotional charge has been adjusted), or the date of the opening of the Shopping Center, whichever of such dates shall be the later to occur. In addition to this cost of living adjustment, such annual promotional charge may be increased from time to time by Landlord to the extent required by increases in the costs of promotional, public relations or advertising services provided pursuant to this Section (including, without limitation, changes in costs arising from variations in the type, nature or extent of such services). Tenant also agrees to pay to Landlord, within ten (10) days after demand therefor, an initial promotional charge in the amount set forth in the Data Sheet in addition to the foregoing promotional charges. The various promotional charges set forth in this Section 16.03 and in the Data Sheet shall be increased as of the commencement date of the Lease to reflect the then current 0charges per square foot for Shopping Center tenants. (b) Landlord reserves the right at any time to cease providing promotional services and to cause a Merchants' Association to be formed. Upon the formation of the Association, Landlord will turn over to the Association any funds in its possession, collected from tenants as promotional charges, not spent or required to discharge indebtedness, and less Landlord's compensation due under Section 16.03(a). Thereupon, Landlord shall be relieved of any and all liability to Tenant in connection with such advertising and promotional services. Upon formation of the Association, Tenant shall become a member thereof and will maintain membership in good standing and will 39 abide by the regulations and cooperate in the activities of such Association throughout the term of this Lease and any extensions or renewals thereof. The purpose of the Merchants' Association shall be to encourage its members to deal fairly and courteously with their customers, to follow ethical business practices, and to assist the business of its members by sales promotions and centerwide advertising. If Landlord shall elect to provide promotional services and personnel to formulate and effect an advertising, promotional and public relations program for the Shopping Center, Landlord shall be reimbursed by the Merchants' Association for Landlord's cost of providing such promotional services and personnel, in an amount equal to twenty-five percent (25%) of the annual dues payable to the Merchants' Association. Any promotional services and personnel so provided shall be under the exclusive control and supervision of Landlord, who shall have the sole authority to employ and discharge such personnel. The provisions of this Section 16.03 shall be deemed to be covenants for the benefit of Landlord and said Association as and when formed, and may be enforced by either of them as binding obligations of Tenant. Tenant's obligation for payment of dues to the Association shall be the same sum per month as Tenant was obligated to pay for promotional service prior to the formation of the Association, subject, however, to annual adjustments approved by the Board of Directors of the Association increasing said dues to the extent required by increases in the costs of promotional, public relations and advertising services (including, without limitation, changes in costs arising from variations in the type, nature or extent of such services). In addition, the cost of living adjustment referred to in Section 16.03(a) above with respect to Tenant's monthly payment to Landlord for promotion services shall also apply in the same manner to the Merchants' Association dues. In the event that such a Merchants' Association shall be in operation as of the date of this Lease, the parties hereby acknowledge the present application of this Section 16.03(b). Sections 16.03 (a) & (b): In lieu of payment of the charge imported by ------------------------ these Sections, Tenant may elect to advertise the restaurant located in the leased premises in Washington/Baltimore SMSA media (including, without limitation, direct distribution advertising) using the name Lakeforest to designate the location of such restaurant provided Tenant shall expend at least Seventeen Thousand One Hundred Eighty-Two Dollars ($17,182.00) per lease year on such advertising. If Tenant fails to provide to Landlord, within thirty (30) days following the expiration of each lease year, copies of Tenant's books and records showing such Seventeen Thousand One Hundred Eighty-Two Dollars ($17,182.00) expenditure for the lease year in question; then Tenant shall be obligated to pay to Landlord an amount equal to the charges which Tenant would have otherwise been obligated to pay to Landlord for such lease year under Sections 16.03 (a) & (b). (c) Landlord reserves the right, at any time, to dissolve any Merchants' Association which may exist and to provide, or cause to be provided, a program of advertising and promotional events which, in Landlord's sole judgment, will serve to promote the regional retail development. In the event any such program is so established, it shall be governed by the provisions of Section 16.03(a) hereof. (d) All recurring payments, charges, dues and assessments (other than the initial assessment) payable under this Section 16.03 shall be due in monthly installments on the first day of each month during the term of this Lease, and all such items, and the initial assessment, shall be paid without deduction or offset. Failure by Tenant to pay all amounts when due shall carry with it the same consequences under Article XIX hereof as Tenant's failure to pay rent. (11) Section 16.03: Original Annual Promotional Charge: N/A ARTICLE XVII. DESTRUCTION OF LEASED PREMISES SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES. In the event the leased premises shall be partially or totally destroyed by fire or other casualty insured under the insurance carried by Landlord pursuant to Section 11.02 of this Lease so as to become partially or totally untenantable, then the damage to the leased premises shall be promptly repaired (unless Landlord shall elect not to rebuild as hereinafter provided), and the minimum rent and (to the extent 40 covered by the insurance carried by Landlord under Section 11.02(b)) other charges payable by Tenant to Landlord shall be abated in proportion to the floor area of the leased premises rendered untenantable, and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced. Payment of full rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business on the thirtieth (30th) day following the date that Landlord advises Tenant that the premises are tenantable, unless Tenant opens at an earlier time in the damaged area or remains open in such area following destruction or damage, in which event there shall be no abatement or any such abatement shall terminate as of the date of Tenant's earlier reopening. If Landlord shall elect to cause Tenant to make the necessary repairs to the leased premises, as provided below, payment of full rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business on the one hundred twentieth (120th) day following the date that Landlord advises Tenant of Landlord's election for Tenant to perform such work. Landlord shall be obligated to cause such repairs to be made unless Landlord, at its sole option, elects to cause Tenant to make such repairs, in which event Tenant shall promptly complete the same and Landlord will make available to Tenant for the sole purpose of reconstruction of Tenant's improvements such portion of any insurance proceeds received by Landlord from its insurance carrier, under a policy carried pursuant to Section 11.02 of this Lease, allocated to the leased premises by Landlord. In the event of any such reconstruction by Tenant, an architect duly registered in the State shall be selected by Landlord and shall direct the payment of such insurance proceeds. Such insurance proceeds shall be payable to Tenant only upon receipt by Landlord of certificates of said architect stating that the payments specified therein are properly payable for the purpose of reimbursing Tenant for expenditures actually made by Tenant in connection with such work. At the election of Landlord or Landlord's mortgagee, direct payments may be made to material suppliers and laborers upon written certification by said architect that such payments are due and payable. Any such insurance proceeds in excess of Tenant's actual expenditures in restoring the damage or destruction shall belong to Landlord. In making repairs, restoration or reconstruction, Tenant, at its expense, (subject to application of any insurance proceeds allocable to the leased premises, as determined hereunder) shall comply with all laws, ordinances, and governmental rules or regulations, and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of such insurance proceeds received by Landlord and made available to Tenant shall be the sole obligation of Tenant. In the event of reconstruction or repair by Landlord, any amount expended by Landlord in repairing the leased premises in excess of the proceeds of insurance received by Landlord pursuant to Section 11.02 of this Lease allocated to the leased premises shall be repayable by Tenant to Landlord within ten (10) days after receipt by Tenant from Landlord of a statement setting forth the amount of such excess. The party required hereunder to repair the damage to the leased premises shall reconstruct such leased premises in accordance with the working drawings originally approved by Landlord or with (at Landlord's sole election) new drawings prepared by Tenant and acceptable to Landlord and Tenant. In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, furnishings or equipment. If (i) more than thirty-five percent (35%) of the floor area of the building in which the leased premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (ii) during the last two (2) years of the initial term hereof or the last three (3) years of any renewal term hereof more than twenty-five percent (25%) of the floor area of the leased premises or of the building in which the leased premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (iii) all or any part of the Shopping Center or said building or the leased premises are damaged or destroyed at any time by the occurrence of any risk not insured under the insurance carried by Landlord pursuant to Sections 8.03 or 11.02(a), then Landlord, at its sole option, may terminate this Lease by giving written notice to Tenant of Landlord's election so to terminate, such notice to be given within ninety (90) days after the occurrence of such damage or destruction. If Landlord repairs or rebuilds, or requires Tenant to repair or rebuild the leased premises as herein provided, Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to the damage or destruction thereof. 41 SECTION 17.02. WAIVER OF SUBROGATION. Each party hereto does hereby waive, remise, release and discharge the other party hereto and any officer, director, shareholder, beneficiary, partner, agent, employee or representative of such other party, of and from any liability whatsoever hereafter arising from loss, damage or injury caused by fire or other casualty to the extent of any recovery by the injured party under such insurance which is covered by fire, extended coverage 'all-risk' or similar policies maintained by such party or required to be maintained by such party under this Lease (or is within the deductible limitations of such insurance). Both parties agree to procure a waiver of rights of subrogation against each other on the part of their insurance carriers in connection with insurance policies covering losses arising out of destruction or damage to the leased premises, or the contents thereof, or to other portions of the Shopping Center." ARTICLE XVIII. EMINENT DOMAIN SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES. If the whole of the leased premises shall be taken by any public authority under the power of eminent domain or sold to public authority under threat or in lieu of such a taking, then the term of this Lease shall cease as of the day possession shall be taken by such public authority, and the rent shall be paid up to that day with a proportionate refund by Landlord of such rent and other charges as may have been paid in advance for a period subsequent to the date of the taking. SECTION 18.02. PARTIAL CONDEMNATION. (a)(i) If less than the whole but more than five percent (5%) of the leased premises or more than fifty percent (50%) of the common areas shall be so taken under eminent domain, or sold to public authority under threat or in lieu of such a taking, Tenant shall have the right either to terminate this Lease and declare the same null and void as of the day possession is taken by public authority, or, subject to Landlord's right of termination as set forth in Section 18.02(b) of this Article, to continue in the possession of the remainder of the leased premises, upon notifying Landlord in writing within twenty (20) days after such taking of Tenant's intention. In the event Tenant elects to remain in possession, all of the terms herein provided shall continue in effect, except that, as of the day possession of such percentage of the leased premises is taken by public authority, the minimum rent and other charges payable by Tenant to Landlord (to the extent that such charges are based upon the square foot area of the leased premises) shall be reduced in proportion to the floor area of the leased premises taken and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced; thereafter, Landlord shall, at its own cost and expense, make all necessary repairs or alterations to the basic building, so as to constitute the remaining leased premises a complete architectural unit, and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's improvements, trade fixtures, furnishings and equipment. (ii) If five percent (5%) or less of the leased premises shall be so taken, the lease term shall cease only on the part so taken, as of the day possession shall be taken by such public authority, and Tenant shall pay rent and other charges up to that day, with appropriate credit by Landlord (toward the next installment of such rent or charges due from Tenant) of such rent or charges as may have been paid in advance for a period subsequent to the date of the taking; thereafter, the minimum rent and other charges payable to Landlord (to the extent that such charges are based upon the square foot area of the leased premises) shall be reduced in proportion to the amount of the leased premises taken and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced. Landlord shall, at its expense, make all necessary repairs or alterations to the basic building, so as to constitute the remaining leased premises a complete architectural unit, and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's improvements, trade fixtures, furnishings and equipment. (b) If more than fifty percent (50%) of the building in which the leased premises are located, or more than fifty percent (50%) of the leased premises, or more than fifty percent (50%) of the Shopping Center or of the common areas, shall be taken under power of eminent domain, or sold to public authority under the threat or in lieu of such a taking, Landlord may, by written notice to Tenant delivered on or before the tenth (both) day following the date of surrendering possession 42 to the public authority, terminate this Lease as of the day possession is taken by public authority. The rent and other charges shall be paid up to the day possession is taken by public authority, with an appropriate refund by Landlord of such rent as may have been paid in advance for a period subsequent to that date. SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES. All damages awarded for such taking under the power of eminent domain or sale under threat or in lieu of such a taking, whether for the whole or a part of the leased premises, shall belong to and be the property of Landlord, irrespective of whether such damages shall be awarded as compensation for diminution in value to the leasehold or to the fee of the leased premises, and Tenant shall have no claim against either Landlord or the condemning authority with respect thereto; provided, however, that Landlord shall not be entitled to any award specifically designated as compensation for, depreciation to, and cost of removal of, Tenant's stock and trade fixtures. ARTICLE XIX. DEFAULT SECTION 19.01. RIGHT TO RE-ENTER. (a) In the event of (1) any failure of Tenant to pay any rent or other charges due hereunder within five (5) business days following notice from Landlord that the same is past due, or (2) if Tenant shall fail to move into the premises and to commence the conduct of its business on the date specified in Section 1.02 hereof (provided that if Tenant shall have paid all rent, and shall also have paid the liquidated damages amounts payable under Section 1.03 of this Lease as a result of Tenant's failure to initially open for business in the leased premises on the commencement date of the term of this Lease, then such failure to commence operations shall not be a default permitting Landlord to exercise the rights under this Article XIX until the expiration of ninety (90) days following the commencement date of the term of this Lease), or fail to continuously operate its business pursuant to Section 7.02 for the purpose specified in Section 7.01 hereof, or fail to operate under the name specified in Section 16.01 hereof, or if Tenant shall abandon said premises, or permit this Lease to be taken under any writ of execution, or if Tenant shall wrongfully offset against rents any amounts purported to be due by Landlord to Tenant, or if there shall be any default by Tenant (or by any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with Tenant) under any other lease with Landlord (or with any person or entity which is affiliated with Landlord or which, directly or indirectly, controls, is controlled by, or is under common control with Landlord, or which is managed by the managing agent utilized by Landlord for the Shopping Center) which shall not be remedied within the applicable grace period, if any, provided therefor under such other lease, or if there shall be any default by Tenant or any entity affiliated with Tenant with respect to any financing instrument or arrangement, if any, relating to any items used in, or the operation of business upon, the leased premises, or (3) any failure to perform any other of the terms, conditions or covenants of this Lease to be observed or performed by Tenant for more than thirty (30) days after written notice of such default shall have been received or refused by Tenant (provided, however, such period shall be extended for an additional, reasonable period if Tenant has diligently commenced the curing of such default and is diligently pursuing the same to completion, but in no event shall either the thirty (30) day period or any extension thereof apply to Tenant's covenant to operate pursuant to Section 7.02 of this Lease, unless the same is excused pursuant to Section 17.01 or Article XVIII of this Lease); then Landlord, besides other rights or remedies it may have, shall have the right to declare this Lease terminated and the term ended (in which event, this Lease and the term hereof shall expire, cease and terminate with the same force and effect as though the date set forth in any required notice were the date originally set forth herein and fixed for the expiration of the term and Tenant shall vacate and surrender the premises but shall remain liable for all obligations arising during the balance of the original stated term as hereafter provided as if this Lease had remained in full force and effect) and Landlord shall have the right to bring a special proceeding to recover possession from Tenant holding over and/or Landlord may, in any of such events, without notice, re-enter the leased premises either by force or otherwise, and dispossess, by summary proceedings or otherwise, Tenant and the legal representative of Tenant or other occupant of the leased premises and remove their effects and hold the premises as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal 43 proceedings to that end. Notwithstanding the foregoing, if Tenant has closed its business for repairs or alterations, and landlord believes that such closure violates the continuous operation provisions of Section 7.02, then Landlord shall not have the right to terminate this Lease or exercise its re-entry rights unless Landlord shall first provide at least twenty-four (24) hours written notice to Tenant of such violation and opportunity for Tenant to cure during such 24-hour period." (b) In addition to the remedies set forth herein for such failure by Tenant, Landlord shall have the further remedy of erecting a barricade at the storefront of the leased premises at such time as possession of the leased premises is deemed vested in Landlord, which barricade may be erected, at Tenant's expense, and without notice to Tenant or resort to legal process, and without Landlord in any manner becoming liable for an; loss or damage which may be occasioned thereby. Notwithstanding the foregoing provisions of this Section, in the event Tenant shall fail to perform or shall default in the performance of any term, covenant or condition of this Lease on three (3) or more separate occasions during any twelve-month period, then, even though such failures or defaults may have been cured by Tenant, any further failure or default by Tenant during the following twelve (12) month period shall be deemed a default without the ability for cure by Tenant. During the continuance of any failure of performance or any default by Tenant in the performance of any term, covenant or condition of this Lease, Tenant shall not be entitled to exercise any rights or options, or to receive any funds or proceeds being held under or pursuant to this Lease, notwithstanding any contrary provisions contained herein. In the event of re-entry by Landlord, Landlord may remove all persons and property from the leased premises and such property may be stored in a public warehouse or elsewhere at the cost of, and for the account of Tenant, without notice or resort to legal process and without Landlord being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby. In addition, and to the extent permitted by law, in the event of re-entry by Landlord, Landlord may, but shall not be required to, padlock or otherwise secure the entrances to the leased premises without prior notice or resort to legal process and without being deemed guilty of trespass or becoming liable for any loss or damage; all costs and expenses incurred by Landlord in securing the entrances to the leased premises shall be borne by Tenant and shall be payable to Landlord on ten (10) days' written notice; and any such padlocking or securing of the premises shall not constitute or be deemed as an election on Landlord's part to terminate this Lease unless a written notice of such intention shall be given to Tenant or unless the termination of this Lease is decreed by a court of competent jurisdiction. In the event Tenant shall not remove its property from the leased premises within ten (10) days after Tenant has vacated the premises, then such property shall be deemed abandoned by Tenant and Landlord may dispose of the same without liability to Tenant. To the extent that this Lease specifically provides for any abatement of rent otherwise payable by Tenant under this Lease, or any payment by Landlord to Tenant, such abatement shall not be effective, nor shall such payment be required to be made, if Tenant shall be in default hereunder, and in the event Landlord shall elect to exercise its remedies as set forth in Section 19.02 of this Lease, then Tenant shall be obligated to immediately repay to Landlord the amount of any rent previously abated or the amount of any payment previously made by Landlord to Tenant hereunder, notwithstanding anything contained in this Lease to the contrary. Section 19.01: In the event that this Lease is terminated as a result of ------------- Tenant's default prior to expiration of the stated lease term, then, in addition to the rights and remedies which are available to Landlord, to compensate Landlord for certain costs and expenses which the parties agree are difficult to identify in total, Tenant shall owe Landlord, as additional rent, the sum of Five Hundred Thousand and 00/100ths Dollars ($500,000.00) provided such Five Hundred Thousand and 00/100ths Dollars ($500,000.00) figure shall be reduced by Fifty Thousand and 00/100ths Dollars ($50,000.00) on each anniversary of the commencement date of the lease term. SECTION 19.02. RIGHT TO RELET. Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, it may either terminate this Lease or it may from time to time, without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rent and upon such other terms and 44 conditions as Landlord in its sole discretion may deem advisable. Upon each such reletting all rents and other sums received by Landlord from such reletting shall be applied, thirst, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including reasonable brokerage fees and attorneys' fees and the costs of any alterations and repairs; third, to the payment of rent and other charges due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. If such rents and other sums received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay such deficiency to Landlord; if such rents and the sums shall be more, Tenant shall have no right to, and shall receive no credit for, the excess. Such deficiency shall be calculated and paid monthly. No re-entry or taking possession of the leased premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time elect to terminate this Lease for such previous breach. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant all damages it may incur by reason of such breach, including the cost of recovering the leased premises, reasonable attorneys' fees, and including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to rent reserved in this Lease for the remainder of the stated term over the then reasonable rental value of the leased premises for the remainder of the stated term, all of which amounts shall be immediately due and payable from Tenant to Landlord. In determining the rent which would be payable under this Lease by Tenant subsequent to default, the percentage rent for each year of the unexpired portion of the term shall be equal to the average percentage rent payable by Tenant from the commencement of the term to the time of default, or during the preceding three (3) full lease years, whichever period is shorter. The failure or refusal of Landlord to relet the premises shall not affect Tenant's liability. Notwithstanding the foregoing, Landlord agrees to use reasonable efforts to relet the leased premises; provided, however, that in no event shall Landlord be obligated to give preference to leasing the leased premises over other available space in the Shopping Center; and, provided further, that Landlord shall have the absolute right to take the then existing tenant-mix into account in connection with any such attempt to relet the leased premises. The terms "entry" and "re-entry" are not limited to their technical meanings. Nothing contained in this Lease shall be construed to limit or prejudice the right of Landlord to prove for and obtain as damages by reason of the termination of this Lease or re-entry of the leased premises for the default of Tenant under this Lease an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount shall be greater than any of the sums referred to in this Section. SECTION 19.03. EXPENSES. In case suit shall be brought for recovery of possession of the leased premises, for the recovery of rent or any other amount due under the provisions of this Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, and a breach shall be established, Tenant shall pay to Landlord all expenses incurred therefor, including reasonable attorneys' fees. In addition, in the event Landlord shall incur expenses, including reasonable attorneys' fees, as a result of Tenant's failure to perform or comply with any term, covenant or condition set forth in this Lease, Tenant shall pay to Landlord all such expenses. Any amounts payable by Tenant to Landlord pursuant to this Section 19.03 or Section 11.03 of this Lease may be included in any subsequent monthly rent bill to Tenant, and the failure of Tenant to promptly pay same shall entitle Landlord to all remedies for failure to pay rent as available under this Lease or at law or in equity. SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY. Landlord and Tenant waive their right to trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. Tenant shall not interpose any counterclaim or counterclaims or claims for set-off, recoupment or deduction of rent in a summary proceeding for 45 nonpayment of rent or other action or summary proceeding based on termination, holdover or other default in which Landlord seeks repossession of the leased premises from Tenant. ARTICLE XX. BANKRUPTCY OR INSOLVENCY SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE. Neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any trustee, except as may specifically be provided pursuant to the Bankruptcy Code (11 USC (S) 101 et. seq.), or to any --- --- receiver or assignee for the benefit of creditors or otherwise by operation of law. SECTION 20.02. TERMINATION. In the event the interest or estate created in Tenant hereby shall be taken in execution or by other process of law, or if Tenant or Tenant's Guarantor, if any, or Tenant's executors, administrators, or assigns, if any, shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state law or an order for the relief of such entity shall be entered pursuant to the Bankruptcy Code, or if a receiver or trustee of the property of Tenant or Tenant's Guarantor, if any, shall be appointed by reason of the insolvency or inability of Tenant or Tenant's Guarantor, if any, to pay its debts, or if any assignment shall be made of the property of Tenant or Tenant's Guarantor, if any, for the benefit of creditors, then and in any such events, this Lease and all rights of Tenant hereunder shall automatically cease and terminate with the same force and effect as though the date of such event were the date originally established herein and fixed for the expiration of the term, and Tenant shall vacate and surrender the leased premises but shall remain liable as herein provided. Notwithstanding the foregoing provisions of this Section, in the event that such termination shall result solely from the bankruptcy or insolvency of, or such other described event relating to, Tenant's Guarantor, Landlord shall have the option to reinstate all of the provisions of this Lease (including, without limitation, the obligation of Tenant to continuously operate pursuant to Article VII hereof) upon written notice to Tenant. SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITOR'S PROCEEDINGS. Tenant or Tenant's Guarantor, if any, shall not cause or give cause for the appointment of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any, and shall not make any assignment for the benefit of creditors, or become or be adjudicated insolvent. The allowance of any petition under any insolvency law except under the Bankruptcy Code or the appointment of a trustee or receiver of Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall be conclusive evidence that Tenant caused, or gave cause, therefor, unless such allowance of the petition, or the appoints lent of a trustee or receiver, is vacated within thirty (30) days after such allowance or appointment. Any act described in this Section 20.03 shall be deemed a material breach of Tenant's obligations hereunder, and this Lease shall thereupon automatically terminate in the same manner and with the same force and effect as set forth in Section 20.02 hereof. Landlord does, in addition, reserve any and all other remedies provided in this Lease or in law. Notwithstanding the foregoing provisions of this Section, in the event that such termination shall result solely from the bankruptcy or insolvency of, or such other described event relating to, Tenant's Guarantor, Landlord shall have the option to reinstate all of the provisions of this Lease (including, without limitation, the obligation of Tenant to continuously operate pursuant to Article VII hereof) upon written notice to Tenant. SECTION 20.04 RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE. (a) Upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor in possession, and any trustee who may be appointed agree as follows: (i) to perform each and every obligation of Tenant under this Lease including, but not limited to, the manner of "operation" as provided in Section 7.02 of this Lease until such time as this Lease is either rejected or assumed by order of the United States Bankruptcy Court; (ii) to pay monthly in advance on the first day of each month, as reasonable compensation for use and occupancy of the leased premises, an amount equal to all minimum rent and other charges otherwise due pursuant to this Lease and to pay percentage rent monthly at the percentage set forth in this Lease for the lease year in which such month falls on all sales during such month in excess of one twelfth (1/12th) of 46 the Minimum Gross Sales for such lease year, with payment of all such percentage rent to be made by the tenth (both) day of the succeeding month; (iii) to reject or assume this Lease within sixty (60) days of the appointment of such trustee under Chapter 7 of the Bankruptcy Code or within sixty (60) days (or such shorter term as Landlord, in its sole discretion, may deem reasonable, so long as notice of such period is given) of the filing of a petition under any other Chapter; provided that no extension of either of the foregoing periods by or on behalf of Tenant shall be permitted; (iv) to give Landlord at least forty-five (45) days' prior written notice of any proceeding relating to any assumption of this Lease; (v) to give at least thirty (30) days' prior written notice of any abandonment of the leased premises, with any such abandonment to be deemed a rejection of this Lease and an abandonment of any property not previously removed from the leased premises; (vi) to do all other things of benefit to Landlord otherwise required under the Bankruptcy Code; (vii) to be deemed to have rejected this Lease in the event of the failure to comply with any of the above; and (viii) to have consented to the entry of an order by an appropriate United States Bankruptcy Court providing all of the above, waiving notice and hearing of the entry of same. (b) No default of this Lease by Tenant, either prior to or subsequent to the filing of such a petition, shall be deemed to have been waived unless expressly done so in writing by Landlord. (c) It is understood and agreed that this is a Lease of real property in a shopping center and that, therefore, Section 365(b)(3) of the Bankruptcy Code is applicable to any proposed assumption of this Lease in a bankruptcy case. (d) Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of assumption and/or assignment are the following: (i) the cure of any monetary defaults and the reimbursement of pecuniary loss immediately upon entry of a court order providing for assumption and/or assignment; (ii) the deposit of an additional sum equal to three (3) months' rent to be held pursuant to the terms of Section 26.01 of this Lease (notwithstanding any alteration or modification of the terms of said Section); (iii) the use of the leased premises as set forth in Section 7.01 of this Lease and the quality, quantity and/or lines of merchandise of any goods or services required to be offered for sale are unchanged; (iv) the payment of any sums which may then be due or which may thereafter become due pursuant to the provisions of Section 2.04 of this Lease; (v) the debtor, debtor in possession, trustee, or assignee of such entity demonstrates in writing that it has sufficient background including, but not limited to, substantial retailing experience in shopping centers of comparable size and financial ability to operate a retail establishment out of the leased premises in the manner contemplated in this Lease, and meets all other reasonable criteria of Landlord as did Tenant upon execution of this Lease; (vi) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security; and (vii) the premises, at all times, remains a single store and no physical changes of any kind may be made to the premises unless in compliance with the applicable provisions of this Lease. (e) Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption. ARTICLE XXI. ACCESS BY LANDLORD SECTION 21.01. RIGHT OF ENTRY. Landlord or Landlord's agents shall have the right to enter the leased premises at all reasonable times, upon reasonable advance notice to Tenant's store manager, which notice may be given orally, to examine the same and to show them to prospective purchasers or mortgagees or prospective tenants. Landlord or Landlord's agents shall have the further right to enter the leased premises to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable, irrespective of whether the work shall be for the leased premises or for other premises or facilities, and Landlord shall be allowed to take all material into and upon the leased premises that may be required therefor without 47 the same constituting an eviction of Tenant in whole or in part, and the rent and other charges resented shall in no wise abate while said repairs, alterations, improvements, or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise provided, however, that Landlord, in the absence of an emergency, shall make such repairs in a manner which will not unduly interfere with the conduct of business on said premises, having due regard for all circumstances then existing. Prior to entering the leased premises to perform work which is Tenant's obligation, Landlord agrees to provide Tenant with written notice if required under Section 10.02(g) of this Lease." If an excavation shall be made upon land adjacent to the leased premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the leased premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which leased premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Landlord, or diminution or abatement of rent. ARTICLE XXII. TENANT'S PROPERTY SECTION 22.01. TAXES ON TENANT'S PROPERTY. Tenant shall be responsible for, and shall pay, prior to delinquency, any and all taxes, assessments, levies, fees and other governmental charges of every kind or nature (for all purposes under this Lease, collectively called "taxes") levied or assessed by municipal, county, state, federal or other taxing or assessing authority upon, against or with respect to (i) the leased premises or any leasehold interest, (ii) all furniture, fixtures, equipment and any personal property of any kind owned by Tenant or any previous tenant and occupant, and placed, installed or located in, within, upon or about the leased premises, (iii) all alterations, additions or improvements of whatsoever kind or nature, if any, made to the leased premises, by Tenant or any previous tenant or occupant, and (iv) rents or other charges payable by Tenant to Landlord, irrespective of whether any of the terms described in clauses (i) through (iv) above are assessed against real or personal property, and irrespective of whether any of such items are assessed to or against Landlord or Tenant. If at any time during the term of this Lease any of such taxes are not levied and assessed separately and directly to Tenant (for example, if the same are levied or assessed to Landlord, or upon or against the building containing the leased premises and/or the land underlying said building), Tenant shall pay to Landlord Tenant's share thereof as determined by Landlord. SECTION 22.02. LOSS AND DAMAGE. Landlord shall not be responsible or liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connected with the premises hereby leased or any part of the building of which the leased premises are a part, or any other area in the regional retail development, or for any loss or damage resulting to Tenant or its property from bursting, stoppage or leaking of water, gas, sewer or steam pipes, or (without limiting the foregoing) for any damages or loss of property within the leased premises from any cause whatsoever except to the extent of damage to Tenant's tangible personal property caused by Landlord's negligence (provided in no event shall Landlord be liable for indirect or consequential damages including, without limitation, lost profits and in no event shall Landlord be liable to the extent the damage is covered by Tenant's insurance or is required to be covered by the insurance which Tenant is obligated to maintain under this Lease inclusive of self insurance and deductibles which are Tenant's risk). SECTION 22.03. NOTICE BY TENANT. Tenant shall give immediate notice to Landlord in case of any damage to or destruction of all or any part of, or accidents in, the leased premises or of defects therein or in alterations, decorations, additions or improvements, including, without limitation, any fixtures or equipment. 48 ARTICLE XXIII. HOLDING OVER SECTION 23.01. HOLDING OVER. Any holding over after the expiration of the term hereof with the consent of the Landlord, shall be construed to be a tenancy from month to month at a monthly minimum rent of not less than one-sixth (1/6) the annual minimum rent effective for the final lease year or partial lease year preceding expiration of the term (subject to further adjustment pursuant to the various provisions of this Lease, including, without limitation, Section 2.04), together with an amount estimated by Landlord for the monthly additional charges payable pursuant to this Lease, and shall otherwise be on the same terms and conditions (including, without limitation, payment of percentage rent) as herein specified so far as applicable, subject to any changes in any of the foregoing terms or conditions as may be submitted by Landlord to Tenant. Any holding over without Landlord's consent shall entitle Landlord to re-enter the leased premises as provided in Section 19.01 of this Lease. SECTION 23.02. SUCCESSORS. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of :the said parties; and if there shall be more than one person or entity comprising Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant other than an assignee expressly permitted under the terms of this Lease. ARTICLE XXIV. RULES AND REGULATIONS SECTION 24.01. RULES AND REGULATIONS. Tenant agrees to comply with and observe all rules and regulations established by Landlord from time to time, provided the same shall apply uniformly to all tenants of the Shopping Center. Tenant's failure to keep and observe said rules and regulations shall constitute a breach of the terms of this Lease in the same manner as if the rules and regulations were contained herein as covenants. In the case of any conflict between said rules and regulations and this Lease, this Lease shall be controlling. The rules and regulations established by Landlord shall not increase Tenant's monetary obligations to Landlord under the Lease nor materially and adversely affect the right of Tenant to engage in its permitted use as set forth in Section 7.01 of this Lease. ARTICLE XXV. QUIET ENJOYMENT SECTION 25.01. LANDLORD'S COVENANT. Upon payment by Tenant of the rents herein provided, and upon the observance and performance of all covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the leased premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease and any mortgage, deed of trust or underlying lease to which this Lease is subordinate. SECTION 25.02. TENANT'S COVENANT. Tenant hereby acknowledges and agrees that Landlord has specifically relied upon the identity, skill, product line, and trade name of Tenant in entering into this Lease with Tenant. Tenant recognizes that its use of the leased premises in accordance with the use clause set forth in the Data Sheet and its compliance with the particular provisions of Article VII hereof, regarding the conduct and continuous operation of Tenant's business in the leased premises throughout the term of this Lease, forms a material inducement to Landlord, and Tenant specifically covenants that it will strictly adhere to these provisions. Any ambiguities in Article VII or in the use clause set forth in the Data Sheet shall be construed neither against Tenant nor in favor of Landlord. ARTICLE XXVI. SECURITY PROVISION SECTION 26.01. SECURITY. The amount set forth in the Data Sheet as a security deposit is payable by Tenant, upon the execution of this Lease by Tenant, in the manner and at the 49 place where minimum rent is payable. Landlord is to retain said amount as security for the faithful performance of all covenants, conditions and agreements of this Lease. Such amount is occasionally referred to herein as the "security." Landlord may, at its option, apply the security to remedy defaults in the payment of any rent or other charge hereunder, to repair damages to the leased premises caused by Tenant, or to clean the leased premises upon the expiration or termination of this Lease; in no event however, shall Landlord be obligated so to apply the security. Landlord's right to bring a special proceeding to recover or otherwise to obtain possession of the leased premises before or after Landlord's declaration of the termination of this Lease for nonpayment of rent or for any other reason shall not in any event be affected by reason of the fact that Landlord holds such security. Such security, if not applied toward the payment of rent in arrears or toward the payment of damages suffered by Landlord by reason of Tenant's breach of the covenants, conditions and agreements of this Lease, is to be returned to Tenant without interest, except as provided by law, when this Lease is terminated according to its terms, but in no event is such security to be returned until Tenant has vacated the leased premises and delivered possession thereof to Landlord. In the event that Landlord repossesses itself of the leased premises, whether by special proceeding or re-entry or otherwise, because of Tenant's default or failure to carry out the covenants, conditions and agreements of this Lease, Landlord may apply such security upon all damages suffered to the date of said repossession and may retain the security to apply upon such damages as may be suffered or shall accrue thereafter by reason of Tenant's default or breach. In the event any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings shall be instituted by or against Tenant, or its successors or assigns, or any guarantor of Tenant hereunder, such security shall be deemed to be applied first to the payment of any rents and/or other charges due Landlord for all periods prior to the institution of such proceedings, and the balance, if any, of such security may be retained by Landlord in partial liquidation of Landlord's damages. Landlord shall not be obligated to keep such security as a separate fund but may commingle the security with its own funds. In the event Landlord applies the security in whole or in part, Tenant shall, upon demand by Landlord, deposit sufficient funds to maintain the security in the initial amount. Failure of Tenant to deposit such additional security shall entitle Landlord to avail itself of the remedies provided in this Lease for nonpayment of rent by Tenant. The acceptance by Landlord of the security deposit submitted by Tenant shall not render this Lease effective unless and until Landlord shall have executed and actually delivered to Tenant a fully-executed copy of this Lease. (12) Section 26.01: Security Deposit: N/A Additional Security: N/A (13) Guarantor(s): N/A Address(es): N/A ARTICLE XXVII. MISCELLANEOUS SECTION 27.01. WAIVER; ELECTION OF REMEDIES. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. In particular, but without limitation, if Tenant assigns or transfers its interest in this Lease contrary to the terms of this Lease, any acceptance by Landlord of such assignee's or transferee's payment shall not be deemed to be a waiver of the restrictions set forth in Section 14.01 hereof. In the event that Tenant shall be at any time in default of both monetary and nonmonetary terms, covenants or conditions of this Lease, any acceptance by Landlord of any payment rendered by Tenant shall not have the effect of curing Tenant's nonmonetary defaults and shall not have the effect of curing any monetary default other than the particular amount owing for which such payment is specifically accepted by Landlord. Following notice of termination or any other remedy exercised by Landlord with respect to any monetary default of Tenant, such default 50 shall not be deemed cured by the payment of rent owing by Tenant for the current period only, and Landlord may apply such payments to current rent only without any effect upon Tenant's existing indebtedness and continuing monetary default, notwithstanding any contrary instructions by or on behalf of Tenant, which instructions shall be null and void and of no effect. In addition, after the service of notice or. the commencement of a suit, or after final judgment for the possession of the leased premises, Landlord may receive and collect rent due from Tenant, and the payment of rent by Tenant shall not waive or affect said notice or suit or judgment. One or more waivers of any covenant or condition by Landlord shall not be construed as a waiver of a subsequent breach of the same covenant or condition, and the consent or approval by Landlord to or of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary Landlord's consent or approval to or of any subsequent similar act by Tenant. The failure of Landlord to insist upon a strict performance of any term, condition or covenant contained in this Lease shall not be deemed a waiver of any rights or remedies that Landlord may have and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions or covenants herein contained, and any such failure shall not be construed as creating a custom of Landlord's accepting other than strict performance or as modifying in any way the terms, covenants or conditions of this Lease. No breach by Tenant of a covenant or condition of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord. No act or thing done by Landlord or Landlord's agents shall be deemed an acceptance of surrender of the leased premises and no agreement to accept such surrender shall be valid unless in writing signed by Landlord. In addition to any and all other remedies available to Landlord, Landlord may obtain an injunction to restrain any breach or threatened breach of any term, covenant or condition of this Lease. The rights and remedies of Landlord under this Lease or under any specific section, subsection or clause hereof shall be cumulative and in addition to any and all other rights and remedies which Landlord has or may have elsewhere under this Lease or at law or equity, whether or not such section, subsection or clause expressly so states. Nothing contained in this Lease shall be construed to confer upon any person or entity other than Landlord or Tenant any rights, benefits or causes of action, except to the extent specifically otherwise provided in this Lease and except to the extent provided for the benefit of any mortgagee, deed-of-trust beneficiary, ground lessor or trustee for the Shopping Center. SECTION 27.02. ENTIRE AGREEMENT. The Addendum, and all exhibits, and riders, if any, attached hereto form a part of this Lease and shall be given full force and effect, as fully as if set forth at length herein. This Lease and said Addendum, exhibits, and riders, if any, so attached hereto and forming a part hereof, set forth all the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the leased premises, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than as are herein set forth. Tenant has not relied upon any representation of Landlord or its agents, other than any items contained in this Lease, as an inducement to enter into this Lease. No alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by each party. SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS. Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties herein shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant. Whenever herein the singular number is used the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. SECTION 27.04. DELAYS. In the event that either party hereto shall be delayed in the performance of its initial construction or maintenance dnd/or repair obligations by reason of strikes, lockouts, labor troubles, inability to procure materials or shall at any time be so delayed by reason of failure of power, restrictive governmental laws or reasons of a similar nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. 51 Nothing contained in this Section shall excuse Tenant from the continuous operation of its business in the leased premises in accordance with the provisions of Sections 7.01 and 7.02 hereof; provided, however that Tenant shall be excused from such continuous operation in the event of a power failure for more than forty-eight (48) consecutive hours or a natural catastrophe (e.g., ---- earthquake, hurricane, tornado) which shall prevent the operation of Tenant's business and all other businesses within the Shopping Center, provided that Tenant shall immediately reopen for business upon the cessation of such power failure or natural catastrophe.. The provisions of this Section 27.04 shall not excuse Tenant from payment of minimum rent, percentage rent or any other payments required by the terms of this Lease; provided, however, that the commencement date under Section 1.02 hereof and the obligation of Tenant to open for business pursuant to Section 1.03 hereof may be delayed pursuant to the provisions of this Section 27.04. Further, Landlord's reduction of heat, light, air conditioning, or any other services whatsoever to the Shopping Center because of any similar or dissimilar event constituting a cause for excusable delay hereunder shall not relieve Tenant from its obligations under Article VII of this Lease. SECTION 27.05. NOTICES. Unless specifically stated to the contrary in this Lease, any notice, demand, request or other instrument which may be or is required to be given by Tenant or Landlord under this Lease or by law shall be sent by United States certified mail, return receipt requested, postage prepaid, and shall be deemed to have been given as of the date of receipt (or refusal to accept receipt) following receipt of same by the other party, whichever of such dates shall be the first to occur; and shall be addressed (a) if to Landlord at the address set forth for Landlord on Page D I of this Lease or at such other address as Landlord may designate by written notice, Attention Lease Administration, together with copies thereof to such other parties designated by Landlord, and (b) if to Tenant, at the leased premises or the address set forth for Tenant on Page D1 of this Lease, or such other address as Tenant shall designate by written notice. All notices given from Landlord to Tenant, including, without limitation, notices of default and/or termination of Tenant's interests under this Lease, may be given by Landlord's attorney acting as agent on behalf of Landlord. SECTION 27.06. CAPTIONS AND SECTION NUMBERS. The captions, section numbers, article numbers, and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease, nor in any way affect this Lease. SECTION 27.07. BROKER'S COMMISSION. Each party represents and warrants to the other party that the warrantor has dealt with no brokers and that there are no claims for brokerage commissions or finder's fees, nor will there be any such claim, arising from any act or omission of the warrantor in connection with this Lease, and the warrantor agrees to indemnify the other party and hold it harmless from all liabilities arising from any such claim, including, without limitation, the cost of attorneys' fees in connection therewith. Such agreement shall survive the termination of this Lease. SECTION 27.08. RECORDING. Tenant shall not record this Lease or any memorandum, affidavit or other notice of this Lease. If Landlord records this Lease, such recording shall be at Landlord's sole cost and expense SECTION 27.09. FURNISHING OF FINANCIAL STATEMENTS. Upon the execution of this Lease by Tenant and upon each succeeding anniversary date of the date of this Lease, or at any earlier time upon Landlord's written request (but in no event more than one [1] time in any lease year, unless Tenant is in default), Tenant shall promptly furnish Landlord, from time to time, with financial statements (including, without limitation, operating statements including an annual profit and loss statement for the individual store unit covered by this Lease) reflecting Tenant's current financial condition, and written evidence of then current ownership of managing and controlling interests in Tenant and in any entities which directly or indirectly control or manage Tenant (which written evidence shall include, without limitation, the names of all existing managers, shareholders and partners, as applicable, of record holding (directly or indirectly) greater than a five percent (5%) interest in Tenant and their respective 52 management/ownership interests as of the date of such writing), which financial statements and written evidence shall be certified as being true and correct by the chief financial officer or partner and by the chief executive officer or partner of Tenant. SECTION 27.10. LANDLORD'S USE OF COMMON AREAS. Landlord reserves the right, from time to time, to utilize portions of the common areas for carnival type shows, rides and entertainment, outdoor shows, displays, automobile and other product shows, the leasing of permanent and temporary kiosks, or such other uses which in Landlord's judgment tend to attract the public. Further, Landlord reserves the right to utilize the lighting standards and other areas in the parking facilities for advertising purposes. Any revenues derived by Landlord from the use of the common areas, whether from usage fees or otherwise, shall not be applied as a deduction against any cost or expense required to be paid by Tenant under this Lease. SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer or transfers of Landlord's interest in the premises, including a so- called sale-leaseback, the transferor shall be automatically relieved of any and all obligations on the part of Landlord accruing from and after the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which Tenant has an interest shall be turned over, subject to such interest, to the then transferee; and (b) notice of such sale, transfer or lease shall be delivered to Tenant as required by law; and (c) subject to the rights of Landlord's mortgagee, the said transferee (other than a mortgagee of the Shopping Center) shall assume all of the unperformed terms, covenants and conditions of this Lease arising after the date of such transfer. Upon the termination of any such lease in a sale-leaseback transaction prior to termination of this Lease, the former lessee thereunder shall become and remain liable as Landlord hereunder until a further transfer. No holder of a mortgage or deed of trust, or underlying lessor on an underlying lease, to which this Lease is or may be subordinate, and no lessor under a so- called sale-leaseback shall be responsible in connection with the security deposited hereunder, unless such mortgagee, holder of such deed of trust, underlying lessor or lessor shall have actually received the security deposited hereunder. SECTION 27.12. FLOOR AREA. (a) The term "floor area" as used in this Lease means, with respect to any leasable area in the Shopping Center or in the regional retail development, the aggregate number of square feet of floor space of all floor levels therein, including any mezzanine space (to the extent reflected as floor area in the applicable leases), measured from (i) the outside faces of all perimeter walls thereof other than any party wall separating such premises from other leasable premises, (ii) the center line of any such party wall, (iii) the outside face of any interior wall, and (iv) the building and/or leaseline adjacent to any entrance to such premises. In the event Landlord determines that the square foot area of the leased premises is at variance with the square foot area stated in this Lease, Landlord may, at its option, adjust the floor area of the leased premises and make proportional adjustments in minimum rent, percentage rent, and promotional/Merchants' Association charges, and other charges to Tenant under this Lease. Section 27.12(a): Notwithstanding the provisions of this Section 27.12(a), ---------------- Landlord shall have no right to remeasure the floor area of the leased premises with the exception of the unconstructed popout portion. Tenant shall have the right to employ an architect to measure the floor area of the popout portion of the leased premises only in accordance with this Section. In the event Tenant's architect does not agree with the measurement of this portion of the leased premises as reflected in this Lease (or as separately determined by Landlord pursuant to the foregoing provisions), then, upon notice from Tenant's architect in writing to Landlord, which notice shall set forth in detail the architect's findings, Landlord shall be entitled either to accept such findings (and to prospectively make the floor area adjustments as set forth above) or to advise Tenant in writing that it disagrees with such findings and will remeasure the popout portion of the leased premises. Upon such remeasurement by Landlord, Tenant shall be entitled to either accept Landlord's determination of the popout portion of the floor area or to request an independent measurement of the popout portion of the leased premises by a third party to be mutually selected within thirty (30) days following Tenant's notice to Landlord of its election to require such independent additional measurement. The party selected by Landlord and Tenant to conduct such independent 53 measurement shall measure the leased premises within thirty (30) days after selection, and the results of such measurement shall be final and binding upon both Landlord and Tenant absent manifest error. Notwithstanding the foregoing, Tenant shall be obligated to pay all rent and charges under this Lease prior to and during the period of the determination of the square footage of the leased premises (pursuant to the foregoing) on the basis of the floor area set forth in the Lease (or as previously determined by Landlord) until such measurement of the leased premises shall be so finally determined. Notwithstanding the provisions of this Section, minimum rent and Minimum Gross Sales shall not be adjusted as a result of any redetermination of the square foot floor area of the popout portion of the leased premises. (b) For the purpose of this Lease, in determining the gross leasable floor area or the gross leased and occupied floor area of the Shopping Center, there shall be excluded therefrom, at the sole option of Landlord, the leasable area of 20,000 square feet or more occupied by a single entity (which, for purposes of this Lease, shall be defined as a department store), the floor area of any premises leased for the operation of a post-office type or packaging or delivery facility or other public/consumer-service or governmental facility, the floor area of any space without direct customer access from the enclosed Mall, and the total floor area utilized by Landlord for the operation of a skating rink or other recreational area, child care center, community room, library, project offices, and related rooms, common areas and project areas, which shall be deemed amenities to the Shopping Center. The term "gross leased and occupied floor area" shall include only such areas as are leased and occupied by tenants subsequent to the dates of commencement of the terms of their respective leases. Areas shall not be considered occupied to the extent that Landlord shall not be receiving full proportionate share contributions for the same. No deduction or exclusion from floor area shall be made by reason of columns, ducts, stairs, elevators, escalators, shafts, or other interior construction or equipment. SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS. Any amount due from Tenant to Landlord hereunder which is not paid when due (including, without limitation, amounts due as reimbursement to Landlord for costs incurred by Landlord in performing obligations of Tenant hereunder upon Tenant's failure to so perform) shall bear interest at the prime rate of interest then in effect at the majority of commercial banks located in the City of New York, New York, plus three percent (3%), but in no event more than the highest rate then allowed under the usury laws of the State from the date due until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. SECTION 27.14. LIABILITY OF LANDLORD. If Landlord shall fail to perform any covenant, tern or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Shopping Center and out of net income from such property received by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, subject, nevertheless, to the rights of Landlord's mortgagee, and neither Landlord, nor the individuals or entities which constitute the partners of the partnership which is Landlord, nor the individuals or entities which constitute the partners of the partnership which is the beneficiary of the Trust of which Landlord is Trustee (if applicable), shall be liable for any deficiency. If Landlord is identified in this Lease as a Trustee, Tenant hereby recognizes that Landlord is executing this Lease as Trustee under an express trust, and it is expressly understood and agreed by and between the parties hereto, anything herein to the contrary notwithstanding, that each and all of the representations, covenants, undertakings and agreements herein made on the part of the Landlord while in form purporting (except as herein otherwise expressed) to be the representations, covenants, undertakings, and agreements of the Landlord are nevertheless each and every one of them, made and intended not as personal representations, covenants, undertakings and agreements by the Landlord or for the purpose or with the intention of binding said Landlord personally but are made and intended for the purpose of binding only that portion of the trust property specifically leased hereunder, and this Lease is executed and delivered by said Landlord 54 not in its own right, but solely in the exercise of the powers conferred upon it as such Trustee; that no duty shall rest upon Landlord to sequester the trust estate or the rents, issues and profits arising therefrom, or the proceeds arising from any sale or other disposition thereof; and that no personal liability or personal responsibility is assumed by nor shall at any time be asserted or enforceable against Trustee, or any successor trustee or any of the beneficiaries under said trust, on account of this Lease or on account of any representation, covenant, undertaking or agreement of the said Landlord in this Lease contained, either expressed or implied, all such personal liability, if any, being expressly waived and released by the Tenant herein and by all persons claiming by, through or under said Tenant. SECTION 27.15. ACCORD AND SATISFACTION. Payment by Tenant or receipt by Landlord of a lesser amount than the rent or other charges herein stipulated may be, at Landlord's sole option, deemed to be on account of the earliest due stipulated rent or other charges, or deemed to be on account of rent owing for the current period only, notwithstanding any instructions by or on behalf of Tenant to the contrary, which instructions shall be null and void, and no endorsement or statement on any check or any letter accompanying any check payment as rent or other charges shall be deemed an accord and satisfaction, and Landlord shall accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or other charges or pursue any other remedy in this Lease or in law or in equity against Tenant. SECTION 27.16. EXECUTION OF LEASE; NO OPTION. The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of or option for Tenant to lease, or otherwise create any interest of Tenant in the leased premises or any other premises situated in the Shopping Center Execution of this Lease by Tenant shall be irrevocable for a period of thirty (30) days. The return to Landlord of Tenant- executed copies of this Lease shall not be binding upon Landlord, notwithstanding any preparation or anticipatory reliance or expenditures by Tenant or any time interval, until Landlord has in fact executed and actually delivered a fully-executed copy of this Lease to Tenant. SECTION 27.17. GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State. If any provision of this Lease or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease shall not be affected thereby and each remaining provision of the Lease shall be valid and enforceable to the full extent permitted by the law. Tenant appoints the following persons at the following locations as agent to receive service of process, writs, notices, summonses, or other legal documents in any suit, action or proceeding which Landlord may commence against Tenant: (a) the person in charge at the leased premises, or (b) any officer, partner or other principal of Tenant, or any person in charge, at the Tenant's address as set forth on Page Dl of this Lease. Where permitted by law or local court rule, Tenant consents to service of such process by United States mail, in the manner specified in the applicable law or court rule. SECTION 27.18. SPECIFIC PERFORMANCE. Landlord and Tenant shall have the right to obtain specific performance of any and all of the covenants or obligations under this Lease, and nothing contained in this Lease shall be construed as or shall have the effect of abridging such right. SECTION 27.19. CERTAIN RULES OF CONSTRUCTION. Time is of the essence in this Lease. Notwithstanding the fact that certain references elsewhere in this Lease to acts required to be performed by Tenant hereunder omit to state that such acts shall be performed at Tenant's sole cost and expense, unless the context clearly implies to the contrary, each and every act to be performed or obligations to be fulfilled by Tenant pursuant to this Lease shall be performed or fulfilled at Tenant's sole cost and expense. Any breach or default by Tenant of its obligations under this Lease shall be deemed material. Tenant shall be fully responsible and liable for the observance and compliance by concessionaires with all the terms and conditions of this Lease, which terms and conditions shall be applicable to concessionaires as fully as if such concessionaires were the Tenant hereunder; any failure by a concessionaire fully to observe and comply with the terms mad conditions of this Lease shall constitute a default hereunder by Tenant. Nothing contained in the 55 preceding sentence shall constitute a consent by Landlord to any concession, subletting or other arrangement proscribed by Section 14.01. All provisions of this Lease have been freely negotiated by and between the parties. SECTION 27.20. INDEX. The term "Index" as used in this Lease shall be the "Consumer Price Index for All Urban Consumers (1982-84 = l00), U.S. City Average, All Items," as published by the Bureau of Labor Statistics of the United States Department of Labor. If the Index is not published by the Bureau of Labor Statistics or another governmental agency at any time during the term of this Lease, or if the Index is otherwise re-named, discontinued or superseded, then the calculations based on the Index shall be made using the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and selected by Landlord. SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT. The obligations of Tenant for payment of rent and charges under this Lease shall survive the expiration or earlier termination of the term of this Lease. Tenant covenants that neither Tenant nor any attorney or other representative for Tenant shall disclose the contents of this Lease to any other person or entity. Tenant shall be fully responsible for the actions of its attorneys and representatives. By its execution of this Lease, Tenant acknowledges and agrees that it has read this Lease, understands the contents hereof, and is signing this Lease as its own free act and deed, and as the free act and deed of the representatives signing on Tenant's behalf without any persuasion or coercion by any person or entity, and with full advice of counsel. SECTION 27.23. ATTORNEYS' FEES. If either party shall bring an action against the other to enforce or interpret the terms of this Lease or otherwise arising out of this Lease, the prevailing party in such action shall be entitled to recover its costs of suit and reasonable attorneys' fees. 'Prevailing party' shall be the party whose position is substantially upheld in the final judgment rendered in such action. SECTION 27.24. LANDLORD'S REPRESENTATIONS. Landlord represents to Tenant that (i) the individuals executing this Lease on behalf of Landlord have the authority to do so and (ii) the Shopping Center is not currently (as of the date of this Lease) subject to any ground lease." (14) Rider: The Rider attached and made a part of this Lease is the "Standard Silver Diner Rider" containing the pre-negotiated revisions to the Standard Form and Exhibit B, which revisions are accepted by Landlord and Tenant by their execution of this Lease. -------------------------------------------------------- [End of Standard Form; signature and acknowledgment pages for the Lease appear after the Data Sheet on the pages immediately preceding the Addendum.] 56 EXECUTION/ACKNOWLEDGMENT In confirmation of their agreement to enter into this Lease (including the Preamble, Data Sheet, Addendum, Standard Form, all exhibits, and the Rider (if any) attached hereto), and intending to be bound hereby, Landlord and Tenant have signed and sealed this Lease as of the day and year first above written on page D1 of this Lease. In the Presence of: LAKEFOREST ASSOCIATES LLC, a Delaware limited liability company [_____signed____________________] By: ____________________________________ [_____signed____________________] LANDLORD SILVER DINER DEVELOPMENT, INC. [_____signed____________________] By: ____________________________________ Print Name:_________________________ Its: ____________________________________ Print Title: _______________________ And: ____________________________________ Print Name:_________________________ Its: ____________________________________ Print Title: _______________________ TENANT Tenant's Federal Tax Identification Number: 54-1439417 ---------- Tenant's corporate seal _________________ 57 EXHIBIT B CONSTRUCTION Notwithstanding anything contained in this Lease to the contrary, Tenant may submit plans and specifications for Landlord's approval which are inconsistent with the requirements of the exhibits to this Lease without such submittal constituting a default. Certain deletions have been made to Exhibit B to insure that Tenant may submit plans and specifications for Landlord's approval which may be inconsistent with those deleted provisions. Notwithstanding deletion of such provisions, Landlord shall have the right to not approve Tenant's plans and specifications based upon an inconsistency with the deleted provisions. However, notwithstanding anything contained in this Lease or its exhibits to the contrary, once Landlord approves Tenant's plans and specifications, such approved plans and specifications shall control in the event of any conflict with Exhibit B or B-1 or with the Standard Project Details and Construction Information referenced in Section IV of Exhibit B. This Exhibit B shall be deemed to include Exhibit B-1 and any additional construction exhibits as may be attached to this Lease. Such additional exhibits may have the effect of providing further specifications or criteria or may serve to amplify or adjust certain of the provisions contained in this Exhibit B. SECTION I. EXISTING IMPROVEMENTS - --------------------------------- The reuse by Tenant of existing improvements, if any, within the leased premises shall be as dictated by practicality and Landlord's existing design criteria and shall be subject to Landlord's written approval. SECTION II. LANDLORD'S WORK - --------------------------- A. A complex of building shells and common area improvements of exterior and interior design and materials as determined by Landlord substantially as shown in Exhibit A. B. If any partitions are required to separate the leased premises from adjacent spaces, Landlord shall install metal stud framing only, after Tenant has performed any demolition necessary to accommodate installation of said framing. Such stud framing shall extend from the floor slab of the leased premises to the underside of the floor or roof structure. Tenant shall reimburse Landlord as Tenant's share of the cost of such work, $20.00 per lineal foot of said stud framing. Tenant shall install gypsum board on Tenant's side of stud framing to underside of structure as required for a one-hour fire resistant separation. Exhibit B. Section II.B.: The $20.00 per lineal foot charge shall not apply to - ------------------------- Tenant. C. In the event that the leased premises are located in a retail development, or in an expansion wing of a retail development, which development or expansion wing shall not yet have opened for business to the public, and Tenant shall be able to complete its construction within the leased premises prior to such opening, Landlord shall not provide a temporary barricade at the storefront lease line, except to the extent that Landlord shall determine that such barricade is necessary or desirable. If the leased premises are not located in such a development or in such an expansion wing, or if Tenant shall be unable to complete the construction of the leased premises and to open for business at the time that such development or expansion wing, as applicable, first opens for business to the public, Landlord shall provide, for Tenant's use during construction and demolition, a temporary barricade at the storefront lease line. Tenant shall reimburse Landlord $45.00 per lineal foot of storefront lease line for any such temporary barricade provided by Landlord. Landlord shall remove the storefront barricade upon completion of Tenant's Work and when Tenant 58 is prepared to open for business. Landlord shall have the option, by written notice to Tenant, to require Tenant to remove the storefront barricade and to store the same at a location specified by Landlord within the regional retail development. In the event of such removal by Tenant, Tenant shall be responsible for any damage (except as a result of normal use) caused to the barricade by such removal and storage. In either case, Tenant shall immediately repair any damage caused to the leased premises by the removal of the barricade. D. If the entire leased premises shall not have been previously occupied by another tenant or occupant, the provision of utility connections by Landlord shall be as set forth under Section II of Exhibit B-1. If the entire leased premises shall have been previously occupied, and the following utilities or utility stubs are not contained within the premises, Landlord shall cause said utilities to be extended to within the leased premises at a point which is closest to Landlord's pickup point. Such utilities shall include: sanitary, domestic cold water, plumbing vent (where applicable), fire protection, and air conditioning supply duct stub (where applicable). Refer to Exhibit B-1 (and/or to other construction exhibits, if any, attached to this Lease) for additional information on certain utilities. SECTION III. TENANT'S WORK - -------------------------- Tenant at its sole cost and expense shall perform all work required to complete the leased premises to a finished condition ready for the conduct of business therein. Tenant's Work shall conform to criteria, procedures, and schedules as set forth in Sections IV, V, and VI respectively, of this Exhibit, and shall include, but not be limited to, the following: A. Field Conditions: Prior to the preparation of its working drawings and the ---------------- commencement of its construction Tenant shall survey the site to inspect, verify and coordinate all existing conditions within the leased premises. Such survey shall include the location of existing mall utilities which are to remain, placement of wall stud framing defining the leased premises, and identification of various improvements made by previous occupant(s), if any, which are to remain, be relocated or removed and the determination of the extent of demolition or repair to be performed by Tenant. Tenant shall advise Landlord immediately of any discrepancies with respect to Landlord's Space Layout drawings. The results of such survey shall be incorporated into Tenant's working drawings and specifications. Tenant shall verify conditions pertaining to the leased premises from time to time after commencement of construction of its leased premises. Any material adjustments to the work arising from field conditions not apparent on drawings and other building documents shall receive the prior written approval of Landlord. Immediately following the installation by Landlord of wall stud framing defining the leased premises, Tenant shall verify the accuracy of said installation and shall immediately advise Landlord of any discrepancies. Failure to so notify Landlord shall be deemed as acceptance by Tenant of said installation and layout. Tenant shall reasonably coordinate its work with the work of others or with existing conditions occurring above or below the leased premises and shall make reasonable changes from time to time as required to accommodate such work or conditions. B. Working Drawings and Specifications: Working Drawings and Specifications ----------------------------------- as set forth in Section V of this Exhibit. C. Demolition ---------- 59 1. All demolition required to facilitate Tenant's construction shall be performed by Tenant at Tenant's expense, and shall be as approved by Landlord on Tenant's demolition plans, prior to commencing such work. a. Floors: Tenant shall repair or replace any part of the existing concrete slab which may have been removed by Landlord or Tenant to allow for extension of underground utilities. Backfill and compaction shall be provided by Tenant. b. Interior Finishes: Tenant shall demolish any existing improvements made by previous occupant(s) within the leased premises which Tenant has indicated on the survey referred to in Section III (A) above are not to remain. Such work shall include but not be limited to: storefront and storefront enclosure, abandoned party walls, interior partitions and finishes, floor coverings, ceilings and miscellaneous improvements. Removal of demolition debris shall be performed by Tenant. In no event shall removal of debris take place through the malls during the hours in which the Shopping Center is open for business. c. Mechanical and Electrical Equipment: Tenant shall remove all mechanical and electrical systems existing on the leased premises which are no longer functional or designated to be reused. Such work shall include but not be limited to: roof top and interior HVAC equipment and supports, duct work, wire and conduits, electrical distribution equipment, plumbing fixtures, sprinkler lines, telephone equipment and any specialty equipment as may exist in the leased premises. d. Barricades and Screening: Tenant shall install construction barricades approved by Landlord which screen the areas in which Tenant is performing work visible from the outside of the Shopping Center building. Such barricades shall be between 8' and 10' in height, shall not display any contractor's names or any advertising, shall be painted, and shall be located within 3' of the periphery of Tenant's work area. 2. Repairs: Tenant shall make all repairs to the premises necessitated by the removal of the improvements made by previous occupant(s). Such work shall include but not be limited to: concrete slab, roof, structural members, mechanical and electrical equipment, telephone equipment, party walls and interior finishes. D. Architectural and Finishing Work -------------------------------- 1. Storefront work. 2. Partitions. a. To the extent that new corridor-partitions are required, Landlord will erect stud framing and one (1) layer of 5/8" firecode gypsum wallboard on the corridor side of one-hour fire resistant partitions separating the leased premises from adjacent service/exit corridors. Such stud framing shall extend from the floor slab of the leased premises to the underside of the floor or roof structure. Tenant shall reimburse Landlord as Tenant's share of the cost of such work $45.00 per lineal foot of said stud framing, and gypsum wallboard. Tenant shall install one (1) layer of 5/8" firecode gypsum wallboard on Tenant's side of stud framing to underside of structure as required for a one-hour fire resistant separation. Note: Service/exit corridors where a two-hour fire resistant ---- partitions separating the leased premises from the adjacent service/exit corridor is required, Landlord will erect stud framing and two (2) layers of 5/8" 60 firecode gypsum wallboard on the corridor side of two-hour fire resistant partitions separating the leased premises from adjacent service/exit corridors. Tenant shall reimburse Landlord as Tenant's share of the cost of such work $66.00 per lineal foot of said stud framing and gypsum wallboard. Tenant shall install two (2) layers of 5/8" firecode gypsum wallboard on Tenant's side of stud framing to underside of structure as required for a two-hour fire resistant separation. Exhibit B. Section III.D.2.a.: Neither the $45.00 per lineal foot charge nor - ------------------------------ the $66.00 per lineal foot charge shall apply to Tenant. 3. All required interior partitioning, fire separations and doors, service exit door, ceiling work, floor coverings, commercial grade finish hardware, and painting and finishing work. 4. Covering and finishing of columns to achieve a one-hour fire resistant rating. 5. Toilet facilities. 6 Sign(s) and sign panel backgrounds. 7. Floors: a. In upper level Tenant spaces with a depressed structural concrete floor, concrete topping to achieve a finished floor elevation at the same elevation as the mall. b. Repairs as may be required to accommodate extension of underground utilities. c. All slabs on grade. Tenant shall provide sand fill and/or remove excess as required and compact same to 95% modified proctor and install a vapor barrier (minimum .004 mill visqueen) and a concrete minimum strength of 3,000 pounds with 6 x 6 No. 10 woven wire mesh (minimum thickness 4") in accordance with Standard Project Details, finished as required to receive floor finishes. d. Finished floor elevation at all store entrances shall be at the same elevation as adjacent areas. All carpet areas are to be depressed. E. Structural ---------- 1. Any alterations and/or additions and reinforcements to Landlord's structure required to accommodate Tenant's Work, all of which must be designed by a certified structural engineer at Tenant's expense. Performance of such work is subject to prior written approval of Landlord. F. Mechanical ---------- 1. All plumbing, heating, ventilating, and air conditioning systems within or directly related to Tenant's leased premises, proceeding from the points of connection to utilities as listed in Exhibit B-1, or modifications to existing mechanical systems, all in accordance with Landlord's design criteria. G. Electrical ---------- 61 1. All electrical and telephone systems within or directly related to the leased premises proceeding from points of connection to utilities as listed in Exhibit B-1 (or in other construction exhibits, if any, attached to this Lease), or modifications to existing systems, all in accordance with Landlord's design criteria. H. Fire Protection --------------- 1. A complete, hydraulically calculated fire protection sprinkler system, proceeding from the point of connection to Landlord's system or modifications or removal of existing fire protection sprinkler system and existing fire retardant materials in accordance with Landlord's design criteria. All such work shall be performed, at Tenant's sole cost and expense, by a qualified sprinkler contractor acceptable to Landlord, provided such contractor shall charge reasonably competitive rates (i.e., within ten percent [10%] of the bid by any contractors which have been approved by Landlord, such approval not to be unreasonably withheld). Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency thereof, and Tenant shall be solely responsible therefor. Tenant shall be responsible for the cost of the complete removal of all existing fire-retardant materials and all demolition associated with this removal. All work will be done in strict compliance with all local, state, and federal codes and requirements. All demolition and removal work will be performed by contractors under contract with the Landlord. All of the work performed pursuant to this Section III shall, for the purpose of the Lease to which this Exhibit is attached and made a part, be deemed to be improvements made to the leased premises by Tenant. SECTION IV. CRITERIA -- TENANT'S WORK. - -------------------------------------- The requirements, criteria and/or outline specifications as set forth herein represent minimum standards for the preparation of working drawings, construction and finish of the leased premises by Tenant: A. Standard Project Details and Construction Information ----------------------------------------------------- 1. Standard Project Details and Construction Information, issued by Landlord, as they pertain to Tenant's Work, shall govern with respect to such work. Such details shall be reviewed by Tenant and incorporated as required in Tenant's Working Drawings and Specifications for the leased premises. B. Design Loads ------------ 1. Structural loading imposed by any of Tenant's Work on a temporary or permanent basis shall not exceed the following allowable live loads: a. Stores located on supported slabs (levels other than on-grade): 75 lbs. per square foot. b. Common areas, mall courts, and galleries: 75 lbs. per square foot. c. On-grade slabs: 125 lbs. per square foot. d. Roof: 20 lbs. per square foot. 62 C. Architectural Structural ------------------------ 1. Storefront work: a. The configuration of the storefront line, as established by Landlord, shall be considered the leaseline, beyond which no element of the storefront may extend. b. All storefront components, including head tracks for sliding doors, grille roller supports, guide, and supports for side rolling grilles, etc., shall be structurally fastened and braced to the building structure. All aluminum storefront components which remain visible during business hours, such as sliding doors and other glazing sections, rolling grilles or ornamental metal shall have an anodized finish. c. Electronic surveillance or other shoplifting detection devices and security systems shall be incorporated and integrated within Tenant's storefront. Free-standing "boxes" or "columns" or other exposed equipment or decals shall be prohibited. 2. Ceilings: Non-combustible ceilings on a concealed metal suspension system shall be used throughout all Tenant's public areas. An exposed metal suspension system may be permitted only if the system consists of 2' x 2' tee grid with regressed lay-in acoustical tile in horizontal planes only; vertical or sloped use of exposed tees is prohibited. Taped, painted and/or plaster sprayed gypsum board ceilings shall be used in conjunction with all storefront soffits. The use of exposed wood or other combustible material above ceilings or in any other attic spaces is prohibited. 3. Walls: 5/8" Firecode (UL listed) gypsum board shall be used on all party walls where a one-hour fire resistant separation is required. All interior partitions shall have gypsum board finish on all sides. A one-hour tire resistant rating is required for all steel columns. 4. Floors: a. Carpeting and/or other quality floors, such as glazed or unglazed tiles or hardwood flooring shall be used in Tenant's public areas. The reuse of flooring materials not in compliance with the foregoing is prohibited. b. Toilet rooms and kitchens shall have waterproofed floors (if a level exists below the Leased Premises) and toilet rooms shall have door thresholds. 5. Service Exit Door: One hinged 3'-0" x 7'-0" x 1-3/4" prime coated, one-hour fire labeled, hollow metal service exit door, frame, and commercial grade hardware unless otherwise required by code. The service door shall be installed in a vestibule, by Tenant at its expense, if required by code. 6. Rubbish Storage: a. Food and beverage service Tenants shall provide adequate storage areas for rubbish and solid waste storage room(s) within leased premises as shown on Tenant's plans. 63 b. Floor area of kitchens, bathrooms and other wet areas to be waterproofed with membrane approved in writing by Landlord. 7. General: a. Landlord shall have the right to locate, both vertically and horizontally, utility lines, air ducts, pipes, refrigerant lines, drains, sprinkler mains and valves, and such other facilities, including access panels for same, within the leased premises, as deemed necessary by engineering design and/or code requirements. Landlord's right to locate facilities within the leased premises shall include the facilities required by other tenants. Landlord shall also have the right to locate mechanical and other equipment on the roof over the leased premises. In exercising its rights under this paragraph, Landlord agrees to use reasonable efforts to minimize interference with Tenant's business operations within the leased premises, in light of the then existing circumstances. b. Notwithstanding anything to the contrary contained in this Lease or in any of the exhibits attached thereto, all flashing, counter-flashing, roof penetrations, and roofing repairs shall conform to the project roofing specifications. Roof repairs or penetrations required by removal or relocation of existing equipment or installation of new equipment (cutting of roof and deck material and/or repair of same) shall be performed by Landlord's roofing contractor at Tenant's expense, provided such contractor shall charge reasonably competitive rates (i.e., within ten percent [10%] of the amount Landlord would have been charged for similar work). Tenant shall enter into a direct contract with Landlord's roofing contractor. D. Mechanical ---------- l. Plumbing: a. Plumbing fixtures and accessories shall be of commercial quality and shall be of water conserving type. b. Tenant shall provide a water meter (calibrated in gallons) in an easily accessible location (or, at Landlord's direction, Tenant will install a remote reader device). c. Floor drains shall be provided in toilet rooms and kitchens and/or food service areas. Refer to Exhibit B-l for additional criteria. 2. Heating, Ventilating and Air Conditioning: a. If Tenant elects to utilize existing HVAC system, said system shall be completely upgraded and repaired to like new condition at Tenant's sole cost and expense. b. If Tenant elects to install a new HVAC system or a supplement to an existing system, (which system shall be separate from the Mall HVAC system) said systems, shall be approved by Landlord. Refer to Exhibit B-l for additional criteria. 64 3. Fire Protection: Hydraulically calculated fire protection sprinkler system, fire hose cabinets, fire extinguishers and other equipment within the leased premises in accordance with Landlord's insurance underwriters' Fire Rating Inspection Bureau, and Code requirements. Since the entire fire protection system for the project is required to be an inter- related, centrally controlled installation, Tenant shall cause to be designed and installed, by a qualified sprinkler contractor acceptable to Landlord, said system within the leased premises in accordance with Landlord's requirements and shall submit shop drawings, specifications and hydraulic calculations for the sprinkler system to the Landlord's Insurance Underwriters' Fire Rating Inspection Bureau for approval. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy of sufficiency thereof, and Tenant shall be solely responsible therefor. Said work shall be accomplished without interrupting fire service to remainder of Shopping Center during occupied hours. E. Electrical ---------- l. Tenant, at its expense, shall furnish and install and/or modify the existing to provide a complete electrical service proceeding from the Landlord's point of connection as defined in Exhibit B-l to a point within the leased premises. This work shall include, but not be limited to, furnishing and installing a fusible disconnect switch at Landlord's/utility company's distribution equipment and conduit and conductors of sufficient capacity for Tenant's requirements. All conductors shall be insulated copper wire type THW or THWN. 2. All fluorescent or incandescent lighting fixtures in Tenant's public areas, other than track type and decorative fixtures, shall be recessed. Connections to all devices in Tenant's public areas shall be concealed. 3. Emergency lighting shall be provided by Tenant per code to illuminate stock and/or sales areas and rear exitway during power outage, which lighting shall be battery-operated, twin-head light pack(s) and/or fluorescent fixtures. In public areas battery assembly for emergency lights shall be concealed. 4. Circuits serving signs shall be controlled by a time switch. 5. Audio systems installed by Tenant shall be designed such that sound shall be contained within the leased premises. Except for table speakers connected to a jukebox system, no speaker or sound emitting device shall be installed or employed within ten feet (10') of Tenant's storefront lease line and all such speakers shall be directed toward the interior of the space. Refer to Exhibit B-l for additional criteria. F. Tenant's Permanent Sign ----------------------- 1. General: Tenant shall submit quadruplicate copies of its sign drawings and specifications, including samples of materials and colors, for Landlord's approval, prior to fabrication of Tenant's sign. Such drawings shall show location of sign on storefront elevation drawing and shall clearly indicate color, materials, attachment devices, dimensions and construction details. 2. Criteria: 65 Only the storefront of the leased premises facing malls and/or courts shall be identified by a sign except as expressly provided in this Lease or permitted by Landlord. Tenant's sign shall be subject to the following requirements and limitations except as expressly provided in this Lease or permitted by Landlord: a. The average height of sign letters or components shall not exceed twelve inches (12"). b. No part of the sign letters shall hang free of the background. c. Sign shall not project beyond the leaseline of the leased premises more than two inches (2") if less than eight feet (8') above finished floor line, or more than six inches (6") if above eight feet (8'). d. Signs shall be limited to the store name only as set forth in Section 16.01 of this Lease; reference to merchandise or activity is prohibited. e. Surface brightness of translucent material shall be consistent in all letters and components of the sign. All edges and the backs shall be fully encased in metal. f. The storefront sign shall not employ the name of the Shopping Center as part of Tenant's store identification. g. The outer limits of sign letters, components or insignia shall fall within a rectangle, the two short sides of which must be at least twenty-four inches (24") from the side leaselines of the leased premises, the top side of which must be at least twelve inches (12") from the soffit of the mall fascia element. h. All electrical sign components must bear U.L. Label. Such U.L. Label must be inconspicuously placed. 3. The following types of signs or sign components are prohibited: a. Signs employing moving or flashing lights or any audible or moving components. b. Signs employing exposed raceways, transformers. c. Signs exhibiting manufacturer's name, stamps or decals. d. Signs employing painted and/or non-illuminated letters. e. Signs employing luminous-vacuum formed plastic letters. f. Signs of box or cabinet type, employing transparent, translucent or luminous plastic background panels. g. Shadow-box type signs. h. Signs employing unedged or uncapped plastic letters with no returns. i. j. Cloth, paper, plastic or cardboard signs, stickers, decals, or painted signs of any kind, hung around, on or behind storefront glass or within storefront space. k. Back-illuminated signs. l. Free-standing signs. 66 4. The service door of the leased premises shall be identified with a plastic sign, uniform to all Tenants, in accordance with Center Management criteria. SECTION V. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE - -------------------------------------------------------- COMPLETION OF PLANS AND SPECIFICATIONS BY TENANT. - ------------------------------------------------ All prints, drawing information and other material to be furnished by Tenant to Landlord for approval as required in this Exhibit shall be addressed to Landlord at 200 East Long Lake Road, P.O. Box 200, Bloomfield Hills, Michigan 48303-0200. Approvals of such documents shall be deemed invalid unless given by Landlord in writing. Any approval given by Landlord with respect to Tenant's Work or any subsequent alterations by Tenant shall be effective only for a period of one hundred twenty (120) days following Landlord's notice to Tenant of such approval subject to Section 27.04 delays. If Tenant shall not have commenced construction with respect to such work or alterations within such one hundred twenty (120) day period, subject to Section 27.04 delays (or shall not be diligently pursuing such work or alterations to completion), Tenant shall be required to resubmit the applicable plans and specifications to Landlord for re- approval prior to commencement or continuation of such work or alterations. All notices, drawing information and other material furnished by Landlord to Tenant under this Exhibit or pursuant to Sections 5.01 or 5.02 of the Lease may be effectively submitted to Tenant by mailing the same to Tenant at the address set forth on the Data Sheet on page 1 of the Lease or to Tenant's architect if Tenant has provided Landlord with such an address, notwithstanding any contrary or additional requirement contained in any other section of the Lease. A. Space Layout Drawings --------------------- 1. Following the execution of this Lease, Landlord shall furnish Tenant with one (l) set of prints of Space Layout Drawings giving technical and design information for the leased premises; provided that Landlord shall not be responsible for the accuracy, efficacy or sufficiency of said Space Layout Drawings and Tenant shall be solely responsible for all technical and other examinations of the leased premises and shall be exclusively responsible with respect to verification of actual field conditions and actual field measurements and a full review of all technical and engineering requirements with respect to the leased premises and Tenant's construction thereon. B. Working Drawings and Specifications ----------------------------------- l. Within sixty (60) days from either of the following dates, whichever shall be the later to occur (a) receipt by tenant of Space Layout Drawings or (b) execution of this Lease by the parties hereto, Tenant shall engage an Architect registered in the state in which the Shopping Center is located for the purpose of preparing Working Drawings and Specifications for the leased premises. Working Drawings and Specifications shall be prepared in strict compliance with the Construction Criteria and requirements as set forth in Section IV of this Exhibit and shall adhere to the design as indicated in Section 5.01(b) of the Data Sheet of the Lease to which this exhibit is attached. 2. All Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (l) set of reproducible prints (i.e., sepias) and one (l) set of prints, along with a Letter of Certification by Tenant's Architect that such drawings and specifications comply with Section 5.01(b) of the Data Sheet and Landlord's Construction Criteria. Any required revisions to such Working 67 Drawings and Specifications shall be prepared and resubmitted by Tenant to Landlord within ten (10) days of receipt of notice from Landlord. 3. Tenant shall pay all fees of its Architect, and shall pay to Landlord for Coordination and Administrative Services a fee based on the floor area of the leased premises in accordance with the following schedule: Floor Area of Lease Premises Applicable Amount in $ ---------------------------- ---------------------- 1 to 500 sq. ft. 900.00 501 to 750 sq. ft. 975.00 751 to 1,500 sq. ft. 1,150.00 1,501 to 3,500 sq. ft. 1,700.00 3,501 to 6,000 sq. ft. 2,150.00 6,001 to 10,000 sq. ft. 2,750.00 10,001 sq. ft. and over 3,300.00 + 30c/sq. ft. in excess of 10,000 sq. ft. Tenant's payment of the foregoing fee shall be payment to Landlord in connection with Landlord's review of the various plans and specifications submitted by Tenant and in connection with Landlord's facilitation and coordination of Tenant's actual construction in the leased premises; however, Landlord shall not be in any way responsible or liable with respect to the accuracy, sufficiency, or feasibility of Tenant's plans, and Tenant shall be totally responsible for same. Exhibit B. Section V.B.3. and - ----------------------------- Exhibit B-2D. Section V.C.3. The fee for Coordination and Administrative - ---------------------------- Services shall not apply to this Lease. C. Completion Schedule: -------------------- 1. The following information regarding Tenant's completion schedule shall be completed by Tenant and delivered to Landlord upon Tenant's execution of this Lease: a. Working Drawings and Specifications submittal date (thirty (30) days after receipt of fully-executed Lease) b. Submission of Working Drawings and Specifications to the local building department for building permit concurrent with submittal to Landlord (allow four (4) weeks for approval) c. Construction start date d. Merchandise date e. Store opening date f. Commencement date Notification may be sent by Landlord to Tenant, at Landlord's option, for completion of any of the preceding dates not listed on the Completion Schedule submitted by Tenant. Any such notification shall be returned completed to Landlord no later than twenty-one (21) days following Tenant's receipt thereof. 68 SECTION VI. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE CONSTRUCTION OF THE - ----------------------------------------------------------------------------- LEASED PREMISES BY TENANT. - ------------------------- A. Commencement of Construction ---------------------------- 1. Tenant shall commence demolition and/or construction of its leased premises in time to open by the commencement date of the lease term and shall carry such construction to completion with all due diligence. The failure of Tenant to comply with procedures and schedules set forth in this Exhibit, or to commence or complete the construction of the leased premises prior to the date of commencement of the term of the Lease to which this Exhibit is attached and made a part shall have no effect whatsoever upon the commencement of said term, which shall in any event commence at the time provided for in Section 1.02 of said Lease. B. General Requirements -------------------- 1. Tenant shall submit to Landlord via Certified or Registered Mail, at least five (5) days prior to the commencement of construction, the following information: a. The names and addresses of the General, Mechanical and Electrical Contractors Tenant intends to engage in the construction of its leased premises. b. The date on which Tenant's construction work will commence, together with the estimated date of completion of Tenant's construction work and fixturing work, and date of Tenant's projected opening for business in the leased premises. c. Evidence of insurance as called for hereinbelow. d. Statement of estimated construction costs, including architectural, engineering and contractor's fees. 2. Tenant shall engage the services of such bondable, licensed contractors who will work in harmony with Landlord's contractors and the contractors employed by the other tenants so that there shall be no labor disputes which would interfere with the operation, construction and completion of the Shopping Center or with any work being carried out therein. 3. Construction shall comply in all respects with applicable Federal, State, County and/or City statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the leased premises shall be obtained and paid for by Tenant. Landlord's review of Tenant's Working Drawings and Specifications shall be for the purpose of ascertaining compliance with the requirements of this Lease and Landlord's requirements, and shall in no event extend to any confirmation or authorization, express or implied, that Tenant's Working Drawings and Specifications have been prepared in accordance with the requirements of applicable laws, codes, ordinances and regulations, including, without limitation, the Americans with Disabilities Act, and Tenant shall be solely responsible with respect to all necessary compliance with such laws, codes, ordinances and regulations. Tenant shall provide temporary heat if required. Tenant shall provide temporary electrical if required. Tenant shall apply and pay for all utility services. 69 Tenant shall cause its Contractor to provide warranties for not less than one year against defects in workmanship, materials and equipment. 4. Tenant's Work shall be subject to the inspection of Landlord, its consultants, and its supervisory personnel. 5. Upon the expiration of one half (1/2) of the lease term, Tenant shall, within thirty (30) days after direction from Landlord, submit Working Drawings and Specifications as set forth in Section V of this Exhibit showing the work to be performed by Tenant to completely remodel and refurbish the leased premises. Tenant will cause such work to be performed not later than ninety (90) days following the date of Landlord's direction in accordance with Working Drawings and Specifications approved by Landlord specifying the remodeling work to be done by Tenant. All such work shall be subject to and shall be carried out in accordance with the provisions of this Lease, including, without limitation, the provisions of Section 5.01(b) governing construction of the leased premises and the remedies of Landlord in the event of noncompliance by Tenant, including, but not limited to, termination of this Lease as therein set forth. Without limiting the foregoing, in the event that Tenant shall fail to perform such remodeling work, or if Tenant shall fail to operate the leased premises as required in the Lease or shall fail to surrender possession of the leased premises to Landlord as required in the Lease or under law, Landlord shall have the right to erect, at Tenant's expense, a storefront barricade in front of the leased premises, which barricade shall not be removed except upon Landlord's prior written consent and with Tenant paying the cost of such removal. Exhibit B. Section VI.B.5.: Notwithstanding the provisions of this Section to - -------------------------- the contrary, the remodeling and refurbishing required by this Section shall be limited to cosmetic refinishing of surfaces to bring same to a `like new' condition. Conflict: In the event of an express conflict between the provisions of this Lease, then any such conflict shall be resolved by referring to the portions of this Lease in which the conflicting provisions are located and resolving the conflict by using the following order of priority to determine which portion of the Lease controls over the other: (i) the Special Provisions of the Data Sheet; (ii) the other provisions of the Data Sheet; (iii) the Addendum; (iv) the Rider; (v) Exhibit B-2D (if applicable), Exhibit B-1 and Exhibit C (if applicable); (vi) the Standard Form and Exhibit B. C. Landlord's Right to Perform Work -------------------------------- 1. Landlord shall have the right to perform, on behalf of and for the account of Tenant, subject to reimbursement of the cost thereof by Tenant, any and all of Tenant's Work which Landlord determines in its reasonable discretion should be performed immediately and on an emergency basis for the best interest of the project, including without limitation, work which pertains to structural components, mechanical, sprinkler and general utility systems, roofing and removal of unduly accumulated construction material and debris. D. Temporary Facilities During Construction ---------------------------------------- 1. Tenant shall pay for all temporary utility facilities, and the removal of debris, as necessary and required in connection with the demolition and/or construction of the leased premises. Storage of Tenant's Contractors' construction material, tools, equipment and debris shall be confined to the leased premises and in areas which may be designated for such purposes by Landlord. In no event shall any material or debris be stored in the mall or in service or exit corridors. 70 2. During construction, Landlord may provide temporary electrical service in an area designated by Landlord. Tenant shall request, in writing, permission to connect temporary lines to the power source for service to its premises. The cost to Tenant for this service will be $450.00 per month or twenty-five cents (25c) per square foot of leased area per month, whichever is greater. Payment is to be remitted to Landlord by the first of each month after service is initiated. In the event that the leased premises presently contain a metered electrical service, Tenant shall utilize the existing service and reimburse Landlord on the metered basis. 3. During initial construction, Tenant fixturing and merchandise stocking, Landlord may require Tenant to utilize trash removal service from designated truck courts. Tenant is responsible for breaking down boxes and placing trash in containers in the designated truck court areas. The cost to Tenant for this service will be on a monthly basis and payment is to be remitted by the first of each month after service is initiated on the following basis: Floor Area of Leased Premises Monthly Charge in $ ----------------------------- ------------------- 30,001 sq. ft. to 50,000 sq. ft. 460.00 20,001 sq. ft. to 30,000 sq. ft. 410.00 15,001 sq. ft. to 20,000 sq. ft. 360.00 10,001 sq. ft. to 15,000 sq. ft. 320.00 5,001 sq. ft. to 10,000 sq. ft. 280.00 2,001 sq. ft. to 5,000 sq. ft. 240.00 2,000 sq. ft or less 200.00 At any time, as determined by Landlord, Landlord may discontinue trash removal service and Tenant shall assume responsibility therefor. All such work shall be performed by contractors approved by Landlord. E. Construction Completion ----------------------- 1. A Letter of Certification by Tenant's Architect stating that the store has been satisfactorily completed in compliance with the Landlord Approved Working Drawings. Any deficiencies should be outlined and sent to Tenant's contractor for correction within thirty (30) days. F. Landlord's Letter of Acceptance ------------------------------- 1. Upon the completion of Tenant's construction and fixturing work, and upon written request to Landlord from Tenant, Landlord shall issue a Landlord's Letter of Acceptance of said premises. The issuing of such a Letter shall be contingent upon Tenant satisfying all of the following conditions (which conditions shall, in any event, be satisfied by Tenant as a obligation hereunder): a. The satisfactory completion by Tenant of the work to be performed by Tenant under Section III of this Exhibit including correction of deficiencies and inconsistencies with approved Working Drawings and Specifications. b. Furnishing by Tenant to Landlord of all waivers of liens and sworn statements from all persons performing labor and/or supplying materials in connection with such work showing that all of said persons have been compensated in full. c. Submittal by Tenant to Landlord of Tenant's final and total construction costs. 71 d. Submittal by Tenant to Landlord of warranties for not less than one (1) year against defects in workmanship, materials and equipment, if so required by Landlord. e. Full payment by Tenant of all sums due Landlord for items of work performed by Landlord on behalf of Tenant, as outlined in this Exhibit. f. The issuance of a Certificate of Occupancy by the Building and Safety Department of the local unit of government. g. Tenant shall have provided Landlord with 'as-built' drawings depicting the leased premises and all mechanical, electrical and architectural changes thereto. 2. Within fifteen (15) days following written request from Tenant, Landlord shall also inspect that portion of Tenant's Work which shall have been completed up to the date of such request, and upon satisfaction of all of the foregoing conditions set forth in paragraph 1 above (other than issuance of a Certificate of Occupancy) with respect to the portion of Tenant's Work so completed, Landlord shall issue a Landlord's Letter of Acceptance with respect to such completed work. No payments, if any, required to be made by Landlord to Tenant shall be made unless and until Tenant shall have obtained a current Letter of Acceptance with respect to all of Tenant's Work completed as of the date of such required payment. G. Payments by Tenant ------------------ 1. Tenant shall pay Landlord all sums due Landlord for items of work performed or expenses incurred by Landlord on behalf of Tenant within twenty (20) days after receipt by Tenant of a statement therefor September 23, 1999 from Landlord. Such items of work and expenses incurred include, but are not necessarily limited to, the following: a. All items called for as Tenant's cost obligations in this Exhibit. b. In the event that the leased premises are located in a retail development, or in an expansion wing of a retail development, which development or expansion wing shall not yet have opened for business to the public at the time of the commencement by Tenant of its construction hereunder, Tenant shall be obligated to pay to Landlord Tenant's pro rata share of costs and expenses incurred by Landlord in arranging for a final cleaning of and debris removal from the common areas and vacant premises in preparation for the grand opening of the retail development or of such expansion wing. Tenant's pro rata share shall be computed on the basis that the square footage of the leased premises bears to the square footage of gross leased and occupied area in the Shopping Center (or in the expansion wing of the Shopping Center, as applicable) as of the earlier of: the date of the opening of the Shopping Center (or the expansion wing, as applicable), or the date that Tenant is notified of its pro rata share of such costs and expenses. H. Insurance --------- 1. Tenant shall secure, pay for and maintain, or cause its Contractor(s) to secure, pay for and maintain during construction and fixturing work within the leased premises, all of the insurance policies required herein, in the amounts as set forth below, and such insurance as may from time to time be required from city, county, state or federal laws, codes, regulations or authorities, together with such other insurance as is reasonably necessary or appropriate under the circumstances. Tenant shall not 72 permit its Contractor(s) to commence any work until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. 2. Tenant's General Contractor's and Subcontractors' Required Minimum Coverages and Limits of Liability. a. Worker's Compensation, as required by state law, and including Employer's Liability Insurance with a limit of not less than $2,000,000, and any insurance required by any Employee Benefit Acts or other statutes applicable where the work is to be performed as will protect the Contractor and Subcontractors from any and all liability under the aforementioned acts. b. Commercial General Liability Insurance (including Contractor's Protective Liability) in an amount not less than $2,000,000 for any one occurrence whether involving personal injury liability (or death resulting therefrom) or property damage liability or a combination thereof with an aggregate limit of $2,000,000. Such insurance shall provide for explosion, collapse and underground coverage. Such insurance shall insure Tenant's General Contractor against any and all claims for personal injury, including death resulting therefrom and damage to or destruction of property of any kind whatsoever and to whomsoever belonging and arising from his operations under the Contract and whether such operations are performed by Tenant's General Contractor, Subcontractors, or any of their Subcontractors, or by any one directly or indirectly employed by any of them. c. Comprehensive Automobile Liability Insurance, including the ownership, maintenance, and operation of any automotive equipment, owned, hired, and non-owned, in the following amounts: (1) Bodily injury, per occurrence for personal injury and/or death........................... $2,000,000 (2) Property Damage Liability..................... $2,000,000 Such insurance shall insure the General Contractor and/or Subcontractors against any and all claims for personal injury, including death resulting therefrom and damage to the property of others caused by accident and arising from its operations under the Contract and whether such operations are performed by the General Contractor, Subcontractors, or by anyone directly or indirectly employed by any of them. 3. Tenant's Protective Liability Insurance. Tenant shall provide Owner's Protective Liability Insurance as will insure Tenant against any and all liability to third parties for damages because of personal injury liability (or death resulting therefrom) and property damage liability of others or a combination thereof which may arise from work in connection with the leased premises, and any other liability for damages which Tenant's General Contractor and/or Subcontractors are required to insure against under any provisions herein. Said insurance shall be provided in minimum amounts as follows: (1) Bodily injury, per occurrence for personal injury and/or death ............................. $2,000,000 (2) Property Damage Liability........................ $2,000,000 4. Tenant's Builder's Risk Insurance -- Completed Value Builder's Risk Material Damage Insurance. 73 Coverage: Tenant shall provide an "All Physical Loss" Builder's Risk insurance policy on the work to be performed for Tenant in the leased premises as it relates to the building within which the leased premises is located. The policy shall include Tenant, its Contractor and Subcontractors, Landlord, and the partners and agents of Landlord, as insureds as their interests may appear. The amount of insurance to be provided shall be 100% of the replacement cost. 5. All such insurance policies required under this Exhibit, except as noted above, shall include Landlord, its Managing Agent, its Architect, its General Contractor, and the partners and agents of Landlord, and the partners of such partners, and any other parties in interest designated by Landlord, as additional insureds; except Worker's Compensation Insurance, which shall contain an endorsement waiving all rights of subrogation against Landlord, its Managing Agent, its Architect, General Contractor, partners and agents, and the partners of such partners, and any other parties in interest designated by Landlord. Certificates of Insurance shall provide that no reduction in the amounts or limits of liability or cancellation of such insurance coverage shall be undertaken without prior thirty (30) day written notice to Landlord. The insurance required under this Exhibit shall be in addition to any and all insurance required to be procured by Tenant pursuant to Section 11.01 of the Lease to which this Exhibit is attached. [End of text of Standard Construction Exhibit] 74 LAKEFOREST EXHIBIT B-1 UTILITIES (Attached to and forming a part of Exhibit B; Section references correspond to the Section numbers set forth in Exhibit B.) SECTION II: LANDLORD'S WORK. - ---------------------------- A. Building Utilities and Services ------------------------------- 1. Points of connection, for Tenant's use, to the following utilities in location and sizes determined by Landlord. a. Sanitary sewer stub. b. Domestic cold water stub. c. Plumbing vent stub. d. Fire protection sprinkler system stub. e. Air conditioning supply duct stub. f. Toilet exhaust duct stub. g. Central electric utility company distribution centers (227/480V, 3PH, 4W, 60C). h. Central telephone distribution boards. i. Kitchen waste system sewer stub. j. Central gas utility company meeting manifolds. SECTION IV: CRITERIA - TENANT'S WORK. - ------------------------------------- The requirements, criteria, and/or outline specifications as set forth herein represent minimum standards for the design, construction, and finish of the mechanical and electrical systems installed by Tenant. A. Mechanical ---------- 1. Plumbing: a. Plumbing fixtures and accessories shall be of commercial quality and (if required by governmental code) shall be of a water-conserving type. b. Water heaters shall be electric, except Food and Beverage Service tenants where gas units may be permitted if gas is available. c. Floor drains shall be provided in toilet rooms, kitchens, and/or food service areas. d. Food and Beverage Service Tenants shall further provide cast-iron grease traps located within the leased premises, or shall connect to Landlord's "Kitchen Waste System," where provided, in accordance with code. Tenants permitted or required by Landlord to connect to the Kitchen Waste System will be obligated to pay their proportionate share of all costs involved in service, maintenance, repairs and/or replacement of the Kitchen Waste System. Tenant's proportionate share of such costs and expenses shall be computed on the basis that the total number of square feet of floor area in the leased premises bears to the total number of square feet of gross leased and occupied floor area being served by the Kitchen Waste System. Grease traps will not be permitted within the premises of tenants connected to the Kitchen Waste System, notwithstanding any provisions of Exhibit B to the contrary. 75 2. Heating, Ventilating, and Air Conditioning: a. The leased premises is served from a centrally conditioned cold air supply system installed by Landlord, which will deliver, during regular Shopping Center business hours, filtered, cooled air at a fixed temperature and variable volume. They system is designed to maintain the leased premises at 76(degrees)F. (plusminus) 2(degrees)F. DB and 50% RH, when outdoor temperature is 94(degrees)F. DB and 78(degrees) F. WB, and Tenant's total internal sensible and latent heat gain does not exceed 27 BTU/hour per square foot of leased premises. b. The Common area air conditioning system is designed to provide initial "warm-up" to 65(degrees) F., when outdoor temperature is 10(degrees) F. DB. Tenant shall provide its own supplementary electrical heating equipment, should additional heating be required by it for its leased premises. c. Landlord will furnish, for installation by Tenant within its leased premises, Variable Air Volume Control Device(s), with pneumatic operator(s) and thermostat(s) for same (collectively, VAV Device Sets). Tenant shall design and install the air distribution system for its leased premises, using the VAV Device Set(s), in accordance with Standard Project Details. d. Tenant shall provide openings in the partitions defining Tenant's leased premises (party walls) for the transfer of the return air to its respective central system unit where applicable. Refer to Standard Project Details for location in attic space, detail, height and sizing of return air openings. e. Tenant shall provide exhaust fans to satisfy exhaust requirements for toilet rooms and removal of heat generated within the show windows. Exhaust fans shall be located within the leased premises. Exhaust air discharge shall be restricted to exhaust duct locations designated by Landlord. f. Duct work in Tenant's public areas shall be concealed. Standards for construction and design shall be in accordance with ASHRAE and SMACNA Guides. B. Electrical ---------- 1. Power available to the leased premises is 277/480 volt, 3-phase, 4-wire. 2. Installation or modification of the existing system shall conform to the following: a. Dry-type transformer shall be used for all 120/208-volt requirements. b. Panelboards shall be designed for 20% minimum spare ampacity (based on connected load) and 20% spare breaker space. c. All electrical wiring systems shall be in conduit. The use of "BX" or "Romex" is not permitted except BX shall be permitted for runs between Tenant's junction boxes and Tenant's electrical fixtures. 76 Exhibit B-2D STORE DESIGN DRAWINGS (Attached to and forming a part of Exhibit B and showing certain modifications thereof; Section references correspond to the Sections of Exhibit B) SECTION III. TENANT'S WORK. - --------------------------- Tenant, at its sole cost and expense, shall perform all work required to complete the leased premises to a finished condition ready for the conduct of business therein. Tenant's Work shall conform to criteria, procedures, and schedules as set forth in Sections IV, V and VI, respectively, of Exhibit B, except as herein modified, and shall further include the preparation of Store Design Drawings and related matters as set below. SECTION V. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE COMPLETION OF PLANS AND - -------------------------------------------------------------------------------- SPECIFICATIONS BY TENANT. - ------------------------ B. Store Design Drawings --------------------- 1. Within thirty (30) days from either of the following dates, whichever shall be later to occur: (a) receipt by Tenant of Space Layout Drawings, or (b) execution of this Lease by the parties hereto, Tenant shall submit to Landlord one (1) set of reproducible prints of Store Design Drawings prepared by a qualified architect specializing in retail design, showing intended design character and finishing of the leased premises. The Store Design Drawings shall comply with the design criteria of the development and shall set forth the requirements of Tenant within the leased premises. Said drawings shall include but not be limited to the following: a. Merchandising layout of the space: merchandise allocations and fixture locations, both permanent and movable. b. Architectural design of the space, including storefront: floor plans, reflected ceiling plans and elevations including sign(s), sections and complete fixturing information, material selections and finishes, including color and material sample boards. c. Mechanical system: basic equipment to be used and its position and capacity, duct distribution system and diffuser locations. d. Electrical system: floor and reflected ceiling plans showing outlets, type of lighting fixtures, other electrical equipment contemplated and location of panelboard(s), switchboard(s) and projected electrical loads. e. General demolition plan. The parties acknowledge that Tenant's floor plans and exterior elevations have already been approved by Landlord (subject to receipt of approvals from governmental authorities and Department Store Site occupants. 2. After review of Store Design Drawings, Landlord shall return to Tenant one (1) set of prints of Store Design Drawings with Landlord's modifications and/or approval. 3. If Store Design Drawings are returned to Tenant with modifications, but not bearing Landlord's approval, said Store Design Drawings shall be immediately revised by Tenant and resubmitted to landlord for approval within fifteen (15) days of their receipt by Tenant. C. Working Drawings and Specifications. ----------------------------------- 1. Immediately following the date on which Store Design Drawings bearing Landlord's approval are returned to Tenant, Tenant shall engage an Architect registered in the state in which the Shopping Center is located for the purpose of preparing Working Drawings and Specifications for Tenant's leased premises. Working Drawings and Specifications shall be prepared in strict compliance with the Design Criteria and requirements as set forth in Section IV of this Exhibit and shall adhere to the Store Design Drawings as approved by Landlord. 2. All Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (1) set of reproducible prints (i.e., sepias) and one (1) set of prints, to Landlord within twenty-one (21) days from receipt by Tenant of Landlord's approved Store Design Drawings. Any required revisions to such Working Drawings and Specifications shall be prepared and resubmitted by Tenant to Landlord within fifteen (15) days of receipt of notice. 3. Tenant shall pay all fees of its Architect. Landlord shall not be in any way responsible or liable with respect to the accuracy, sufficiency or feasibility of Tenant's plans, and Tenant shall be totally responsible for same. D. Completion Schedule. ------------------- The submittal dates for Store Design Drawings and for Working Drawings and Specifications shall be included and shall be consistent with the requirements of paragraphs B and C above. [End of text of Standard Design Exhibit] 77 List of Miscellaneous Exhibits to Be Incorporated into The LAKEFOREST ASSOCIATES LLC., a Delaware limited liability company, as Landlord and SILVER DINER DEVELOPMENT, INC., as Tenant, dated ________________, 1999. The parties agree that the exhibits listed below and attached hereto shall be incorporated into the Lease in addition to the exhibits already contained therein: 1.) Exhibit "D" attached hereto. 2.) Exhibit "E" attached hereto. 3.) Exhibit "F" attached hereto. 4.) The Center Court icon/kiosk exhibit is attached hereto as Exhibit "G":. 5.) The Auxiliary Signage and Kiosk Operation Lease Exhibit is attached hereto as Exhibit "H". In addition, the parties acknowledge and agree that Tenant's design drawings submitted by Tenant to Landlord on October 6, 1999 as approved by Landlord inclusive of notations by Landlord are acceptable to Landlord and Tenant. Agreed: Silver Diner Development Inc. By: __________________________________ Lakeforest Associates LLC By: __________________________________ 78 EX-10.13.2 3 LEASE INTERFACE PROPERTIES EXHIBIT 10.13.2 LEASE ----- INTERFACE PROPERTIES, INC. LANDLORD AND SILVER DINER DEVELOPMENT, INC. TENANT August 11, 1999 TABLE OF EXHIBITS ----------------- Exhibit A Site Plan Exhibit A-1 and A-2 Description of the Shopping Center Exhibit B Construction Responsibilities Exhibit B-1 Landlord's Plans and Specifications Exhibit B-2 Tenant's Prototype Plans Exhibit C Form of First Amendment to Lease Exhibit D Form of Subordination and Non-Disturbance Agreement Exhibit D-1 Form Recognition, Non-Disturbance and Attornment Agreement Exhibit E Permitted Exceptions Exhibit F Form of Letter of Credit BASIC LEASE INFORMATION ----------------------- LANDLORD: INTERFACE PROPERTIES, INC. LANDLORD'S ADDRESS FOR NOTICES: 1200 N. Federal Highway Suite 200 Boca Raton, Florida 33432 Attention: Kenneth J. Goodman With a copy to: Mays & Valentine, L.L.P. 1111 E. Main Street Richmond, Virginia 23219 Attention: Pamela S. Belleman, Esquire TENANT: SILVER DINER DEVELOPMENT, INC. TENANT'S ADDRESS FOR NOTICES: Silver Diner c/o SILVER DINER DEVELOPMENT, INC. Corporate Office (Rear Entrance) 11806 Rockville Pike Rockville, Maryland 20852 Attn: Mr. Robert T. Giaimo Telecopy No. (301) 770-4521 and a copy to: SILVER DINER DEVELOPMENT, INC. Corporate Office (Rear Entrance) 11806 Rockville Pike Rockville, Maryland 20852 Attn: Controller Telecopy No. (301) 770-4521 SHOPPING CENTER: COLUMBUS VILLAGE EAST at the intersection of Virginia Beach Blvd and Beasley Street and Silverbrook Road Virginia Beach, Virginia BUILDING: The building to be located at the Shopping Center Pad Site at the corner of Silverbrook Road and Virginia Beach Blvd (the "Building"). LAND: The land under Tenant's the Building. PREMISES: The Building and the Land. DELIVERY DATE: October 15, 1999 EXPIRATION DATE: The last day of the calendar month in which the twentieth anniversary of the Rent Commencement Date occurs. INITIAL TERM: Twenty Years. RENEWAL TERM: Four (4) Five (5) Year Options BASE LAND RENT: The base rental for each Lease Year (a "Lease Year" being defined as each consecutive 12-month period beginning on the first day of the calendar month next following the month in which the Rent Commencement Date occurs) during the Term (hereinafter referred to as the "Base Land Rent"), shall be as follows: Lease Years Annual Base Land Rent ----- --------------------- 1-5 $100,000.00 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 11-15 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 16-20 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 21-25 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 26-30 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 31-35 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. 36-40 Prior Base Land Rent plus the CPI Increase over the prior 5 Lease Years not to exceed 10%. The CPI Increase shall be calculated as follows: (1) As promptly as practicable after the end of the fifth (5th), tenth (10th), and at the end of each successive five year period thereafter, Landlord shall compute the increase, if any, in the cost of living over the preceding period based upon the Consumer Price Index for All Urban Consumers (CPI-U), Washington-DC-MD-VA (1982-1984=100) (hereinafter called the "Index"), published by the Bureau of Labor Statistics of the United States Department of Labor or any successor or comparable successor Index. If the Index is not published for any given month, then the Index for the most recent month prior to such month shall be used. (2) The Index number for the month of the Rent Commencement Date shall be the base Index number for the first rent adjustment (e.g. adjustment for sixth (6th) Lease Year), and the corresponding Index number for the month in which the sixth (6th) Lease year commences shall be called the "current Index number". For each successive adjustment period the base Index number and the current Index numbers shall be the Index number for the same month occurring five years after the last adjustment. . (3) The current Index number shall be divided by the base Index number. From the quotient thereof, there shall be subtracted the integer 1, and any resulting positive number shall be deemed to be the CPI Increase. (4) If the CPI Increase is not determined prior to the first day of the Lease Year, Tenant shall continue paying the previous Lease Year's Base Land Rent until the CPI Increase for the Lease Year is determined by Landlord. In such event, on the first day of the Adjustment Month (defined hereinbelow) for the Lease Year Tenant shall pay in a lump sum an amount equal to one-twelfth (1/12th) of the difference between the Base Land Rent for the Lease Year and the Base Land Rent for the previous Lease Year multiplied by the number of months from the first month of the Lease Year to the Adjustment Month, and shall thereafter pay the Base Land Rent for the current Lease Year on a monthly basis. For purposes of this Section, the "Adjustment Month" shall mean the first full calendar month next following a thirty (30)-day notice by Landlord of the CPI Increase for the Lease Year. Landlord shall notify Tenant of the CPI Increase and the new Base Land Rent no later than ninety (90) days after each CPI Increase Date. If Landlord fails to notify Tenant of the CPI Increase Amount within ninety (90) days after an applicable CPI Increase Date, such fact shall be deemed a waiver by Landlord of its right to the CPI Increase Amount for such Lease Year. BUILDING RENT: In addition to the Base Land Rent above, Tenant shall pay to Landlord Building Rent during the Initial Term and all Renewal Terms in an amount equal to $96,000.00 per annum (based on 12% of the $800,000.00 being paid by Landlord for the construction of Tenant's Building)./1/ PERCENTAGE RENT: See Section 3(d). PERCENTAGE RENT COMMENCEMENT YEAR: The second (2nd) Lease Year. PERCENTAGE RENT MULTIPLIER: Six percent (6%). TENANT'S PRO RATA SHARE: A fraction, the numerator of which shall be the gross leasable area of the Premises and the denominator of which shall be the gross leasable area of the Shopping Center; provided, however, if any tenant pays taxes pursuant to a separate tax assessment of its premises, maintains its own parcel or insures its own building, the amount of such taxes, maintenance charges or insurance shall be excluded from the calculation of Tenant's Pro Rata Share of Taxes or Common Area Expenses and such tenant's premises shall be deducted in computing the square feet of gross leasable area in the Shopping Center for purposes of computing Tenant's Pro Rata Share of such item. The initial estimate is 7.9%. ESTIMATED INITIAL MONTHLY COMMON AREA CHARGE: $1.00 per square foot ESTIMATED INITIAL MONTHLY REAL ESTATE TAX CHARGE: $1.50 per square foot PERMITTED USE: Restaurant, including without limitation, the right to serve alcoholic beverages, subject to governmental approval, and as incidental thereto the right to sell Tenant's trademark apparel items. - -------------- /1/ Thus, the total annual Base Land Rent and Building Rent to be paid to Landlord during the first five years shall be $196,000.00. LEASE INTEREST RATE: An annual rate of interest equal to the lesser of (i) the maximum rate of interest permitted in the State of Virginia or (ii) at the prime rate from time to time published in the Wall Street Journal (or, if the Wall Street Journal is no longer being published, then another similar financial publication) plus two percent (2%). Interest shall be calculated on the basis of a 365-day year, actual days elapsed, from the date any cost or expense is incurred until the amount owing is fully paid. BROKERS: Divaris Real Estate and KLNB, Inc. SECURITY DEPOSIT: A letter of credit in the amount of $500,00.00. See Section 33. SITE PLAN: Site Plan attached as Exhibit A and by this reference made a part hereof. The foregoing Basic Lease Information is hereby incorporated and made a part of the Lease. Each reference in the Lease to any information and definitions contained in the Basic Lease Information shall mean and refer to the information and definitions hereinabove set forth. References in this document to the "Lease" shall mean the Basic Lease Information, the body of the Lease, and any Exhibits, Addenda, or Riders thereto. The provisions of the body of Lease shall be read to implement the Basic Lease Information. LEASE ----- THIS LEASE is made and entered into as of the date set forth on the cover page hereof (the "Effective Date") by Landlord and Tenant. The obligations of Landlord are expressly contingent upon Landlord closing on the purchase of the portion of the Shopping Center described in Exhibit A-1, attached hereto and by this reference made a part hereof. In the event Landlord fails to close on such portion of the Shopping Center on or before October 30, 1999, Landlord or Tenant shall have the right to terminate this Lease. 1. Premises. Landlord hereby leases the Premises to Tenant, and Tenant -------- hereby leases the Premises from Landlord, for the term and upon the conditions hereinafter provided. Landlord shall perform Landlord's Work as described in Exhibit B attached hereto and made a part hereof. It is understood and agreed that Landlord will not make, and is under no obligation to make, any structural or other alterations, decorations, additions or improvements in or to the Premises except as set forth in Exhibit B. Tenant shall perform or cause to be performed Tenant's work as described in Exhibit B, attached hereto and by this reference made a part hereof. 2. Term; Renewal Options. --------------------- (a) Lease Commencement Date. The Initial Term shall commence on the Lease ----------------------- Commencement Date (as defined in Section 3(f) of Exhibit B) and expire at midnight on the Lease Expiration Date unless extended or earlier terminated pursuant to the provisions contained herein. (b) Rent Commencement Date. The Rent Commencement Date is defined in ---------------------- Section 4(a) of Exhibit B. (c) First Amendment. Within thirty (30) days after the Rent Commencement --------------- Date, Landlord and Tenant shall execute a First Amendment to Lease (substantially in the form of Exhibit C attached hereto) setting forth the Lease Commencement Date, the Rent Commencement Date, and the Lease Expiration Date. 2 (d) Renewal Terms. The Initial Term and any exercise Renewal Term shall be ------------- defined as the "Term". In the event Tenant is not in default hereunder after the expiration of any applicable cure periods, Tenant shall have the right, at its option, to extend the Initial Term of this Lease for the number of consecutive Renewal Terms set forth in the Basic Lease Provisions ("Renewal Terms") on all of the same terms and conditions herein set forth, except that the Base Land Rent payable by Tenant during any Renewal Terms shall be asset forth in the Base Lease Information. Tenant may exercise each such Renewal Term by giving Landlord notice in writing at least eight (8) months prior to the then scheduled expiration of the Initial Term or then current Renewal Term. However, if Tenant fails to give such notice at least six (6) months prior to the then scheduled expiration of the Term, Tenant shall not be deemed to have waived the right to exercise such Renewal Term until Landlord gives Tenant written notice of Tenant's failure to exercise such Renewal Period and affords Tenant a period of thirty (30) days after receipt of such notice to exercise such Renewal Term. (e) Effective Date. Subject to the terms of this Lease, on the Effective -------------- Date (as defined in the first grammatical paragraph of this Lease), all rights and obligations of the parties under this Lease shall commence. 3. Base Rent; Additional Rent; Percentage Rent. ------------------------------------------- (a) Base Rent. (1) "Base Rent" is the amount set forth in the Basic Lease --------- Information as adjusted from time to time pursuant to the terms of this Lease. "Additional Rent" is any and all Percentage Rent (as defined in Section 3(d)(1)), and any and all other payments or charges payable by Tenant hereunder, other than Base Rent, whether due and payable immediately or in monthly installments. Throughout the Lease, Base Land Rent and Additional Rent are sometimes collectively referred to as the "Rent." (2) From and after the Rent Commencement Date, Base Land Rent and Additional Rent (where applicable pursuant to the terms of the Lease) shall be due and payable, in advance, in equal monthly installments. If the Rent Commencement Date is on a date other than on the first day of a month, Rent for the month during which the Rent Commencement Date falls shall be prorated on a daily basis based upon a thirty (30)-day month and shall be paid at the same time and together with the first full month's installment of Rent. All payments of Base Land Rent shall be due on the first day of each and every calendar month during the Term. All payments of Additional Rent (other than Percentage Rent) shall be due on the first day of each and every calendar month during the Term (except as expressly required herein). All payments of Rent shall be made to Landlord at Landlord's Address for Notices as set forth in the Basic Lease Information, or to such other party or at such other office as Landlord may designate from time to time by written notice to Tenant. All payments of Rent shall be made without demand, notice or invoice and without deduction, set-off or counterclaim (except as set forth elsewhere in this Lease). If Landlord shall at any time or times accept Rent after it shall become due and payable, such acceptance shall not excuse delay upon subsequent occasion. 3 (3) The Common Area Charge and Real Estate Taxes for the first and last calendar years of the Term shall be prorated based on the number of months of each such year occurring after the Rent Commencement Date and during the Term. If the Rent Commencement Date shall be a day other than the first day of a calendar month, payment for the first month shall be made on a pro rata basis and if the Term of this Lease shall end on a day other than the last day of a calendar month, payment for the last month shall likewise be made on a pro rata basis (b) Intentionally Deleted. (c) Payment of Rent. Tenant shall pay any installment of Base Land Rent --------------- and any Additional Rent (whether such Additional Rent is being paid on an installment or other basis) by check made payable to Landlord and postmarked on or before the due date. (d) Percentage Rent. --------------- (1) In addition to Base Land Rent and any other Additional Rent payable hereunder, Tenant shall pay as percentage rent ("Percentage Rent"), beginning with the Percentage Rent Commencement Date Tenant shall pay to Landlord as Additional Rent for each Lease Year, an amount equal to the product of (a) the Percentage Rent Multiplier set forth in the Basic Lease Information multiplied by (b) Tenant's gross receipts in excess of the Annual Breakpoint, hereinafter as defined. The initial Annual Breakpoint is $3,000,000.00 and shall be increased by the same percentage increase in the Base Land Rent whenever the annual Base Land Rent increases. (2) Statements and payments in respect of Percentage Rent shall be made by Tenant as follows: (i) Within thirty (30) days after the four (4) week accounting period of each Lease Year during the Term, beginning with the first accounting period commencing on or after the Rent Commencement Date, Tenant shall submit to Landlord (i) an accurate written statement, certified as true, complete and correct by an officer of Tenant, setting forth the amount of gross receipts for such accounting period and the total amount of gross receipts for the Lease Year through such accounting period. Percentage Rent shall be due and payable on or before thirty (30) days after the close of the first month Tenant's gross receipts exceed the Annual Breakpoint at which Tenant is required to pay Percentage Rent for such Lease Year. (ii) Within ninety (90) days after the end of each Lease Year during the Term, beginning after the first Lease Year, Tenant shall submit to Landlord a written statement (the "Annual Statement"), certified by an officer of Tenant as true and correct and in accordance with Tenant's books and records, showing in reasonable detail the full amount of the gross receipts during the immediately preceding Lease Year and the Percentage Rent payable and paid for such Lease Year, if any. If the Percentage Rent for such Lease Year shall exceed the Percentage Rent theretofore paid 4 in respect of such Lease Year, the balance due shall be paid by Tenant together with the Annual Statement. Any overpayment of Percentage Rent disclosed by the Annual Statement shall be applied as a credit to the next payment of Base Rent. Each Annual Statement shall include and reflect data necessary for an accurate computation of the Percentage Rent due under this Lease for the period covered by such Annual Statement. (iii) Throughout the Term, Tenant shall maintain and keep, or cause to be maintained and kept, at its general offices a full and accurate record and account of all sales of food, beverages, merchandise and services and all sums of money paid or payable for or on account of or arising out of the business transactions conducted at or from the Premises by or for the account of Tenant. Tenant shall maintain its books and records in accordance with generally accepted accounting principles. Tenant shall be allowed to maintain its books and records in a computerized form; provided, however, that (a) such computerized books and records provide the same level of information as the books and records described above, are retained for the full record retention period provided for herein, and are made accessible for Landlord's inspection on request, and (b) promptly upon request, printed copies of any such books and records are made available to Landlord's representatives who are engaged in inspecting and/or auditing Tenant's books and records as provided herein. Tenant shall keep and preserve, or cause to be kept and preserved, the records applicable to any 12-month period for not less than thirty-six (36) months after the Annual Statement in respect of such 12-month period is delivered to Landlord. Tenant agrees that Landlord may, on one occasion during each Lease Year, audit Tenant's records of sales made in the Premises relating to the calculation of gross receipts at the office of Tenant (which shall be located within the Washington, D.C. metropolitan area) upon at least fourteen (14) days advance written notice and during normal business hours, provided that, with respect to any particular Annual Statement, such audit is made within twenty- four (24) months after the Annual Statement is delivered to Landlord and is limited to the period covered by such Annual Statement. Any claim made by Landlord for revision of any Annual Statement or for additional Percentage Rent, which claim is not made to Tenant within twenty-four (24) months after the date when the Annual Statement is delivered to Landlord, shall be and hereby is waived by Landlord. If it is ultimately determined that there was an error in any of Tenant's statements prejudicial to Landlord's receipt of Percentage Rent, Tenant shall pay any differential, plus interest at the Lease Interest Rate from the time such Percentage Rent was to have been paid until actually paid, on demand as Additional Rent and if such difference is in an amount equal to more than five percent (5%) of the amount of Percentage Rent reported by the Annual Statement for the period covered by the Annual Statement, the reasonable expenses of Landlord's audit (excluding travel and lodging) shall be paid on demand as Additional Rent by Tenant. Any such audit must be performed either by Landlord's own employees or by independent contractors who are being paid on a fixed (as opposed to contingent fee basis). Otherwise, the expenses of Landlord's audit shall be paid by Landlord. In the event of any disagreement in regard to any claimed revisions, the parties shall submit the disagreement to a certified public accountant chosen mutually whose judgment shall be binding, with the costs of this procedure to be borne equally by the parties. (3) For purposes of this Lease, the term "gross receipts" shall mean all 5 amounts charged by Tenant and by all licensees, concessionaires and sublessees of Tenant, arising from all business conducted upon or from the Premises, whether such business be conducted by Tenant or by any licensee, concessionaire or sublessee of Tenant, whether such sales shall be credit or cash sales or otherwise and shall include, but not be limited to, the amounts received from the sale of goods, wares, merchandise and services at or on the Premises. Landlord acknowledges that Tenant's organizational structure is such that there may be inventory transfers between Tenant and any Affiliate of Tenant. For purposes of this Lease, an "inventory transfer" is a transfer of inventory to an Affiliate made solely for the convenience of Tenant's business and not for the purpose of consummating a sale which has been made at, in or from the Premises. For purposes of this Lease, an "Affiliate" of any entity is any other entity that controls, is controlled by or is under common control with the first entity or any successor of the first entity. Any and all inventory transfers between Tenant and any Affiliate of Tenant shall be excluded from the term "gross receipts." Each sale upon credit shall be treated as a sale for the full price at the time such sale shall be made, irrespective of the time when Tenant or its licensee, concessionaire or sublessee shall receive complete or partial payment from its customer. The following shall be deducted or excluded from "Gross receipts" as applicable: (i) sales of merchandise or food for which cash has been refunded or allowances made on merchandise or food claimed to be defective or unsatisfactory; (ii) discounts on the stated sales price which are not actually charged to the customer or employee; (iii) any and all sums collected and are actually paid out for any sales or excise tax, rent tax or gross receipts tax by whatever name called, imposed by any federal, state, municipal or other governmental authority based upon all sales included within the definition of gross receipts as required by law, whether now or hereafter in force, to be paid by Tenant or collected from its customers, (iv) issuance of gift certificates for consideration which shall be deemed gross receipts at the time and location of redemption; (v) receipts for the sale of fixtures, equipment or property that are not stock in trade, or from any sale not in the ordinary course of business; (vi) any tips collected by employees; (vii) any amounts deposited in pay phones, the jukebox system (including selector boxes at tables), vending machines, and charitable collection boxes.; (viii) cigar, cigarette, tobacco, candy and gum sales not to exceed one percent (1%); (ix) the value of any complimentary or promotional food dispensed from the Premises for no charge; and (x) the amount of any unpaid ticket. (e) Late Payment. If Tenant fails to pay in the time and manner provided ------------ in Section 3(c) any Rent due hereunder, and such failure to pay continues for seven (7) days after Tenant receives notice from Landlord thereof, then such Rent shall bear interest at a rate per annum equal to the Lease Interest Rate from the date such Rent became due to the date of the payment thereof by Tenant. In addition, if Tenant fails to pay any Rent due hereunder after receipt of notice and the expiration of any applicable cure period with respect thereto, then Landlord shall be entitled to collect a late payment charge in the amount of Two Hundred Dollars ($200.00) ("Late Payment Charge"). Any written notice to Tenant of a failure to pay Rent timely shall state the amount of Rent and the per diem interest due. No payment by Tenant of any interest or Late Payment Charge shall relieve Tenant from the obligation to make any other payments due under this Section 3 or any other provision of the Lease. Such interest and Late Payment Charge shall constitute Additional Rent due and payable with the next monthly installment of Rent following Tenant's receipt of written notice thereof from 6 Landlord 4. Common Area Charge; Real Estate Taxes. ------------------------------------- (a) Common Areas Charge. Commencing on the Rent Commencement Date and ------------------- ending on the last day of the Term, Tenant shall pay Landlord, as Additional Rent, an annual charge representing its contribution to the costs of the maintenance and operation of the Common Areas. Tenant shall pay Tenant's Pro Rata Share of Common Area Expenses to Landlord in the form of the Monthly Common Area Charge. The Monthly Common Area Charge is the initial estimated charge payable by Tenant to Landlord for Common Area Maintenance Costs, which may be adjusted by Landlord as provided for herein. However, the Common Area Charge payable by Tenant for the first year shall not exceed $1.00 per square foot and thereafter the annual Common Area Charge payable by Tenant shall never exceed an amount equal to 107% of the Capped Common Area Charge paid by Tenant for the prior year (defined as the Common Area Charge exclusive of the Excluded Expenses) . As used herein, Excluded Expenses mean insurance, and costs incurred to third parties for utilities and snow removal and Tenant shall pay Tenant's Pro Rata Share of such Excluded Expenses without limitation. Landlord shall give Tenant its estimate of the Common Areas Charge for each subsequent calendar year and Tenant's estimated pro-rata share thereof at least thirty (30) days prior to the commencement of each subsequent calendar year which estimate shall not exceed seven percent (7%) of the prior year's actual Common Area Charge. Tenant shall pay the estimated amount in equal monthly installments over the calendar year. Within ninety (90) days after the expiration of each calendar year, Landlord shall provide to Tenant a detailed statement showing the total Common Areas Charges for the Shopping Center actually incurred by Landlord for the prior calendar year (or partial calendar year, if applicable) and the resulting Common Areas Charge, and such statement shall be binding upon Landlord and Tenant, subject to Tenant's right to audit the same pursuant to Paragraph (d) of this Section 4. If the total amount paid by Tenant is different than the actual amount owed, there shall be an appropriate adjustment, with payment being made by the applicable party to the other within fifteen (15) days after the rendering of the statement. Landlord may provide any refund in the form of a credit against the next installment of Common Area Charge due from Tenant to Landlord hereunder, or by refund if there is insufficient time remaining in the Term to apply such credit. Landlord's failure to provide the statement called for above in this Section shall not release or relieve Tenant of Tenant's obligations under this Section or elsewhere in this Lease; provided, however, if Landlord fails to deliver such statement to Tenant on or before the date which such annual statement must be delivered, Tenant may send a written notice requesting said statement to Landlord and if Landlord fails to send the applicable statement to Tenant within thirty (30) days after receipt of such written request therefor from Tenant, then Tenant may elect to suspend the monthly payment of Common Area Charge until Landlord delivers the statement to Tenant; it being understood, acknowledged and agreed, however, that once Tenant receives such statement, Tenant shall pay all such suspended amounts to Landlord and shall thereupon and thereafter pay monthly installments of Common Area Charges as and when due pursuant to this Section. (b) Common Areas Expenses. As used herein, the term "Common Areas --------------------- 7 Expenses" shall mean the reasonable costs and expenses actually incurred by Landlord for the following: (i) painting, restriping, repaving (subject to the limitations on capital expenditures set forth below), cleaning, sweeping, removing of snow and ice, and lighting parking areas, driveways, accesses, entranceways, sidewalks, and walkways; (ii) maintaining and replacing the landscaping; (iii) maintenance, repair, and replacement (subject to the limitations on capital expenditures set forth below) of signs advertising and identifying only the Shopping Center, parking area directional and safety signs, tenant directory signs, lights, lighting standards, security systems, parking bumpers, drainage facilities, and all utility systems and cost of all utilities serving the Common Area, including, without limitation stormwater fees; (iv) public utility costs for services to the Common Areas, including, without limitation, stormwater fees; (v) premiums on all public liability insurance for the Common Areas; (vi) expenses for security services and parking attendants; (vii) seasonal decorations; and (viii) a management, administrative and overhead fee of ten percent (10%) of Tenant's Pro Rate Share of the other Common Area Expenses exclusive of insurance expenses (the "Administration Fee"). Notwithstanding the foregoing, the following shall not be included in the Common Areas Expenses: (1) maintenance performed, on separately assessed and/or maintained outparcels or other adjacent tracts reserved for the exclusive use of a tenant in the Shopping Center; (2) any dues or charges for a merchants' or other association of the tenants in the Shopping Center; (3) maintenance, repairs or replacements to the Common Areas or the Shopping Center necessitated by the negligent or willful misconduct of Landlord or made to correct any construction, defect or condition, to any interior mall space, or to any buildings (including exterior walls thereof) or utility systems not part of the Common Areas unless due to the negligence or willful misconduct of Tenant or its agents, contractors or employees; (4) repairs or replacements necessitated by any governmental entity or by the negligence or the willful misconduct of Landlord (including failure to construct any portion of the Shopping Center in accordance with plans or specifications therefor) or any other tenant or made to correct any initial construction defect or condition in existence prior to the Commencement Date of this Lease or to correct damage caused by subsidence or adverse or substandard soil conditions; (5) amounts paid to entities related to Landlord in excess of the competitive cost of such services in the metropolitan area where the Shopping Center is located; (6) amounts reimbursable from insurance proceeds, under warranty or by Tenant, any other tenant in the Shopping Center or any other third party other than pursuant to a common areas expenses provision similar to the Common Areas Expenses provision contained herein; (7) the amount of any deductible under Landlord's liability policy; (8) capital improvements and/or replacements to upgrade existing facilities, but capital costs incurred after the first ten (10) years of the Lease for replacement of the curbs, sidewalks, drainage, lighting and similar systems and repaving of parking areas and access drives may be amortized over a period equal to the useful life of such improvement, determined in accordance with generally accepted accounting principles, and the amortized cost allocated to each calendar year during the Term, may be treated as a Common Areas Expense; (9) reserves for anticipated future expenses; (10) interest, late charges or penalties incurred as a result of Landlord's failure to pay bills in a timely manner; (11) the costs of complying with all laws, rules, orders and regulations of governmental, quasi-governmental or judicial authorities with respect to Hazardous Materials, as hereinafter defined; (12) amounts incurred to repair roofs and/or roof decks, canopies and gutters of buildings within the Shopping Center (excluding the Building which is Tenant's obligation pursuant to Section 8); (13) the cost of 8 the original Site Improvements, as hereinafter defined, to the Shopping Center, (14) debt service on indebtedness of Landlord, and/or the expense of rental payments made by Landlord pursuant to any grant or lease covering any or all of the Shopping Center, (15) Landlord's cost of any utility or other services, if any, separately sold by Landlord to Tenant and/or other occupants in the Shopping Center, (16) costs incurred by Landlord for alterations, if any, for other tenants, (17) depreciation of the Shopping Center buildings and major components, (18) the cost of any maintenance or services with respect to tracts which are excluded from the computation of Tenant's Pro Rata Share, (19) costs which Landlord is entitled to recoup from other persons such as insurance companies and pursuant to warranties; (20) real estate broker's commissions; (21) the costs of complying with all laws, rules, orders and regulations of all governmental, quasi-governmental or judicial authorities concerning any improvements or alterations to the Shopping Center; (22) the costs of Landlord's management office, except for the Administration Fee provided for above, Landlord's management, administrative and overhead costs, except for the Administrative Fee provided for above, or (23) other maintenance expenses not considered normal and customary under generally accepted accounting principles or shopping center industry standards. Common Area Expenses shall be at competitive rates in the area where the Premises are located. Landlord warrants that none of the expenses included in determining Tenant's Pro Rata Share of Common Area Expenses shall be included in any other charge payable under this Lease. (c) Tenant shall have the right to audit the Common Areas Expenses for any calendar year at any time within one year after the date on which Tenant receives the statement of Common Areas Expenses. Such audit must be performed either by Tenant's own employees or by independent contractors who are being paid on a fixed (as opposed to contingent) fee basis. The cost of any such audit shall be paid by Tenant, except that, if it is ultimately determined that the Common Areas Charge for any calendar year was overstated by more than five percent (5%), then the cost of the audit shall be paid by Landlord (excluding the costs of travel and lodging). Landlord shall pay to Tenant any overpayment of Common Areas Charge for the calendar year in question within 30 days after the amount of the overpayment has ultimately been established by the audit. If Tenant fails to exercise its right of audit within the one year period, the amount of the Common Areas Charge for the calendar year shall be conclusively established as the amount set forth in the statement of Common Areas Expenses for such calendar year delivered by Landlord to Tenant pursuant to subsection (b). If, however, Tenant timely exercises its right of audit, the amount of Common Areas Charge for such calendar year shall be conclusively established as the amount determined as a result of such audit unless, within six months after receipt of a report of the same from the auditors selected by Tenant, Landlord shall contest the amount thereof. (d) Real Estate Taxes. Commencing on the Rent Commencement Date and ending ----------------- on the last day of the Term, Tenant shall pay Landlord, as Additional Rent, an annual charge representing its contribution to the costs of the real estate taxes and assessments (extraordinary or special), betterments, water and sewer rents and other governmental impositions and charges presently imposed and any and all which may, during the Term, be levied, assessed or imposed with respect to the Shopping Center ("Real Estate Taxes"). Tenant shall pay Tenant's Pro Rata Share of 9 Real Estate Taxes to Landlord in the form of the Monthly Real Estate Tax Charge. The Monthly Real Estate Tax Charge is the initial estimated charge payable by Tenant to Landlord for Real Estate Taxes, which shall be adjusted as provided for below. Real Estate Charges shall not include income or franchise or gross profits taxes on Landlord or any other taxes imposed or measured by the income or rents received by Landlord. Landlord shall give Tenant its estimate of the Real Estate Charge for each subsequent tax fiscal year at least thirty (30) days prior to the commencement of each subsequent tax fiscal year. The actual real property tax for the prior tax fiscal year shall be used for the purpose of calculating the estimated Real Estate Tax Charge for each subsequent tax fiscal year. Following receipt of all tax bills and assessment bills attributable to any calendar or fiscal year during the Term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's Pro Rata Share of Real Estate Taxes for such year. If the total amount paid by Tenant is different than the actual amount owed, there shall be an appropriate adjustment, with payment being made by the applicable party to the other within fifteen (15) days after the rendering of the statement. Landlord may provide any refund in the form of a credit against the next installment of Real Estate Taxes due from Tenant to Landlord hereunder, or by refund if there is insufficient time remaining in the Term to apply such credit. Landlord's failure to provide the statement called for above in this paragraph shall not release or relieve Tenant of Tenant's obligations under this section or elsewhere in this Lease; provided, however, if Landlord fails to deliver such statement to Tenant on or before the date which such statement must be delivered, Tenant may send a written notice requesting said statement to Landlord and if Landlord fails to send the applicable statement to Tenant within thirty (30) days after receipt of such written request therefor from Tenant, then Tenant may elect to suspend the monthly payment of Real Estate Taxes until Landlord delivers the statement to Tenant; it being understood, acknowledged and agreed, however, that once Tenant receives such statement, Tenant shall pay all such suspended amounts to Landlord and shall thereupon and thereafter pay monthly installments of Real Estate Taxes as and when due. Notwithstanding anything to the contrary herein, with respect to betterments or other extraordinary or special assessments that may, at the option of the taxpayer, be paid in installments over a period longer than one (1) year, then the same shall be deemed paid in installments over the maximum period permitted by the taxing authority and Tenant's obligation for any one (1) tax fiscal year to pay its share of such special assessments shall only apply to those installments which become actually due and payable (i.e., failing which payment the same would become delinquent), together with the interest charged thereon by the governmental authority, during that same tax fiscal year. Real Estate Taxes for any fraction of a tax year at the commencement or expiration of the Term shall be apportioned prorata between the parties. (e) Landlord to Pay Common Area Expenses and Real Estate Taxes. Landlord ---------------------------------------------------------- will pay all Common Areas Expenses and Real Estate Taxes timely. No interest or late payment charge resulting from the failure of Landlord to make a timely payment will be included in either Common Areas Expenses or Real Estate Taxes. 5. Common Areas. ------------ 10 (a) As used in this Lease, the term "Common Areas" means, without limitation, any driveways, parking areas, walkways, terraces, sidewalks, docks (unless for other tenants exclusive use), loading areas (unless for other tenants exclusive use), trash facilities and all other areas and facilities in the Shopping Center as shown on Exhibit A (unless for other tenants exclusive use) or which are subsequently provided and designated from time to time by Landlord for use by all tenants. Tenant shall have the nonexclusive right with other tenants of the Shopping Center and their respective employees, customers, invitees, licensees or other visitors to use the Common Areas. Tenant shall have no obligation or liability whatsoever in connection with the ownership, maintenance or management of the Common Areas. Landlord grants Tenant, its employees, invitees, licensees and other visitors a nonexclusive license for the Term to use the Common Areas in common with all others entitled to use the Common Areas including, without limitation, Landlord and other tenants of the Shopping Center, and their respective employees, customers, invitees, licensees and visitors, and other persons authorized by Landlord, subject to the terms and conditions of this Lease. Without advance notice to Tenant (except with respect to matters covered by clause (i) below) and without any liability to Tenant in any respect, Landlord will have the right to: (i) establish and enforce reasonable rules and regulations concerning the maintenance, management, use and operation of the Common Areas, provided that such rules and regulations shall not conflict with the express terms of this Lease, do not adversely affect the operation of Tenant's business, and apply to and are enforced equally against all other tenants of the Shopping Center; (ii) temporarily close off any portion of the Common Areas to whatever extent required in the reasonable opinion of Landlord and its counsel to prevent a dedication of any of the Common Areas or the accrual of any rights by any person or the public to the common areas, provided such closure does not materially deprive Tenant of the substantial benefit and enjoyment of the Premises; (iii) temporarily close any of the Common Areas for maintenance, alteration or improvement purposes; (iv) select, appoint or contract with any person for the purpose of operating and maintaining the Common Areas, subject to such terms and at such rates as Landlord deems reasonable and proper; and (v) the right at anytime, and from time to time, to make changes or revisions in the Shopping Center, as Landlord may deem reasonably necessary or desirable; provided, however, that no such alterations, changes, reductions, buildings or improvements shall (i) reduce the ratio of parking spaces to gross leasable area of buildings in the Shopping Center below five (5) spaces per 1,000 square feet of the total ground floor area, exclusive of basement space, (ii) construct any improvements other than as shown on the Site Plan or reduce or rearrange the parking spaces 11 within the area labeled "No Build Area" on Exhibit A ( the "No Build Area"), (iii) materially change any driveways, entrances or access roads, unless required by law, and subject to Tenant's reasonable approval as to the substitution or relocation, (iv) unreasonably interfere with truck access to the loading dock of the Premises, (v) unreasonably interfere with customer access to the Premises or the parking areas within the No-Build Area, or (vi) in any way modify or alter the Premises. (b) Landlord will keep the Common Areas (i) in a clean and orderly condition and free of snow, ice and debris; (ii) in compliance with all laws, ordinances, rules and regulations of governmental authorities and all reasonable recommendations of Landlord's casualty insurer(s); and (iii) properly lighted, until at least one hour after the posted closing hour of Tenant's restaurant each night and, during the months when the sun rises after 6:00 a.m., from 6:00 a.m. until at least sunrise, and landscaped. Landlord will replace, repair, and/or repaint signs, landscaping, pavement and other improvements to the Common Areas as necessary in order to keep the Common Areas in first class, lawful condition in the Virginia Beach area. Landlord will not be in default under this Lease or be liable for any damages directly or indirectly resulting from, nor will the Rent be abated by reason of, (x) the installation, use, or interruption of use of any equipment in connection with the furnishing of any of such services, (y) failure to furnish, or delay in furnishing, any such services when such failure or delay is caused by accident or any condition beyond the reasonable control of Landlord or by the making of necessary repairs or improvements to the Shopping Center, or (z) the limitation, curtailment, rationing or restrictions on use of water, electricity, gas or any other form of energy serving the Shopping Center. Landlord will use reasonable efforts to remedy diligently any interruption in the furnishing of such services. (c) Landlord and Tenant shall use reasonable efforts to require their respective employees or the other employees of other tenants in the Shopping Center (as to Landlord) to park in the rear of the Shopping Center. 6. Use of Premises. --------------- (a) Tenant shall use the Premises for the Permitted Use and shall initially open as a Silver Diner. Tenant will not use or occupy the Premises for any unlawful purpose. (b) Nothing in this Lease shall require Tenant to continuously operate a restaurant or any other particular type of business in the Premises. If after opening, Tenant ceases doing business for a continuous period in excess of ninety (90) days, Landlord shall thereafter have the right, until such time as Tenant reopens for business, to terminate this Lease by serving written notice of termination on Tenant, which termination shall become effective on the thirtieth (30th) day following Tenant's receipt of such termination notice. In the event of a termination hereunder, the parties hereto shall automatically be released from any and all liability of whatever kind for the terminated portion of the unexpired Term. Nothing herein shall be deemed to affect Tenant's obligation to pay Rent until the effective date of said termination by the Landlord or liability for occurrences prior to the date of such termination. Periods of closing of the Premises (a) caused by 12 rebuilding, remodeling and/or repair; (b) due to casualty, or condemnation; (c) war, acts of God or other force majeure events; (d) consented to by Landlord; or (e) occurring during that period of time commencing thirty (30) days after Tenant has a signed letter of intent to assign or sublet the Premises subject to terms of Section 7 hereof and continuing until an assignee or sublessee opens for business in the Premises; shall be exempted from the provisions of this Section and shall give the Landlord no right to terminate as set forth herein. (c) In regard to the use and occupancy of the Premises, Tenant shall, at its sole cost and expense, use reasonable efforts to (i) maintain, repair and make replacements to the Premises in a good clean, safe and orderly condition and (ii) comply with all laws, ordinances, rules, and regulations of governmental authorities and all reasonable recommendations of Tenant's casualty insurer(s) and other applicable insurance rating organizations now or hereafter in effect, relating specifically to Tenant's use of the Premises, exclusive of any obligations that are otherwise Landlord's obligation under the terms of this Lease. In the event Tenant fails to maintain, repair or make replacements as provided herein, Landlord shall have the right, but not the obligation, after giving Tenant thirty (30) days notice and opportunity to cure or opportunity to commence to cure so long as Tenant diligently pursues such cure if such failure is of the type that cannot be corrected within thirty (30) days (unless an emergency in which case no notice is required), to make such maintenance, repairs, or replacement and charge Tenant therefor plus Lease Interest Rate, as Additional Rent hereunder. Landlord agrees not to lease or sell to any diner or family restaurant that serves all day breakfast (e.g. Evans, I-Hop, Denny's) and agrees that there shall be no other restaurants with frontage on Virginia Beach Boulevard -------------------------------------------------------------- (excluding the Premises and Starbucks) in the Shopping Center (collectively the "Restrictive Covenant"). Landlord covenants and agrees with respect to said Restrictive Covenant to (i) give all subsequent tenants of the Shopping Center notice of the Restrictive Covenant by inserting such notice in such tenant's Leases; and (ii) not permit any building or other improvements located within the Shopping Center to be used or occupied in violation of the Restrictive Covenant. In connection therewith, Landlord agrees to take any and all actions necessary at Landlord's own cost and expense, including the institution of legal proceedings, to enforce Tenant's rights under such Restrictive Covenant. However, in no event shall this provision be construed to prohibit Noodle Kidoodle, Inc., Starbucks Corporation, GGM Virginia Beach, L.L.C. from handling and selling any of the items which such tenant customarily handles and sells. Landlord and Tenant further acknowledge and agree that in the event that the Restrictive Covenant is violated that Tenant's damages shall be extremely difficult to ascertain and Tenant shall not be entitled to an adequate remedy at law or in equity. Therefore, Landlord and Tenant agree that in the event that another tenant of the Shopping Center is conducting its business in the Shopping Center in violation of the Restrictive Covenant, and Landlord is unable to abate such violation within sixty (60) days following notice from Tenant of such violation, Tenant shall have the right to declare, in addition to any other remedies Tenant may have under this Lease, at law, or in equity, that the Base Land Rent payable under this Lease shall be immediately reduced by Fifty Percent (50%), as liquidated damages and not as a penalty, until such time as such violation is abated; provided, however Percentage Rent shall be 13 computed as if Landlord had been paid the full amount of Base Rent. Tenant acknowledges and agrees that Noodle Kidoodle, Inc. has the exclusive right to sell children's toys, games and educational products in the Shopping Center. 7. Assignment or Subletting. ------------------------ (a) Except as provided in Section 7(d) below, Tenant shall have no right to assign this Lease or sublet all or any portion of the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, Landlord's consent shall not be withheld provided that Tenant is not in default beyond applicable notice and cure periods and that the assignee has a net worth of at least the greater of Tenant's net worth at the time of such assignment or $18,000,000, and assignee has in the past three (3) years operated a restaurant with gross receipts in excess of $2,000,000. Except for an assignment to Section 7(d), the Percentage Rent after assignment shall not be less than the average Percentage Rent paid during the preceding two (2) years. (b) Except as provided in Section 7(d) below, if Tenant desires to assign this Lease or sublet all or any portion of the Premises, Tenant shall give Landlord written notice of Tenant's desire to do so at least sixty (60) days prior to the effective date thereof. At such time, Tenant shall also submit to Landlord with the notice such financial statements and other information to show the then-current net worth and business experience of the assignee or sublessee. Landlord shall have ten (10) days from the receipt of Tenant's notice to notify Tenant whether it consents to the proposed assignment or sublease. (c) In the event of an assignment of this Lease, Tenant shall remain liable for the performance by the assignee-in-possession of Tenant's obligations hereunder, provided, however, that (i) in the event that Tenant's assignee or any subsequent assignee shall have a net worth equal to the greater of Tenant's net worth at the date of the assignment or Eighteen Million Dollars ($18,000,000.00) (determined as of the end of the most recent fiscal year of such assignee immediately preceding such assignment, unless more current figures are available), and (ii) there has not been an Event of Default by the assignee for a period of two (2) years after the date of such assignment, then Tenant and all intervening successors in interest shall be released and discharged from any further liability under this Lease. If the foregoing condition to the release of Tenant is not satisfied at the date of assignment, Tenant shall remain liable for the performance of the obligations of Tenant hereunder until such time as the assignee has satisfied the above-referenced conditions. (d) Notwithstanding any provision to the contrary contained in this Lease, Tenant shall have the right without Landlord's consent to assign or transfer this Lease or sublease the Premises to any entity which is owned by or closely affiliated with the Tenant, to a franchisee or licensee of Tenant, to any subsidiary corporation of Tenant, to Tenant's parent corporation, or to any entity succeeding to substantially all of the assets of Tenant as a result of a consolidation, merger or 14 sale (including an asset purchase agreement or stock sale), or to any entity which by any means acquires a majority of Tenant's other stores. For the purposes of this Article, an entity shall be deemed to be closely affiliated with Tenant if fifty percent (50%) or more of the financial rights or voting control in such entity are owned or controlled by the Tenant, any subsidiary of the Tenant, or by a majority of the stockholders of Tenant. 8. Repairs and Capital Improvements. Tenant shall, throughout the Term, at -------------------------------- its sole cost and expense, keep and maintain the Premises and all fixtures and personalty located thereon or appurtenant thereto (including, without limitation, the Building roof, foundation, structure, the Building mechanical, electrical, HVAC, storefront, doors, plate glass and plumbing systems) in good order and condition and shall make all necessary repairs and replacements thereof and shall use all reasonable precaution to prevent waste, damage or injury thereto. 9. Site Plan Approval. See Exhibit B, Section 1. ------------------ 10. Initial Site Work; Alterations; Signs; Landlord Cooperation. ----------------------------------------------------------- (a) Initial Site Work. Landlord shall perform the work set forth in ----------------- Exhibit B. (b) Tenant's Work. Promptly upon obtaining all required governmental ------------- licenses and approvals, Tenant shall cause the general contractor, as hereinafter defined, to commence and diligently prosecute to completion in a good and workmanlike manner the construction on the Land of a Silver Diner restaurant in accordance with the Tenant's Plans, as hereinafter defined, which have been approved by Landlord. (c) Alterations. During the Term, Tenant shall have the right, at its sole ----------- cost and expense, to make or cause to make any alterations, betterments or improvements in or to the Premises ("Alterations") without Landlord's consent, provided that such Alterations do not have a material adverse impact upon the value of the Building or the Premises and/or affect the structural integrity of the Building or the Premises, in which case Landlord's prior consent shall be required, which consent Landlord shall not unreasonably withhold. The term "Alterations" does not include any furniture, fixtures and equipment, any personal property, or any other similar items. Tenant will comply with, at its sole cost and expense, and make any Alterations to the Premises (including structural alterations and alterations to the Building and/or the Building systems) as may be necessary to effect compliance with all present and future laws, ordinances, regulations, and orders of any public authority having jurisdiction over the Premises. All Alterations to the Premises, made or installed in or about the Premises by either party shall be surrendered to Landlord with the Premises as a part thereof upon the expiration or earlier termination of the Term. (d) Signs. Tenant shall have the exclusive right to place and maintain ----- professionally manufactured signs and other advertising matter upon the interior and exterior of the 15 Premises, subject to applicable law. Tenant shall have the option to erect, at its sole cost and expense subject to the approval of the appropriate governmental agencies a pylon sign in the Common Areas in the area designated on the Site Plan of such height and dimensions as Tenant shall determine and bearing such legend or inscription as Tenant shall determine, subject to Landlord's approval, which approval Landlord shall not unreasonably withhold. Tenant shall, at its sole cost and expense, maintain, repair and replace such signs and other advertising matter in good condition and repair. Landlord agrees to cooperate with Tenant in Tenant's efforts to secure any necessary governmental approvals, permits or licenses for any such signs and other advertising matter, at no cost to Landlord. (e) Cooperation. (1) Within fifteen (15) days after receipt of a written ----------- request therefor from Landlord, Tenant shall execute, acknowledge and deliver (or join with Tenant in the execution, acknowledgment and delivery of), at Landlord's sole cost and expense, any and all (i) applications for licenses, permits, vault space or other authorizations of any kind or character required by any governmental authority in connection with the construction, alteration, repair or demolition of any buildings or improvements located on the Premises (excluding Tenant's building and signage permits, where Landlord will cooperate with Tenant to obtain at no cost to Landlord), (ii) grants or deeds of easements and/or rights of way for public utilities or similar public facilities, which are necessary for the orderly development of the Premises, and (iv) grants or deeds of dedication where such dedication is required by any governmental authority in connection with the construction of buildings or improvements on the Premises. Landlord and Tenant will cooperate with each other in obtaining all such permits and approvals. 11. Inspection. Tenant will permit Landlord, or its representative, upon ---------- reasonable prior notice (except in the case of an emergency when no such notice shall be required), to enter the Premises at any reasonable time and from time to time, without charge to Landlord and without diminution of the Rent payable by Tenant, to examine, inspect and protect the same or to exhibit the same to prospective, lenders or purchasers and during the last six (6) months of the Term to prospective tenants. Landlord shall use reasonable efforts to minimize any interference with Tenant's business in connection with such entry. 12. Insurance. --------- (a) Tenant, at its sole cost and expense, shall obtain and maintain in effect, throughout the Term, insurance policies providing at least the following coverage: (1) Commercial general liability insurance, with broad form property damage endorsement (or a substantially similar policy), naming Landlord and any mortgagees of the Premises as additional insureds and protecting Landlord, Tenant and the mortgagees against any liability for bodily injury, personal injury, death or property damage occurring upon the Premises, with such policy to afford protection with a combined single limit of not less than $2,000,000 per occurrence. Such amounts of insurance may be increased by a reasonable amount from time to time. 16 (2) A policy of fire and extended coverage and additional broad perils insurance (i.e., an "all risk" policy) (or a substantially similar policy) covering all of Tenant's personal property, including contents, furniture, fixtures, and equipment not permanently attached to the Building, for not less than one hundred percent (100%) of the full replacement cost thereof (the "FF&E Policy"). (3) A policy providing workers' compensation insurance as required by law. (b) Tenant shall pay the premiums of all insurance policies required to be maintained by Tenant hereunder directly to the appropriate insurance companies. Upon Landlord's written request, Tenant shall submit receipts evidencing payment for such insurance policies. (c) Landlord, at its sole cost and expense (subject to reimbursement as part of the Common Areas Charge), shall obtain and maintain in effect, throughout the Term, (i) commercial general liability insurance, with broad form property damage endorsement (or a substantially similar policy), protecting Tenant against any liability for bodily injury, personal injury, death or property damage occurring upon the Common Areas, with such policy to afford protection with a combined single limit of not less than $2,000,000 per occurrence, (ii) rent loss insurance, and (iii) a policy of fire and extended coverage and additional broad perils insurance (i.e., an "all risk" policy) (or ---- a substantially similar policy) covering the Building and the improvements and betterments thereto, in an amount not less than one hundred percent (100%) of the full replacement cost of the Building and the improvements and betterments thereto. (d) Each party releases and waives on behalf of itself and on behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss (other than loss or damage resulting from the willful act of such other party, its employees and agents) sustained from any peril to property that is covered under a standard all-risk or Special Form - Causes of Loss policy, or any peril that is required to be insured against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Lease. All insurance policies of Landlord and Tenant shall contain a clause or endorsement pursuant to which the insurance companies waive subrogation and consent to a waiver of right of recovery. (e) If at any time the type of insurance required to be maintained hereunder becomes generally unavailable (for reasons other than the negligence or willful misconduct of Tenant), then Landlord and Tenant will agree on an appropriate substitute. (f) Neither the issuance of any policy required hereunder nor the minimum limits specified herein shall be deemed to limit or restrict Tenant's liability under this Lease. (g) Each policy required to be procured by either party hereto shall state that it is 17 primary and non-contributory with any insurance policy procured by the other party. Landlord's commercial general liability insurance shall be primary with respect to the Common Areas and in the event Tenant's commercial general liability insurance policy covers all or any portion of the Common Areas, Landlord shall not be entitled to make a claim thereunder with respect to such Common Areas (except as it relates to Tenant's or its agents, employee's servants officers negligence or willful misconduct). Tenant's commercial general liability insurance shall be primary with respect to the Premises, and in the event Landlord's commercial general liability insurance policy covers all or any portion of the Premises, Tenant shall not be entitled to make a claim thereunder with respect to thereto (except as it relates to Landlord's or its agents, employees, servants, officers, contractors, successors or assigns negligence or willful misconduct). The property insurance to maintained by Tenant on the Premises shall be primary with respect to the Premises. Landlord shall have the right to require Tenant to increase general liability insurance to amounts consistent to those in the Hampton Roads area. (h) All insurance to be carried by Landlord or Tenant(except for workers' compensation insurance) may be in the form of one or more policies including "umbrella" insurance and the policies may cover more than one location. All insurance policies required to be maintained under the terms of this Lease by Tenant or Landlord (i) shall be issued by a company or companies licensed to do business in the jurisdiction in which the Premises is located and rated "A- /VIII" or better as defined in the then-current edition of Bests Insurance Reports (or the equivalent thereof if Bests Insurance Reports is no longer published) ; (ii) shall be procured for periods of not less than one (1) year; (iii) shall be non-assessable; (iv) shall require thirty (30) days' prior written notice to the other party of any cancellation or material change affecting coverage under such policy; and (v) with respect to property damage insurance shall not be prejudiced if the insureds thereunder have waived in whole or in part the right of recovery from any person or persons prior to the date and time of loss or damage, if any, and/or the insurer waives any rights of subrogation against Landlord. Upon written request from either party, the other shall submit a Certificate of Insurance (or binders) or policy. 13. Indemnification. --------------- Each party (in the capacity of "Indemnitor") shall indemnify, the other its agents, employees and lender [in the case of Landlord] (in the capacity of "Indemnitee")and save the Indemnitee harmless from and against any and all claims, actions, damages, liabilities, losses, costs and expenses, including, without limitation reasonable attorney's fees, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon or at the Premises (in the case of Tenant), or in other portions of the Shopping Center or the Common Areas (in the case of Landlord), or the occupancy or use by Indemnitor of the Premises or any part thereof, (in the case of Tenant), or in other portions of the Shopping Center or the Common Areas (in the case of Landlord) or occasioned wholly or in part by the default under this Lease or any act or omission of Indemnitor, its agents, contractors, employees, servants, or concessionaires or licensees. In case the Indemnitee shall, without fault on its part, be made a party to any litigation commenced by or against 18 Indemnitor, then Indemnitor shall protect and hold the Indemnitee harmless and shall pay all costs, expenses and reasonable attorney's fees incurred or paid by the Indemnitee in connection with such litigation. The provisions of this Section shall survive termination or expiration of this Lease. 14. Liability of Landlord. --------------------- (a) Except for damages caused by the negligence or the intentionally wrongful acts or omissions of Landlord, Landlord shall not be liable to Tenant for any damage, compensation or claim arising from (i) the repairing of any portion of the Building, (ii) any interruption in the use of the Premises, (iii) accident or damage resulting from the use or operation of heating, cooling, electrical or plumbing equipment or apparatus, (iv) the termination of this Lease by reason of the destruction of the Building or a taking or sale in lieu thereof by eminent domain, (v) any fire, robbery, theft, criminal act and/or any other casualty, (vi) any leakage in any part of the Building, or from water, rain or snow that may leak into, or flow from, any part of the Building or from drains, pipes or plumbing work in or about the Building, or (vii) any damage caused by other persons or occupants of adjacent property, or caused by operations in construction of any private, public or quasi-public work. All personal property of Tenant or others kept or stored on the Premises shall be kept or stored at the sole risk of Tenant. (b) Tenant shall neither assert nor seek to enforce any claim for breach of this Lease against any of Landlord's assets other than Landlord's interest in the Shopping Center, or any portion thereof, and Tenant shall look solely to such interest for the satisfaction of any liability of Landlord under this Lease, it being specifically agreed that in no event shall Landlord (or any of the officers, trustees, directors, partners, beneficiaries, joint venturers, members, stockholders, or other principals or representatives, disclosed or undisclosed) ever be personally liable for any such liability. Nothing in the foregoing shall preclude Tenant from satisfying any claim against Landlord from (i) the proceeds of sale produced upon execution of such judgment and levy thereon against Landlord's interest in the entire Shopping Center and improvements thereon, (ii) the rents, other income, or insurance proceeds from such property receivable by Landlord and (iii) the consideration received by Landlord from the sale of all or any part of Landlord's interest in the Shopping Center, and Landlord shall not be liable for any deficiency. The provisions of Section are not designed to relieve Landlord from the performance of any of its obligations hereunder, but rather to limit Landlord's liability in the case of the recovery of a judgment against it, nor shall any of the provisions of this Section be deemed to limit or otherwise affect Tenant's right to obtain injunctive relief or specific performance, without the necessity of a bond, or avail itself of any other right or remedy which may be accorded Tenant by law or this Lease. (c) Landlord may freely sell, assign or otherwise transfer all or any portion of its interest in this Lease or in the Premises, the Building, the Shopping Center or the Land, and in the event of any such sale or transfer and receipt by Tenant of notice of same, advising Tenant as to the identity and notice address of the purchaser or other transferee ("Successor Landlord") the landlord whose interest is thus sold or transferred (the "Selling Landlord") shall be and hereby is completely 19 released and forever discharged from and in respect of all covenants, obligations and liability as Landlord hereunder, except for any obligations accruing prior to such transfer, and is further forever discharged from the obligation to return any security deposit to Tenant, provided that the Selling Landlord has transferred such security deposit (if any) to the Successor Landlord. Thereafter, Tenant shall attorn and be bound to the Successor Landlord with the same effect as though the latter had been the original Landlord hereunder, provided that such purchaser assumes and agrees to carry out the obligations of Landlord hereunder. Notwithstanding the foregoing, Landlord agrees that it shall not assign this Lease, except to CI Virginia Beach Limited Partnership, a Florida limited partnership, and to the lender pursuant to any acquisition and construction loan for the Premises, to any person or entity until ninety (90) days after the Lease Commencement Date. 15. Mechanic's Liens. No work performed by Tenant pursuant to this Lease, ---------------- whether in the nature of erection, construction, alteration or repair, shall be deemed to be for the immediate use and benefit of Landlord, nor shall Tenant be deemed to be the agent of Landlord in performing such work, so that no mechanic's or other lien shall be allowed against the estate of Landlord by reason of any consent given by Landlord to Tenant to improve the Premises. Tenant shall pay promptly all persons furnishing labor or materials with respect to any work performed by Tenant or its contractor on or about the Premises. If any mechanic's or other lien shall at any time be filed against the Premises by reason of work, labor, services or materials performed or furnished, or alleged to have been performed or furnished to Tenant, Tenant shall, within thirty (30) days after receiving notice thereof from the Landlord, cause the same to be discharged of record or bonded to the satisfaction of Landlord, at Tenant's sole cost and expense. If Tenant shall fail to cause such lien to be so discharged or bonded within such thirty (30)-day period, then, Landlord in its sole discretion, may bond or discharge the same by paying the amount claimed to be due, and the amount so paid by Landlord, including reasonable attorneys' fees, incurred by Landlord either in defending against such lien or in procuring the bonding or discharge of such lien, together with interest thereon at the Lease Interest Rate shall be due and payable by Tenant to Landlord as Additional Rent within ten (10) days after Tenant's receipt of notice thereof from Landlord. 16. Services and Utilities. ---------------------- (a) Landlord shall cooperate with Tenant and execute such documentation as may be necessary to permit water, sewer, gas and electric utility services to be provided to the Premises with meters to measure Tenant's use of such services. (b) Tenant shall pay for all utilities directly to the appropriate utility company. Landlord shall not be liable in any way to Tenant, and Tenant's obligation to pay Rent shall not be affected, for any failure, interruption, curtailment, stoppage, suspension or defect in the supply or character of the utilities furnished to the Premises by reason of any requirement, act or omission of the public utility serving the Premises or otherwise, except as may be the result of the negligence or the intentionally wrongful acts or omissions of Landlord. 20 (c) In the event natural gas service is unavailable or cannot reasonably be obtained by Tenant, then Landlord hereby consents to the installation of a liquified petroleum gas system (i.e., bottled gas) to service the Premises, which installation and use shall be in compliance with all applicable laws, including, without limitation, Environmental Laws, as hereinafter defined. Tenant may install such tanks and pipes as are necessary in conjunction with such system at a location to be mutually agreed upon by Landlord, Tenant and the appropriate governmental authorities. Any cost and expenses associated with the installation and use of a liquified petroleum gas system, including any increase in insurance premiums for fire and extended coverage, shall be borne solely by Tenant. 17. Damage by Fire or Casualty. -------------------------- (a) In the event of damage to or destruction of the Building or any part thereof, by fire or any other casualty, the Building shall be, subject to the provisions of this Section 17, and receipt of sufficient insurance proceeds, promptly and fully repaired and restored by Landlord with a contractor reasonably approved by Tenant within one hundred eighty (180) days after the receipt of such proceeds, but in no event longer than twelve (12) months, in which case Tenant shall have the right to terminate. There shall be an abatement of Rent until the first to occur of (i) Tenant opening for business to the public or (ii) sixty (60) days after Landlord completes such restoration. (b) If during the last two (2) years of the Term, Tenant's Building is damaged as a result of fire or other casualty then Landlord or Tenant shall have the right to terminate this Lease upon notice to the other, and in such event the Lease shall be deemed to have terminated thirty (30) days after the giving of such notice. Provided if Landlord terminates and Tenant has remaining Renewal Terms, Tenant shall nullify the termination by exercising such Renewal Term by giving Landlord notice within thirty (30) days after such termination notice. (c) The parties waive such rights of Lease termination as are granted to them under the laws of the state wherein the Premises is located, it being their agreement that the rights of termination in the event of casualty, as set forth herein, shall be exclusive. 18. Default of Tenant. (a) The occurrence of any of the following shall ----------------- constitute an event of default (each, an "Event of Default") under this Lease: (i) Failure of Tenant to pay any Rent when due hereunder after seven (7) days written notice from Landlord; Tenant's failure to perform any covenant, condition or obligation under this Lease (other than those set forth in (i) above) within thirty (30) days after written notice and demand by Landlord, unless the failure is of such a character as to require more than thirty (30) days to cure, in which event it shall be an Event of Default upon Tenant's failure to commence and proceed diligently to cure such default. 21 Appointment of a receiver or trustee of the assets of Tenant. (b) Upon the occurrence of an Event of Default: (i) Landlord may terminate this Lease and/or any services provided to Tenant under this Lease, by giving notice of such termination to Tenant, whereupon this Lease shall automatically cease and terminate, and Tenant shall be obligated to immediately quit the Premises. Any other notice to quit or notice of Landlord's intention to re-enter the Premises is hereby expressly waived. If Landlord elects to terminate this Lease, everything contained in this Lease on the part of Landlord to be done and performed shall cease, without prejudice, however, to the right of Landlord to recover from Tenant all Rent accrued up to the time of termination or recovery of possession by Landlord, whichever is later, and any other monetary damages or loss of Rent sustained by Landlord. (ii) Whether or not this Lease is terminated pursuant to (i) above, Landlord may proceed to recover possession of the Premises under and by virtue of the provisions of the laws of the State of Virginia, or by such other proceedings, including re-entry and possession, as may be lawful. (iii) Should this Lease be terminated pursuant to(i) above, Landlord shall have the option to relet the Premises for such rent and upon such terms as are not unreasonable under the circumstances and, if the full Rent reserved under this Lease (and any of the costs, expenses, or damages indicated below) shall not be realized by Landlord, Tenant shall be liable to Landlord for deficiency in Rent, reasonable attorneys' fees, reasonable brokerage fees (attributable to the end of the Term), and the reasonable expenses of placing the Premises in the condition Tenant is required to return the same at the end of the Term. (iv) Tenant shall pay to Landlord as damages, in monthly installments, an amount equal to the Rent for the balance of the Lease Term (not including any unexercised renewal options) had this Lease not been terminated, less the net proceeds, if any, of any reletting of the Premises by Landlord subsequent to such termination, after deduction of Landlord's reasonable legal expenses and court costs in connection with such recovery of possession. Landlord shall be entitled to collect and receive such damages from Tenant on the days on which the Rent would have been payable if this Lease had not been terminated. (c) If, under the provisions hereof, Landlord shall institute proceedings against Tenant and a compromise or settlement thereof shall be made, the same shall not constitute a waiver of any other covenant, condition, agreement or obligation contained in this Lease, nor of any of Landlord's rights under this Lease. (d) If Tenant commits an Event of Default in the making of any payment or in the doing of any act under this Lease required to be made or done by Tenant, then Landlord may, but shall not be required to, make such payment or do such act, and charge the amount of the expense thereof, if made or done by Landlord, with interest thereon at the Lease Interest Rate. Such payment and interest shall 22 constitute Additional Rent hereunder due and payable within thirty (30) days of Landlord's demand therefor, but the making of such payment or the taking of such action by Landlord shall not operate to cure such default or to estop Landlord from the pursuit of any remedy to which Landlord would otherwise be entitled at law, in equity or under this Lease. (e) Notwithstanding any of the terms and provisions herein contained to the contrary, Landlord and Tenant shall each have the duty and obligation to use reasonable efforts to mitigate any and all damages that may or shall be caused or suffered by virtue of the other's defaults under, or violation of, any of the terms and provisions of this Lease. The burden of proof as to the reasonableness of a party's efforts shall be borne by the defaulting party in any litigation between the parties. In the event of an Event of Default by Tenant, if Landlord puts a for lease sign on the Premises and lists the Premises with a broker to lease, Landlord shall be deemed to have satisfied the provisions of this subsection. (f) All rights and remedies of the parties under this Lease shall be cumulative and shall not be exclusive of any other rights and remedies provided to each under this Lease, which rights and remedies include specific performance, a suit for actual damages incurred and injunctive relief, except that Landlord shall have no right to accelerate rent for more than six (6) months at a time. 19. Waiver. If under the provisions hereof Landlord or Tenant shall ------ institute proceedings and a compromise or settlement thereof shall be made with respect to any matter, the same shall not constitute a waiver of any covenant herein contained nor of any of Landlord's or Tenant's rights hereunder with respect to any other matter. No waiver by Landlord or Tenant of any breach of any covenant, condition or agreement herein contained shall operate as a waiver of such covenant, condition or agreement itself, or of any subsequent breach thereof. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Base Land Rent or any Additional Rent shall be deemed to be other than on account of the earliest stipulated Base Land Rent and Additional Rent nor shall any endorsement or statement on any check or letter accompanying a check for payment of any Base Land Rent or Additional 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 Base Land Rent or Additional Rent or to pursue any other remedy provided in this Lease, except as otherwise provided herein. 20. Subordination and Attornment. ---------------------------- (a) Existing Encumbrances. Landlord warrants and represents that the --------------------- Shopping Center is not subject to any ground lease, or the liens of any holders of any deeds of trust, mortgages or other security interests (collectively, the "Superior Instruments") covering the Building and/or Land or any interest of Landlord therein (collectively, the "Holders of Superior Instruments") except that certain Ground Lease dated June 24, 1999, between Landlord, as Lessee, and Ashbrook Associates, LLC, as Lessor (the "Ground Lease"). As a condition to the Lease Commencement Date, Landlord shall obtain and deliver to Tenant (i) a Subordination, Non-Disturbance and Attornment 23 Agreement in substantially the form attached hereto as Exhibit D, subject to --------- reasonable changes to such form requested by Landlord's lender and reasonably acceptable to Landlord and Tenant, and (ii) an agreement with Tenant from Landlord's ground lessor that such ground lessor agrees to give Tenant notice of any default and opportunity to cure any of Landlord's default under the Ground Lease. (b) Future Encumbrances. Within twenty (20) days of a written request of ------------------- Landlord, or any mortgagee or beneficiary of Landlord, Tenant shall, in writing, subordinate its rights hereunder to the interest of any future ground lessor of the land and to the future lien of any mortgage or deed of trust, recorded against the Premises and/or the Shopping Center after this Lease is fully executed by Landlord and Tenant, and as to all advances made or hereafter to be made thereon, provided, however, that, as a condition precedent to such subordination to such future encumbrance by Tenant, the ground lessor, or the mortgagee or trustee named in said mortgage or trust deed shall agree to execute an SNDA Agreement in favor of Tenant in substantially the form attached hereto as Exhibit D (for a future mortgage or deed of trust) or Exhibit D-1 (for a future ground lessor), subject to such reasonable changes to such forms requested by such ground lessor and such mortgagee and reasonably acceptable to Tenant and Landlord. Tenant further agrees that the Holders of Superior Instruments shall have the right to make this Lease superior to the lien of such mortgage or ground lease, by the filing of subordination statements or otherwise, and Tenant hereby consents to any such filing. 21. Condemnation. ------------ (a) Total Condemnation. If during the Term of this Lease, fee title to all ------------------ of the Premises or to all of the Building, or the entire leasehold estate of Tenant is taken under the power of eminent domain by any public or quasi-public agency or entity (a "Total Taking"), this Lease shall terminate as of 12:01 A.M. on the date legal title becomes vested in the agency or entity exercising the power of eminent domain. Thereafter, both Landlord and Tenant shall be released from all obligations under this Lease, except those specified elsewhere herein. (b) Taking - Parking Area. If, at any time during the Term of this Lease, --------------------- a taking occurs that is less than a Total Taking and said taking terminates access from any one of the three (3) streets shown on the Site Plan, reduces the parking ratio of the Shopping Center to less than five (5) spaces per one thousand (1,000) square feet, or affects greater than ten percent (10%) of the parking spaces in the No-Build Area as shown on the Site Plan, then, subject to the terms and provisions of the Ground Lease, and the respective rights and obligations of the parties thereto, and subject to the rights of any mortgagee of the Premises or any part thereof or of Landlord's and Ground Lessor's respective interests therein or in the Ground Lease, all compensation and damages payable for that taking shall be paid to Landlord, but will be made available to be used, to the extent reasonably needed by Landlord, to repair any portion of the remaining parking area damaged by the taking and to replace the parking areas taken with other new parking areas on the portion of the Premises not taken, or replace the access, provided that replacement is then permitted by existing law. Plans and 24 specifications for the replacement parking areas and replacement areas must be first approved in writing by Landlord which approval shall not be unreasonably withheld. (c) Partial Taking - Improvements. If at any time during the Term of this ----------------------------- Lease a taking occurs that is less than a Total Taking and said taking affects the Building, then, subject to the terms and provisions of the Ground Lease, and the respective rights and obligations of the parties thereto, and subject to the rights of any mortgagee of the Premises or any part thereof or of Landlord's and Ground Lessor's respective interests therein or in the Ground Lease, all compensation and damages payable for that taking (excluding any portion payable for a taking of parking areas) shall be paid to Landlord and this Lease shall terminate as of the date of such taking. (d) Termination for Partial Taking. Tenant or Landlord (only in the event ------------------------------ Landlord terminates the other tenants in the Shopping Center, excluding the tenant in the grocery store space) may terminate this Lease for the reasons stated in either Sections 21(a), 21(b) of this Lease, by serving written notice of termination on the other within sixty (60) days after Tenant has received from Landlord or within sixty (60) days after Landlord has received from the condemning authority written notice of a definite taking setting forth the date of the taking, and/or a copy of the condemnation proceedings as filed in the appropriate court and the extent and scope of such taking. If Tenant elects to terminate this Lease pursuant to this Section 21(d), the effective date of termination shall be time of taking (as hereinafter defined) of the portion of the Premises taken by eminent domain. On termination of this Lease pursuant to this subsection, all subleases and subtenancies in or on the Premises, if any, or any portion or portions of the Premises created by Tenant under this Lease shall also terminate and the Premises shall be delivered to Landlord free and clear of all such subleases and subtenancies. On termination of this Lease pursuant to this subsection, both Landlord and Tenant shall be released from all obligations to the other under this Lease except those specified elsewhere in this Lease. (e) Condemnation Award. Any compensation or damages awarded or payable ------------------ because of the taking of all or any portion of the Premises by eminent domain shall, subject to the terms and provisions of the Ground Lease, and the respective rights and obligations of the parties thereto, and subject to the rights of any mortgagee of the Premises or any part thereof or of Landlord's and Ground Lessor's respective interests therein or in the Ground Lease, be allocated between Landlord and Tenant as follows: (1) All compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the Premises shall be paid to and be the sole property of Landlord, free and clear of any claim of Tenant or any person claiming rights to the Premises through or under Tenant. (2) Improvements constructed or located on the portion of the Premises taken by eminent domain when only a portion of the Premises is taken by eminent domain and Tenant is not entitled to or does not terminate this Lease shall be applied in the manner specified in Section 25 21(b) or Section 21(c) toward the replacement of those improvements with equivalent new improvements on the remaining portions of the Premises. (3) All compensation or damages awarded or payable because of the Premises taken by eminent domain when this Lease is terminated because of the taking by eminent domain, whether all or only a portion of the Premises is taken by eminent domain, shall be allocated between Tenant and Landlord as follows: (i) Tenant shall be entitled to recover from any award up to an amount equal to the then depreciated (for tax purposes) cost of the portion of the improvements taken which were constructed, owned and paid for by Tenant at the time of the taking. (ii) The balance of any award after deducting the amount described in (i) above shall be the sole property of Landlord. (iii) Any damages awarded or payable for relocation due to Tenant's termination of the Lease as permitted hereunder shall be the sole and separate property of Tenant. (4) The term "time of taking" as used in this Section 21 shall mean 12:01 a.m. of whichever of the following shall first occur: the date that title, or the date that physical possession of the portion of the Premises on which the improvements are located is taken by the agency or entity exercising the eminent domain power. (f) Rent Abatement for Partial Taking. If title and possession of only a --------------------------------- portion of the Premises is taken under the power of eminent domain by any public or quasi-public agency or entity during the Term of this Lease and Tenant does not or cannot terminate this Lease, then this Lease shall terminate as to the portion of the Premises taken under eminent domain as of the time of taking of the portion taken by eminent domain by the agency or entity exercising the eminent domain power. Furthermore, the Rent payable under this Lease shall, as of that time, shall be equitably reduced in the same proportion of that the value of the portion of the Premises taken by eminent domain bears to the full value of the Premises at that time. There shall be no abatement in the event the taking covers a portion of the Premises that does not adversely affect the improvements. 22. Landlord's Representations. Landlord, in order to induce Tenant to enter -------------------------- into this Lease, hereby represents, throughout the Lease Term: (a) To the best of Landlord's knowledge, there are no Hazardous Materials (including without limitation, asbestos containing material) on, under, above or about the Shopping Center or the Premises except as set forth in Environmental Report, as hereinafter defined. (b) That Landlord has not received any notice with respect to, and has no knowledge of, any facts which would constitute violations of any Environmental Laws, as hereinafter defined, 26 relating to the use, ownership or occupancy of the Shopping Center or the Premises, except as set forth in. (c) That Landlord is duly organized and validly existing under the laws of the Applicable State and has full power and authority to enter into this Lease. (d) To the best of Landlord's knowledge, that Landlord is not a party to any agreement or litigation which could adversely affect the ability of Landlord to perform its obligations under this Lease or which would constitute a default on the part of Landlord under this Lease, or otherwise adversely affect Tenant's rights or entitlements under this Lease. (e) That as of the date hereof and as of the Lease Commencement Date, the Premises are not and shall not be subject to any leases, subleases, tenancies, agreements, liens, encumbrances, restrictions, or violations of laws, ordinances and regulations which will prevent Tenant from conducting its business for the Permitted Use. (f) That any construction activities being conducted by, through or under Landlord shall be performed in a manner having as little adverse effect as possible (under the circumstances) on Tenant's operations in the Premises, and in no event shall any portion of the No-Build Area be used for the staging of trucks or equipment or the storage of materials, nor shall access to the Premises be adversely affected. Landlord shall notify Tenant in writing at least five (5) days prior (unless due to an emergency in which case no notice shall be required) to the commencement of any reconstruction, repairing or repaving of the Common Areas and/or any restriction or closure of any access roads or entrances to the Shopping Center. If such reconstruction, repairing, repaving, restriction, and/or closure substantially and materially impedes or interferes with normal access to the Premises in a manner which materially interferes with Tenant's business therein, and such condition continues in excess of two (2) days after notice to Landlord from Tenant, then until such work no longer substantially impedes or interferes with normal access to the Premises, Based Rent and Additional Rent shall be equitably abated during the period subsequent to such two (2) day period until such condition ceases, without waiver of Tenant's other rights or remedies under this Lease or at law. (g) That during the Term of this Lease, Landlord will provide those sidewalks, driveways, service drives, roadways and entrances for automotive and pedestrian ingress and egress to and from the Common Areas and the adjoining public streets and highways to the Premises in the number and in the locations depicted on the Site Plan, subject to changes required by law. (h) That Landlord has no information or knowledge of any change contemplated in any applicable statutes, laws, ordinances, rules and regulations, or any action by adjacent landowners, or natural or artificial conditions on the Premises that would prevent, limit, impede, or render more costly Tenant's Work. (i) That all statements made here are true and correct, and the information provided and to 27 be provided by Landlord to Tenant relating to this Lease does not and will not contain any statement that, at the time and in the light of circumstances under which it is made, is false or misleading with respect to any fact, or omits to state any fact (which is known, or in the exercise of reasonable diligence by Landlord, should have been known) necessary in order to avoid making any statement contained in this section false or misleading in any respect. (j) That, as of the date hereof, to the best of Landlord's knowledge, all access roads within and to the Shopping Center shown on the Site Plan afford actual and legal access to the public rights of way of the streets and roads depicted on the Site Plan, cannot be closed, diminished, removed or altered except by condemnation or other legal proceedings and that Landlord has no knowledge of any threatened or actual condemnation proceedings affecting such access or roadways. (k) That there are no additional leasehold charges or occupancy costs which would be payable by Tenant to Landlord other than which has been identified in this Lease. (l) So long as Tenant is not in default that Tenant shall during the Term freely, peaceably and quietly occupy and enjoy the full possession of the Premises without molestation or hindrance. In addition, Landlord covenants to take all actions necessary to abate any nuisances that are occurring within the Shopping Center. (m) To the best of Seller's knowledge, that Tenant will be permitted to tap into and receive service from all utilities without the imposition of charges other than the charges of the type and amount which are customarily charged. (n) That it is a Florida corporation duly organized and in good standing in the State of Florida; that it has full right, power, and authority to execute, deliver, and perform this Lease; and that ) the person signing on behalf of Landlord is authorized to do so by any and all necessary partnership and corporate actions; (o) That no litigation has been initiated or, to the knowledge of Landlord, threatened against Landlord or against the Premises which, if adversely determined, would impair Landlord's ability to execute, deliver, and perform this Lease; and that neither Landlord, any affiliate of Landlord, nor the Premises is subject to or otherwise bound by any legal requirement or agreement (written or oral) which would be breached, or which would result in the creation or imposition of any title exception applicable to the Premises, by Landlord's execution, delivery, or performance of this Lease; (p) Upon the Lease Commencement Date, that the Site Plan for the Premises will have been approved by all necessary governmental bodies so that, except for building permits, no further governmental approvals need be obtained before Tenant may construct its Building; (q) Landlord represents that there shall be adequate utilities at the Premises for the 28 operation of Tenant's business as a Silver Diner restaurant and that the Premises shall be zoned to permit the construction and operation of a Silver Diner restaurant. (r) Landlord represents that there are no matters of record against the Shopping Center other than as shown on Exhibit E, attached hereto and by this reference made a part hereof. 23. That it is a Virginia corporation duly organized and in good standing in the State of Virginia; that it has full right, power, and authority to execute, deliver, and perform this Lease; and that the person signing on behalf of Tenant is authorized to do so by any and all necessary partnership and corporate actions. 24. No Partnership; No Other Rights. ------------------------------- (a) Nothing contained in this Lease shall be deemed or construed to create a partnership or joint venture of or between Landlord and Tenant, or to create any other relationship between the parties hereto other than that of landlord and tenant. (b) No rights, privileges, easements or licenses are acquired by Tenant pursuant to this Lease except as herein expressly set forth. This Lease shall not be binding on the parties until and unless this Lease is fully executed and delivered by the parties hereto. 25. Brokers. Landlord and Tenant represent and warrant each to the other ------- that each has not dealt with any real estate agent or broker in connection with this transaction other than the Brokers identified in the Basic Lease Information and agree to indemnify and save each other harmless from and against all loss, cost and expense incurred by reason of the breach of such representation and warranty. Landlord agrees to pay said Brokers any commissions owing in connection with this transaction. The provisions of this section shall survive termination or expiration of this Lease. 26. Notices. All notices or other communications hereunder shall be in ------- writing and shall be deemed duly given if delivered by hand, or by overnight courier, or by certified mail return receipt requested, (i) if to Landlord, to Landlord's Address for Notices set forth in the Basic Lease Information, and (ii) if to Tenant, at Tenant's Address for Notices set forth in the Basic Lease Information, unless notice of a change of address is given pursuant to the provisions of this Section 26. Notice shall be deemed to have been given upon receipt or at the time delivery is refused. 27. Estoppel Certificates. Landlord and Tenant agree at any time and from --------------------- time to time (but not more than two (2) times in any twelve (12)-month period), upon not less than ten (10) business days' prior written notice from Tenant or Landlord, as the case may be, to execute, acknowledge and deliver to the other party a statement in writing (i) certifying that this Lease is 29 unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified and stating the modifications), (ii) stating the dates to which the rentals and other charges hereunder have been paid by Tenant or Landlord, (iii) stating whether or not to the best knowledge of Tenant or Landlord, the other party has failed to fulfill any of its obligations under this Lease, and, if so, specifying each such failure of which Tenant or Landlord may have knowledge, and (iv) stating the address to which notices to Tenant or Landlord should be sent. 28. Surrender; Holding Over. ----------------------- (a) Except as otherwise expressly provided in this Lease, upon the expiration or termination of this Lease, Tenant agrees to peaceably and promptly surrender possession of the Premises to Landlord broom clean and in good condition and repair, subject to reasonable wear and tear and casualty damage; provided, Landlord hereby acknowledges that the standard of "reasonable wear and tear" expected of the Premises is that of a high volume restaurant, and that in no event shall Tenant be obligated to redecorate or repaint the Premises, nor replace mechanical equipment, ceiling or floor tiles, or light fixtures. Tenant shall remove any and all fixtures, equipment and signs installed by it no later than the expiration of the Term or thirty (30) days after the date of any earlier termination of this Lease and shall replace and repair, at Tenant's own expense, all damage to the Premises caused by or resulting from such removal. (b) If, pursuant to the consent of Landlord, Tenant, or anyone (including a sublessee) claiming under Tenant, does not immediately surrender the Premises on the date of the expiration of this Lease, then Tenant shall, by virtue of the provisions hereof, become a Tenant by the month at a monthly rental equal to one hundred twenty-five percent (125%) of Tenant's total rental obligation for the final month of tenancy under the Term, which rental shall be payable monthly in advance. Said monthly tenancy shall commence with the first day next after the Lease Expiration Date. Tenant, as a monthly Tenant, shall be subject to all of the terms, covenants, and conditions of this Lease. In the event Tenant becomes a monthly Tenant under the provisions of this Section 28, such tenancy shall be terminable by Landlord or Tenant upon thirty (30) days' written notice to the other. (c) If Tenant retains possession of the Premises or any part thereof after the termination of the Term of this Lease by lapse of time or otherwise, without the prior written approval of Landlord, Tenant becomes a holdover tenant from month-to-month on all of the terms set forth in this Lease, except as to rent and duration. The first three (3) months of such month-to-month extension shall be on all of the terms set forth in this Lease, except that the rent shall be one hundred twenty-five percent (125%) of the Base Land Rent in effect immediately prior to the expiration or termination of this Lease. 29. Defaults by Landlord. (a)(1) If Landlord shall breach, violate or -------------------- otherwise fail to perform any of the other conditions, covenants, agreements or obligations contained herein to be performed by Landlord , and such failure to perform continues for a period of thirty (30) days after 30 receipt of written notice thereof to Landlord by Tenant setting forth in detail the default, provided that if such a default will take longer than this thirty (30)-day period to cure, Landlord shall have such longer period, as may be reasonably required to effectuate such cure, as long as such cure is commenced within such thirty (30)-day period, and such cure is prosecuted diligently to completion then such failure, breach, violation, occurrence or failure to pay shall constitute an Event of Default. (2) Upon an Event of Default, then in any of said events, Tenant shall be entitled to exercise any of the following remedies provided in this Section 29. Each such remedy shall be cumulative and the exercise of any one remedy shall not preclude the exercise of any other remedy provided hereunder: (i) Tenant may cure such default on behalf of and at the expense of Landlord, and do all necessary work and make all necessary payments in connection therewith, including but not limited to the payment of any fees, costs and charges of or in connection with any legal action which may be brought in connection with such Landlord's Default, in which event Landlord shall promptly pay to Tenant forthwith the amount so paid by the Tenant, together with interest thereon at the Lease Interest Rate; (ii) Tenant may recover from Landlord any and all damages or expenses suffered or incurred by Tenant as a result of the Event of Default; and (iii) Tenant may obtain and enforce an order of specific performance or injunctive relief against Landlord. (b) If Landlord shall fail to pay to Tenant within thirty (30) days after receipt of written notice from Tenant the amount of such expenditures and interest described in Section 29(a)(2)(i) above after Tenant obtains a final judgement therefor (and after all applicable appeal periods have expired), Tenant in addition to any other right provided for by law or in equity, may deduct the amount of such expenditures and interest from any and all payments of Rent thereafter coming due to Landlord hereunder. 30. Tenant's Trade Fixtures. All trade fixtures, equipment and apparatus ----------------------- leased or owned (whether under an installment sales contract or otherwise) by Tenant and installed in or about the Premises by Tenant shall remain the property of Tenant and may be removed by Tenant at any time but must be replaced with property of equal value; provided there shall not be an Event of Default by Tenant. At all times during the Initial Term and any Renewal Terms, Landlord shall have a lien on such trade fixtures as security against loss or damage resulting from any Event of Default by Tenant, and said fixtures shall not be removed by Tenant until such default is cured or Landlord notifies Tenant to remove such trade fixtures (or any items thereof) from the Premises. Tenant, at its sole expense, shall repair any damage to the Premises caused by Tenant's removal of any trade fixtures. 31. Tenant's Personal Property. Subject to the rights of Landlord set forth -------------------------- in Section 30, 31 Tenant shall have the right to remove its personal property from the Premises at any time. From time to time, some or all of Tenant's personal property may be financed or owned by someone other than Tenant. Landlord hereby agrees to recognize the rights of the lender or owner of Tenant's personal property so long as Tenant and Tenant's creditors agree to repair any damage resulting from their removal of Tenant's personal property. Subject to the foregoing, Landlord hereby agrees to subordinate any Landlord's lien, whether created by statute or by contract (or otherwise with respect to Tenant's personal property) Landlord also agrees that all of Tenant's personal property that is not subject to a security interest or leased from another shall be the property and remain the property of Tenant. If Tenant fails to remove any of its property at the end of the Term, Landlord after ten (10) days' notice to Tenant the property shall be deemed abandoned by Tenant. 32. Benefit and Burden. The provisions of this Lease shall be binding upon, ------------------ and shall inure to the benefit of, the parties hereto and each of their respective representatives, successors and permitted assigns. 33. Security Deposit. ---------------- (a) Prior to the Rent Lease Commencement Date, Tenant shall deposit with Landlord a letter of credit in the amount of $500,000.00 as a security deposit (the "Letter of Credit"). Such security deposit shall be considered as security for the payment and performance by Tenant of all of Tenant's obligations under this Lease. The Letter of Credit shall be irrevocable and unconditional for the period of time commencing on the Rent Lease Commencement Date and extending until September 1, 2001 (the "Letter of Credit Term"). The Letter of Credit shall be issued by a financial institution acceptable to Landlord and shall be substantially in the form attached hereto as Exhibit G and by this reference made a part hereof. (b) If Tenant does not provide a renewal or replacement Letter of Credit within twenty (20) days prior to the expiration of any then existing Letter of Credit during the Letter of Credit Term, Landlord shall have the immediate right to draw on the then existing Letter of Credit and hold such security deposit to be applied for the purposes permitted by law, in equity or under this Lease. (c) Commencing on the Rent Commencement Date and provided that Tenant shall not be in default under this Lease or the Construction Contract, the amount of the Letter of Credit shall be reduced on a monthly basis by the Land Rent and the Building Rent actually paid by Tenant and received by Landlord. (d) Tenant shall require its general contractor, as hereinafter defined, to obtain and keep in full force a payment and performance bond for the benefit of Landlord and Landlord's mortgagee in the amount of $800,000. Landlord agrees to pay for one-half (1/2) of the costs of such payment and performance bond not to exceed $6,000.00. 32 34. Landlord or Tenant as an Individual or Partnership. If Landlord or -------------------------------------------------- Tenant or any successor in interest to Landlord or Tenant shall be an individual, corporation, limited liability company, joint venture, tenancy in common, firm or partnership, general or limited, there shall be no personal liability on any employees, officers, directors or other individuals, of the Landlord or Tenant, their successors, partners, or Affiliates with respect to any of the provisions of this Lease, any obligation arising therefrom or in connection therewith. Nothing in this Section 34 shall be construed to limit the liability of Landlord or Tenant hereunder. 35. Intentionally Deleted. ----------------------- 36. Landlord Mortgagee Protection. Tenant agrees to give any mortgagee(s) ----------------------------- and/or trust deed holder(s), by certified or registered mail, postage prepaid, return receipt requested, a copy of any notice of any failure by Landlord to fulfill any of its obligations under this Lease served upon the Landlord by Tenant, 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 addresses of such mortgagee(s) and/or trust deed holder(s). Tenant further agrees that the mortgagee(s) and/or trust deed holder(s) shall have the same amount of time as does Landlord under the terms of this Lease to cure such failure. 37. Intentionally Deleted. --------------------- Environmental Matters. --------------------- (a) Landlord represents and warrants to Tenant that, as of the date hereof and on the Lease Term Commencement Date, to the best of Landlord's knowledge there are no Hazardous Materials on or about the Premises or Shopping Center, except as set forth in the Environmental Report, as hereinafter defined. Neither Landlord nor Tenant, nor their agents and employees, shall violate or cause to be violated any federal, state or local law, ordinance or regulation relating to the environmental conditions on, under or about the Premises or Shopping Center, including, but not limited to, soil and ground water conditions. Neither Landlord nor Tenant, nor their agents and employees, shall introduce, use, generate, store, accept or dispose of on, under or about the Premises or Shopping Center or transport to or from the Premises any hazardous wastes, toxic substances or related materials, except normal and usual office and cleaning supplies ("Hazardous Materials"). For the purposes of this Article, Hazardous Materials shall include, but not be limited to substances defined as "hazardous substances" or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9061 et -- seq.; Hazardous Materials Transportation Act, 49 U.S.C. Section 1802; and - --- Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., ------- asbestos, total petroleum hydrocarbons, and any other substances considered hazardous, toxic or the equivalent pursuant to any other applicable laws and in the regulations adopted and publications promulgated pursuant to said laws or any future laws or regulations (collectively, the "Environmental Laws"). 33 (b) Tenant shall clean up and remove or cause to be cleaned up and removed from, under or about the Premises any Hazardous Materials, Tenant or its agents, contractors or employees have caused to be introduced, at its sole cost and expense, and shall ensure that such removal is conducted in compliance with all applicable Environmental Laws. (c) Landlord shall clean up and remove or cause to be cleaned up and removed from, under or about the Shopping Center and the Premises any Hazardous Materials not introduced by Tenant or Tenant's agents, contractors, or employees, at its sole cost and expense, and shall ensure that such removal is conducted in compliance with all applicable Environmental Laws (d) Landlord and Tenant shall and do indemnify, defend and hold the other, its successors and assigns harmless from and against any losses, costs, including reasonable attorneys' fees, expenses, liabilities, claims and damages which Landlord or Tenant, or their successors and assigns may sustain or which may arise by reason of Tenant's or Landlord's or their respective agents, employees or contractors, failure to comply with the requirements of this Section. (e) This Section shall survive the expiration or earlier termination of this Lease. 40. Memorandum of Lease. ------------------- (a) Landlord and Tenant shall, at the request of either party, execute, acknowledge and deliver to the other party a memorandum or short form of this Lease (the "Lease Memorandum") in recordable form, setting forth the date of this Lease, the names of the parties hereto, the Lease Commencement Date and describing the Premises and Tenant's right to renew this Lease. Said Lease Memorandum shall not in any circumstances be deemed to modify or to change any of the provisions of this Lease. Either party may elect, at its sole expense, to record the Lease Memorandum. (b) In the event that Landlord and Tenant execute such Lease Memorandum, each party shall after the expiration or termination of the Term, at the request of the other party, execute, acknowledge and deliver a memorandum in recordable form evidencing the expiration or termination of this Lease, and if such party fails to execute such memorandum within fifteen (15) days after the date of such request, such party hereby irrevocably appoints the requesting party its attorney-in-fact to execute and deliver such memorandum on behalf of such party. The requesting party may elect, at its sole expense, to record said memorandum at its sole cost. 41. Excuse For Nonperformance - Force Majeure. Either party shall be excused ----------------------------------------- from performing any obligation or undertaking provided in this Lease for a period of time equivalent to the delay caused by the items described below, in the event and so long as the performance of any such obligation is prevented or delayed, retarded or hindered by Act of God, fire, earthquake, floods, explosion, actions of the elements, war, invasion, insurance, riot, mob violence, sabotage, inability to procure or general shortage of labor, equipment, facilities, materials or supplies in the open market, failure of transportation, adverse weather conditions, condemnation, requisition, laws, orders of 34 government or civil military or naval authorities, or any other cause, whether similar or dissimilar to the foregoing not within the reasonable control of such party ("Force Majeure"), excluding however, the inability to obtain monies to perform or fulfill a party's obligations and undertakings. The provisions of this Section shall not apply to Tenant's obligation to pay Rent hereunder. 42. Interference. Whenever Tenant's business is materially interfered with ------------ by virtue of Tenant's being prevented in whole or in material part from the free, uninterrupted and unimpeded enjoyment of the use of the Premises, or the fixtures therein, by reason of (a) an Event of Default by Landlord; or (b) Landlord's making any repairs or alterations in or to the Shopping Center, Tenant shall be allowed an abatement of Rent and all other charges payable hereunder in whole or in part based upon the duration and the extent of such interrupted enjoyment. 43. Miscellaneous. ------------- (a) Construction. Feminine or neuter pronouns shall be substituted for ------------ those of the masculine form, and the plural shall be substituted for the singular number, in any place or places herein in which the context may require such substitution. The Lease shall not be construed strictly against either party, but fairly in accordance with their mutual intent as expressed in this Lease. Words such as "hereof," "hereunder," "hereto," and "herein," as used in this Lease, refer to this entire Lease, not just a part thereof, except where otherwise specifically stated. (b) Waiver of Jury Trial. Landlord and Tenant hereby waive their right to -------------------- a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or occupancy of the Premises, and any claim or counterclaim of injury, damage or otherwise by Landlord and Tenant against or with respect to each other. (c) Entire Agreement. This Lease and the Exhibits attached hereto contain ---------------- and embody the entire agreement of the parties hereto, and supersedes and revokes any and all negotiations, arrangements, letters of intent, representations, inducements or other agreements, oral or in writing. No representations, inducements or agreements, oral or in writing, between the parties not contained in this Lease, shall be of any force or effect. This Lease may not be modified, changed, amended, altered or terminated in whole or in part in any manner other than by an agreement in writing duly signed by both parties hereto. (d) Savings Clause. If any provision of this Lease or the application -------------- thereof to any person or circumstances shall to any extent be held by a court of competent jurisdiction invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law unless Tenant reasonably determines that the unenforceability of such provision shall interfere with 35 Tenant's quiet enjoyment of the Premises or will materially impact upon the financial benefit of this Lease to Tenant, in which event Tenant shall be entitled to terminate this Lease upon thirty (30) days written notice to Landlord. (e) Days. Any references in the Lease to the term "day" shall be deemed to ---- mean "calendar day" unless expressly stated otherwise. (f) Lease Binding. This Lease shall become immediately binding upon the ------------- parties hereto on the date signed by all such parties, notwithstanding that the Term of this Lease shall commence on a future date. (g) Headings. The Table of Contents preceding this Lease and the headings -------- of the paragraphs and subparagraphs are inserted solely for conveyance of reference and shall not constitute a part of this Lease, nor limit, define or describe the scope or intent of any provision hereof. (h) Applicable Law. This Lease, the rights and obligations of the parties -------------- hereto, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the state in which the Premises is located. (i) Benefit of Lease. Except for those provisions concerning the rights of ---------------- mortgagees of the Premises, mortgagees of Tenant's leasehold interest, and the suppliers of furniture, fixtures, and equipment to the Premises, none of the provisions of this Lease are intended to be for the benefit of any person to whom any debts, liabilities or obligations are owed, or who otherwise has any claim against, the Landlord or Tenant or any of the partners of Landlord or Tenant; and no such person shall obtain any right under the provisions of this Lease or shall by reason of any such provisions make any claim in respect of any debt, liability or obligation (or otherwise) against the Landlord, Tenant or any of their partners. (j) Running Of Covenants. All of the covenants of Landlord contained in -------------------- this Lease shall be covenants running with the land pursuant to applicable law. It is expressly agreed that each covenant to do or refrain from doing some act within the Shopping Center or any part thereof (a) is for the benefit of the Premises and each person having any leasehold interest therein derived through Tenant, and (b) shall be binding upon each successive owner, during his ownership, of any portion of the Shopping Center and upon each person having any interest therein derived through any owner of the Shopping Center. (k) Confidentiality. Landlord and Tenant will maintain all Confidential --------------- Information in confidence and will not disclose such information to any other party without written consent. "Confidential Information" includes the terms of this Lease any and all information whether oral, written or other form, which is communicated by on one party to the other, including but not limited to architectural plans, specifications, Site Plans and drawings and gross receipts (regardless of whether such information is labeled confidential). Confidential Information may be released to the 36 parties' employees, accountants, prospective or existing partners and any prospective transferees of all or any portion of Landlord's interest in the Shopping Center; to any existing or prospective lenders (and their rating agencies); to any existing or prospective insurers of Landlord; attorneys, and consultants, who have a reasonable need for such Confidential Information, provided that such individuals agree to maintain the confidential nature of the information, or in connection with any judicial or administrative proceeding, or when such information is subpoenaed or otherwise required by law or a court order; or in connection with any litigation concerning the rights and obligations of the parties to this Lease; or to any governmental or quasi- governmental agency. (l) Attorney's Fees and Costs. If either party hereto finds it necessary ------------------------- to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms, covenants or conditions hereof, the unsuccessful party shall pay to the prevailing party a reasonable sum for attorneys' fees. Attorneys' fees shall include attorneys' fees on any appeal, and in addition a party entitled to attorneys' fees shall be entitled to all other reasonable costs for investigating such action, taking depositions and the discovery, travel, and all other necessary costs incurred in such litigation. (m) Payment and Performance Under Protest. It is agreed that it at any ------------------------------------- time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said party to institute suit for the recovery of such sum, and if it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease; and if at any time a dispute shall arise between the parties hereto as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation to perform the work is asserted may perform such work and/or pay the costs thereof "under protest" and the performance of or payment for such work shall in no event be regarded as a voluntary performance or payment and shall survive the right on the party of said party to institute suit for recovery of the costs of such work, and if it shall be adjudged that there was no legal obligation on the part of said party to perform the same or any part thereof, said party shall be entitled to recover the costs of such work or the cost of so much thereof as said party was not legally required to perform under the provisions of this Lease. Similarly, if payment is made by one party to the other and that payment is deemed by the payee to be insufficient to meet the obligations of the payor, the payee may cash or otherwise negotiate said payment "under protest" and such receipt and use shall not be regarded as an accord or satisfaction of the payor's obligation, and there shall survive the right of the payee to institute suit for the recovery of any claimed deficiencies. (n) Satellite Dish. Landlord agrees that Tenant, at its sole cost and -------------- expense, has the right to install, maintain, repair, replace and remove a satellite dish on the roof of the Building subject to the following:(i) all construction and improvements related thereto (that are not minor in nature) shall be subject to Landlord's approval, which shall not be unreasonably withheld, conditioned 37 or delayed (and Landlord shall approve or disapprove [with detailed reasons for such disapproval] same within thirty [30] days of written request therefor the same shall be deemed approved; (ii) Tenant shall screen the satellite dish and, if possible, set it back from the front of the Building to reduce visibility thereof by customers; (iii) Tenant shall repair, at its own expense, any damage to the Building or the roof caused by the use, maintenance, installation, or removal of the satellite dish; (iv) Landlord assumes no liability or responsibility for interference with the satellite dish caused by other tenants placing similar equipment on the roof of their premises (provided, that Landlord shall use commercially reasonable efforts not to allow other tenants cause interference); (v) the satellite dish shall be included within the coverage of all insurance policies required to be maintained by Tenant under this Lease and (vi) Tenant shall obtain at its cost all permits required by governmental authorities for said satellite dish. Should Tenant elect to install a satellite dish on the roof of the Building, Tenant agrees to install the satellite dish in accordance with sound construction practices and shall use commercially reasonable efforts not place its satellite dish in a location that will interfere with another tenant's satellite dish. The satellite dish shall be used solely in connection with the business operations in the Building, and shall not be used by any party who is not an occupant or tenant of the Building. (o) Survival. Any provision hereof which by its terms survive expiration -------- or earlier termination of the Lease or would by its terms require performance after the expiration or earlier termination of the Lease shall survive the expiration or earlier termination of the Lease. (p) Time is of the Essence. All provisions of this Lease shall be ---------------------- construed in accordance with the principle that time is of the essence, it being understood and agreed, however, that Landlord and Tenant shall each still be entitled to the notices and the cure periods specified in this Lease. (q) Rule Against Perpetuities. Notwithstanding any provision in this Lease ------------------------- to the contrary, if the Lease Term has not commenced within twenty-one (21) years after the Date of Lease, this Lease shall automatically terminate on the 21st anniversary of the Date of Lease. The sole purpose of this provision is to avoid any possible interpretation of this Lease as violating the Rule Against Perpetuities or other rule of law against restraints on alienation. 44. Reciprocal Easement Agreement. ----------------------------- (a) Tenant acknowledges and agrees that this Lease shall be subject and subordinate to a reciprocal easement agreement regarding traffic flow (vehicular and pedestrian) access, utilities, drainage and parking (the "REA"). In connection with the REA, Tenant agrees to execute and deliver any and all documents reasonably requested by Landlord evidencing Tenant's consent to the REA and the subordination of this Lease to the REA. (b) Notwithstanding anything contained herein to the contrary, to the extent that the Lease imposes greater restrictions or obligations upon Landlord than those set forth in the REA, 38 the provisions of the Lease shall control. Notwithstanding anything contained herein to the contrary, it being expressly understood and agreed that all of Tenant's monetary obligations with respect to the Premises (including, without limitation, Common Area Charge, Real Estate Taxes and insurance) shall be as set forth in the Lease. Landlord agrees that the REA shall not change any of Tenant's rights granted under this Lease. Notwithstanding anything contained herein to the contrary, Tenant acknowledges and agrees that the terms of this Lease shall be subject and subordinate to the terms of the Ground Lease. In an event of a conflict between the terms of this Lease and the terms of the Ground Lease, the terms of the Ground Lease shall govern. IN WITNESS WHEREOF, Landlord and Tenant intending to be legally bound have each executed this Lease under seal on the day and year hereinabove written. TENANT ------ SILVER DINER DEVELOPMENT, INC., a Virginia corporation By:/s/ (SEAL) -------------------------------------- Name: ___________________________________ Title: __________________________________ LANDLORD -------- INTERFACE PROPERTIES, INC. a Florida corporation By:/s/ (SEAL) -------------------------------------- Name: ___________________________________ Title: __________________________________ 39 STANDARD FORM BUILD TO SUIT. EXHIBIT B --------- CONSTRUCTION RESPONSIBILITIES The following sets forth the respective construction responsibilities of Landlord and Tenant with regard to Landlord's obligation to construct certain Site Improvements (hereafter defined) with regard to the Shopping Center, including certain designated work on the Premises and Tenant's responsibility to construct the Building and sidewalk. 1. Investigations, Site Plan Approval. Investigations. Subject to the rights of the current owners of the Land, Tenant and/or its agents and representatives shall have the right to enter upon the Premises at any time after the Effective Date for purposes of conducting such surveys or engineering tests, including test borings, inspections, investigations, and/or studies as Tenant deems necessary or desirable to evaluate the Premises at the sole cost and expense and risk of Tenant. Tenant hereby indemnifies, defends and agrees to hold Landlord harmless from and against any claims, losses, liabilities, expenses, costs, including, without limitation, reasonable attorneys fees, or damages incurred by Landlord as a result of persons or firms entering the Premises on Tenant's behalf pursuant to the privilege granted under this subsection (a). The provisions of this subsection (a) shall survive termination or expiration of this Lease. Site Plan Approval. Landlord agrees to obtain Site Plan approval and other approvals and permits as may be necessary for developing the Shopping Center and permitting the construction of a Silver Diner (exclusive of any building permits which shall be Tenant's responsibility) promptly as provided herein, to use due diligence and to expend any necessary application or other fees to secure such permits and approvals. On or before the Effective Date, Landlord shall file all necessary applications to obtain the approval of the Site Plan substantially and in all material respects consistent with the sketch Site Plan attached hereto as Exhibit A and the detailed engineered Site Plan dated July 1, 1999 prepared by Langley and McDonald, Inc. and described in Exhibit B-1 attached hereto and made a part hereof. If Landlord has not obtained - ----------- the Site Plan approval and all other approvals and permits which will enable Tenant to obtain a building permit for the construction of a Silver Diner restaurant on the Premises on or before January 30, 2000, then Tenant shall have the right to terminate this Lease any time thereafter until such contingency is satisfied by sending written notice to Landlord of such election. There shall be no material change to the sketch Site Plan or the engineered Site Plan, without Tenant's reasonable approval, which consent shall not be unreasonably withheld, if such changes do not change the size or location of Tenant's Building, the No- Building Area, or materially change access from the Premises to the driveways and entrances to the Premises. In the event 1 Landlord changes the size of the other buildings in the Shopping Center by fifteen percent (15%) or less within the building envelope, such change shall not be deemed a material change and Tenant shall not have any approval rights with regard thereto. (c) Tenant shall apply for its construction and signage permits for the construction of a prototype Silver Diner restaurant, and to use Tenant's exterior prototype signage on the Premises and liquor license on or before the day which is fourteen (14) days after the date Landlord notifies Tenant that Landlord obtained Site Plan approval and closing on the portion of the Shopping Center described in Exhibit A-1. Tenant shall use diligent good faith efforts to ----------- obtain such construction and signage permits and liquor license, and if Tenant shall have not received all of the construction and signage permits and reasonable notification from the applicable governmental authority that a liquor license will be issued upon completion on or before the date which is sixty (60) days after Site Plan approval, Tenant or Landlord shall have the right to terminate this Lease any time thereafter until such contingency is satisfied by sending written notice of such election to the other, provided, however, if Landlord elects to terminate and Tenant notifies Landlord within five (5) days of Tenant's receipt of Landlord's termination notice that Tenant has obtained such permit or waives such contingency, this Lease shall continue in full force and effect. In the event the Lease is terminated, neither party shall have any further rights, liabilities or obligations hereunder thereafter accruing, except as provided herein. Tenant represents that when applying for its construction and signage permits that Tenant's building and signage plans shall be in accordance with Tenant's Plans, which shall be generally consistent with the last two Silver Diner restaurants constructed subject to size and configuration as shown on such prototype plans. (d) Landlord will cooperate with Tenant in obtaining Tenant's permits and approvals as provided for in this Lease, at no cost to Landlord. Tenant shall have the right to seek specific performance of the obligations of Landlord, injunctive relief or other equitable remedies. Tenant agrees to indemnify, defend and hold harmless Landlord from and against all liability, costs, expenses, including, without limitation, attorneys fees, and obligation in connection with, or resulting from, the signing of any such document or instrument (e) Landlord has delivered to Tenant an environmental report entitled, "Combined Phase I/II & Limited Asbestos Survey", dated June 15, 1999, made by Langley and McDonald, Inc. (the "Environmental Report") of which Tenant acknowledges receipt of and review thereof. (f) Tenant shall be deemed to have waived its rights to terminate as provided for in this Section 1, if Tenant accepts possession of the Premises and the general contractor under the Construction Contract, as hereinafter defined, commences constructing Tenant's Building. 2 2. Landlord's Work. --------------- (a) Landlord shall construct a "finished" Building pad for Tenant's Building. Landlord to deliver Building pad at 8 inches below finish grade with accepted soils to support Tenant's Building, properly compacted, with all erosion and sediment controls in place. All utilities, adequate for Tenant's use, shall be extended to 5 feet inside the Tenant's Building pad at locations reasonably determined by Tenant, including all tap connection utility fees or charges. Landlord shall be responsible for storm water systems and management. Landlord shall complete all other site improvements outside of the Building pad and sidewalk curb line, including without limitation, paving, curb and gutters, sidewalks, irrigation, landscaping, site lighting, trash corrals, loading areas and related screen walls, off site construction work in accordance with the Site Plan attached as Exhibit A to the Lease and the Development Plans identified in Exhibit B-1 (the "Plans and Specifications"); provided, however, the buildings (exclusive of the Premises and the grocery store) will be deemed completed when certified by Landlord's architect that the buildings (exclusive of the Premises and the grocery store) are substantially completed exclusive of interior improvements. Landlord shall also be responsible for all costs of any Public Works proffers or other development conditions, if any. All such work described in this subsection (a) is collectively referred to herein as the "Site Improvements". (b) Landlord shall amend the Plans and Specifications, if necessary, so they shall be consistent with plans given to Landlord by Tenant showing the location of the utility lines to Tenant's Building. (c) Landlord will apply for and use reasonable efforts to obtain, at its own expense any and all necessary permits and variances that are necessary to construct the Site Improvements, including, without limitation, any such permits pertaining to utilities, curb cuts, driveways (including ingress and egress to public thoroughfares), and architectural elevation approvals specific to Silver Diner's Building. Notwithstanding anything herein to the contrary, Landlord shall not be responsible for or obligated to obtain a building permit for the Tenant's Building and Tenant shall be responsible for obtaining the building permit for Building or other improvements to be performed by Tenant, as well as any Health Department approval specific to Tenant's Building, at its own expense. (d) Landlord shall provide to Tenant testing results relating to work on the Premises from licenses engineers and/or testing labs for tests conducted by Landlord. All tests must meet the criteria established in the Plans and Specifications. Test results, as completed, shall be sent to Landlord and Tenant. Upon completion of the Tenant's Building pad and site grading, Landlord shall provide a report from a licensed surveyor stating to Tenant that the Premises has been graded to the elevation required in the plans and specifications. 3 (e) After the awarding of the construction contract(s) by Landlord and receipt of the necessary Permits, Landlord shall cause the commencement and diligent continuance of the construction of the Site Improvements until completion. (f) Landlord shall be responsible for the supervision of the construction of the Site Improvements, and shall use reasonable efforts to advise and consult with Tenant as to material elements of the work and its progress. Tenant and its designated architect and/or engineer, at its own expense, may visit the job site to inspect the progress and performance of the work and the materials being incorporated into the Site Improvements, so long as Tenant and its designated architect and/or engineer do not interfere with the construction of Site Improvements. (g) Intentionally omitted. (h) The Site Improvements shall be deemed "completed" after the completion of all work and certification of such completion by Landlord's engineer. The Site Improvements shall be deemed "substantially completed" upon the completion of all such work, except for minor items which do not materially detract from the usability of such item or are of a seasonal nature (such as landscaping or striping on the parking area and the interior roads in the Shopping Center), commonly referred to as "punch list" items and certification of such by Landlord's engineer and provided it is sufficient for Tenant to obtain its certificate of occupancy for Tenant's Building. Landlord shall diligently complete all punch list items. (i) Landlord will perform the Site Improvements in a manner reasonably designed to minimize any interference with the construction of the Tenant's Building. If Tenant takes possession prior to completion of the Site Improvements by Landlord, Landlord shall provide reasonable means for construction access and reasonable construction staging areas for Tenant's use in connection with construction of the Building. In the event that during the construction of the Building, the construction activities of Landlord, or the progress of the same, interferes with or delays the construction activities of the Tenant, Tenant shall notify the Landlord, in writing, of the same, specifying exactly what construction activities of Landlord are the source of the problem or what portion of Landlord's work needs to be performed to avoid such delay. Landlord will have forty-eight (48) hours after its receipt of the foregoing notice to stop or commence to diligently cure the matters raised by Tenant in its notice. Should Landlord fail to do so, or should Landlord, having commenced such care, fail to diligently complete it, Tenant shall be entitled to one day free rent for each day Tenant is delayed by Landlord. In the event that during the construction of the Site Improvements, the construction activities of Tenant, or the progress of the same, interferes with or delays the construction activities of Landlord, Landlord shall notify Tenant, in writing, of the same, specifying exactly what construction activities of Tenant are the source of the problem or what portion of the 4 construction of Tenant's Building needs to be performed to avoid such delay. Tenant will have forty-eight (48) hours after its receipt of the foregoing notice to stop or commence to diligently cure the matters raised by Landlord in its notice. Should Tenant fail to do so, or should Tenant, having commenced such cure, fail to diligently complete it, Landlord shall be entitled to two (2) days rent for each day Landlord is delayed by Tenant, commencing on the Rent Commencement Date. (j) Notwithstanding the foregoing, Landlord shall cause the construction of the Site Improvements serving the Demised Premises (including all parking within the No Build Zone) in two phases, the first phase being the delivery of Tenant's Building pad, staging areas and an access road to Virginia Beach Boulevard and Beaseley Drive (the "Phase One Work"). The Phase One Work shall be substantially completed by October 1, 1999, but in no event later than December 1, 1999 subject to Section 41 of the Lease. The remaining Site Improvements serving the Demised Premises (the "Phase Two Work"), shall be completed in accordance with the following schedule: (1) Permanent Utilities to Tenant's Building--90 days after delivery of Phase One Work (2) Substantial completion of remaining Phase Two Work--one hundred sixty (160) days after delivery of Phase One Work in each case subject to Section 41 of the Lease. 3. Tenant's Building. ----------------- (a) Tenant has delivered to Landlord its general design elevations which include Tenant's proposed general physical characteristics of the Tenant's Building, exterior materials, exterior color scheme and building heights. Landlord has approved the construction of a restaurant substantially in accordance with the Silver Diner prototype plans identified in Exhibit B-2 ("Tenant's Plans"). Tenant has delivered to Landlord a plan which depicts the location of all utilities entering the Tenant's Building and will deliver detailed plans for the same within thirty (30) days after the date hereof ("Tenant's Utilities Plans"). Tenant's Utilities Plans are subject to Landlord's approval, which approval Landlord shall not unreasonably withhold or delay. (b) Tenant agrees to build Tenant's Building, exclusive of Tenant's leasehold improvements, furniture and fixtures, on behalf of Landlord. Such work shall be accomplished by Tenant entering into an $800,000.00 fixed price contract ("Construction Contract") with Uniwest Construction, Inc. ("general contractor") to build a Silver Diner building in accordance with Tenant's Plans. Payments under such contract shall not exceed for any reason whatsoever $800,000.00 and shall be made by Landlord in monthly installments based upon the work completed, less a 10% 5 retention, upon receipt by Landlord of (i) written certification from Tenant and the general contractor as to percentage of work that has been completed; and (ii) receipt of partial lien releases from the general contractor and subcontractors having contracts for $10,000. Landlord shall pay the general contractor for the balance of the construction payment upon the happening of the following events: (i) completion of the Building; (ii) receipt by Landlord of a Use and Occupancy Permit or its equivalent which Tenant shall obtain; and (iii) receipt of final lien release from the general contractor and subcontractors having contracts over $10,000. Notwithstanding the fact that Tenant is executing the Construction Contract, ownership of the Building constructed pursuant to the Construction Contract shall belong to the Landlord. If Landlord wrongfully fails to make any payments to the general contractor in accordance with the requirements above, Tenant shall have the right to make such payments after giving Landlord ten (10) days prior written notice and opportunity to cure, and in such event the Rent Commencement Date shall not commence, even if Tenant has opened for business, until such time as Landlord has made all payments under the Construction Contract. Notwithstanding the foregoing, the Landlord's construction lender for the Shopping Center (the "Construction Lender") shall have the right to consent to the request for payment from the general contractor of any amounts required to be dispersed to the general contractor by Landlord pursuant to the Construction Contract inclusive of the final payment (the "Construction Draws"). If the Construction Lender refuses for any reason to approve payment of the Construction Draw, then such Construction Draw shall not be paid; provided, however, that if the Construction Lender consents to payment of the Construction Draw, then such Construction Draw shall be paid regardless of the Landlord's or Tenant's objections. If a timely payment of a Construction Draw is not made as a result of a refusal to pay (all or any portion of) the Construction Draw, and such refusal is "wrongful" (as defined below) and such failure continues for more than ten (10) days after written notice from Tenant, then (1) each day of delay in making such payment shall be deemed a "Landlord Delay" hereunder and (2) any damages or other costs due to the general contractor under the Construction Contract for such delay in payment of the Construction Draws as a result of the Construction Lender's or Landlord's wrongful refusal to approve or make payment to the general contractor shall be paid by Landlord. For the purposes of this Lease, a "wrongful" refusal to pay all or any portion of a Construction Draw shall be for a reason other than the reasons set forth in Paragraph 9.5.1 of the Construction Contract. (c) The Construction Contract with the general contractor shall provide for the coordination and cooperation of such contractor with Landlord in completing the Site Improvements and other construction work on the Shopping Center, including any space to be erected by Landlord or its tenants. The general contractor shall perform its construction in a manner reasonably designed to minimize any interference with the construction taking place simultaneously on the balance of the Shopping Center or the operation of stores then open for business. The contractor agrees to use 6 reasonable efforts to minimize construction traffic on the private road leading to the apartments called Silver Brook Lane. In the event that during the construction of the Building, the construction activities of the general contractor, or the progress of the same, interferes with or delays the construction activities of the Landlord, Landlord shall notify the Tenant, in writing, specifying exactly what construction activities of general contractor are the source of the problem or what portion of the general contractors work needs to be performed to avoid such delay. Tenant will have seventy-two (72) hours after its receipt of the foregoing notice to cause the general contractor stop or commence to diligently cure the matters raised by Landlord in its notice. Notwithstanding the foregoing, in no event shall the general contractor or Tenant be expected or obligated to engage in any conduct which is in conflict with or violates any federal, state or local law including, without limitation, the National Labor Relations Act or the regulations thereto. (d) The construction of the Tenant's Building shall be performed in a good and workmanlike manner in accordance with sound professional standards and with the provision of this Agreement, in compliance with all governmental authorities and Tenant's Plans and Tenant's Utilities Plans. All materials used in the construction of the Tenant's Building shall be of new, commercial grade and first class quality. (e) The Building construction work shall be properly protected with lights and barricades and secured against accident, storm or any other hazard. Staging for the construction of the Tenant's Building shall be confined to the area designated "staging" on the Site Plan. Tenant shall cause the general contractor to keep all other portions of the Shopping Center substantially free from and unobstructed by debris, equipment materials or supplies related to the general contractor's construction work and will use its best good faith commercially reasonable efforts to keep obstruction to a minimum. The general contractor shall patch and repair asphalt and cement, if necessary, in its staging areas upon demobilization of construction and leave same clean and free of debris. During such construction work, Tenant shall cause the general contractor to store all trash, debris and rubbish as reasonably directed by Landlord and upon the completion of the general contractor's work, Tenant shall cause the general contractor to remove all temporary structures, surplus materials, debris and rubbish of whatever kind remaining on the Premises, the staging areas or other portions of the Shopping Center. Landlord shall be responsible for the removal of rubbish and trash from the Shopping Center caused by Landlord. In the event Tenant fails to cause the general contractor to promptly remove all temporary structures, surplus materials, debris and rubbish, Landlord shall have the right after giving Tenant forty-eight (48) hours notice, and charge Tenant together with interest at the Lease Interest Rate until paid as Additional Rent hereunder. (f) The Lease Commencement Date shall be the date Landlord delivers the Premises to Tenant with Phase One of Landlord's Work, as set forth in Section 2 (j) above, substantially completed and Tenant has obtained or waived all permits and approvals, as provided 7 herein, necessary to enable Tenant to perform any work required to construct its Building and to install Tenant's prototype signage. Landlord shall give Tenant at least fifteen (15) days advance notice of the Lease Commencement Date. If the Lease Commencement Date would fall between December 15 and the succeeding last day of February, the Lease Commencement Date shall be deemed to be March 1st unless Tenant elects to accept possession of the Premises and to commence Tenant's Work. Tenant may terminate this Lease by notice to Landlord if the Lease Commencement Date has not occurred by April 30, 2000. (g) Tenant shall enter into a separate contract with the general contractor for any Tenant leasehold improvements which shall be paid by Tenant at Tenant's sole cost and expense. At the end of the Term, Landlord shall own the Tenant's leasehold improvements. (h) Landlord and Tenant shall look to the general contractor for any defects in construction, workmanship or materials of Tenant's Building. (i) Tenant shall notify Landlord of any defects in Landlord's construction of Tenant's Building pad within five (5) business days after Landlord delivers the same to Tenant. After the expiration of such five (5)-day period, Landlord shall have no responsibility to correct any defects to Tenant's Building pad. 4. Rent Commencement Date ---------------------- (a) The Rent Commencement Date shall be the earlier of (i) the day the Premises are occupied by Tenant and opened to the public for business or (ii) the last to occur of (a) the date which is 180 days ("Construction Period") after the Lease Commencement Date; (b) the date all Site Improvements have been completed; and (c) certification from Landlord that fifty percent (50%) of the square footage of the floor area in Shopping Center (including the four (4) spaces adjacent to the Premises fronting on Virginia Beach Boulevard and exclusive of the Premises) has been leased and any contingencies satisfied; provided, however, that if Tenant's Work is not "substantially completed" (as defined below) by the end of the Construction Period as a result of Landlord Delay (including failure of Landlord to complete the Phase Two Work as provide for in paragraph (j) of Section 2 above) or Force Majeure (as defined in Section 41), then the Rent Commencement Date shall be postponed by the total number of days of Landlord Delay and Force Majeure. (b) Notwithstanding the foregoing, if the Rent Commencement Date occurs between October 1st and the succeeding January 31, the Rent Commencement Date will not be deemed to have occurred until February 1st, unless Tenant opens for business prior to such date, in which event the Rent Commencement Date will be deemed to have occurred on the date Tenant opens 8 for business. 5. Indemnity and Insurance. ----------------------- (a) Landlord shall indemnify, defend and save Tenant and its agents, servants, employees, officers and directors harmless from any and all loss, damages, liability, costs and expenses including, but not limited to, reasonable attorney's fees, and all other sums which Tenant, its agents, servants, employees, officers and directors may pay or become obligated to pay on account of any claim or assertion of liability arising or alleged to have arisen out of any act or omission of Landlord, its agents, contractors, subcontractors, servants, employees, licensees or invitees in connection with construction of the Site Improvements to be performed by or at the direction of Landlord under this Exhibit; provided, however, Landlord shall not be responsible for any such loss, damages, liability, costs or expenses which arise from the act or omission of Tenant, its agents, contractors, subcontractors, servants, employees, directors or officers. Notwithstanding the foregoing, in no event shall Landlord be responsible for any lost profits or consequential damages. The construction contract shall require the general contractor to indemnify, defend and save Landlord and its agents, servants, employees, contractors, officers and directors harmless from any and all loss, damages, liability, costs and expenses including, but not limited to, reasonable attorneys fees, and all other sums which Landlord, its agents, servants, employees, contractors, subcontractors, officers and directors may pay or become obligated to pay, on account of any claim or assertion of liability arising or alleged to have arisen out of any act or omission of general contractor or its agents, subcontractors, or employees in connection with the construction of the Tenant's Building on the Premises; provided, however, the general contractor shall not be responsible for any loss, damage, liability, cost or expenses which arise from the negligence or willful misconduct of Landlord, its agents, servants, employees or officers. Notwithstanding the foregoing, in no event shall the general contractor be responsible for any lost profits or consequential damages, except as may be otherwise set forth in the construction contract. (b) Notwithstanding the foregoing, but in no event sooner than one hundred sixty (160) days after the Phase One Work has been completed, if the Certificate of Occupancy will not issue by reason of work done, or failed to be done, by Landlord (and not because of the manner in which Tenant shall have done its work), or by reason of any condition of the Shopping Center that is not under Tenant's control, then it shall be the responsibility of Landlord to remedy the situation so as to enable Tenant to secure the Certificate of Occupancy, the same shall constitute a Landlord Delay and the Rent Commencement Date shall be delayed by one (1) day for each day that Tenant is delayed from opening as a result thereof. Landlord shall pay to Tenant an amount equal to $500 for each day of Landlord Delay. (c) Landlord and Tenant shall each maintain or cause to be maintained in force a 9 commercial public liability policy or policies of insurance written by one or more responsible insurance carriers licensed to do business in the state where the Premises are located insuring against liability for injury to and/or death of any person and/or damage to property of any person or persons in connection with the construction of the Site Improvements to be performed by Landlord pursuant to this Agreement, and as to Tenant, the construction of the Tenant's Building, in each case with single limit liability coverage of not less than $1,000,000.00 (plus umbrella coverage for an additional $1,000,000.00). Such policy or policies shall name the other party (and Landlord's mortgagee or Lender) as an additional insured. Each party agrees to deliver to the other a certificate of insurance evidencing the existence of such policy or policies of insurance. Such certificate will provide that such insurance will not be canceled or materially amended unless thirty (30) days' prior written notice of such cancellation or amendment is given to the other and shall contain a waiver of subrogation clause. (d) The contract with the general contractor shall require the general contractor to be maintain in force a commercial general liability policy or policies of insurance written by one or more responsible insurance carriers licensed to do business in the state where the Premises are located insuring against liability for injury to and/or death of any person and/or damage to property of any person or persons in connection with the construction of the Tenant's Building and leasehold improvements, in each case with single limit liability coverage of not less than $1,000,000.00 (plus umbrella coverage for an additional $1,000,000.00). Such policy or policies shall name Landlord, and Landlord's Lender or mortgagee as an additional insured. Each party agrees to deliver to the other a certificate of insurance evidencing the existence of such policy or policies of insurance. Such certificate will provide that such insurance will not be canceled or materially amended unless thirty (30) days' prior written notice of such cancellation or amendment is given to the other and shall contain a waiver of subrogation clause. 10 EXHIBIT C --------- FORM OF FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE (this "Amendment") is made this ______ day of ______________, 1997 between ____________________________, a ______________________________ ("Landlord"), and SILVER DINER DEVELOPMENT, INC. , a Virginia corporation ("Tenant"). R E C I T A L S - - - - - - - - A. Landlord and Tenant executed that certain Lease dated ___________________ (collectively referred to herein with all amendments and agreements regarding that certain Lease as the "Lease") with respect to certain Premises located - ___________________, all as more particularly described in the Lease. All terms and definitions used in this Amendment not herein defined are to be given the definition of the term as provided in the Lease, unless specifically stated otherwise. B. Section 2(c) of the Lease requires that the Landlord and Tenant execute this Amendment to establish the Rent Commencement Date and the Lease Expiration Date. NOW, THEREFORE, in consideration of the foregoing, TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and confessed, Landlord and Tenant hereby agree as follows: (a) The Lease Commencement Date is the __ day of _________, 199_, the Rent Commencement Date is the ___ day of __________, 199__ and the Lease Expiration Date is the ___ day of __________, ____. (b) Except as hereby amended, the Lease shall remain unchanged in full force and effect. If there is any conflict between the terms and provisions of the Lease and the terms and provisions of this Amendment, this Amendment shall control. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. 1 TENANT ------ SILVER DINER DEVELOPMENT, INC. a Virginia corporation WITNESS: _________________________ By:_____________________________ Name:____________________ Name:___________________________ Title:___________________ Title: _________________________ LANDLORD -------- ________________________________ By: ____________________________ ____________________________ WITNESS: _________________________ By:_____________________________ Name:____________________ Name: __________________________ Title:___________________ Title: _________________________ 2 ________________________ ) ) ss: ) Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me _________________________, _____________________ of SILVER DINER DEVELOPMENT, INC. personally well known to me and acknowledged that he executed the annexed Lease as the corporate act and deed of SILVER DINER DEVELOPMENT, INC. WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: 3 ________________________ ) ) ss: ________________________ ) Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me _________________________, _______________________ of __________________________ personally well known to me and acknowledged that he executed the annexed Lease as the act and deed of__________________________________________________________________. WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: 4 EXHIBIT D --------- SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT is made and entered into as of the ____ day of _________, 199__, by and among ___________________________, a ______________________________ ("Landlord"); _____________________________________, a _______________ corporation ("Tenant"); _____________________, a _____________________ ("Mortgagee"); and _____________________ and _______________________ ("Trustees"). RECITALS: -------- A. Landlord is the owner in fee simple of the real property in _______________________ described in Exhibit A attached hereto ("Land"). --------- B. Mortgagee is the owner of the beneficial interest under that certain deed of trust dated _____________, 199__, encumbering the Land to the Trustees, and recorded in the records of the Clerk of the Circuit Court of ____________________, _______________ in Deed Book _______ at Page _____ (the "Mortgage"). C. Pursuant to that certain Lease dated ______________, 199_ the "Lease"), Tenant has leased from Landlord the Land (the Land, together with all improvements now or hereinafter situated thereon are collectively referred to as the "Premises"). The Premises are more particularly described in the Lease, a true copy of which as executed by Landlord and Tenant has been delivered to Mortgagee. D. Tenant and Mortgagee desire to confirm certain understandings with respect to the Lease and the Mortgage, and Landlord desires to join herein to evidence its agreement to the provisions hereof. NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereby agree as follows: 1. Approval of Lease. Mortgagee hereby approves the execution of the ----------------- Lease by Landlord and Tenant. 2. Nondisturbance; No Joinder. So long as Tenant is not in default -------------------------- (beyond any period granted to Tenant to cure such default) in the payment of rent or Additional Rent or in the 1 performance of any of the other terms, covenants or conditions of the Lease on Tenant's part to be performed: (a) Tenant's possession of the Premises and Tenant's rights, options and privileges under the Lease, or under any extensions thereof effected in accordance with any option therefor in the Lease, shall not be diminished or interfered with by Mortgagee, and Tenant's occupancy of the Premises shall not be disturbed by Mortgagee for any reason whatsoever during the Term of the Lease or any such extensions or renewals thereof; and (b) Mortgagee will not join Tenant as a party defendant in any action or proceeding for the purpose of terminating Tenant's interest and estate under the Lease because of any default under the Mortgage. 3. Attornment. If Mortgagee succeeds to the interest of Landlord in the ---------- Lease by reason of foreclosure, dispossession or other proceedings brought by Mortgagee, or by any other manner, Tenant shall be bound to Mortgagee under all of the terms, covenants and conditions of the Lease for the balance of the Term thereof and any extensions thereof effected in accordance with any option therefor in the Lease, with the same force and effect as if Mortgagee were the landlord under the Lease, and Tenant does hereby attorn to Mortgage as its landlord. Such attornment shall be effective and self-operative, without the execution of any further instruments on the part of any of the parties hereto, immediately upon Mortgagee's succeeding to the interest of Landlord under the Lease. In confirmation of such attornment, Tenant shall execute and deliver promptly any certificate or other instrument which Mortgagee may request; provided, that Tenant shall be under no obligation to pay Minimum Rent, - -------- Additional Rent or other sums payable under the Lease until Tenant receives written notice from Mortgagee that Mortgagee has succeeded to the interest of Landlord under the Lease or that Mortgagee has exercised any right under the Mortgage to collect such payments directly from Tenant. The respective rights and obligations of Tenant and Mortgagee upon such attornment shall be the same as set forth in the Lease. Such attornment shall also extend to the successors and assigns of Landlord including Mortgagee and all future or successor mortgagees. 4. Mortgagee's Succession. If Mortgagee shall succeed to the interest of ---------------------- Landlord in the Lease, Mortgagee shall be bound to Tenant under all the terms, covenants and conditions of the Lease, and Tenant shall, from and after Mortgagee's succeeding to the interest of Landlord in the Lease, have the same remedies against Mortgagee for the breach of any agreement contained in the Lease that Tenant might have had under the Lease against Landlord if Mortgagee had not succeeded to the interest of Landlord; provided, that Mortgagee shall -------- not be -- (i) bound by any termination, amendment, modification or surrender of the Lease without Mortgagee's written consent; 2 (ii) bound by any payment in advance of Minimum Rent or Additional Rent for more than one month to any prior landlord (including Landlord), unless such advance payment is specifically required under the Lease; and (iii) liable for any act, omission or default of any prior landlord. 5. Subordination. Subject to the provisions hereof, the Lease now is and ------------- shall continue to be subject and subordinate to the Mortgage, to any and all renewals and modifications thereof and to all advances made and to be made thereunder, so long as no such renewal or modification shall increase any obligation of Tenant or shall diminish any obligation of Mortgagee or Landlord hereunder or under the Lease. Any such renewal or modification shall nevertheless be subject to and entitled to the benefits of the terms of this Agreement and no further instrument of subordination shall be required. Such subordination shall be effective and self-operative, without the execution of any further instruments on the part of any of the parties hereto. 6. No Oral Modifications. This Agreement may not be modified orally or --------------------- in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest. 7. Benefit and Burden. All provisions and covenants in this Agreement ------------------ shall be deemed to touch and concern and run with the Land. This Agreement shall inure to the benefit of, be enforceable by and be binding upon the parties hereto and their respective successors and assigns, including as a successor in the case of Mortgagee any purchaser at a foreclosure sale. The word "Mortgagee" shall include the original Mortgagee named herein and any of its successors and assigns, including any person or entity succeeding to Landlord's interest in the Land or the Lease upon foreclosure of the Mortgage. The word "foreclosure" and "foreclosure sale" as used herein shall be deemed to include the acquisition of Landlord's estate in the Land by voluntary deed, assignment or other disposition or transfer in lieu of foreclosure. 8. Lease Defined. The word "Lease" as used herein shall be deemed to be ------------- the Lease as originally executed by Landlord and Tenant, as amended or modified by written agreements hereafter made, from time to time, between the Landlord and Tenant and consented to by Mortgagee. 9. Applicable Law; Gender. This Agreement shall be construed according ---------------------- to the laws of the State of New Jersey. The use of the neuter gender in this Agreement shall be deemed to include any other gender, and words in the singular number shall be held to include the plural, when the sense so requires. 3 10. Trustee. Mortgagee hereby authorizes the Trustee to execute this ------- Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. By: --------------------------- Robert T. Giaimo President ______________________________ By: __________________________ __________________________ By:___________________________ Name:_________________________ Title:________________________ By:___________________________ Name:_________________________ Title:________________________ By:___________________________ Name:_________________________ Title:________________________ 4 _____________________________ ____________________) ____________________) ____________________) ss: Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me __________________________ of _________________ personally well known to me and acknowledged that he executed the Agreement as the corporate act and deed of SILVER DINER DEVELOPMENT, INC. WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: 5 ____________________) ____________________) ____________________) ss: Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me ________________________, _________________________ of _________________________, a ________________________ personally well known to me and acknowledged that he executed the Agreement as the corporate act and deed of __________________________ as general partner of __________________________. WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: ____________________) ____________________) ____________________) ss: Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me __________________________ of _________________ personally well known to me and acknowledged that he executed the Agreement as the corporate act and deed of __________________________________. 6 WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: ____________________) ____________________) ____________________) ss: Before me, a Notary Public in and for the jurisdiction aforesaid, on this date personally appeared before me__________________________ of _________________ personally well known to me and acknowledged that he executed the Agreement as the corporate act and deed of __________________________________. WITNESS my hand and official seal on _____________, 199__. ____________________[SEAL] Notary Public My commission expires: 7 EXHIBIT D-1 RECOGNITION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS RECOGNITION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this "Agreement") is made and entered into as of this ____ day of _______________, 1999, by and between SILVER DINER DEVELOPMENT, INC. (hereinafter referred to as "Silver Diner"), whose address is Corporate Office (Rear Entrance) 11806 Rockville Pike, Rockville, Maryland 20852; ______________________ a ____________ (hereinafter referred to as "Prime Lessor"), whose address is 66 Canal Center Plaza, 7th Floor, Alexandria, Virginia 22314, and ____________________________., a __________________ (hereinafter referred to as "Landlord"), whose address is ___________________________________. PRELIMINARY STATEMENT OF FACTS: A. Prime Lessor is the owner of a certain tract of land comprised of approximately ___ acres in the City of Virginia Beach, Virginia, which property is known as ______________________, as legally described on Exhibit A-1 attached hereto (the "Ground Leased Property") . B. Landlord is the ground lessee of the Ground Leased Property pursuant to that certain Ground Lease between Landlord, as ground lessee, and Prime Lessor, as ground lessor, dated as of _______ (the "Shopping Center Ground Lease"). C. Silver Diner is a lessee of a portion of the Ground Leased Property, to be known as Store Number __ ("Silver Diner Premises"), and which is shown on the Site Plan attached as Exhibit B, pursuant to that certain Lease Agreement dated _________, 1999 between Silver Diner, as Tenant, and Landlord, as Landlord, (the "Silver Diner Lease"). D. As a condition to Silver Diner entering into the Silver Diner Lease, Silver Diner has required that Prime Lessor (i) recognize the Silver Diner Lease, (ii) agree and consent to the terms of the Silver Diner Lease, and (iii) agree that Silver Diner's rights and privileges under the Silver Diner Lease, and its possession of the Silver Diner Premises, shall not be terminated, diminished or interfered with by Prime Lessor in the exercise of any of Prime Lessor's rights under the Shopping Center Ground Lease. NOW, THEREFORE, in consideration of the sum of One and 00/100 Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, all parties hereto agree as follows: 1.RECOGNITION AND NON-DISTURBANCE. Prime Lessor hereby recognizes, agrees, 1 and consents to the terms and provisions of the Silver Diner Lease and agrees that Silver Diner's rights and privileges under the Silver Diner Lease, and its possession of the Silver Diner Premises, shall not be terminated, diminished or interfered with by Prime Lessor in the exercise of any of Prime Lessor's rights under the Shopping Center Ground Lease or, notwithstanding anything to the contrary contained in the Shopping Center Ground Lease, as a result of the termination or the expiration by its terms of the Shopping Center Ground Lease. Prime Lessor agrees not to join Silver Diner as a party defendant in any action or proceeding terminating the Shopping Center Ground Lease unless such joinder is necessary to terminate the Shopping Center Ground Lease and then only for such purpose and not for the purpose of terminating the Silver Diner Lease. 2.ATTORNMENT. If the Shopping Center Ground Lease is terminated by Prime Lessor or expires by its terms (the "Termination"), Silver Diner shall be bound to Prime Lessor under all of the terms, covenants, and conditions of the Silver Diner Lease for the balance of the Term thereof remaining and any extensions or renewals thereof which may be effected in accordance with any option therefore in the Silver Diner Lease, and Silver Diner does hereby attorn to Prime Lessor as its landlord and its successors and assigns including mortgagees, said attornment to be effective and self-operative immediately without the execution of any further instruments on the part of either Silver Diner or Prime Lessor. From and after such attornment, Prime Lessor shall be bound to Silver Diner under all of the terms, covenants, and conditions of the Silver Diner Lease as a direct deed of Lease with the same force and effect as if originally entered into between Silver Diner and Prime Lessor; provided, however, that Silver Diner shall be under no obligation to pay rent to Prime Lessor until Silver Diner receives written notice from Prime Lessor that Prime Lessor has terminated the Shopping Center Ground Lease, in which case Prime Lessor further agrees to indemnify, defend, protect and hold Silver Diner harmless from any liability it may suffer as a result of compliance with Prime Lessor's written instructions to pay rent. 3.PRIME LESSOR NOT BOUND BY CERTAIN ACTS OF LANDLORD. Following any Termination of the Shopping Center Ground Lease, Prime Lessors shall not be: (a) personally liable for any act or omission of any prior landlord (including Landlord) unless such act or omission is of a continuing nature and Prime Lessor had notice of such act or omission prior to the Termination; provided, however, that the foregoing shall not be enforced or construed to, or limit Silver Diner's right to obtain injunctive relief regarding any term, covenant or condition in the Silver Diner Lease, or to preclude Silver Diner from exercising or obtaining any other right or remedy which may be accorded Silver Diner arising out of or resulting from any prior landlord's default under the Silver Diner Lease; (b) personally liable for either prepaid rent or additional rent for more than one (1) month in advance or any security deposit paid and not delivered or credited to Prime Lessor; or 2 (c) bound by any amendment or modification of the Silver Diner Lease made without its consent; provided, however, that Prime Lessor agrees it shall not unreasonably delay, condition or withhold its consent unless such amendment either materially increases landlord's obligations or materially decreases landlord's rights under the Silver Diner Lease. 4. SUBORDINATION OF FUTURE FEE MORTGAGES. In the event either Prime Lessor or Landlord desires the Silver Diner Lease to become subordinate to any future mortgage, deed of trust, or security interest ("Mortgage") affecting the Ground Leased Property granted subsequent to the date hereof, Silver Diner shall execute a subordination, non-disturbance and attornment agreement substantially in the form attached hereto as Exhibit D (or containing only non-material changes that do not in any way diminish the protection or benefits accorded to Silver Diner under such agreement), which to be effective must be signed by the holder of any note or obligation secured by such Mortgage (the "SNDA"). In the event of a conflict or inconsistency between the provisions of this Agreement and the provisions of the SNDA, the provisions of the SNDA shall control. 5. ACCESS. Notwithstanding anything contained in the Shopping Center Ground Lease to the contrary, Prime Lessor acknowledges that Prime Lessor's access to the Silver Diner Premises and the improvements located thereon shall be subject to all terms and conditions of the Silver Diner Lease. 6. AMENDMENT. This Agreement may not be modified orally or in any manner other than by a written instrument signed by the parties hereto or their successors in interest. 7. SUCCESSORS AND ASSIGNS. This Agreement and each and every covenant, agreement and other provision hereof shall be binding upon and inure to the benefit of the parties hereto and their heirs, administrators, representatives, successors and assigns. 8. CHOICE OF LAW. This Agreement is made and executed under and in all respects is to be governed by and construed in accordance with the laws of the state where the Silver Diner Premises is located. 9. CAPTIONS AND HEADINGS. The captions and headings of the various sections of this Agreement are for convenience only and are not to be construed as confining or limiting in any way the scope or intent of the provisions hereof. Whenever the context requires or permits, the singular shall include the plural, the plural shall include the singular and the masculine, feminine and neuter shall be freely interchangeable. 10. NOTICE. Any notice which any party hereto may desire or may be required to give to any other party shall be in writing to the addresses as set forth above, or to such other place any party 3 hereto may by notice in writing designate, and such notice shall be deemed to have been given as of the date such notice is (i) delivered to the party intended, (ii) delivered to the current address of the party intended, or (iii) rejected at the current address of the party intended, provided such notice was prepaid. All notices shall be given by (a) personal delivery (including a reputable overnight courier service), or (b) certified mail, return receipt requested, postage prepaid. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed as of the date first above written. Silver Diner, Inc. By:_____________________ Name:___________________ Title:__________________ Prime Lessor ------------------------ By:_____________________ Name:___________________ Title:__________________ LANDLORD ------------------------ By:_____________________ Name:___________________ Title:__________________ 4 County of _____________________) ) to wit: State of ______________________) I hereby certify that on this ____ day of ____________, 1997, before the subscriber, a notary public in and for the jurisdiction aforesaid, personally appeared __________________ of *1*, and acknowledged that he/she executed the foregoing agreement for the purposes therein contained and acknowledged the same to be his/her act and deed on behalf of such corporation. Witness my hand and notaries seal. [Notaries Seal] _________________________________________ Notary Public Commission Expiration: ______________________ County of ______________________) ) to wit: State of _______________________) I hereby certify that on this ____ day of ____________, 1997, before the subscriber, a notary public in and for the jurisdiction aforesaid, personally appeared __________________ of Commonwealth Atlantic Land V Inc., a Virginia corporation, and acknowledged that he/she executed the foregoing agreement for the purposes therein contained and acknowledged the same to be his/her act and deed on behalf of such ________________. Witness my hand and notarial seal. [Notarial Seal] _________________________________________ Notary Public Commission Expiration: ______________________ 5 County of ______________________) ) to wit: State of _______________________) I hereby certify that on this ____ day of ____________, 1997, before the subscriber, a notary public in and for the jurisdiction aforesaid, personally appeared __________________ of _____________________, and acknowledged that he/she executed the foregoing agreement for the purposes therein contained and acknowledged the same to be his/her act and deed on behalf of such ________________. Witness my hand and notarial seal. [Notarial Seal] _________________________________________ Notary Public Commission Expiration: ______________________ 6 EXHIBIT E PERMITTED EXCEPTIONS NEEDS TO BE REVIEW BY BANK. EXHIBIT F Form of Letter of Credit [BANK] ACCOUNT PARTY Silver Diner Limited Partnership TO: BENEFICIARY AMOUNT: $500,000.00 (Five Hundred Thousand Dollars) EXPIRATION DATE: _________________ Sirs: We hereby open our irrevocable Letter of Credit in your favor for an amount of USD $500,000.00 available to you against presentation of your draft at sight drawn on ________________ [Bank] bearing the clause "Drawn under [Bank] Letter of Credit No. ______ dated __________, 19__, and accompanied by the following documents: 1. This Letter of Credit No. ________ and its amendments, if any; and 2. A statement signed by the President or Vice President of ___________ stating that the draw under the Letter of Credit is made pursuant to the provisions of Section ______ of that certain Lease Agreement between Silver Diner Limited Partnership and ______________________ dated as of _________ and the amount of the draw. Partial draws are permitted and this Letter of Credit shall remain in effect subsequent to a partial draw, but the face amount hereof shall be reduced by the amount of any and all partial draws. This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended or amplified by reference to any documents, instruments or agreements referred to herein or in which this Letter of Credit is referred to or to which this letter of Credit relates, and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement. 1 We hereby agree that drafts drawn and presented in compliance with the terms of this Letter of Credit shall be duly honored upon due presentation if presented on or before the expiration date. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1983 Revision), International Chamber of Commerce Publication No. 400. Very truly yours, ________________________ Authorized Signature 2 EX-10.20.9 4 1996 EMPLOYEE STOCK OPTION PUR. PLAN EXHIBIT 10.20.9 SILVER DINER INC. 1996 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED The following constitute the provisions of the Employee Stock Purchase of Silver Diner Inc. (the "Company"), as amended. 1. Purpose. The purpose of the Plan is to provide employees of the ------- Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. This Plan document is intended to serve as a restatement of the original version of the Plan approved by the shareholders of the Company in 1997. 2. Definitions. ----------- (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Common Stock, $0.01 par value, of the Company. (d) "Company" shall mean Silver Diner Inc., a Delaware corporation. (e) "Compensation" shall mean all remuneration received for services including regular base salary, imputed tip income, payments for overtime, shift premium, incentive compensation, incentive payments, bonuses, commissions and other non-base salary compensation. (f) "Continuous Status As An Employee" shall mean the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. (g) "Contributions" shall mean all amounts credited to the account of a participant pursuant to the Plan. (h) "Designated Subsidiaries" shall mean the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (i) "Employee" shall mean any person, including an officer, who is customarily employed for at least twenty (20) hours per week and more than five (5) months in a calendar year by the Company or one of its Designated Subsidiaries. (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (k) "Exercise Date" shall mean the last day of each Offering Period of the Plan. (l) "Offering Date" shall mean the first business day which occurs on or immediately following January 1, April 1, July 1, and October 1 of each calendar year. (m) "Offering Period" shall mean a period of three (3) months constituting each quarter of the calendar year. The initial Offering Period under the Plan shall be October 1, 1998. (n) "Plan" shall mean this Employee Stock Purchase Plan. (o) "Subsidiary" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. 3. Eligibility. ----------- (a) Any person who has been continuously employed as an Employee for six (6) months as of the Offering Date of a given Offering Period shall be eligible to participate in such Offering Period under the Plan, subject to the requirements of paragraph 5(a) and the limitations imposed by Section 423(b) of the Code. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any subsidiary of the Company, or (ii) which permits his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars -2- ($25,000) of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Offering Periods. The Plan shall be implemented by a series of ---------------- Offering Periods, with a new Offering Period commencing on the first business day of each quarter of each calendar year (or at such other time or times as may be determined by the Board). The Plan shall continue until terminated in accordance with paragraph 19 hereof. The Board shall have the power to change the duration and/or the frequency of Offering Periods with respect to future offerings without stockholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected. 5. Participation. ------------- (a) An eligible Employee may become a participant in the Plan by notifying the Company's Office of Human Resources, prior to the applicable Offering Date pursuant to such notification procedures as the Board may establish, from time to time. Such notification procedures shall require the participant to specify the percentage of the participant's Compensation (which shall not be less than 1% and not more than 10%) to be paid as Contributions pursuant to the Plan. (b) Payroll deductions shall commence on the first payroll following the Offering Date and shall end on the last payroll paid on or prior to the Exercise Date of the offering to which the subscription agreement is applicable, unless sooner terminated by the participant as provided in paragraph 10. 6. Method of Payment of Contributions. ---------------------------------- (a) The participant shall elect to have payroll deductions made during the Offering Period in an amount not less than one percent (1%) and not more than ten percent (10%) of such participant's Compensation; provided that the aggregate of such payroll deductions during the Offering Period shall not exceed ten percent (10%) of the participant's aggregate Compensation during said Offering Period. All payroll deductions made by a participant shall be credited to his or her account under the Plan. A participant may not make any additional payments into such account. (b) A participant may discontinue his or her participation in the Plan as provided in paragraph 10, by completing and filing with the Company a new subscription agreement within the ten (10) day period immediately preceding the beginning of any payroll period during the Offering Period. The discontinuance shall be effective as of the beginning of the payroll period following the date of filing of the new subscription agreement. A participant who discontinues participation in the Plan with respect to an Offering Period may not re-enroll in the Plan prior to the second Offering Period commencing after the effective date of such discontinuance. -3- (c) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and paragraph 3(b) herein, a participant's payroll deductions may be decreased to 0% at such time during any Offering Period which is scheduled to end during the current calendar year that the aggregate of all payroll deductions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year equal $21,250. Payroll deductions shall recommence at the rate provided in such participant's Subscription Agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in paragraph 10. 7. Grant of Option. --------------- (a) On the Offering Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period a number of shares of the Company's Common Stock determined by dividing such Employee's Contributions accumulated prior to such Exercise Date and retained in the participant's account as of the Exercise Date by the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Offering Date, or (ii) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Exercise Date; provided, however, that the maximum number of shares an Employee may purchase during each Offering Period shall be determined at the Offering Date by dividing (i) the difference between $25,000 minus the fair market value of all Common Stock purchased during any prior Offering Period occurring within such calendar year (computed as of the Offering Date of the Offering Period with respect to which such Common Stock was purchased) by (ii) the fair market value of a share of the Company's Common Stock on the Offering Date, and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. The fair market value of a share of the Company's Common Stock shall be determined as provided in Section 7(b) herein. (b) The option price per share of the shares offered in a given Offering Period shall be the lower of (i) 85% of the fair market value of a share of the Common Stock of the Company on the Offering Date; or (ii) 85% of the fair market value of a share of the Common Stock of the Company on the Exercise Date. The fair market value of the Company's Common Stock on a given date shall be determined by the Board on its discretion based on the closing price of the Common Stock for such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date), as reported by the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System or, if such price is not reported, the mean of the bid and asked prices per share of the Common Stock as reported by NASDAQ or, in the event the Common Stock is listed on a stock exchange, the fair market value per share shall be the closing price on such exchange on such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date), as reported in The Wall Street Journal. -4- 8. Exercise of Option. Unless a participant withdraws contributions from ------------------ the Plan during an Offering Period as provided in paragraph 10, his or her option for the purchase of shares will be exercised automatically on the Exercise Date of the Offering Period, and the maximum number of full shares subject to option will be purchased for him or her at the applicable option price with the accumulated Contributions in his or her account. The shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Exercise Date. During his lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. 9. Delivery. As promptly as practicable after the Exercise Date of each -------- Offering Period, the Company shall arrange for the credit to the custodial account established on behalf of each participant pursuant to the provisions of paragraph 12(c) of the shares purchased upon exercise of the option by the participant on whose behalf the custodial account has been established. Any cash remaining to the credit of a participant's account under the Plan after a purchase by him or her of shares at the termination of each Offering Period shall be retained in such custodial account of said participant. 10. Withdrawal; Termination of Employment. ------------------------------------- (a) A participant who elects to discontinue participation in the Plan with respect to an Offering Period may also elect to withdraw all but not less than all the Contributions credited to his or her account under the Plan with respect to such Offering Period at any time prior to the Exercise Date of such Offering Period by giving written notice to the Company. All of the participant's Contributions credited to his or her account will be paid to him or her promptly after receipt of his or her withdrawal election and his or her option for the current period will be automatically terminated, and no further Contributions for the purchase of shares will be made during the Offering Period. (b) Upon termination of the participant's Continuous Status as an Employee prior to the Exercise Date of the Offering Period for any reason, including retirement or death, the Contributions credited to his or her account will be returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under paragraph 14, and his or her option will be automatically terminated. (c) In the event an Employee fails to remain in Continuous Status as an Employee of the Company for at least twenty (20) hours per week during the Offering Period in which the employee is a participant, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to his or her account will be returned to him or her and his or her option terminated. (d) In the event a participant elects to discontinue participation or is deemed to elect to discontinue participation with respect to an Offering Period, such participant may not -5- re-enroll in the Plan prior to the second Offering Period commencing after the effective date of such elective or constructive discontinuance. 11. Interest. No interest shall accrue on the Contributions of a -------- participant in the Plan. 12. Stock. ----- (a) The maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 300,000 shares, subject to adjustment upon changes in capitalization of the Company as provided in paragraph 18. If the total number of shares which would otherwise be subject to options granted pursuant to Section 7(a) hereof on the Offering Date of an Offering Period exceeds the number of shares then available under the Plan (after deduction of all shares for which options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the shares remaining available for option grant in as uniform a manner as shall be practicable and as it shall determine to be equitable. Any amounts remaining in an Employee's account not applied to the purchase of stock pursuant to this Section 12 shall be refunded on or promptly after the Exercise Date. In such event, the Company shall give written notice of such reduction of the number of shares subject to the option to each Employee affected thereby and shall similarly reduce the rate of Contributions, if necessary. (b) The participant will have no interest or voting right in shares covered by his or her option until such option has been exercised. (c) Shares to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse. Notwithstanding the above, any stock purchased on behalf of a participant with respect to an Offering Period will be retained in a custodial account on behalf of such participant and may not be sold by the participant or transferred to the direct ownership of the participant prior to the last day of the Offering Period immediately following the Offering Period with respect to which such stock was purchased. (d) Any stock purchased on behalf of a participant shall remain in the above-referenced custodial account for no less than twenty-four months from the date of its acquisition unless previously sold on behalf of such participant prior to the twenty-fourth month following the date of its acquisition. 13. Administration. The Board, or a committee named by the Board, shall -------------- supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The composition of the committee shall be in accordance with the -6- requirements to obtain or retain any available exemption from the operation of Section 16(b) of the Exchange Act, pursuant to Rule 16b-3 promulgated thereunder. 14. Designation of Beneficiary/Joint Account. ---------------------------------------- (a) In the event of the death of a participant, the Company shall deliver such shares and/or cash to the participant's joint account holder, if any, as designated under paragraph 14(b) or in the absence of any such joint account holder, to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. (b) The participant may, in his/her sole discretion, designate another individual to serve as a joint account holder on his/her account provided such designated individual (i) is of legal age and (ii) executes a statement acknowledging that he/she is a joint account holder and that he/she understands the restrictions imposed on the joint account. 15. Transferability. Neither Contributions credited to a participant's --------------- account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in paragraph 14 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with paragraph 10. 16. Use of Funds. All Contributions received or held by the Company under ------------ the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions. 17. Reports. Individual accounts will be maintained for each participant ------- in the Plan. Statements of account will be given to participating Employees promptly following the Exercise Date, which statements will set forth the amounts of Contributions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any. 18. Adjustments Upon Changes in Capitalization. Subject to any required ------------------------------------------ action by the stockholders of the Company, the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the "Reserves"), as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common -7- Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the Offering Period then in progress by setting a new Exercise Date (the "New Exercise Date"). If the Board shortens the Offering Period then in progress in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify each participant in writing, at least ten (10) days prior to the New Exercise Date, that the Exercise Date for his or her option has been changed to the New Exercise Date and that his or her option will be exercised automatically on the New Exercise Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in paragraph 10. For purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed if, following the sale of assets or merger, the option confers the right to purchase, for each share of option stock subject to the option immediately prior to the sale of assets or merger, the consideration (whether stock, cash or other securities or property) received in the sale of assets or merger by holders of Common Stock for each share of Common Stock held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in the sale of assets or merger was not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock and the sale of assets or merger. The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, and in the event of the Company being consolidated with or merged into any other corporation. -8- 19. Amendment or Termination. The Board may at any time terminate or ------------------------ amend the Plan. Except as provided in paragraph 18, no such termination may affect options previously granted, nor may an amendment make any change in any option theretofore granted which adversely affects the rights of any participant. In addition, to the extent necessary to comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as so required. 20. Notices. All notices or other communications by a participant to the ------- Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 21. Conditions Upon Issuance of Shares. Shares shall not be issued with ---------------------------------- respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 22. Term of Plan. The Plan shall expire on or before September 11, 2006. ------------ The Plan may be amended or terminated by the Board pursuant to paragraph 19, as provided above. 23. Additional Restrictions of Rule 16b-3. The terms and conditions of ------------------------------------- options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. 24. Severability. With respect to persons subject to Section 16 of the ------------ Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or any action by the administrator of the Plan fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the administrator of the Plan. -9- EX-10.20.10 5 1996 NON-EMPLOYEE DIR. STOCK OPTION PLAN EXHIBIT 10.20.10 SILVER DINER, INC. 1996 Non-Employee Director Stock Option Plan (as amended March 4, 1998 and March 18, 1999) WHEREAS, the 1996 Non-Employee Director Stock Option Plan was approved by the Board of Directors of Silver Diner, Inc. (the "Company") on May 29, 1996, subject to approval by the stockholders at the annual meeting of stockholders to be held on June 11, 1997, which stockholder approval was subsequently given on June 11, 1997. WHEREAS, Section 6 of the Plan was subsequently amended by the Board of Directors on March 4, 1998 so as to increase the number of shares of Common Stock reserved for issuance under the Plan from 75,000 to 150,000, which amendment was approved by the stockholders at the annual meeting of stockholders held on June 10, 1998. WHEREAS, as originally adopted, subsections (a) and (c) of Section 7 of the Plan provided for the quarterly issuance of options for 1,000 shares of Common Stock to each Non-Employee Director, which options vested on and expired three years after their date of grant. WHEREAS, the Board of Directors amended subsections (a) and (c) of Section 7 of the Plan on March 18, 1999, subject to stockholder approval, so as to grant an option for 4,000 shares to each Non-Employee Director immediately following each annual stockholder meeting, with the options to (i) vest 100% one year following the date of grant, and (ii) expire ten years from the date of grant. WHEREAS, the foregoing amendment to the Plan as approved by the Board of Directors on March 18, 1999, was subsequently approved by the stockholders at the annual meeting of stockholders held on June 18, 1999. WHEREAS, options for 91,000 shares of Common Stock had been granted and were outstanding prior to June 18, 1999. NOW, THEREFORE, the Plan hereby is amended and restated as set forth below. 1. Purpose The purpose of the Plan is to provide an investment opportunity to the Company's Non-employee Directors by granting them Options to purchase shares of Common Stock as compensation for their service on the Board. 2. Definitions As used in this Plan, the following words and phrases shall have the meanings indicated: (a) "Board" shall mean the Company's Board of Directors. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the shares of common stock, $.00074 par value, of the Company. (d) "Company" shall mean Silver Diner, Inc., and its Subsidiaries. (e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (f) "Fair Market Value" shall mean the closing price of a share of the Common Stock as reported on the Nasdaq National Market System, or (ii) if the shares of such Common Stock are not then listed on the Nasdaq National Market System, the closing price per share of the Common Stock on the principal national securities exchange, if any, on which the shares of Common Stock shall then be listed, or (iii) if the shares of such Common Stock are not then listed on a national securities exchange, the closing price per share of Common Stock entered on a national inter-dealer quotation system, or (iv) if no closing or last sales price per share of Common Stock is entered on a national inter-dealer quotation system, the average of the closing bid and asked prices for the shares of such Common Stock in the over-the-counter market, or (v) if no price can be determined under the preceding alternatives, then the price per share as most recently determined by the Board, which shall, if the price is not determined under any one of the preceding alternatives, make such determination of the Fair Market Value at least once each month. (g) "Form S-8 Registration Statement" shall mean a registration statement filed on Form S-8 with and declared effective by the Securities and Exchange Commission under the Securities Act covering the offer and sale of the Options and the underlying Common Stock. (h) "Non-employee Director" shall mean any member of the Company's Board who is a "Non-Employee Director" as such term is defined under Rule 16b- 3(b)(3)(i) promulgated under the Exchange Act. (i) "Option" shall mean any option issued pursuant to this Plan. (j) "Optionee" shall mean any person to whom an Option is granted under this Plan. (k) "Parent" shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of granting an Option or the sale of any Common Stock, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (l) "Plan" shall mean this 1996 Non-employee Director Stock Option Plan. (m) "Reorganization" shall mean any merger, reorganization, consolidation or sale of all or substantially all of the Company's assets. (n) "Registered" shall mean a Form S-8 Registration Statement shall be in effect covering the purchase of the Options or the underlying shares. (o) "Securities Act" shall mean the Securities Act of 1933, as amended. -2- (p) "Stock Option Agreement" shall mean the agreement evidencing the Options sold to Optionees pursuant to the Plan containing the terms and conditions specified in Section 7 below and on the form attached hereto as Exhibit A. (q) "Subsidiary" shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting an Option, each of the corporations, other Than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. General Administration The Plan shall be administered by a committee (the "Committee"), consisting of not less than two Non-employee Directors. The Committee shall have the authority in its discretion to administer the Plan and to interpret the Plan and to prescribe, amend and rescind rules and regulations relating to the operation of the Plan and to make all other determinations deemed necessary or advisable for the administration of the Plan; provided, however, that the Committee may not alter, amend or modify the express provisions of the Plan. The Board shall fill all vacancies, however caused, in the Committee. The Board may from time to time appoint additional members to the Committee, and may at any time remove one or more Committee members and substitute others. No member of the Board or the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any action taken thereunder. 4. Term of Plan The Plan became effective upon its adoption by the Company's Board on September 11, 1996, subject to stockholder approval, and shall continue in effect for a term of ten (10) years unless sooner terminated under Section 10 hereof. Any Options outstanding under the Plan on such date shall continue to be exercisable pursuant to their terms, except as provided by Section 7(f) hereof. 5. Eligibility Options may be granted to any Non-employee Director of the Company as compensation for service on the Board. 6. Stock Subject to the Plan An aggregate of 150,000 shares of Common Stock shall be reserved for issuance pursuant to Options issued pursuant to the Plan. If any outstanding Option under the Plan for any reason expires or is terminated without having been exercised in full, the shares of Common Stock allocable to the unexercised portion of such Option shall (unless the Plan shall have been terminated) become available for subsequent issuance of Options under the Plan. -3- 7. Terms and Conditions of Options Each Option issued pursuant to the Plan shall be evidenced by a Stock Option Agreement containing the terms and conditions specified in this Section 7. (a) Grant of Options. Each Non-employee Director shall be granted an Option to purchase 4,000 shares of Common Stock immediately following each annual stockholder meeting commencing with the stockholder meeting held on June 18, 1999. (b) Option Exercise Price. The exercise price of each Option (the "Option Exercise Price") shall equal the Fair Market Value of the Common Stock on the day immediately preceding the date of grant of each Option. The Option Exercise Price shall be subject to adjustment as provided in Section 7(f) hereof. (c) Term and Exercise of Options. Options shall be exercisable in whole or in part at any time over the exercise period commencing one year after the date of grant, but in no event shall such period exceed ten years from the date of the grant of each such Option. The exercise period shall be subject to earlier termination as provided in Section 7(f) below. An Option may be exercised by giving prior written notice of such exercise to the Company and by paying the Option Exercise Price to the Company either by delivering on the date of exercise (i) a check in the amount of the Option Exercise Price, (ii) Common Stock having a Fair Market Value on the day immediately preceding the date of exercise equal to or less than the Option Exercise Price, or (iii) a combination thereof. If the Optionee tenders shares of Common Stock having a Fair Market Value which exceeds the Option Exercise Price, the Company shall return to the Optionee any and all whole shares of Common Stock which exceed the Option Exercise Price and the Company shall pay the Optionee any additional amount which exceeds the Option Exercise Price in cash in lieu of issuing the Optionee a fractional share for such amount. (d) Vesting and Restrictions on Transferability. Options issued under the Plan shall vest immediately upon grant and shall not be transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act ("ERISA") or the rules thereunder. (e) Death or Disability of Optionee. If an Optionee shall die or become disabled, all Options theretofore issued to such Optionee may, unless earlier terminated in accordance with their terms, be exercised at any time during the term of the Option by the personal representative of the Optionee or by the person who acquired the right to exercise such Option by bequest or inheritance or otherwise by reason of the death or disability of the Optionee. (f) Reclassification; Recapitalization; and Reorganizations. (1) Dividends and Stock Splits. If there is any change in the number of shares of Common Stock through the declaration of stock dividends, recapitalization resulting in stock splits, or combinations or exchanges of such shares, then the number of shares of Common Stock available for Options, the number of such shares covered by outstanding Options and the Option Exercise Price shall be proportionately adjusted to reflect any increase or decrease in the -4- number of issued shares of Common Stock; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. (2) Spin-Offs and Liquidations. In the event of the proposed dissolution or liquidation of the Company, or in the event of any corporate separation or division, including, but not limited to, a split-up, a split-off or spin-off, each Option granted under the Plan shall terminate as of a date to be fixed by the Board, provided, however, that no less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee, who shall have the right during the period of thirty (30) days preceding such termination, to exercise the Options as to all or any part of the shares of Common Stock covered thereby. (3) Reorganizations. If, while unexercised Options remain outstanding under the Plan, the Company executes a definitive Reorganization agreement, the Committee may provide that each Option granted under the Plan shall (i) terminate as of a date to be fixed by the Board, provided, however, that no less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee, who shall have the right, during the period of thirty (30) days preceding such termination, to exercise the Options as to all or any part of the shares of Common Stock covered thereby or (ii) remain outstanding and be adjusted so that on exercise the Optionee shall receive the securities, cash or property that would have been issued with respect to the shares of Common Stock had the Option been exercised immediately prior to the Reorganization. The Committee may also, in its discretion, permit the cancellation of outstanding Options in exchange for a cash payment to the Optionee equal to the difference between the exercise price of the Option and the value of the consideration that would have been paid had the Option been exercised immediately prior to the Reorganization. (4) Exemptions. Section 7(f) shall not apply to a Reorganization in which the Company is the surviving corporation and shares of Common Stock are not converted into or exchanged for stock, securities of any other corporation, cash or any other thing of value. Notwithstanding the preceding sentence, in case of any Reorganization in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any changes in such shares into two or more classes series of shares), the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option solely for the kind and amount of shares of stock and other securities (including those of any new direct or indirect Parent of the Company), property, cash or any combination thereof receivable by the holder of the number of shares of Common Stock for which such Option might have been exercised upon such Reorganization or reclassification. In the event of a change in the Common Stock as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. Except as herein expressly provided, the Optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, or Reorganization, and any assurance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, and no adjustment by reason thereof shall be made with respect to the number of shares of Common Stock subject to an Option or to the Option Price. The grant of -5- an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, Reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. 8. Rights as a Shareholder No Optionee shall have any rights as a shareholder with respect to any shares until the stock certificate evidencing such shares has been issued evidencing such shares. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 7(f) hereof. 9. General Restrictions (a) Investment Representations. The Company may require an Optionee to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effect as the Company deems necessary or appropriate in order to comply with applicable federal and applicable state securities laws. (b) Compliance with Securities Laws. Each Option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject thereto on any securities exchange or any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance of Options, such Options may not be sold or exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. The Company plans to register the shares subject to the Options on a Form S-8 Registration Statement. However, nothing herein shall be deemed to require the Company to obtain an effective Form S-8 Registration Statement or to apply for or to obtain any listing, registration or qualification of the Options or Common Stock to be issued pursuant thereto. 10. Amendment and Termination of the Plan The Board may at any time and from time to time suspend, terminate, modify or amend the Plan, provided that no suspension, termination, modification or amendment of the Plan may adversely affect any rights under the Plan unless the written consent of those affected is obtained. -6- SILVER DINER, INC. Stock Option Agreement for the 1996 Non-employee Director Stock Option Plan A stock option award (the "Stock Option" or "Award") is hereby granted by Silver Diner, Inc., (the "Company"), to the Non-employee Director named below ("Optionee"), for and with respect to common stock of the Company, par value $.00074 per share ("Common Stock"), subject to the following terms and conditions: 1. Subject to the provisions set forth herein and the provisions of the 1996 Non-employee Director Stock Option Plan (the "Plan"), the provisions of which are hereby incorporated by reference, and in consideration of the agreements of Optionee provided in this Stock Option Agreement (the "Option Agreement"), the Company hereby grants to Optionee a Stock Option to purchase from the Company the number of shares of Common Stock, at the exercise price and on the schedule, all as set forth below. Name of Optionee: Date of Grant: Option Exercise Price: Number of Shares of Common Stock Subject to Stock Option: Expiration Date: 2. Written notice of an election to exercise any portion of the Award specifying the portion thereof being exercised and the exercise date, shall be given by Optionee, or his legal representative, (a) by delivering such notice at the principal executive offices of the Company no later than the exercise date, or (b) by mailing such notice, postage prepaid, addressed to the Secretary of the Company at the Company's principal executive offices at least three business days prior to the exercise date. 3. Neither Optionee nor any other person entitled to exercise the Stock Option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any Common Stock issuable on exercise of the Stock Option, until the date of the issuance of a stock certificate for such Common Stock. 4. If the Award shall be exercised in whole, this Option Agreement shall be surrendered to the Company for cancellation. If the Award shall be exercised in part, or a change in the number or designation of the Common Stock shall be made, this Option Agreement shall be delivered to the Company for the purpose of making appropriate notation thereon, or of otherwise reflecting, in such manner as the Company shall determine, the partial exercise or the change in the number or designation of the Common Stock. 5. The grant of the Award hereunder shall not be deemed to give the Optionee the right to be retained as a Non-employee Director of the Company or to affect the right of the Company to discharge the Optionee at any time. 6. The Award shall be exercised in accordance with such administrative regulations as the Board shall from time to time adopt. 7. The Award and this Option Agreement shall be construed, administered and governed in all respects under and by the laws of the State of Delaware, without giving effect to principles of conflict of laws. 8. The Award and this Option Agreement are subject to the requirement that the shareholders of the Company approve and ratify the adoption of the Plan no later than __________________, 199_. SILVER DINER, INC. By: -------------------------- Name: Title: -2- EX-10.20.11 6 FORM OF PERFORMANCE CRITERIA EXHIBIT 10.20.11 FORM OF PERFORMANCE CRITERIA (January 1, 1999-December 31, 1999) (as amended by the Compensation Committee on 12/08/99) If the Company's actual net income from January 1, 1999 through December 31, 1999: . exceeds budgeted net income by less than $100,000, the right to purchase 20,000 shares of Common Stock under the Stock Option shall become immediate and the remaining shares of the Stock Option shall become vested on December 31, 2005; . does not exceed budgeted net income, all shares of Common Stock under the Stock Option shall become vested on December 31, 2005. EX-10.20.12 7 FORM OF PERFORMANCE CRITERIA EXHIBIT 10.20.12 FORM OF PERFORMANCE CRITERIA (January 1, 2000-December 31, 2000) (as adopted by the Compensation Committee on 12/08/99) In the event that the Company's actual net income from January 1, 2000 through December 31, 2000 exceeds the Company's budgeted net income, as described in the attachment hereto, by at least $300,000, the Stock Option shall become immediately vested and exercisable with respect to 25,000 shares of Common Stock. If the Company's actual net income during the period specified does not exceed the Company's budgeted net income by at least $300,000, the Stock Option shall vest immediately in part in accordance with the following schedule: If the Company's actual net income for 2000: . exceeds budgeted net income by $200,000 or more but less than $300,000, the right to purchase 20,000 shares of Common Stock under the Stock Option shall become immediate and the remaining shares of the Stock Option shall become vested on December 31, 2005; . exceeds budgeted net income by $100,000 or more but less than $200,000, the right to purchase 15,000 shares of Common Stock under the Stock Option shall become immediate and the remaining shares of the Stock Option shall become vested on December 31, 2005; . exceeds budgeted net income by less than $100,000, the right to purchase 10,000 shares of Common Stock under the Stock Option shall become immediate and the remaining shares of the Stock Option shall become vested on December 31, 2005; . does not exceed budgeted net income, all shares of Common Stock under the Stock Option shall become vested on December 31, 2005. EX-10.22.1 8 FORMS OF CONF. AND NON-COMPET.-MESKELL Exhibit 10.22.1 [SILVER DINER LETTERHEAD] March 4, 1999 Mr. Patrick Meskell Silver Diner, Inc. 11806 Rockville Pike Rockville, MD 20852 Dear Paddy: When you came on board, we provided you with a letter dated December 4, 1995, setting forth your employment terms and compensation. This letter takes the place of the December 4, 1995, letter. Please signify your acceptance by signing in the space provided at the end of this letter. The specifics of our understanding are as follows: 1. Salary - A base salary of $104,000 per annum, with annual adjustments in the future as approved by the Company's Compensation Committee or by the Board of Directors. 2. Bonus and Stock Options - You will be entitled to participate in bonus and stock option plans as made available by the Company to its executives. 3. Automobile - You will receive a $500.00 per month car allowance. 4. Life Insurance - The Company will provide, at no cost to you, life insurance coverage in the amount of $500,000.00. 5. Health/Dental Insurance - The Company will provide, at no cost to you and your family, group health and dental plans offered by the Company's employees generally. 6. Disability Coverage - The Company will provide, at no cost to you, long term disability insurance coverage in an amount of approximately 60% of your base salary per month, with a 90 day waiting period during which time your base salary will continue to be paid by the Company. 7. Vacation Days - Three weeks per year. Vacation does not accrue or carry over from one year to the next year. 8. Sick Leave and Other Benefits - You will be entitled to sick leave and other benefits in accordance with the Company's policies for its executives. 11806 ROCKVILLE PIKE, ROCKVILLE, MD 20852 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DINER 301-770-4166 EXECUTIVE OFFICE 301-770-0333 FAX 301-770-2832 Mr. Patrick Meskell March 4, 1999 Page 2 9. Compensation Coverage - If the Company terminates your employment for any reason, you will be paid all base salary earned by you and unpaid on the date of termination, plus three months base salary. If you resign, you will be paid all base salary earned by you and unpaid on the date of resignation, plus three months base salary, payable after resignation on the same schedule as your salary was paid before resignation, provided you have given the Company at least three months prior notice of your proposed resignation as an employee of the Company. If you resign as an employee of the Company and do not give at least three months prior notice, (a) all stock options to purchase stock of the Company and all common stock purchase rights granted to you by the Company subsequent to March 1, 1999, and all stock options granted to you on December 29, 1997, and on December 15, 1998, pursuant to the Plan known as the "Active Employee/Consultant Stock Option Plan" will be terminated on the date of your resignation and may not thereafter be exercised and (b) you will sell and the Company will purchase all common stock of the Company acquired by you pursuant to stock options or stock purchase rights within six (6) months prior to the date of such resignation at a purchase price equal to the price you paid for such common stock. All certificates for common stock of the Company acquired by you pursuant to the exercise of stock options or stock purchase rights will bear a legend describing the foregoing. 10. Confidentiality and Non-Competition - You will enter into Confidentiality and Non-Competition Agreements that all of the general managers have entered into in the form attached hereto as Exhibit A. I am excited about our progress. Sincerely, SILVER DINER, INC. by: /s/ Robert T. Giaimo -------------------- Robert T. Giaimo President AGREED AND ACCEPTED: /s/ Patrick Meskell Date: 3/16/99 - ------------------- ------- Patrick Meskell EXHIBIT A --------- [Form of Confidentiality and Non-Competition Agreement] 1. Confidential Information. Employee agrees that all Confidential Information (as defined below) relating to Silver Diner, Inc., or to its business and affairs, including, without limitation, any information whatsoever concerning its organization, management, or finances, shall at all times, and notwithstanding that termination of employment shall have occurred, be treated as confidential and shall not be used, disclosed, divulged or otherwise placed at the disposal of any person or entity except to the extent that (i) the parties hereto may otherwise agree in writing, (ii) such information is required to be disclosed by law, (iii) such information is otherwise publicly available other than by reason of a breach by such party of this Section 1, or (iv) such information is submitted into evidence in any legal proceedings between or among the parties. "Confidential Information" means all information, records, documents, accounts and correspondence of every description regarding past, current or future business activities, interests, methodology or affairs, whether written, recorded or stored by electronic, magnetic, electro-magnetic or other form or process or otherwise in machine or computer readable form, including, without limitation: (a) business plans, research, know-how, development and survey information, (b) customer, staff, and all other training manuals and product policy manuals, recipes, and (c) planning and marketing strategies, procedures, techniques and information. 2. Non-Competition. Employee agrees that during the period of time that he/she is providing services hereunder and for a period ending on the first anniversary of any termination of employment: (i) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly within 25 miles of a then existing Silver Diner Restaurant, in any restaurant business (x) with the word "Diner" in its name or logo or which is commonly understood to be a diner or (y) whose menu, trade dress and pricing are substantially similar to that employed in the Silver Diner Restaurants, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (ii) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly, within the United States, in any restaurant business with the word "Diner" in its name or logo or which is commonly understood to be a diner, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (iii) Employee will not induce or attempt to persuade any employee of Silver Diner, Inc. to terminate his or her employment relationship in order to enter into employment which is competitive with Silver Diner, Inc. (iv) It is the intent and understanding of each party hereto that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 2, any term, restriction, covenant or promise contained therein is found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency, and such finding shall not, in any event, affect the enforceability of any other term, restriction, covenant, or promise herein. EX-10.25.1 9 KENDALL EMP & COMPEN. Exhibit 10.25.1 [SILVER DINER LETTERHEAD] March 4, 1999 Mr. Craig Kendall Silver Diner, Inc. 11806 Rockville Pike Rockville, MD 20852 Dear Craig: I am pleased to set forth in this letter your employment terms and compensation. This letter takes the place of all prior oral and written agreements and understandings with respect to your employment terms and compensation. The specifics of our understanding are as follows: 1. Salary - A base salary of $125,000 per annum, with annual adjustments in the future as approved by the Company's Compensation Committee or by the Board of Directors. 2. Bonus and Stock Options - You will be entitled to participate in bonus and stock option plans as made available by the Company to its executives. 3. Automobile - You will receive a $500.00 per month car allowance. 4. Life Insurance - The Company will provide, at no cost to you, life insurance coverage in the amount of $500,000.00. 5. Health/Dental Insurance - The Company will provide, at no cost to you and your family, group health and dental plans offered by the Company's employees generally. 6. Disability Coverage - The Company will provide, at no cost to you, long term disability insurance coverage in an amount of approximately 60% of your base salary per month, with a 90 day waiting period during which time your base salary will continue to be paid by the Company. 7. Vacation Days - Three weeks per year. Vacation does not accrue or carry over from one year to the next year. 8. Sick Leave and Other Benefits - You will be entitled to sick leave and other benefits in accordance with the Company's policies for its executives. 11806 ROCKVILLE PIKE, ROCKVILLE, MD 20852 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DINER 301-770-4166 EXECUTIVE OFFICE 301-770-0333 FAX 301-770-2832 Mr. Craig Kendall March 4, 1999 Page 2 9. Compensation Coverage - If the Company terminates your employment for any reason, you will be paid all base salary earned by you and unpaid on the date of termination, plus three months base salary. If you resign, you will be paid all base salary earned by you and unpaid on the date of resignation, plus three months base salary, payable after resignation on the same schedule as your salary was paid before resignation, provided you have given the Company at least three months prior notice of your proposed resignation as an employee of the Company. If you resign as an employee of the Company and do not give at least three months prior notice, (a) all stock options to purchase stock of the Company and all common stock purchase rights granted to you by the Company subsequent to March 1, 1999, and all stock options granted to you on December 15, 1998, pursuant to the Plan known as the "Active Employee/Consultant Stock Option Plan" will be terminated on the date of your resignation and may not thereafter be exercised and (b) you will sell and the Company will purchase all common stock of the Company acquired by you pursuant to stock options or stock purchase rights within six (6) months prior to the date of such resignation at a purchase price equal to the price you paid for such common stock. All certificates for common stock of the Company acquired by you pursuant to the exercise of stock options or stock purchase rights will bear a legend describing the foregoing. 10. Confidentiality and Non-Competition - You will enter into Confidentiality and Non-Competition Agreements that all of the general managers have entered into in the form attached hereto as Exhibit A. I am excited about our progress. Sincerely, SILVER DINER, INC. by: /s/ Robert T. Giaimo ------------------------- Robert T. Giaimo President AGREED AND ACCEPTED: /s/ Craig A. Kendall Date: 3/17/99 - ----------------------------- -------------- Craig A. Kendall EXHIBIT A --------- [Form of Confidentiality and Non-Competition Agreement] 1. Confidential Information. Employee agrees that all Confidential Information (as defined below) relating to Silver Diner, Inc., or to its business and affairs, including, without limitation, any information whatsoever concerning its organization, management, or finances, shall at all times, and notwithstanding that termination of employment shall have occurred, be treated as confidential and shall not be used, disclosed, divulged or otherwise placed at the disposal of any person or entity except to the extent that (i) the parties hereto may otherwise agree in writing, (ii) such information is required to be disclosed by law, (iii) such information is otherwise publicly available other than by reason of a breach by such party of this Section 1, or (iv) such information is submitted into evidence in any legal proceedings between or among the parties. "Confidential Information" means all information, records, documents, accounts and correspondence of every description regarding past, current or future business activities, interests, methodology or affairs, whether written, recorded or stored by electronic, magnetic, electro-magnetic or other form or process or otherwise in machine or computer readable form, including, without limitation: (a) business plans, research, know-how, development and survey information, (b) customer, staff, and all other training manuals and product policy manuals, recipes, and (c) planning and marketing strategies, procedures, techniques and information. 2. Non-Competition. Employee agrees that during the period of time that he/she is providing services hereunder and for a period ending on the first anniversary of any termination of employment: (i) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly within 25 miles of a then existing Silver Diner Restaurant, in any restaurant business (x) with the word "Diner" in its name or logo or which is commonly understood to be a diner or (y) whose menu, trade dress and pricing are substantially similar to that employed in the Silver Diner Restaurants, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (ii) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly, within the United States, in any restaurant business with the word "Diner" in its name or logo or which is commonly understood to be a diner, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (iii) Employee will not induce or attempt to persuade any employee of Silver Diner, Inc. to terminate his or her employment relationship in order to enter into employment which is competitive with Silver Diner, Inc. (iv) It is the intent and understanding of each party hereto that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 2, any term, restriction, covenant or promise contained therein is found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency, and such finding shall not, in any event, affect the enforceability of any other term, restriction, covenant, or promise herein. EX-10.25.2 10 CUSICK EMP. TERMS AND COMPEN. Exhibit 10.25.2 [SILVER DINER LETTERHEAD] March 4, 1999 Mr. Timothy Cusick Silver Diner, Inc. 11806 Rockville Pike Rockville, MD 20852 Dear Tim: I am pleased to set forth in this letter your employment terms and compensation. This letter takes the place of all prior oral and written agreements and understandings with respect to your employment terms and compensation. The specifics of our understanding are as follows: 1. Salary - A base salary of $104,000 per annum, with annual adjustments in the future as approved by the Company's Compensation Committee or by the Board of Directors. 2. Bonus and Stock Options - You will be entitled to participate in bonus and stock option plans as made available by the Company to its executives. 3. Automobile - You will receive a $500.00 per month car allowance. 4. Life Insurance - The Company will provide, at no cost to you, life insurance coverage in the amount of $500,000.00. 5. Health/Dental Insurance - The Company will provide, at no cost to you and your family, group health and dental plans offered by the Company's employees generally. 6. Disability Coverage - The Company will provide, at no cost to you, long term disability insurance coverage in an amount of approximately 60% of your base salary per month, with a 90 day waiting period during which time your base salary will continue to be paid by the Company. 7. Vacation Days - Three weeks per year. Vacation does not accrue or carry over from one year to the next year. 8. Sick Leave and Other Benefits - You will be entitled to sick leave and other benefits in accordance with the Company's policies for its executives. 11806 ROCKVILLE PIKE, ROCKVILLE, MD 20852 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DINER 301-770-4166 EXECUTIVE OFFICE 301-770-0333 FAX 301-770-2832 Mr. Timothy Cusick March 4, 1999 Page 2 9. Compensation Coverage - If the Company terminates your employment for any reason, you will be paid all base salary earned by you and unpaid on the date of termination, plus three months base salary. If you resign, you will be paid all base salary earned by you and unpaid on the date of resignation, plus three months base salary, payable after resignation on the same schedule as your salary was paid before resignation, provided you have given the Company at least three months prior notice of your proposed resignation as an employee of the Company. If you resign as an employee of the Company and do not give at least three months prior notice, (a) all stock options to purchase stock of the Company and all common stock purchase rights granted to you by the Company subsequent to March 1, 1999, and all stock options granted to you on December 29, 1997, and on December 15, 1998, pursuant to the Plan known as the "Active Employee/Consultant Stock Option Plan" will be terminated on the date of your resignation and may not thereafter be exercised and (b) you will sell and the Company will purchase all common stock of the Company acquired by you pursuant to stock options or stock purchase rights within six (6) months prior to the date of such resignation at a purchase price equal to the price you paid for such common stock. All certificates for common stock of the Company acquired by you pursuant to the exercise of stock options or stock purchase rights will bear a legend describing the foregoing. 10. Confidentiality and Non-Competition - You will enter into Confidentiality and Non-Competition Agreements that all of the general managers have entered into in the form attached hereto as Exhibit A. I am excited about our progress. Sincerely, SILVER DINER, INC. by: /s/ Robert T. Giaimo ------------------------- Robert T. Giaimo President AGREED AND ACCEPTED: /s/ Timothy Cusick Date: 3/15/99 - ----------------------------- -------------- Timothy Cusick EXHIBIT A --------- [Form of Confidentiality and Non-Competition Agreement] 1. Confidential Information. Employee agrees that all Confidential Information (as defined below) relating to Silver Diner, Inc., or to its business and affairs, including, without limitation, any information whatsoever concerning its organization, management, or finances, shall at all times, and notwithstanding that termination of employment shall have occurred, be treated as confidential and shall not be used, disclosed, divulged or otherwise placed at the disposal of any person or entity except to the extent that (i) the parties hereto may otherwise agree in writing, (ii) such information is required to be disclosed by law, (iii) such information is otherwise publicly available other than by reason of a breach by such party of this Section 1, or (iv) such information is submitted into evidence in any legal proceedings between or among the parties. "Confidential Information" means all information, records, documents, accounts and correspondence of every description regarding past, current or future business activities, interests, methodology or affairs, whether written, recorded or stored by electronic, magnetic, electro-magnetic or other form or process or otherwise in machine or computer readable form, including, without limitation: (a) business plans, research, know-how, development and survey information, (b) customer, staff, and all other training manuals and product policy manuals, recipes, and (c) planning and marketing strategies, procedures, techniques and information. 2. Non-Competition. Employee agrees that during the period of time that he/she is providing services hereunder and for a period ending on the first anniversary of any termination of employment: (i) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly within 25 miles of a then existing Silver Diner Restaurant, in any restaurant business (x) with the word "Diner" in its name or logo or which is commonly understood to be a diner or (y) whose menu, trade dress and pricing are substantially similar to that employed in the Silver Diner Restaurants, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (ii) Employee will not engage, without first obtaining Silver Diner, Inc.'s prior written consent, directly or indirectly, within the United States, in any restaurant business with the word "Diner" in its name or logo or which is commonly understood to be a diner, whether as employee, officer, director, partner, joint venturer, stockholder (other than the holder of less than 5% of the stock of a corporation, the securities of which are traded on a national securities exchange or in the over-the-counter market), consultant, or agent. (iii) Employee will not induce or attempt to persuade any employee of Silver Diner, Inc. to terminate his or her employment relationship in order to enter into employment which is competitive with Silver Diner, Inc. (iv) It is the intent and understanding of each party hereto that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 2, any term, restriction, covenant or promise contained therein is found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency, and such finding shall not, in any event, affect the enforceability of any other term, restriction, covenant, or promise herein. EX-10.31 11 AGREEMENT BETWEEN OWNER AND CONTR. Exhibit 10.31 [AIA Document Logo] Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of Limited Scope where the basis of payment is a STIPULATED SUM AIA Document A107 - 1997 1997 Edition - Electronic Format - ------------------------------------------------------------------------------- This document includes abbreviated General Conditions and should not be used with other general conditions. This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401. This document has been approved and endorsed by The Associated General Contractors of America. Copyright 1936, 1951, 1958, 1961, 1963, 1966, 1974, 1978, 1987, /C/1997 by The American Institute of Architects. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will subject the violator to legal prosecution. - ------------------------------------------------------------------------------- AGREEMENT made as of the 29th day of February in the year 2000 ---- -------- ---- (In words, indicate day, month and year) BETWEEN the Owner: (Name, address and other information) Silver Diner Development, Inc. - ------------------------------ 11806 Rockville Pike - -------------------- Rockville, MD 21852 - -------------------- and the Contractor: (Name, address and other information) Uniwest Construction, Inc. - -------------------------- 5100 Leesburg Pike, Suite 200 - ----------------------------- Alexandria, VA 22302 - -------------------- The Project is: (Name and location) Silver Diner at Lakeforest Mall - ------------------------------- 701 Russell Avenue, Space E149 - ------------------------------ Gaithersburg, MD 20877 - ---------------------- The Architect is: (Name, address and other information) Helbing/Lipp, Ltd. - ------------------ 8032 Leesburg Pike, Suite 201 - ----------------------------- Vienna, VA 22182 - ---------------- The Owner and Contractor agree as follows. ARTICLE 1 THE WORK OF THIS CONTRACT The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others. The Contract Excludes the Following: 1. Building Permit Fees and related expediting costs; 2. Payment and Performance Bonds; 3. Builder's Risk Insurance; 4. Independent testing, architectural and engineering fees; 5. Excavation, removal and replacement of unacceptable soils or rock; 6. Dewatering of ground water; 7. All refrigeration work; 8. Utility company(ies) fees (consumption during construction is included); 9. Booths, tables, chairs, table numbers, mahogany end panels, booth dividers, juke box backboards, and other components of seating package; 10. POS and cash register equipment and wiring; 11. Any work related to hazardous or contaminated soils or minerals; 12. Juke box, wall boxes, sound equipment and speakers; 13. All kitchen equipment except items #5,38,41,56, 62 and 135. Uniwest will install only item #28; 14. Mural or mural wallcovering; 15. Booth logos; 16. Pay phones; 17. Brushed aluminum letters at light soffit; 18. Glass shelving at counter. ARTICLE 2 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION 2.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner. (Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.) Work shall commence within three (3) days from Contractor's receipt of an ------------------------------------------------------------------------- executed Contract and required permits. --------------------------------------- 2.2 The Contract Time shall be measured from the date of commencement. 2.3 The Contractor shall achieve Substantial Completion of the entire Work not later than 130 days from the date of commencement, or as follows. (Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents, insert any requirements for earlier Substantial Completion of certain portions of the Work.) , subject to adjustments of this Contract Time as provided in the Contract Documents. (Insert provisions, if any, for liquidated damages relating to failure to complete on time or for bonus payments for early completion of the Work.) ARTICLE 3 CONTRACT SUM 3.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance of the Contract. The Contract Sum shall be Seven ----- Hundred Thirty Five Thousand Two Hundred Dollars ($735,200.00), subject to - ----------------------------------------- ----------- additions and deletions as provided in the Contract Documents. 3.2 The Contract Sum is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: (State the numbers or other identification of accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date when that amount expires.) None. ----- 3.3 Unit prices, if any, are as follows: None. ----- ARTICLE 4 PAYMENTS 4.1 PROGRESS PAYMENTS 4.1.1 Based upon Applications for Payment submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows: Contractor shall submit Pay Applications on or before the fifth (5) day of ---------------------------------------------------------------------------- each month and Owner shall make payment on or before the Twenty-Fifth (25th) ---------------------------------------------------------------------------- day of that same month. Each Progress Pay Application shall have Ten Percent ---------------------------------------------------------------------------- (10%) retention held until Substantial Completion, at which time retention ---------------------------------------------------------------------------- shall be reduced to a sum equal to Two Hundred Percent (200%) of the value of ----------------------------------------------------------------------------- the punch list until Final Payment is due. ---------------------------------------------------------------------------- 4.1.2 Provided that an Application for Payment is received by the Architect not later than the day of a month, the Owner shall make payment to the Contractor not later than the day of the month. If an Application for Payment is received by the Architect after the date fixed above, payment shall be made by the Owner not later than days after the Architect receives the Application for Payment. 4.1.3. Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. (Insert rate of interest agreed upon, if any.) Twelve Percent (12%) -------------------- (Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.) 4.2 FINAL PAYMENT 4.2.1 Final payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when: .1 the Contractor has fully performed the Contract including the ------------- issuance of a Certificate of Occupancy except for the Contractor's -------------------------------------- responsibility to correct Work as provided in Paragraph 17.2, and to satisfy other requirements, if any, which extend beyond final payment; and .2 a final Certificate for Payment has been issued by the Architect. 4.2.2 The Owner's final payment to the Contractor shall be made no later than 30 days after the issuance of the Architect's final Certificate for Payment, or as follow: ARTICLE 5 ENUMERATION OF CONTRACT DOCUMENTS 5.1 The Contract Documents are listed in Article 6 and, except for Modifications issued after execution of this Agreement, are enumerated as follows: 5.1.1 The Agreement is this executed 1997 edition of the Abbreviated Standard Form of Agreement Between Owner and Contractor, AIA Document A107-1997. 5.1.2 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows: Document Title Pages None. ----- 5.1.3 The Specifications are those contained in the Contract Documents dated ------------------ as in Subparagraph (Either list the Specifications here or refer to an exhibit attached to this Agreement.) Section Date Pages 5.1.4 The Drawings are as follows, and are dated unless a different date is shown below: (Either list the Drawings here or refer to an exhibit attached to this Agreement.)
Number Title Pages CS Cover Sheet 12/20 -------------------------------------------------------- D-1 Demolition Plan 12/20 -------------------------------------------------------- A-1 Floor Plan 02/01 -------------------------------------------------------- A-2 Finish & Equipment Plan 02/01 -------------------------------------------------------- A-3 Reflected Ceiling Plan 02/01 -------------------------------------------------------- A-4 Building Sections 12/20 -------------------------------------------------------- A-5 Elevations 12/20 -------------------------------------------------------- A-6 Roof Plan/Details 12/20 -------------------------------------------------------- ID-1 Interior Floor Plan & Details 02/01 -------------------------------------------------------- ID-2 Interior Details 02/01 -------------------------------------------------------- ID-3 Interior Details 02/01 -------------------------------------------------------- FS-1.1 Food Service Equipment Plan/Schedule 12/01 -------------------------------------------------------- FS-1.2 Food Service Electrical Plan 12/01 -------------------------------------------------------- FS-1.3 Food Service Mechanical Plan 12/01 -------------------------------------------------------- FS-1.4 Food Service Special Conditions Plan 12/01 -------------------------------------------------------- FS-1.6 Elevations and Sections 09/09 -------------------------------------------------------- FS-2.1 Food Service Utility Load Schedule NO DATE ---------------------------------------------------------- FS-2.2 Food Service Utility Load Schedule NO DATE ---------------------------------------------------------- FS-2.3 Food Service Utility Load Schedule NO DATE ---------------------------------------------------------- FS-2.4 Food Service Utility Load Schedule NO DATE ---------------------------------------------------------- S-1 Foundation Plan/Details 12/20 -------------------------------------------------------- S-2 Roof Framing Plan/Details 12/20 -------------------------------------------------------- MPE-1 Roof Plan 02/10 -------------------------------------------------------- M-1 Floor Plan-HVAC 12/13 -------------------------------------------------------- M-2 Mechanical Notes & Schedules 12/13 -------------------------------------------------------- M-3 Hood Details & Notes 12/13 -------------------------------------------------------- P-1 Water Floor Plan 02/10 -------------------------------------------------------- P-2 San./FP/Gas Floor Plan 02/10 -------------------------------------------------------- P-3 Plumbing Risers 02/10 -------------------------------------------------------- E-1 Notes/Risers 12/13 -------------------------------------------------------- E-2 Floor Plan-Power 02/10 -------------------------------------------------------- E-3 Floor Plan-Lighting 02/10 -------------------------------------------------------- M-4 Hood Details and Notes 12/13 --------------------------------------------------------
5.1.5 The Addenda, if any, are as follows: Number Date Pages None. ----- Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 5. 5.1.6 Other documents, if any, forming part of the Contract Documents are as follows: (List any additional documents which are intended to form part of the Contract Documents.) Exhibit "A" attached hereto. --------------------------- GENERAL CONDITIONS ARTICLE 6 GENERAL PROVISIONS 6.1 THE CONTRACT DOCUMENTS The Contract Documents consist of this Agreement with Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to the execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement. A Modification is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the Architect. The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the indicated results. 6.2 THE CONTRACT The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Contractor, (2) between the Owner and a Subcontractor or sub-subcontractor, (3) between the Owner and Architect or (4) between any persons or entities other than the Owner and Contractor. 6.3 THE WORK The term "Work" means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project. 6.4 EXECUTION OF THE CONTRACT Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become generally familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents. 6.5 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER INSTRUMENTS OF SERVICE The Drawings, Specifications and other documents, including those in electronic form, prepared by the Architect and the Architect's consultants are Instruments of Service through which the Work to be executed by the Contractor is described. The Contractor may retain one record set. Neither the Contractor nor any Subcontractor, sub-subcontractor or material or equipment supplier shall own or claim a copyright in the Drawings, Specifications and other documents prepared by the Architect or the Architect's consultants, and unless otherwise indicated the Architect and the Architect's consultants shall be deemed the authors of them and will retain all common law, statutory and other reserved rights, in addition to the copyrights. All copies of them, except the Contractor's record set, shall be returned or suitably accounted for to the Architect, on request, upon completion of the Work. The Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants, and copies thereof furnished to the Contractor, are for use solely with respect to this Project. They are not to be used by the Contractor or any Subcontractor, sub-subcontractor or material or equipment supplier on other projects or for additions to this Project outside the scope of the Work without the specific written consent of the Owner, Architect and the Architect's consultants. The Contractor, Subcontractors, sub- subcontractors and material or equipment suppliers are authorized to use and reproduce applicable portions of the Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants appropriate to and for use in the execution of their Work under the Contract Documents. All copies made under this authorization shall bear the statutory copyright notice, if any, shown on the Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants. Submittal or distribution to meet official regulatory requirements or for other purposes in connection with this Project is not to be construed as publication in derogation of the Architect's or Architect's consultants copyrights or other reserved rights. ARTICLE 7 OWNER 7.1 INFORMATION AND SERVICES REQUIRED OF THE OWNER 7.1.1 The Owner shall furnish and pay for surveys and a legal description of the site. 7.1.2 The Contractor shall be entitled to rely on the accuracy of information furnished by the Owner but shall exercise proper precautions relating to the safe performance of the Work. 7.1.3 Except for permits and fees which are the responsibility of the Contractor under the Contract Documents, the Owner shall secure and pay for other necessary approvals, easements, assessments and charges required for the construction, use or occupancy of permanent structures or permanent changes in existing facilities. 7.2 OWNER'S RIGHT TO STOP THE WORK If the Contractor fails to correct Work which is not in accordance with the requirements of the Contract Documents, or persistently fails to carry out the Work in accordance with the Contract Documents, the Owner may issue a written order to the Contractor to stop the Work, or any portion thereof, until the cause for such order is eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity. 7.3 OWNER'S RIGHT TO CARRY OUT THE WORK If the Contractor defaults or persistently fails or neglects to carry out the Work in accordance with the Contract Documents, or fails to perform a provision of the Contract, the Owner, after 10 days' written notice to the Contractor and without prejudice to any other remedy the Owner may have, may make good such deficiencies and may deduct the reasonable cost thereof, including Owner's expenses and compensation for the Architect's services made necessary thereby, from the payment then or thereafter due the Contractor. ARTICLE 8 CONTRACTOR 8.1 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR 8.1.1 Since the Contract Documents are complementary, before starting each portion of the Work, the Contractor shall carefully study and compare the various Drawings and other Contract Documents relative to that portion of the Work, as well as the information furnished by the Owner pursuant to Subparagraph 7.1.1, shall take field measurements of any existing conditions related to that portion of the Work and shall observe any conditions at the site affecting it. These obligations are for the purpose of facilitating construction by the Contractor and are not for the purpose of discovering errors, omissions or inconsistencies in the Contract Documents; however, any errors, omissions or inconsistencies discovered by the Contractor shall be reported promptly to the Architect as a request for information in such form as the Architect may require. 8.1.2 Any design errors or omissions noted by the Contractor during this review shall be reported promptly to the Architect, but it is recognized that the Contractor's review is made in the Contractor's capacity as a contractor and not as a licensed design professional unless otherwise specifically provided in the Contract Documents. 8.2 SUPERVISION AND CONSTRUCTION PROCEDURES 8.2.1 The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures, and for coordinating all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters. If the Contract Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures, the Contractor shall be fully and solely responsible for the jobsite safety thereof unless the Contractor gives timely written notice to the Owner and Architect that such means, methods, techniques, sequences or procedures may not be safe. 8.2.2 The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for or on behalf of the Contractor or any of its Subcontractors. 8.3 LABOR AND MATERIALS 8.3.1 Unless otherwise provided in the Contract Documents, the Contractor shall provide and pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. 8.3.2 The Contractor shall enforce strict discipline and good order among the Contractor's employees and other persons carrying out the Contract. The Contractor shall not permit employment of unfit persons or persons not skilled in tasks assigned to them. 8.3.3 The Contractor shall deliver, handle, store and install materials in accordance with manufacturers' instructions. 8.3.4 The Contractor may make substitutions only with the consent of the Owner, after evaluation by the Architect and in accordance with a Change Order. 8.4 WARRANTY The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Contractor's warranty excludes remedy for damage or defect caused by abuse, modifications not executed by the Contractor, improper or insufficient maintenance, improper operation or normal wear and tear and normal usage. 8.5 TAXES The Contractor shall pay sales, consumer, use and other similar taxes which are legally enacted when bids are received or negotiations concluded. 8.6 PERMITS, FEES AND NOTICES 8.6.1 Unless otherwise provided in the Contract Documents, the Contractor shall secure and pay for the building permit and other permits and governmental fees, licenses and inspections necessary for proper execution and completion of the Work. 8.6.2 The Contractor shall comply with and give notices required by laws, ordinances, rules, regulations and lawful orders of public authorities applicable to performance of the Work. The Contractor shall promptly notify the Architect and Owner if the Drawings and Specifications are observed by the Contractor to be at variance therewith. If the Contractor performs Work knowing it to be contrary to laws, statutes, ordinances, building codes, and rules and regulations without such notice to the Architect and Owner, the Contractor shall assume appropriate responsibility for such Work and shall bear the costs attributable to correction. 8.7 SUBMITTALS 8.7.1 The Contractor shall review for compliance with the Contract Documents, approve in writing and submit to the Architect Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents with reasonable promptness. The Work shall be in accordance with approved submittals. 8.7.2 Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. 8.8 USE OF SITE The Contractor shall confine operations at the site to areas permitted by law, ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with materials or equipment. 8.9 CUTTING AND PATCHING The Contractor shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly. 8.10 CLEANING UP The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the Work, the Contractor shall remove from and about the Project waste materials, rubbish, the Contractor's tools, construction equipment, machinery and surplus material. 8.11 ROYALTIES, PATENTS AND COPYRIGHTS The Contractor shall pay all royalties and license fees; shall defend suits or claims for infringement of copyrights and patent rights and shall hold the Owner and Architect harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers is required by the Contract Documents, or where the copyright violations are contained in Drawings, Specifications or other documents prepared by the Owner or Architect, unless the Contractor has reason to believe that there is an infringement of patent or copyright and fails to promptly furnish such information to the Architect. 8.12 ACCESS TO WORK The Contractor shall provide the Owner and Architect access to the Work in preparation and progress wherever located. 8.13 INDEMNIFICATION 8.13.1 To the fullest extent permitted by law and to the extent claims, damages, losses or expenses are not covered by Project Management Protective Liability insurance purchased by the Contractor in accordance with Paragraph 16.3, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 8.13. 8.13.2 In claims against any person or entity indemnified under this Paragraph 8.13 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Subparagraph 8.13.1 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or Subcontractor under workers' compensation acts, disability benefit acts or other employee benefit acts. ARTICLE 9 ARCHITECT'S ADMINISTRATION OF THE CONTRACT 9.1 The Architect will provide administration of the Contract and will be an Owner's representative (1) during construction, (2) until final payment is due and (3) with the Owner's concurrence, from time to time during the one-year period for correction of Work described in Paragraph 17.2. 9.2 The Architect, as a representative of the Owner, will visit the site at intervals appropriate to the stage of the Contractor's operations (1) to become generally familiar with and to keep the Owner informed about the progress and quality of the portion of the Work completed, (2) to endeavor to guard the Owner against defects and deficiencies in the Work, and (3) to determine in general if the Work is being performed in a manner indicating that the Work, when fully completed, will be in accordance with the Contract Documents. However, the Architect will not be required to make exhaustive or continuous on-site inspections to check the quality or quantity of the Work. The Architect will neither have control over or charge of, nor be responsible for, the construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's rights and responsibilities under the Contract Documents, except as provided in Subparagraph 8.2.1. 9.3 The Architect will not be responsible for the Contractor's failure to perform the Work in accordance with the requirements of the Contract Documents. The Architect will not have control over or charge of and will not be responsible for acts or omissions of the Contractor, Subcontractors, or their agents or employees, or any other persons or entities performing portions of the Work. 9.4 Based on the Architect's evaluations of the Work and of the Contractor's Applications for Payment, the Architect will review and certify the amounts due the Contractor and will issue Certificates for Payment in such amounts. 9.5 The Architect will have authority to reject Work that does not conform to the Contract Documents. 9.6 The Architect will review and approve or take other appropriate action upon the Contractor's submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. 9.7 The Architect will interpret and decide matters concerning performance under, and requirements of, the Contract Documents on written request of either the Owner or Contractor. The Architect will make initial decisions on all claims, disputes and other matters in question between the Owner and Contractor but will not be liable for results of any interpretations or decisions so rendered in good faith. 9.8 The Architect's decisions on matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents. 9.9 Duties, responsibilities and limitations of authority of the Architect as set forth in the Contract Documents shall not be restricted, modified or extended without written consent of the Owner, Contractor and Architect. Consent shall not be unreasonably withheld. 9.10 CLAIMS AND DISPUTES 9.10.1 Claims, disputes and other matters in question arising out of or relating to this Contract, including those alleging an error or omission by the Architect but excluding those arising under Paragraph 15.2, shall be referred initially to the Architect for decision. Such matters, except those relating to aesthetic effect and except those waived as provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4, shall, after initial decision by the Architect or 30 days after submission of the matter to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party. 9.10.2 If a claim, dispute or other matter in question relates to or is the subject of a mechanic's lien, the party asserting such matter may proceed in accordance with applicable law to comply with the lien notice or filing deadlines prior to resolution of the matter by the Architect, by mediation or by arbitration. 9.10.3 The parties shall endeavor to resolve their disputes by mediation which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Mediation Rules of the American Arbitration Association currently in effect. Request for mediation shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The request may be made concurrently with the filing of a demand for arbitration but, in such event, mediation shall proceed in advance of arbitration or legal or equitable proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing, unless stayed for a longer period by agreement of the parties or court order. 9.10.4 Claims, disputes and other matters in question arising out of or relating to the Contract that are not resolved by mediation, except matters relating to aesthetic effect and except those waived as provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4, shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Contract Documents shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Agreement under which such arbitration arises, unless it is shown at the time the demand for arbitration is filed that (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is required if complete relief is to be accorded in the arbitration, (3) the interest or responsibility of such person or entity in the matter is not insubstantial, and (4) such person or entity is not the Architect or any of the Architect's employees or consultants. The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction thereof. 9.11 CLAIMS FOR CONSEQUENTIAL DAMAGES The Contractor and Owner waive claims against each other for consequential damages arising out of or relating to this Contract. This mutual waiver includes: .1 damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons; and .2 damages incurred by the Contractor for principal office expenses including the compensation of personnel stationed there, for losses of financing, business and reputation, and for loss of profit except anticipated profit arising directly from the Work. This mutual waiver is applicable, without limitation, to all consequential damages due to either party's termination in accordance with Article 19. Nothing contained in this Paragraph 9.11 shall be deemed to preclude an award of liquidated direct damages, when applicable, in accordance with the requirements of the Contract Documents. ARTICLE 10 SUBCONTRACTORS 10.1 A Subcontractor is a person or entity who has a direct contract with the Contractor to perform a portion of the Work at the site. 10.2 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner through the Architect the names of the Subcontractors for each of the principal portions of the Work. The Contractor shall not contract with any Subcontractor to whom the Owner or Architect has made reasonable and timely objection. If the proposed but rejected Subcontractor was reasonably capable of performing the Work, the Contract Sum and Contract Time shall be increased or decreased by the difference, if any, occasioned by such change, and an appropriate Change Order shall be issued before commencement of the substitute Subcontractor's Work. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection. 10.3 Contracts between the Contractor and Subcontractors shall (1) require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by the terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities, including the responsibility for safety of the Subcontractor's Work, which the Contractor, by the Contract Documents, assumes toward the Owner and Architect, and (2) allow the Subcontractor the benefit of all rights, remedies and redress afforded to the Contractor by these Contract Documents. ARTICLE 11 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS 11.1 The Owner reserves the right to perform construction or operations related to the Project with the Owner's own forces, and to award separate contracts in connection with other portions of the Project or other construction or operations on the site under conditions of the contract identical or substantially similar to these, including those portions related to insurance and waiver of subrogation. If the Contractor claims that delay or additional cost is involved because of such action by the Owner, the Contractor shall make such claim as provided in Paragraph 9.10. 11.2 The Contractor shall afford the Owner and separate contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities, and shall connect and coordinate the Contractor's activities with theirs as required by the Contract Documents. 11.3 The Owner shall be reimbursed by the Contractor for costs incurred by the Owner which are payable to a separate contractor because of delays, improperly timed activities or defective construction of the Contractor. The Owner shall be responsible to the Contractor for costs incurred by the Contractor because of delays, improperly timed activities, damage to the Work or defective construction of a separate contractor. ARTICLE 12 CHANGES IN THE WORK 12.1 The Owner, without invalidating the Contract, may order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly. Such changes in the Work shall be authorized by written Change Order signed by the Owner, Contractor and Architect, or by written Construction Change Directive signed by the Owner and Architect. 12.2 The cost or credit to the Owner from a change in the Work shall be determined by mutual agreement of the parties or, in the case of a Construction Change Directive, by the Contractor's cost of labor, material, equipment, and reasonable overhead and profit. 12.3 The Architect will have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Contract Documents. Such changes shall be effected by written order and shall be binding on the Owner and Contractor. The Contractor shall carry out such written orders promptly. 12.4 If concealed or unknown physical conditions are encountered at the site that differ materially from those indicated in the Contract Documents or from those conditions ordinarily found to exist, the Contract Sum and Contract Time shall be equitably adjusted. ARTICLE 13 TIME 13.1 Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the Contract Time is a reasonable period for performing the Work. 13.2 The date of Substantial Completion is the date certified by the Architect in accordance with Subparagraph 14.4.2. 13.3 If the Contractor is delayed at any time in the commencement or progress of the Work by changes ordered in the Work, by labor disputes, fire, unusual delay in deliveries, abnormal adverse weather conditions not reasonably anticipatable, unavoidable casualties or any causes beyond the Contractor's control, or by other causes which the Architect determines may justify delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Architect may determine, subject to the provisions of Paragraph 9.10. ARTICLE 14 PAYMENTS AND COMPLETION 14.1 APPLICATIONS FOR PAYMENT 14.1.1 Payments shall be made as provided in Article 4 of this Agreement. Applications for Payment shall be in a form satisfactory to the Architect. 14.1.2 The Contractor warrants that title to all Work covered by an Application for Payment will pass to the Owner no later than the time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificates for Payment have been previously issued and payments received from the Owner shall, to the best of the Contractor's knowledge, information and belief, be free and clear of liens, claims, security interests or other encumbrances adverse to the Owner's interests. 14.2 CERTIFICATES FOR PAYMENT 14.2.1 The Architect will, within seven days after receipt of the Contractor's Application for Payment, either issue to the Owner a Certificate for Payment, with a copy to the Contractor, for such amount as the Architect determines is properly due, or notify the Contractor and Owner in writing of the Architect's reasons for withholding certification in whole or in part as provided in Subparagraph 14.2.3. 14.2.2 The issuance of a Certificate for Payment will constitute a representation by the Architect to the Owner, based on the Architect's evaluations of the Work and the data comprising the Application for Payment, that the Work has progressed to the point indicated and that, to the best of the Architect's knowledge, information and belief, the quality of the Work is in accordance with the Contract Documents. The foregoing representations are subject to an evaluation of the Work for conformance with the Contract Documents upon Substantial Completion, to results of subsequent tests and inspections, to correction of minor deviations from the Contract Documents prior to completion and to specific qualifications expressed by the Architect. The issuance of a Certificate for Payment will further constitute a representation that the Contractor is entitled to payment in the amount certified. However, the issuance of a Certificate for Payment will not be a representation that the Architect has (1) made exhaustive or continuous on- site inspections to check the quality or quantity of the Work, (2) reviewed construction means, methods, techniques, sequences or procedures, (3) reviewed copies of requisitions received from Subcontractors and material suppliers and other data requested by the Owner to substantiate the Contractor's right to payment, or (4) made examination to ascertain how or for what purpose the Contractor has used money previously paid on account of the Contract Sum. 14.2.3 The Architect may withhold a Certificate for Payment in whole or in part, to the extent reasonably necessary to protect the Owner, if in the Architect's opinion the representations to the Owner required by Subparagraph 14.2.2 cannot be made. If the Architect is unable to certify payment in the amount of the Application, the Architect will notify the Contractor and Owner as provided in Subparagraph 14.2.1. The Architect may also withhold a Certificate for Payment or, because of subsequently discovered evidence, may nullify the whole or a part of a Certificate for Payment previously issued, to such extent as may be necessary in the Architect's opinion to protect the Owner from loss for which the Contractor is responsible, including loss resulting from acts and omissions described in Subparagraph 8.2.2, because of: .1 defective Work not remedied; .2 third party claims filed or reasonable evidence indicating probable filing of such claims unless security acceptable to the Owner is provided by the Contractor; .3 failure of the Contractor to make payments properly to Subcontractors or for labor, materials or equipment; .4 reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum; .5 damage to the Owner or another contractor; .6 reasonable evidence that the Work will not be completed within the Contract Time and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; or .7 persistent failure to carry out the Work in accordance with the Contract Documents. 14.2.4 When the above reasons for withholding certification are removed, certification will be made for amounts previously withheld. 14.3 PAYMENTS TO THE CONTRACTOR 14.3.1 The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractor's portion of the Work. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to sub-subcontractors in similar manner. 14.3.2 Neither the Owner nor Architect shall have an obligation to pay or see to the payment of money to a Subcontractor except as may otherwise be required by law. 14.3.3 A Certificate for Payment, a progress payment, or partial or entire use or occupancy of the Project by the Owner shall not constitute acceptance of Work not in accordance with the Contract Documents. 14.4 SUBSTANTIAL COMPLETION 14.4.1 Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use. 14.4.2 When the Architect determines that the Work or designated portion thereof is substantially complete, the Architect will issue a Certificate of Substantial Completion which shall establish the date of Substantial Completion, establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and fix the time within which the Contractor shall finish all items on the list accompanying the Certificate. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. Upon the issuance of the Certificate of Substantial Completion, the Architect will submit it to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such Certificate. 14.5 FINAL COMPLETION AND FINAL PAYMENT 14.5.1 Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Architect will promptly make such inspection and, when the Architect finds the Work acceptable under the Contract Documents and the Contract fully performed, the Architect will promptly issue a final Certificate for Payment stating that to the best of the Architect's knowledge, information and belief, and on the basis of the Architect's on-site visits and inspections, the Work has been completed in accordance with terms and conditions of the Contract Documents and that the entire balance found to be due the Contractor and noted in the final Certificate is due and payable. The Architect's final Certificate for Payment will constitute a further representation that conditions stated in Subparagraph 14.5.2 as precedent to the Contractor's being entitled to final payment have been fulfilled. 14.5.2 Final payment shall not become due until the Contractor has delivered to the Owner a complete release of all liens arising out of this Contract or receipts in full covering all labor, materials and equipment for which a lien could be filed, or a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Contractor shall refund to the Owner all money that the Owner may be compelled to pay in discharging such lien, including costs and reasonable attorneys' fees. 14.5.3 The making of final payment shall constitute a waiver of claims by the Owner except those arising from: .1 liens, claims, security interests or encumbrances arising out of the Contract and unsettled; .2 failure of the Work to comply with the requirements of the Contract Documents; or .3 terms of special warranties required by the Contract Documents. 14.5.4 Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. ARTICLE 15 PROTECTION OF PERSONS AND PROPERTY 15.1 SAFETY PRECAUTIONS AND PROGRAMS The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract. The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: .1 employees on the Work and other persons who may be affected thereby; .2 the Work and materials and equipment to be incorporated therein; and .3 other property at the site or adjacent thereto. The Contractor shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorities bearing on safety of persons and property and their protection from damage, injury or loss. The Contractor shall promptly remedy damage and loss to property caused in whole or in part by the Contractor, a Subcontractor, a sub-subcontractor, or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Subparagraphs 15.1.2 and 15.1.3, except for damage or loss attributable to acts or omissions of the Owner or Architect or by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the Contractor are in addition to the Contractor's obligations under Paragraph 8.13. 15.2 HAZARDOUS MATERIALS 15.2.1 If reasonable precautions will be inadequate to prevent foreseeable bodily injury or death to persons resulting from a material or substance, including but not limited to asbestos or polychlorinated biphenyl (PCB), encountered on the site by the Contractor, the Contractor shall, upon recognizing the condition, immediately stop Work in the affected area and report the condition to the Owner and Architect in writing. When the material or substance has been rendered harmless, Work in the affected area shall resume upon written agreement of the Owner and Contractor. The Contract Time shall be extended appropriately and the Contract Sum shall be increased in the amount of the Contractor's reasonable additional costs of shutdown, delay and start-up, which adjustments shall be accomplished as provided in Article 12 of this Agreement. 15.2.2 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Contractor, Subcontractors, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work in the affected area if in fact the material or substance presents the risk of bodily injury or death as described in Subparagraph 15.2.1 and has not been rendered harmless, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), and provided that such damage, loss or expense is not due to the sole negligence of a party seeking indemnity. 15.2.3 If, without negligence on the part of the Contractor, the Contractor is held liable for the cost of remediation of a hazardous material or substance solely by reason of performing Work as required by the Contract Documents, the Owner shall indemnify the Contractor for all cost and expense thereby incurred. ARTICLE 16 INSURANCE 16.1 The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located insurance for protection from claims under workers' compensation acts and other employee benefit acts which are applicable, claims for damages because of bodily injury, including death, and claims for damages, other than to the Work itself, to property which may arise out of or result from the Contractor's operations under the Contract, whether such operations be by the Contractor or by a Subcontractor or anyone directly or indirectly employed by any of them. This insurance shall be written for not less than limits of liability specified in the Contract Documents or required by law, whichever coverage is greater, and shall include contractual liability insurance applicable to the Contractor's obligations. Certificates of Insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least 30 days' prior written notice has been given to the Owner. 16.2 OWNER'S LIABILITY INSURANCE The Owner shall be responsible for purchasing and maintaining the Owner's usual liability insurance. 16.3 PROJECT MANAGEMENT PROTECTIVE LIABILITY INSURANCE 16.3.1 Optionally, the Owner may require the Contractor to purchase and maintain Project Management Protective Liability insurance from the Contractor's usual sources as primary coverage for the Owner's, Contractor's and Architect's vicarious liability for construction operations under the Contract. Unless otherwise required by the Contract Documents, the Owner shall reimburse the Contractor by increasing the Contract Sum to pay the cost of purchasing and maintaining such optional insurance coverage, and the Contractor shall not be responsible for purchasing any other liability insurance on behalf of the Owner. The minimum limits of liability purchased with such coverage shall be equal to the aggregate of the limits required for Contractor's Liability insurance under Paragraph 16.1. 16.3.2 To the extent damages are covered by Project Management Protective Liability insurance, the Owner, Contractor and Architect waive all rights against each other for damages, except such rights as they may have to the proceeds of such insurance. The policy shall provide for such waivers of subrogation by endorsement or otherwise. 16.3.3 The Owner shall not require the Contractor to include the Owner, Architect or other persons or entities as additional insureds on the Contractor's Liability insurance under Paragraph 16.1. 16.4 PROPERTY INSURANCE 16.4.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance on an "all-risk" policy form, including builder's risk, in the amount of the initial Contract Sum, plus the value of subsequent modifications and cost of materials supplied and installed by others, comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Paragraph 14.5 or until no person or entity other than the Owner has an insurable interest in the property required by this Paragraph 16.4 to be covered, whichever is later. This insurance shall include interests of the Owner, the Contractor, Subcontractors and sub-subcontractors in the Project. 16.4.2 The Owner shall file a copy of each policy with the Contractor before an exposure to loss may occur. Each policy shall contain a provision that the policy will not be canceled or allowed to expire, and that its limits will not be reduced, until at least 30 days' prior written notice has been given to the Contractor. 16.5 WAIVERS OF SUBROGATION 16.5.1 The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants, separate contractors described in Article 11, if any, and any of their subcontractors, sub-subcontractors, agents and employees for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to Paragraph 16.4 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary. The Owner or Contractor, as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 11, if any, and the subcontractors, sub-subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged. 16.5.2 A loss insured under the Owner's property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause. The Contractor shall pay Subcontractors their just shares of insurance proceeds received by the Contractor, and by appropriate agreements, written where legally required for validity, shall require Subcontractors to make payments to their sub-subcontractors in similar manner. ARTICLE 17 CORRECTION OF WORK 17.1 The Contractor shall promptly correct Work rejected by the Architect or failing to conform to the requirements of the Contract Documents, whether discovered before or after Substantial Completion and whether or not fabricated, installed or completed. Costs of correcting such rejected Work, including additional testing and inspections and compensation for the Architect's services and expenses made necessary thereby, shall be at the Contractor's expense. 17.2 In addition to the Contractor's obligations under Paragraph 8.4, if, within one year after the date of Substantial Completion of the Work or designated portion thereof or after the date for commencement of warranties established under Subparagraph 14.4.2, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition. The Owner shall give such notice promptly after discovery of the condition. During the one-year period for correction of Work, if the Owner fails to notify the Contractor and give the Contractor an opportunity to make the correction, the Owner waives the rights to require correction by the Contractor and to make a claim for breach of warranty. 17.3 If the Contractor fails to correct nonconforming Work within a reasonable time, the Owner may correct it in accordance with Paragraph 7.3. 17.4 The one-year period for correction of Work shall be extended with respect to portions of Work first performed after Substantial Completion by the period of time between Substantial Completion and the actual performance of the Work. 17.5 The one-year period for correction of Work shall not be extended by corrective Work performed by the Contractor pursuant to this Article 17. ARTICLE 18 MISCELLANEOUS PROVISIONS 18.1 ASSIGNMENT OF CONTRACT Neither party to the Contract shall assign the Contract without written consent of the other. 18.2 GOVERNING LAW The Contract shall be governed by the law of the place where the Project is located. 18.3 TESTS AND INSPECTIONS Tests, inspections and approvals of portions of the Work required by the Contract Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Contractor shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner, or with the appropriate public authority, and shall bear all related costs of tests, inspections and approvals. The Contractor shall give the Architect timely notice of when and where tests and inspections are to be made so that the Architect may be present for such procedures. The Owner shall bear costs of tests, inspections or approvals which do not become requirements until after bids are received or negotiations concluded. 18.4 COMMENCEMENT OF STATUTORY LIMITATION PERIOD. As between Owner and Contractor, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued: .1 not later than the date of Substantial Completion for acts or failures to act occurring prior to the relevant date of Substantial Completion; .2 not later than the date of issuance of the final Certificate for Payment for acts or failures to act occurring subsequent to the relevant date of Substantial Completion and prior to the issuance of the final Certificate for Payment; and .3 not later than the date of the relevant act or failure to act by the Contractor for acts or failures to act occurring after the date of the final Certificate for Payment. ARTICLE 19 TERMINATION OF THE CONTRACT 19.1 TERMINATION BY THE CONTRACTOR If the Architect fails to recommend payment for a period of 30 days through no fault of the Contractor, or if the Owner fails to make payment thereon for a period of 30 days, the Contractor may, upon seven additional days' written notice to the Owner and the Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages applicable to the Project. 19.2 TERMINATION BY THE OWNER 19.2.1 The Owner may terminate the Contract if the Contractor: .1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; .3 persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision of the Contract Documents. 19.2.2 When any of the above reasons exists, the Owner, upon certification by the Architect that sufficient cause exists to justify such action, may, without prejudice to any other remedy the Owner may have and after giving the Contractor seven days' written notice, terminate the Contract and take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor and may finish the Work by whatever reasonable method the Owner may deem expedient. Upon request of the Contractor, the Owner shall furnish to the Contractor a detailed accounting of the costs incurred by the Owner in finishing the Work. 19.2.3 When the Owner terminates the Contract for one of the reasons stated in Subparagraph 19.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished. 19.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the Work, including compensation for the Architect's services and expenses made necessary thereby, and other damages incurred by the Owner and not expressly waived, such excess shall be paid to the Contractor. If such costs and damages exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Contractor or Owner, as the case may be, shall be certified by the Architect, upon application, and this obligation for payment shall survive termination of the Contract. ARTICLE 20 OTHER CONDITIONS OR PROVISIONS 1. Our proposal includes empty conduits for the POS, sound, telephone and soda - ------------------------------------------------------------------------------ system. POS cable, provided by others, will be pulled to the various stations as - -------------------------------------------------------------------------------- required with final terminations to be performed by others. All sound, telephone - -------------------------------------------------------------------------------- and soda cabling/terminations are excluded. - ------------------------------------------- 2. If a time extension is granted as a result of an Owner's Change Order or - --------------------------------------------------------------------------- delay it is understood and agreed that General Conditions are an additional cost - -------------------------------------------------------------------------------- at $425.00 Per calendar day and will become a Change Order to the Contract. - --------------------------------------------------------------------------- 3. It is understood that any delays caused by failure of Owner to timely deliver - -------------------------------------------------------------------------------- Owner supplied items, a time extension would be granted per Article 4.6. - ------------------------------------------------------------------------ 4. The Authorized Representative and Agent for the Owner shall be Mr. Tim - ------------------------------------------------------------------------- Cusick. - ------- 5. Clarifications: - ------------------ 1) Bid is based on pulling new electrical conductors in existing conduit. - ------------------------------------------------------------------------- 2) No depressed slab for Freezer/Cooler boxes. - ---------------------------------------------- 3) No new landscaping included. - ------------------------------- 4) Glazing in "Mall" elevation storefront to be 1/4" in lieu of 1". - ------------------------------------------------------------------- 5) SDC and WSSC Permit charges are excluded. Plumber will apply for permit - -------------------------------------------------------------------------- Owner to pay fees. - ------------------ 6) Allowances: Owner will be credited as a change order for the actual amount - ----------------------------------------------------------------------------- for final costs less than the allowance or will pay as a change order for the - ----------------------------------------------------------------------------- actual amount for final costs greater than the allowance. - --------------------------------------------------------- 1. $5,000.00 for conduit and wire to monitor the kitchen hood Ansul ------------------------------------------------------------------- system. FACP is located in the Management Office. No other fire alarm --------------------------------------------------------------------- work is included. ----------------- 2. 11,000.00 fire sprinkler costs. ---------------------------------- This Agreement entered into as of the day and year first written above. /s/ Michael D. Collier _____________________________________ ___________________________________ OWNER (Signature) CONTRACTOR (Signature) Robert T. Giaimo, President Michael D. Collier, President _____________________________________ ___________________________________ (Printed name and title) (Printed name and title) Exhibit "A" Contract Attachment for Silver Diner At Lake Forest Mall -------- The Owner and Contractor entered into this Contract agreeing as follows: 1. The Owner has reviewed, understands, accepts, and approves the Contract Document's plans and specifications including exclusions and alternates listed herein and accepts responsibility for the furniture and aesthetics, lighting fixtures and locations, floor plan, door locations and general architectural layout and appearance. 2. The Contractor has reviewed, understands, accepts and approves the Contract Document's plans and specifications including exclusions and alternates listed herein and accepts responsibility for the structural, Building dimensions, mechanical, electrical and plumbing systems to being complete, suited for their intended purposes, per code, and sufficient to insure the following: (i) the furniture, fixtures and equipment being able to be properly installed by the appropriate contractor, (ii) the proper installation by the Contractor of finishes, (iii) the issuance to a Certificate of Occupancy to be obtained by the Contractor except for circumstances that the Certificate of Occupancy should be delayed or not issued due to work not within Contractor's Scope, and (iv) the Building being built to function and accommodate all the items listed in Paragraph 1 above. The Contractor shall make any changes in work necessary to implement the requirements of the Contract set forth in the Paragraph 2, and shall pay all expenses incurred as a result of such changes without increase in the Contract price or extensions of the Contract Time. It is understood that the Owner shall have a consultant to review all shop drawings and submittals for the mechanical, plumbing and electrical trades to ensure compliance of the Contract documents as well as to respond to any questions that may arise during construction. For Example: If a piece of FF & E is required and is not included in the Contract Documents then the Owner shall be responsible and pay for this equipment and all related work. However, if the plumbing or electrical is missing or inadequate to allow for the proper installation and operation of the specified equipment, the Contractor shall be responsible and pay for the installation or correction of same. EX-10.32 12 AGREEMENT BETWEEN OWNER AND CONTR. SUPPLEMENT Exhibit 10.32 [UNIWEST Letterhead] January 7, 2000 Mr. Robert Giaimo, President Silver Diner Development, Inc. 11806 Rockville Pike Rockville, MD 20852 RE: Silver Diner at Columbus Square East, Virginia Beach, VA Dear Bob: This letter shall serve as an Agreement to supplement the construction contract for the above referenced store dated December 1, 1999. It is understood and agreed that should there be approved change orders as a result of tenant improvements or FF&E above building improvements which would result in a net increase and therefore would cause the contract sum to exceed $800,000.00, then Uniwest shall in no event cause the contract sum to exceed $800,000.00 but instead, the Contractor shall invoice Silver Diner Development, Inc. directly (outside of the contract) and SDDI agrees to reimburse Uniwest directly for these additional costs. Further, notwithstanding that the December 1, 1999 contract indicates that signage is excluded, it is understood and agreed that all signage is included in the $800,000.00 sum except for the monument sign, the painted logo sign at the rear of the building, the Silver Diner lettering in the front vestibule glass and the interior brushed aluminum letters on the menu board. Last, while not addressed in the contract, the contract sum is based upon a carpet material allowance of $26.00/sq. yd. Sincerely, UNIWEST Construction, Inc. /s/ Michael D. Collier ______________________ Michael D. Collier President Please sign below acknowledging and agreeing to the above. Agreed: /s/ Robert Giaimo 1/8/00 ______________________________ ___________ Silver Diner Development, Inc. Date CONSTRUCTION [LOGO] DEVELOPMENT [LOGO] MANAGEMENT Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of Limited Scope where the basis of payment is a STIPULATED SUM AIA Document A107 - 1997 1997 Edition - Electronic Format - -------------------------------------------------------------------------------- This document includes abbreviated General Conditions and should not be used with other general conditions. This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401. This document has been approved and endorsed by The Associated General Contractors of America. Copyright 1936, 1951, 1958, 1961, 1963, 1966, 1974, 1978, 1987, /C/1997 by The American Institute of Architects. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will subject the violator to legal prosecution. - -------------------------------------------------------------------------------- AGREEMENT made as of the 1st day of December in the year 1999 --- -------- ---- (In words, indicate day, month and year) BETWEEN the Owner: (Name, address and other information) Silver Diner Development, Inc. - ------------------------------ 11806 Rockville Pike - -------------------- Rockville, MD 21852 - ------------------- and the Contractor: (Name, address and other information) Uniwest Construction, Inc. - -------------------------- 5100 Leesburg Pike - ------------------ Suite 200 - --------- Alexandria, VA 22302 - -------------------- The Project is: (Name and location) Silver Diner at Columbus Village East - ------------------------------------- Virginia Beach Boulevard - ------------------------ Virginia Beach, Virginia - ------------------------ The Architect is: (Name, address and other information) Helbing/Lipp, Ltd. - ------------------ 8032 Leesburg Pike, Suite 201 - ----------------------------- Vienna, VA 22182 - ---------------- The Owner and Contractor agree as follows. ARTICLE 1 THE WORK OF THIS CONTRACT The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others. The Contract Excludes the Following: 1. Building Permit Fees and related expediting costs; 2. Payment and Performance Bonds; 3. Builder's Risk Insurance; 4. Independent testing, architectural and engineering fees; 5. Excavation, removal and replacement of unacceptable soils or rock; 6. Dewatering of ground water; 7. All refrigeration work; 8. Utility company(ies) fees (consumption during construction is included); 9. Signage; 10. Booths, tables, chairs, table numbers, mahogany end panels, booth dividers, juke box backboards, and other components of seating package; 11. POS and cash register equipment and wiring; 12. Any work related to hazardous or contaminated soils or materials; 13. Juke box, wall boxes, sound equipment and speakers; 14. All kitchen equipment except items #5, 38, 56, 62 and 135. Uniwest will install only item #28; 15. Mural or mural wallcovering; 16. Booth logos; 17. Vestibule sign boxes D/ID-2; 18. Pay phones; 19. Any work beyond the building except for grease trap and electrical to monument sign. 20. Brushed aluminum letters at menu board. 21. Glass shelving at counter. 22. Fire alarm system, if required. ARTICLE 2 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION 2.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner. (Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.) Work shall commence within seven (7) days from Contractor's receipt of an ------------------------------------------------------------------------- executed Contract and required permits. --------------------------------------- 2.2 The Contract Time shall be measured from the date of commencement. This substantial Completion Date includes five (5) days (excluding Sundays and Holidays) that work cannot be performed in a normal manner due to inclement weather. For each day that work cannot be performed in a normal manner due to inclement weather beyond five (5) days, then the Substantial Completion Date will be extended by one (1) day, up to a maximum of ten (10) weather days. 2.3 The Contractor shall achieve Substantial Completion of the entire Work not later than 150 days from the date of commencement, or as follows. -------- (Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents, insert any requirements for earlier Substantial Completion of certain portions of the Work.) , subject to adjustments of this Contract Time as provided in the Contract Documents. (Insert provisions, if any, for liquidated damages relating to failure to complete on time or for bonus payments for early completion of the Work.) ARTICLE 3 CONTRACT SUM 3.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance of the Contract. The Contract Sum shall be Eight ----- Hundred Thousand and 00/100 Dollars ($800,000.00). ---------------------------- ----------- 3.2 The Contract Sum is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: (State the numbers or other identification of accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date when that amount expires.) 1. Toggle dimmers for lights in lieu of dimmer panels. ------------------------------------------------------ 3.3 Unit prices, if any, are as follows: None. ----- ARTICLE 4 PAYMENTS 4.1 PROGRESS PAYMENTS 4.1.1 Based upon Applications for Payment submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows: Contractor shall submit Pay Applications on or before the fifth (5) day of ---------------------------------------------------------------------------- each month and Owner shall make payment on or before the Twenty-Fifth (25th) ---------------------------------------------------------------------------- day of that same month. Each Progress Pay Application shall have Ten Percent ---------------------------------------------------------------------------- (10%) retention held until Substantial Completion, at which time retention ---------------------------------------------------------------------------- shall be reduced to a sum equal to Two Hundred Percent (200%) of the value of ----------------------------------------------------------------------------- the punch list, until Final Payment is due. ---------------------------------------------------------------------------- 4.1.2 Provided that an Application for Payment is received by the Architect not later than the day of a month, the Owner shall make payment to the Contractor not later than the day of the month. If an Application for Payment is received by the Architect after the date fixed above, payment shall be made by the Owner not later than days after the Architect receives the Application for Payment. 4.1.3. Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. (Insert rate of interest agreed upon, if any.) Twelve Percent (12%) -------------------- (Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.) 4.2 FINAL PAYMENT 4.2.1 Final payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when: .1 the Contractor has fully performed the Contract except for the Contractor's responsibility to correct Work as provided in Paragraph 17.2, and to satisfy other requirements, if any, which extend beyond final payment; and .2 a final Certificate for Payment has been issued by the Architect. 4.2.2 The Owner's final payment to the Contractor shall be made no later than 30 days after the issuance of the Architect's final Certificate for Payment, or as follow: ARTICLE 5 ENUMERATION OF CONTRACT DOCUMENTS 5.1 The Contract Documents are listed in Article 6 and, except for Modifications issued after execution of this Agreement, are enumerated as follows: 5.1.1 The Agreement is this executed 1997 edition of the Abbreviated Standard Form of Agreement Between Owner and Contractor, AIA Document A107-1997. 5.1.2 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows: Document Title Pages None. ----- 5.1.3 The Specifications are those contained in the Contract Documents dated ------------------ as in Subparagraph 5.1.4. (Either list the Specifications here or refer to an exhibit attached to this Agreement.) Section Title Pages 5.1.4 The Drawings are as follows, and are dated unless a different date is shown below: (Either list the Drawings here or refer to an exhibit attached to this Agreement.) Number Title Pages A-1 Floor Plan 11/05/99 ----------------------------------------------------------- A-2 Finish & Equipment Plan 11/05/99 ----------------------------------------------------------- A-3 Reflected Ceiling Plan 11/05/99 ----------------------------------------------------------- A-4 Building Sections 11/05/99 ----------------------------------------------------------- A-5 Wall Sections 11/05/99 ----------------------------------------------------------- A-6 Exterior Elevations 11/05/99 ----------------------------------------------------------- A-7 Roof Plan/Details 11/05/99 ----------------------------------------------------------- ID-1 Interior Floor Plan 11/05/99 ----------------------------------------------------------- ID-2 Interior Details 11/05/99 ----------------------------------------------------------- ID-3 Interior Details 11/05/99 ----------------------------------------------------------- ID-4 Interior Details 11/05/99 ----------------------------------------------------------- FS-1.1 Food Service Equipment Plan/Schedule 09/09/99 ----------------------------------------------------------- FS-1.2 Food Service Electrical Plan 09/09/99 ----------------------------------------------------------- FS-1.3 Food Service Mechanical Plan 09/09/99 ----------------------------------------------------------- FS-1.4 Food Service Special Conditions Plan 09/09/99 ----------------------------------------------------------- FS-1.5 Food Service Dimensions 09/09/99 ----------------------------------------------------------- FS-1.6 Elevations and Sections 09/09/99 ----------------------------------------------------------- FS-2.1 Food Service Utility Load Schedule 09/09/99 ----------------------------------------------------------- FS-2.2 Food Service Utility Load Schedule 09/09/99 ----------------------------------------------------------- FS-2.3 Food Service Utility Load Schedule 09/09/99 ----------------------------------------------------------- FS-2.4 Food Service Utility Load Schedule 09/09/99 ----------------------------------------------------------- FS-2.4 Food Service Utility Load Schedule 09/09/99 ----------------------------------------------------------- S-1 Foundation Plan/Details 11/05/99 ----------------------------------------------------------- S-2 Roof Framing Plan/Details 11/05/99 ----------------------------------------------------------- MPE-1 Roof Plan 11/05/99 ----------------------------------------------------------- M-1 Floor Plan-HVAC 11/17/99 ----------------------------------------------------------- M-2 Mechanical Notes & Schedules 11/05/99 ----------------------------------------------------------- M-3 Hood Details 11/17/99 ----------------------------------------------------------- P-1 Water Floor Plan 11/05/99 ----------------------------------------------------------- P-2 San./FP/Gas Floor Plan 11/05/99 ----------------------------------------------------------- P-3 Plumbing Risers 11/05/99 ----------------------------------------------------------- E-1 Notes/Risers 11/05/99 ----------------------------------------------------------- E-2 Floor Plan-Power 11/05/99 ----------------------------------------------------------- E-3 Floor Plan-Lighting 11/05/99 ----------------------------------------------------------- E-4 Hood and Panel Schedules 11/05/99 ----------------------------------------------------------- 5.1.5 The Addenda, if any, are as follows: Number Date Pages None. ----- Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 5. 5.1.6 Other documents, if any, forming part of the Contract Documents are as follows: (List any additional documents which are intended to form part of the Contract Documents.) None. ----- GENERAL CONDITIONS ARTICLE 6 GENERAL PROVISIONS 6.1 THE CONTRACT DOCUMENTS The Contract Documents consist of this Agreement with Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to the execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement. A Modification is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the Architect. The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the indicated results. 6.2 THE CONTRACT The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Contractor, (2) between the Owner and a Subcontractor or sub-subcontractor, (3) between the Owner and Architect or (4) between any persons or entities other than the Owner and Contractor. 6.3 THE WORK The term "Work" means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project. 6.4 EXECUTION OF THE CONTRACT Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become generally familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents. 6.5 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER INSTRUMENTS OF SERVICE The Drawings, Specifications and other documents, including those in electronic form, prepared by the Architect and the Architect's consultants are Instruments of Service through which the Work to be executed by the Contractor is described. The Contractor may retain one record set. Neither the Contractor nor any Subcontractor, sub-subcontractor or material or equipment supplier shall own or claim a copyright in the Drawings, Specifications and other documents prepared by the Architect or the Architect's consultants, and unless otherwise indicated the Architect and the Architect's consultants shall be deemed the authors of them and will retain all common law, statutory and other reserved rights, in addition to the copyrights. All copies of them, except the Contractor's record set, shall be returned or suitably accounted for to the Architect, on request, upon completion of the Work. The Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants, and copies thereof furnished to the Contractor, are for use solely with respect to this Project. They are not to be used by the Contractor or any Subcontractor, sub-subcontractor or material or equipment supplier on other projects or for additions to this Project outside the scope of the Work without the specific written consent of the Owner, Architect and the Architect's consultants. The Contractor, Subcontractors, sub- subcontractors and material or equipment suppliers are authorized to use and reproduce applicable portions of the Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants appropriate to and for use in the execution of their Work under the Contract Documents. All copies made under this authorization shall bear the statutory copyright notice, if any, shown on the Drawings, Specifications and other documents prepared by the Architect and the Architect's consultants. Submittal or distribution to meet official regulatory requirements or for other purposes in connection with this Project is not to be construed as publication in derogation of the Architect's or Architect's consultants' copyrights or other reserved rights. ARTICLE 7 OWNER 7.1 INFORMATION AND SERVICES REQUIRED OF THE OWNER 7.1.1 The Owner shall furnish and pay for surveys and a legal description of the site. 7.1.2 The Contractor shall be entitled to rely on the accuracy of information furnished by the Owner but shall exercise proper precautions relating to the safe performance of the Work. 7.1.3 Except for permits and fees which are the responsibility of the Contractor under the Contract Documents, the Owner shall secure and pay for other necessary approvals, easements, assessments and charges required for the construction, use or occupancy of permanent structures or permanent changes in existing facilities. 7.2 OWNER'S RIGHT TO STOP THE WORK If the Contractor fails to correct Work which is not in accordance with the requirements of the Contract Documents, or persistently fails to carry out the Work in accordance with the Contract Documents, the Owner may issue a written order to the Contractor to stop the Work, or any portion thereof, until the cause for such order is eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity. 7.3 OWNER'S RIGHT TO CARRY OUT THE WORK If the Contractor defaults or persistently fails or neglects to carry out the Work in accordance with the Contract Documents, or fails to perform a provision of the Contract, the Owner, after 10 days' written notice to the Contractor and without prejudice to any other remedy the Owner may have, may make good such deficiencies and may deduct the reasonable cost thereof, including Owner's expenses and compensation for the Architect's services made necessary thereby, from the payment then or thereafter due the Contractor. ARTICLE 8 CONTRACTOR 8.1 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR 8.1.1 Since the Contract Documents are complementary, before starting each portion of the Work, the Contractor shall carefully study and compare the various Drawings and other Contract Documents relative to that portion of the Work, as well as the information furnished by the Owner pursuant to Subparagraph 7.1.1, shall take field measurements of any existing conditions related to that portion of the Work and shall observe any conditions at the site affecting it. These obligations are for the purpose of facilitating construction by the Contractor and are not for the purpose of discovering errors, omissions or inconsistencies in the Contract Documents; however, any errors, omissions or inconsistencies discovered by the Contractor shall be reported promptly to the Architect as a request for information in such form as the Architect may require. 8.1.2 Any design errors or omissions noted by the Contractor during this review shall be reported promptly to the Architect, but it is recognized that the Contractor's review is made in the Contractor's capacity as a contractor and not as a licensed design professional unless otherwise specifically provided in the Contract Documents. 8.2 SUPERVISION AND CONSTRUCTION PROCEDURES 8.2.1 The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures, and for coordinating all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters. If the Contract Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures, the Contractor shall be fully and solely responsible for the jobsite safety thereof unless the Contractor gives timely written notice to the Owner and Architect that such means, methods, techniques, sequences or procedures may not be safe. 8.2.2 The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for or on behalf of the Contractor or any of its Subcontractors. 8.3 LABOR AND MATERIALS 8.3.1 Unless otherwise provided in the Contract Documents, the Contractor shall provide and pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. 8.3.2 The Contractor shall enforce strict discipline and good order among the Contractor's employees and other persons carrying out the Contract. The Contractor shall not permit employment of unfit persons or persons not skilled in tasks assigned to them. 8.3.3 The Contractor shall deliver, handle, store and install materials in accordance with manufacturers' instructions. 8.3.4 The Contractor may make substitutions only with the consent of the Owner, after evaluation by the Architect and in accordance with a Change Order. 8.4 WARRANTY The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Contractor's warranty excludes remedy for damage or defect caused by abuse, modifications not executed by the Contractor, improper or insufficient maintenance, improper operation or normal wear and tear and normal usage. 8.5 TAXES The Contractor shall pay sales, consumer, use and other similar taxes which are legally enacted when bids are received or negotiations concluded. 8.6 PERMITS, FEES AND NOTICES 8.6.1 Unless otherwise provided in the Contract Documents, the Contractor shall secure and pay for the building permit and other permits and governmental fees, licenses and inspections necessary for proper execution and completion of the Work. 8.6.2 The Contractor shall comply with and give notices required by laws, ordinances, rules, regulations and lawful orders of public authorities applicable to performance of the Work. The Contractor shall promptly notify the Architect and Owner if the Drawings and Specifications are observed by the Contractor to be at variance therewith. If the Contractor performs Work knowing it to be contrary to laws, statutes, ordinances, building codes, and rules and regulations without such notice to the Architect and Owner, the Contractor shall assume appropriate responsibility for such Work and shall bear the costs attributable to correction. 8.7 SUBMITTALS 8.7.1 The Contractor shall review for compliance with the Contract Documents, approve in writing and submit to the Architect Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents with reasonable promptness. The Work shall be in accordance with approved submittals. 8.7.2 Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. 8.8 USE OF SITE The Contractor shall confine operations at the site to areas permitted by law, ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with materials or equipment. 8.9 CUTTING AND PATCHING The Contractor shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly. 8.10 CLEANING UP The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the Work, the Contractor shall remove from and about the Project waste materials, rubbish, the Contractor's tools, construction equipment, machinery and surplus material. 8.11 ROYALTIES, PATENTS AND COPYRIGHTS The Contractor shall pay all royalties and license fees; shall defend suits or claims for infringement of copyrights and patent rights and shall hold the Owner and Architect harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers is required by the Contract Documents, or where the copyright violations are contained in Drawings, Specifications or other documents prepared by the Owner or Architect, unless the Contractor has reason to believe that there is an infringement of patent or copyright and fails to promptly furnish such information to the Architect. 8.12 ACCESS TO WORK The Contractor shall provide the Owner and Architect access to the Work in preparation and progress wherever located. 8.13 INDEMNIFICATION 8.13.1 To the fullest extent permitted by law and to the extent claims, damages, losses or expenses are not covered by Project Management Protective Liability insurance purchased by the Contractor in accordance with Paragraph 16.3, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 8.13. 8.13.2 In claims against any person or entity indemnified under this Paragraph 8.13 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Subparagraph 8.13.1 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or Subcontractor under workers' compensation acts, disability benefit acts or other employee benefit acts. ARTICLE 9 ARCHITECT'S ADMINISTRATION OF THE CONTRACT 9.1 The Architect will provide administration of the Contract and will be an Owner's representative (1) during construction, (2) until final payment is due and (3) with the Owner's concurrence, from time to time during the one-year period for correction of Work described in Paragraph 17.2. 9.2 The Architect, as a representative of the Owner, will visit the site at intervals appropriate to the stage of the Contractor's operations (1) to become generally familiar with and to keep the Owner informed about the progress and quality of the portion of the Work completed, (2) to endeavor to guard the Owner against defects and deficiencies in the Work, and (3) to determine in general if the Work is being performed in a manner indicating that the Work, when fully completed, will be in accordance with the Contract Documents. However, the Architect will not be required to make exhaustive or continuous on-site inspections to check the quality or quantity of the Work. The Architect will neither have control over or charge of, nor be responsible for, the construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's rights and responsibilities under the Contract Documents, except as provided in Subparagraph 8.2.1. 9.3 The Architect will not be responsible for the Contractor's failure to perform the Work in accordance with the requirements of the Contract Documents. The Architect will not have control over or charge of and will not be responsible for acts or omissions of the Contractor, Subcontractors, or their agents or employees, or any other persons or entities performing portions of the Work. 9.4 Based on the Architect's evaluations of the Work and of the Contractor's Applications for Payment, the Architect will review and certify the amounts due the Contractor and will issue Certificates for Payment in such amounts. 9.5 The Architect will have authority to reject Work that does not conform to the Contract Documents. 9.6 The Architect will review and approve or take other appropriate action upon the Contractor's submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. 9.7 The Architect will interpret and decide matters concerning performance under, and requirements of, the Contract Documents on written request of either the Owner or Contractor. The Architect will make initial decisions on all claims, disputes and other matters in question between the Owner and Contractor but will not be liable for results of any interpretations or decisions so rendered in good faith. 9.8 The Architect's decisions on matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents. 9.9 Duties, responsibilities and limitations of authority of the Architect as set forth in the Contract Documents shall not be restricted, modified or extended without written consent of the Owner, Contractor and Architect. Consent shall not be unreasonably withheld. 9.10 CLAIMS AND DISPUTES 9.10.1 Claims, disputes and other matters in question arising out of or relating to this Contract, including those alleging an error or omission by the Architect but excluding those arising under Paragraph 15.2, shall be referred initially to the Architect for decision. Such matters, except those relating to aesthetic effect and except those waived as provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4, shall, after initial decision by the Architect or 30 days after submission of the matter to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party. 9.10.2 If a claim, dispute or other matter in question relates to or is the subject of a mechanic's lien, the party asserting such matter may proceed in accordance with applicable law to comply with the lien notice or filing deadlines prior to resolution of the matter by the Architect, by mediation or by arbitration. 9.10.3 The parties shall endeavor to resolve their disputes by mediation which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Mediation Rules of the American Arbitration Association currently in effect. Request for mediation shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The request may be made concurrently with the filing of a demand for arbitration but, in such event, mediation shall proceed in advance of arbitration or legal or equitable proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing, unless stayed for a longer period by agreement of the parties or court order. 9.10.4 Claims, disputes and other matters in question arising out of or relating to the Contract that are not resolved by mediation, except matters relating to aesthetic effect and except those waived as provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4, shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Contract Documents shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Agreement under which such arbitration arises, unless it is shown at the time the demand for arbitration is filed that (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is required if complete relief is to be accorded in the arbitration, (3) the interest or responsibility of such person or entity in the matter is not insubstantial, and (4) such person or entity is not the Architect or any of the Architect's employees or consultants. The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction thereof. 9.11 CLAIMS FOR CONSEQUENTIAL DAMAGES The Contractor and Owner waive claims against each other for consequential damages arising out of or relating to this Contract. This mutual waiver includes: .1 damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons; and .2 damages incurred by the Contractor for principal office expenses including the compensation of personnel stationed there, for losses of financing, business and reputation, and for loss of profit except anticipated profit arising directly from the Work. This mutual waiver is applicable, without limitation, to all consequential damages due to either party's termination in accordance with Article 19. Nothing contained in this Paragraph 9.11 shall be deemed to preclude an award of liquidated direct damages, when applicable, in accordance with the requirements of the Contract Documents. ARTICLE 10 SUBCONTRACTORS 10.1 A Subcontractor is a person or entity who has a direct contract with the Contractor to perform a portion of the Work at the site. 10.2 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner through the Architect the names of the Subcontractors for each of the principal portions of the Work. The Contractor shall not contract with any Subcontractor to whom the Owner or Architect has made reasonable and timely objection. If the proposed but rejected Subcontractor was reasonably capable of performing the Work, the Contract Sum and Contract Time shall be increased or decreased by the difference, if any, occasioned by such change, and an appropriate Change Order shall be issued before commencement of the substitute Subcontractor's Work. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection. 10.3 Contracts between the Contractor and Subcontractors shall (1) require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by the terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities, including the responsibility for safety of the Subcontractor's Work, which the Contractor, by the Contract Documents, assumes toward the Owner and Architect, and (2) allow the Subcontractor the benefit of all rights, remedies and redress afforded to the Contractor by these Contract Documents. ARTICLE 11 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS 11.1 The Owner reserves the right to perform construction or operations related to the Project with the Owner's own forces, and to award separate contracts in connection with other portions of the Project or other construction or operations on the site under conditions of the contract identical or substantially similar to these, including those portions related to insurance and waiver of subrogation. If the Contractor claims that delay or additional cost is involved because of such action by the Owner, the Contractor shall make such claim as provided in Paragraph 9.10. 11.2 The Contractor shall afford the Owner and separate contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities, and shall connect and coordinate the Contractor's activities with theirs as required by the Contract Documents. 11.3 The Owner shall be reimbursed by the Contractor for costs incurred by the Owner which are payable to a separate contractor because of delays, improperly timed activities or defective construction of the Contractor. The Owner shall be responsible to the Contractor for costs incurred by the Contractor because of delays, improperly timed activities, damage to the Work or defective construction of a separate contractor. ARTICLE 12 CHANGES IN THE WORK 12.1 The Owner, without invalidating the Contract, may order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly. Such changes in the Work shall be authorized by written Change Order signed by the Owner, Contractor and Architect, or by written Construction Change Directive signed by the Owner and Architect. 12.2 The cost or credit to the Owner from a change in the Work shall be determined by mutual agreement of the parties or, in the case of a Construction Change Directive, by the Contractor's cost of labor, material, equipment, and reasonable overhead and profit. 12.3 The Architect will have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Contract Documents. Such changes shall be effected by written order and shall be binding on the Owner and Contractor. The Contractor shall carry out such written orders promptly. 12.4 If concealed or unknown physical conditions are encountered at the site that differ materially from those indicated in the Contract Documents or from those conditions ordinarily found to exist, the Contract Sum and Contract Time shall be equitably adjusted. ARTICLE 13 TIME 13.1 Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the Contract Time is a reasonable period for performing the Work. 13.2 The date of Substantial Completion is the date certified by the Architect in accordance with Subparagraph 14.4.2. 13.3 If the Contractor is delayed at any time in the commencement or progress of the Work by changes ordered in the Work, by labor disputes, fire, unusual delay in deliveries, abnormal adverse weather conditions not reasonably anticipatable, unavoidable casualties or any causes beyond the Contractor's control, or by other causes which the Architect determines may justify delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Architect may determine, subject to the provisions of Paragraph 9.10. ARTICLE 14 PAYMENTS AND COMPLETION 14.1 APPLICATIONS FOR PAYMENT 14.1.1 Payments shall be made as provided in Article 4 of this Agreement. Applications for Payment shall be in a form satisfactory to the Architect. 14.1.2 The Contractor warrants that title to all Work covered by an Application for Payment will pass to the Owner no later than the time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificates for Payment have been previously issued and payments received from the Owner shall, to the best of the Contractor's knowledge, information and belief, be free and clear of liens, claims, security interests or other encumbrances adverse to the Owner's interests. 14.2 CERTIFICATES FOR PAYMENT 14.2.1 The Architect will, within seven days after receipt of the Contractor's Application for Payment, either issue to the Owner a Certificate for Payment, with a copy to the Contractor, for such amount as the Architect determines is properly due, or notify the Contractor and Owner in writing of the Architect's reasons for withholding certification in whole or in part as provided in Subparagraph 14.2.3. 14.2.2 The issuance of a Certificate for Payment will constitute a representation by the Architect to the Owner, based on the Architect's evaluations of the Work and the data comprising the Application for Payment, that the Work has progressed to the point indicated and that, to the best of the Architect's knowledge, information and belief, the quality of the Work is in accordance with the Contract Documents. The foregoing representations are subject to an evaluation of the Work for conformance with the Contract Documents upon Substantial Completion, to results of subsequent tests and inspections, to correction of minor deviations from the Contract Documents prior to completion and to specific qualifications expressed by the Architect. The issuance of a Certificate for Payment will further constitute a representation that the Contractor is entitled to payment in the amount certified. However, the issuance of a Certificate for Payment will not be a representation that the Architect has (1) made exhaustive or continuous on- site inspections to check the quality or quantity of the Work, (2) reviewed construction means, methods, techniques, sequences or procedures, (3) reviewed copies of requisitions received from Subcontractors and material suppliers and other data requested by the Owner to substantiate the Contractor's right to payment, or (4) made examination to ascertain how or for what purpose the Contractor has used money previously paid on account of the Contract Sum. 14.2.3 The Architect may withhold a Certificate for Payment in whole or in part, to the extent reasonably necessary to protect the Owner, if in the Architect's opinion the representations to the Owner required by Subparagraph 14.2.2 cannot be made. If the Architect is unable to certify payment in the amount of the Application, the Architect will notify the Contractor and Owner as provided in Subparagraph 14.2.1. The Architect may also withhold a Certificate for Payment or, because of subsequently discovered evidence, may nullify the whole or a part of a Certificate for Payment previously issued, to such extent as may be necessary in the Architect's opinion to protect the Owner from loss for which the Contractor is responsible, including loss resulting from acts and omissions described in Subparagraph 8.2.2, because of: .1 defective Work not remedied; .2 third party claims filed or reasonable evidence indicating probable filing of such claims unless security acceptable to the Owner is provided by the Contractor; .3 failure of the Contractor to make payments properly to Subcontractors or for labor, materials or equipment; .4 reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum; .5 damage to the Owner or another contractor; .6 reasonable evidence that the Work will not be completed within the Contract Time and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; or .7 persistent failure to carry out the Work in accordance with the Contract Documents. 14.2.4 When the above reasons for withholding certification are removed, certification will be made for amounts previously withheld. 14.3 PAYMENTS TO THE CONTRACTOR 14.3.1 The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractor's portion of the Work. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to sub-subcontractors in similar manner. 14.3.2 Neither the Owner nor Architect shall have an obligation to pay or see to the payment of money to a Subcontractor except as may otherwise be required by law. 14.3.3 A Certificate for Payment, a progress payment, or partial or entire use or occupancy of the Project by the Owner shall not constitute acceptance of Work not in accordance with the Contract Documents. 14.4 SUBSTANTIAL COMPLETION 14.4.1 Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use. 14.4.2 When the Architect determines that the Work or designated portion thereof is substantially complete, the Architect will issue a Certificate of Substantial Completion which shall establish the date of Substantial Completion, establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and fix the time within which the Contractor shall finish all items on the list accompanying the Certificate. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. Upon the issuance of the Certificate of Substantial Completion, the Architect will submit it to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such Certificate. 14.5 FINAL COMPLETION AND FINAL PAYMENT 14.5.1 Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Architect will promptly make such inspection and, when the Architect finds the Work acceptable under the Contract Documents and the Contract fully performed, the Architect will promptly issue a final Certificate for Payment stating that to the best of the Architect's knowledge, information and belief, and on the basis of the Architect's on-site visits and inspections, the Work has been completed in accordance with terms and conditions of the Contract Documents and that the entire balance found to be due the Contractor and noted in the final Certificate is due and payable. The Architect's final Certificate for Payment will constitute a further representation that conditions stated in Subparagraph 14.5.2 as precedent to the Contractor's being entitled to final payment have been fulfilled. 14.5.2 Final payment shall not become due until the Contractor has delivered to the Owner a complete release of all liens arising out of this Contract or receipts in full covering all labor, materials and equipment for which a lien could be filed, or a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Contractor shall refund to the Owner all money that the Owner may be compelled to pay in discharging such lien, including costs and reasonable attorneys' fees. 14.5.3 The making of final payment shall constitute a waiver of claims by the Owner except those arising from: .1 liens, claims, security interests or encumbrances arising out of the Contract and unsettled; .2 failure of the Work to comply with the requirements of the Contract Documents; or .3 terms of special warranties required by the Contract Documents. 14.5.4 Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. ARTICLE 15 PROTECTION OF PERSONS AND PROPERTY 15.1 SAFETY PRECAUTIONS AND PROGRAMS The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract. The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: .1 employees on the Work and other persons who may be affected thereby; .2 the Work and materials and equipment to be incorporated therein; and .3 other property at the site or adjacent thereto. The Contractor shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorities bearing on safety of persons and property and their protection from damage, injury or loss. The Contractor shall promptly remedy damage and loss to property caused in whole or in part by the Contractor, a Subcontractor, a sub-subcontractor, or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Subparagraphs 15.1.2 and 15.1.3, except for damage or loss attributable to acts or omissions of the Owner or Architect or by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the Contractor are in addition to the Contractor's obligations under Paragraph 8.13. 15.2 HAZARDOUS MATERIALS 15.2.1 If reasonable precautions will be inadequate to prevent foreseeable bodily injury or death to persons resulting from a material or substance, including but not limited to asbestos or polychlorinated biphenyl (PCB), encountered on the site by the Contractor, the Contractor shall, upon recognizing the condition, immediately stop Work in the affected area and report the condition to the Owner and Architect in writing. When the material or substance has been rendered harmless, Work in the affected area shall resume upon written agreement of the Owner and Contractor. The Contract Time shall be extended appropriately and the Contract Sum shall be increased in the amount of the Contractor's reasonable additional costs of shutdown, delay and start-up, which adjustments shall be accomplished as provided in Article 12 of this Agreement. 15.2.2 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Contractor, Subcontractors, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work in the affected area if in fact the material or substance presents the risk of bodily injury or death as described in Subparagraph 15.2.1 and has not been rendered harmless, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), and provided that such damage, loss or expense is not due to the sole negligence of a party seeking indemnity. 15.2.3 If, without negligence on the part of the Contractor, the Contractor is held liable for the cost of remediation of a hazardous material or substance solely by reason of performing Work as required by the Contract Documents, the Owner shall indemnify the Contractor for all cost and expense thereby incurred. ARTICLE 16 INSURANCE 16.1 The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located insurance for protection from claims under workers' compensation acts and other employee benefit acts which are applicable, claims for damages because of bodily injury, including death, and claims for damages, other than to the Work itself, to property which may arise out of or result from the Contractor's operations under the Contract, whether such operations be by the Contractor or by a Subcontractor or anyone directly or indirectly employed by any of them. This insurance shall be written for not less than limits of liability specified in the Contract Documents or required by law, whichever coverage is greater, and shall include contractual liability insurance applicable to the Contractor's obligations. Certificates of Insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least 30 days' prior written notice has been given to the Owner. 16.2 OWNER'S LIABILITY INSURANCE The Owner shall be responsible for purchasing and maintaining the Owner's usual liability insurance. 16.3 PROJECT MANAGEMENT PROTECTIVE LIABILITY INSURANCE 16.3.1 Optionally, the Owner may require the Contractor to purchase and maintain Project Management Protective Liability insurance from the Contractor's usual sources as primary coverage for the Owner's, Contractor's and Architect's vicarious liability for construction operations under the Contract. Unless otherwise required by the Contract Documents, the Owner shall reimburse the Contractor by increasing the Contract Sum to pay the cost of purchasing and maintaining such optional insurance coverage, and the Contractor shall not be responsible for purchasing any other liability insurance on behalf of the Owner. The minimum limits of liability purchased with such coverage shall be equal to the aggregate of the limits required for Contractor's Liability insurance under Paragraph 16.1. 16.3.2 To the extent damages are covered by Project Management Protective Liability insurance, the Owner, Contractor and Architect waive all rights against each other for damages, except such rights as they may have to the proceeds of such insurance. The policy shall provide for such waivers of subrogation by endorsement or otherwise. 16.3.3 The Owner shall not require the Contractor to include the Owner, Architect or other persons or entities as additional insureds on the Contractor's Liability insurance under Paragraph 16.1. 16.4 PROPERTY INSURANCE 16.4.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance on an "all-risk" policy form, including builder's risk, in the amount of the initial Contract Sum, plus the value of subsequent modifications and cost of materials supplied and installed by others, comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Paragraph 14.5 or until no person or entity other than the Owner has an insurable interest in the property required by this Paragraph 16.4 to be covered, whichever is later. This insurance shall include interests of the Owner, the Contractor, Subcontractors and sub-subcontractors in the Project. 16.4.2 The Owner shall file a copy of each policy with the Contractor before an exposure to loss may occur. Each policy shall contain a provision that the policy will not be canceled or allowed to expire, and that its limits will not be reduced, until at least 30 days' prior written notice has been given to the Contractor. 16.5 WAIVERS OF SUBROGATION 16.5.1 The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants, separate contractors described in Article 11, if any, and any of their subcontractors, sub-subcontractors, agents and employees for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to Paragraph 16.4 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary. The Owner or Contractor, as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 11, if any, and the subcontractors, sub-subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged. 16.5.2 A loss insured under the Owner's property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause. The Contractor shall pay Subcontractors their just shares of insurance proceeds received by the Contractor, and by appropriate agreements, written where legally required for validity, shall require Subcontractors to make payments to their sub-subcontractors in similar manner. ARTICLE 17 CORRECTION OF WORK 17.1 The Contractor shall promptly correct Work rejected by the Architect or failing to conform to the requirements of the Contract Documents, whether discovered before or after Substantial Completion and whether or not fabricated, installed or completed. Costs of correcting such rejected Work, including additional testing and inspections and compensation for the Architect's services and expenses made necessary thereby, shall be at the Contractor's expense. 17.2 In addition to the Contractor's obligations under Paragraph 8.4, if, within one year after the date of Substantial Completion of the Work or designated portion thereof or after the date for commencement of warranties established under Subparagraph 14.4.2, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition. The Owner shall give such notice promptly after discovery of the condition. During the one-year period for correction of Work, if the Owner fails to notify the Contractor and give the Contractor an opportunity to make the correction, the Owner waives the rights to require correction by the Contractor and to make a claim for breach of warranty. 17.3 If the Contractor fails to correct nonconforming Work within a reasonable time, the Owner may correct it in accordance with Paragraph 7.3. 17.4 The one-year period for correction of Work shall be extended with respect to portions of Work first performed after Substantial Completion by the period of time between Substantial Completion and the actual performance of the Work. 17.5 The one-year period for correction of Work shall not be extended by corrective Work performed by the Contractor pursuant to this Article 17. ARTICLE 18 MISCELLANEOUS PROVISIONS 18.1 ASSIGNMENT OF CONTRACT Neither party to the Contract shall assign the Contract without written consent of the other. 18.2 GOVERNING LAW The Contract shall be governed by the law of the place where the Project is located. 18.3 TESTS AND INSPECTIONS Tests, inspections and approvals of portions of the Work required by the Contract Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Contractor shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner, or with the appropriate public authority, and shall bear all related costs of tests, inspections and approvals. The Contractor shall give the Architect timely notice of when and where tests and inspections are to be made so that the Architect may be present for such procedures. The Owner shall bear costs of tests, inspections or approvals which do not become requirements until after bids are received or negotiations concluded. 18.4 COMMENCEMENT OF STATUTORY LIMITATION PERIOD. As between Owner and Contractor, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued: .1 not later than the date of Substantial Completion for acts or failures to act occurring prior to the relevant date of Substantial Completion; .2 not later than the date of issuance of the final Certificate for Payment for acts or failures to act occurring subsequent to the relevant date of Substantial Completion and prior to the issuance of the final Certificate for Payment; and .3 not later than the date of the relevant act or failure to act by the Contractor for acts or failures to act occurring after the date of the final Certificate for Payment. ARTICLE 19 TERMINATION OF THE CONTRACT 19.1 TERMINATION BY THE CONTRACTOR If the Architect fails to recommend payment for a period of 30 days through no fault of the Contractor, or if the Owner fails to make payment thereon for a period of 30 days, the Contractor may, upon seven additional days' written notice to the Owner and the Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages applicable to the Project. 19.2 TERMINATION BY THE OWNER 19.2.1 The Owner may terminate the Contract if the Contractor: .1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; .3 persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision of the Contract Documents. 19.2.2 When any of the above reasons exists, the Owner, upon certification by the Architect that sufficient cause exists to justify such action, may, without prejudice to any other remedy the Owner may have and after giving the Contractor seven days' written notice, terminate the Contract and take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor and may finish the Work by whatever reasonable method the Owner may deem expedient. Upon request of the Contractor, the Owner shall furnish to the Contractor a detailed accounting of the costs incurred by the Owner in finishing the Work. 19.2.3 When the Owner terminates the Contract for one of the reasons stated in Subparagraph 19.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished. 19.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the Work, including compensation for the Architect's services and expenses made necessary thereby, and other damages incurred by the Owner and not expressly waived, such excess shall be paid to the Contractor. If such costs and damages exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Contractor or Owner, as the case may be, shall be certified by the Architect, upon application, and this obligation for payment shall survive termination of the Contract. ARTICLE 20 OTHER CONDITIONS OR PROVISIONS 1. Our proposal includes empty conduits for the POS, sound, telephone and soda - ------------------------------------------------------------------------------ system. POS cable, provided by others, will be pulled to the various stations as - -------------------------------------------------------------------------------- required with final terminations to be performed by others. All sound, telephone - -------------------------------------------------------------------------------- and soda cabling/terminations are excluded. - ------------------------------------------- 2. If a time extension is granted as a result of an Owner's Change Order or - --------------------------------------------------------------------------- delay it is understood and agreed that General Conditions are an additional cost - -------------------------------------------------------------------------------- at $425.00 per calendar day and will become a Change Order to the Contract. - --------------------------------------------------------------------------- 3. It is understood that any delays caused by failure of Owner to timely deliver - -------------------------------------------------------------------------------- Owner supplied items, a time extension would be granted per Article 4.6. - ------------------------------------------------------------------------ 4. The Authorized Representative and Agent for the Owner shall be Mr. Mark - -------------------------------------------------------------------------- Russell. - -------- 5. Landlord is responsible to insure that there is water on site for - -------------------------------------------------------------------- Contractor's temporary use. - --------------------------- 6. Landlord to provide temporary and adequate road access to allow construction - ------------------------------------------------------------------------------- equipment to building pad at all times including maintenance and removal of - --------------------------------------------------------------------------- same. - ----- 7. Building corners stake-out, benchmark and acceptable building pad at - ----------------------------------------------------------------------- specified sub-grade to be provided by others. - --------------------------------------------- 8. Attached hereto and made a part hereof as Exhibit B are certain lease - ------------------------------------------------------------------------ provisions between the Onwer as "Tenant" and the Landlord for the premises which - -------------------------------------------------------------------------------- are the subject of the Project ("Lease Provisions"). The Contractor agrees that - ------------------------------------------------------------------------------- this agreement is subject to said Lease Provisions and that the Contractor will - ------------------------------------------------------------------------------- comply with the Lease Provisions pertaining to Work under this Agreement. In the - -------------------------------------------------------------------------------- event of a conflict between this Agreement and the Lease Provisions, then the - ----------------------------------------------------------------------------- Lease Provisions shall control. - ------------------------------- This Agreement entered into as of the day and year first written above. /s/ Robert Giaimo /s/ Michael D. Collier _____________________________________ ___________________________________ OWNER (Signature) CONTRACTOR (Signature) Robert Giaimo, President Michael D. Collier, President _____________________________________ ___________________________________ (Printed name and title) (Printed name and title) Exhibit "A" Contract Attachment for Silver Diner Columbus Village East -------- The Owner and Contractor entered into this Contract agreeing as follows: 1. The Owner has reviewed, understands, accepts, and approves the Contract Document's plans and specifications including exclusions and alternates listed herein and accepts responsibility for the furniture, fixtures, equipment, signing, finishes, architectural floor plan dimensions, elevation finishes and aesthetics, lighting fixtures and locations, floor plan, door locations and general architectural layout and appearance. 2. The Contractor has reviewed, understands, accepts and approves the Contract Document's plans and specifications including exclusions and alternates listed herein and accepts responsibility for the structural, Building dimensions, mechanical, electrical and plumbing systems to being complete, suited for their intended purposes, per code, and sufficient to insure the following: (i) the furniture, fixtures and equipment being able to be properly installed by the appropriate contractor, (ii) the proper installation by the Contractor of finishes, (iii) the issuance of a Certificate of Occupancy to be obtained by the Contractor except for circumstances that the Certificate of Occupancy should be delayed or not issued due to work not within Contractor's Scope, and (iv) the Building being built to function and accommodate all the items listed in Paragraph 1 above. The Contractor shall make any changes in work necessary to implement the requirements of the Contract set forth in the Paragraph 2, and shall pay all expenses incurred as a result of such changes without increase in the Contract price or extensions of the Contract Time. It is understood that the Owner shall have a consultant to review all shop drawings and submittals for the mechanical, plumbing and electrical trades to ensure compliance of the Contract documents as well as to respond to any questions that may arise during construction. For Example: If a piece of FF & E is required and is not included in the Contract Documents then the Owner shall be responsible and pay for this equipment and all related work. However, if the plumbing or electrical is missing or inadequate to allow for the proper installation and operation of the specified equipment, the Contractor shall be responsible and pay for the installation or correction of same. 3. Tenant's Building. (a) Tenant has delivered to Landlord its general design elevations which include Tenant's proposed general physical characteristics of the Tenant's Building, exterior materials, exterior color scheme and building heights. Landlord has approved the construction of a restaurant substantially in accordance with the Silver Diner prototype plans identified in Exhibit B-2 ("Tenant's Plans"), Tenant will deliver to Landlord a plan which depicts the location of all utilities entering the Tenant's Building and will deliver detailed plans for the same within thirty (30) days after the date hereof ("Tenant's Utilities Plans"). Tenant's Utilities Plans are subject to Landlord's approval, which approval Landlord shall not unreasonably withhold or delay. (b) Tenant agrees to build Tenant's Building, exclusive of Tenant's leasehold improvements, furniture and fixtures, on behalf of Landlord. Such work shall be accomplished by Tenant entering into an $800,000.00 fixed price contract ("Construction Contract") with Uniwest Construction, Inc. ("general contractor") to build a Silver Diner building in accordance with Tenant's Plans. Payments under such contract shall not exceed for any reason whatsoever $800,000.00 and shall be made by Landlord in monthly installments based upon the work completed, less a 10% retention, upon receipt by Landlord of (i) written certification from Tenant and the general contractor as to percentage of work that has been completed; and (ii) receipt of partial lien releases from the general contractor and subcontractors having contracts for $10,000. Landlord shall pay the general contractor for the balance of the construction payment upon the happening of the following events: (i) completion of the Building; (ii) receipt by Landlord of a Use and Occupancy Permit or its equivalent which Tenant shall obtain; and (iii) receipt of final lien release from the general contractor and subcontractors having contracts over $10,000. Notwithstanding the fact that Tenant is executing the Construction Contract, ownership of the Building constructed pursuant to the Construction Contract shall belong to the Landlord. If Landlord wrongfully fails to make any payments to the general contractor in accordance with the requirements above, Tenant shall have the right to make such payments after giving Landlord ten (10) days prior written notice and opportunity to cure, and in such event the Rent Commencement Date shall not commence, even if Tenant has opened for business, until such time as Landlord has made all payments under the Construction Contract. Notwithstanding the foregoing, the Landlord's construction lender for the Shopping Center (the "Construction Lender") shall have the right to consent to the request for payment from the general contractor of any amounts required to be dispersed to the general contractor by Landlord pursuant to the Construction Contract inclusive of the final payment (the "Construction Draws"). If the Construction Lender refuses for any reason to approve payment of the Construction Draw, then such Construction Draw shall not be paid; provided, however, that if the Construction Lender consents to payment of the Construction Draw, then such Construction Draw shall be paid regardless of the Landlord's or Tenant's objections. If a timely payment of a Construction Draw is not made as a result of a refusal to pay (all or any portion of) the Construction Draw, and such refusal is "wrongful" (as defined below) and such failure continues for more than ten (10) days after written notice from Tenant, then (1) each day of delay in making such payment shall be deemed a "Landlord Delay" hereunder and (2) any damages or other costs due to the general contractor under the Construction Contract for such delay in payment of the Construction Draws as a result of the Construction Lender's or Landlord's wrongful refusal to approve or make payment to the general contractor shall be paid by Landlord. For the purposes of this Lease, a "wrongful" refusal to pay all or any portion of a Construction Draw shall be for a reason other than the reasons set forth in Paragraph 9.5.1 of the Construction Contract. (c) The Construction Contract with the general contractor shall provide for the coordination and cooperation of such contractor with Landlord in completing the Site Improvements and other construction work on the Shopping Center, including any space to be erected by Landlord or its tenants. The general contractor shall perform its construction in a manner reasonably designed to minimize any interference with the construction taking place simultaneously on the balance of the Shopping Center or the operation of stores then open for business. The contractor agrees to use reasonable efforts to minimize construction traffic on the private road leading to the apartments called Silver Brook Lane. In the event that during the construction of the Building, the construction activities of the general contractor, or the progress of the same, interferes with or delays the construction activities of the Landlord, Landlord shall notify the Tenant, in writing, specifying exactly what construction activities of general contractor are the source of the problem or what portion of the general contractors work needs to be performed to avoid such delay. Tenant will have seventy-two (72) hours after its receipt of the foregoing notice to cause the general contractor stop or commence to diligently cure the matters raised by Landlord in its notice. Notwithstanding the foregoing, in no event shall the general contractor or Tenant be expected or obligated to engage in any conduct which is in conflict with or violates any federal, state or local law including, without limitation, the National Labor Relations Act or the regulations thereto. (d) The construction of the Tenant's Building shall be performed in a good and workmanlike manner in accordance with sound professional standards and with the provision of this Agreement, in compliance with all governmental authorities and Tenant's Plans and Tenant's Utilities Plans. All materials used in the construction of the Tenant's Building shall be of new, commercial grade and first class quality. (e) The Building construction work shall be properly protected with lights and barricades and secured against accident, storm or any other hazard. Staging for the construction of the Tenant's Building shall be confined to an area mutually agreed to by Landlord and Tenant. Tenant shall cause the general contractor to keep all other portions of the Shopping Center substantially free from and unobstructed by debris, equipment materials or supplies related to the general contractor's construction work and will use its best good faith commercially reasonable efforts to keep obstruction to a minimum. The general contractor shall patch and repair asphalt and cement, if necessary, in its staging areas upon demobilization of construction and leave same clean and free of debris. During such construction work, Tenant shall cause the general contractor to store all trash, debris and rubbish as reasonably directed by Landlord and upon the completion of the general contractor's work, Tenant shall cause the general contractor to remove all temporary structures, surplus materials, debris and rubbish of whatever kind remaining on the Premises, the staging areas or other portions of the Shopping Center. Landlord shall be responsible for the removal of rubbish and trash from the Shopping Center caused by Landlord. In the event Tenant fails to cause the general contractor to promptly remove all temporary structures, surplus materials, debris and rubbish, Landlord shall have the right after giving Tenant forty-eight (48) hours notice, and charge Tenant together with interest at the Lease Interest Rate until paid as Additional Rent hereunder. (f) The Lease Commencement Date shall be the date Landlord delivers the Premises to Tenant with Phase One of Landlord's Work, as set forth in Section 2(j) above, substantially completed and Tenant has obtained or waived all permits and approvals, as provided herein, necessary to enable Tenant to perform any work required to construct its Building and to install Tenant's prototype signage and has provided the agreements referred to in Section 20 as a condition to the Lease Commencement Date. Landlord shall give Tenant at least fifteen (15) days advance notice of the Lease Commencement Date. If the Lease Commencement Date would fall between December 15 and the succeeding last day of February, the Lease Commencement Date shall be deemed to be March 1st unless Tenant elects to accept possession of the Premises and to commence Tenant's Work. Tenant may terminate this Lease by notice to Landlord if the Lease Commencement Date has not occurred by April 30, 2000. (g) Tenant shall enter into a separate contract with the general contractor for any Tenant leasehold improvements and Tenant's furniture, fixtures and equipment which shall be paid by Tenant at Tenant's sole cost and expense. At the end of the Term, Landlord shall own the Tenant's leasehold improvements. (h) Landlord and Tenant shall look to the general contractor for any defects in construction, workmanship or materials of Tenant's Building. (i) Tenant shall notify Landlord of any defects in Landlord's construction of Tenant's Building pad within five (5) business days after Landlord delivers the same to Tenant. After the expiration of such five (5)-day period, Landlord shall have no responsibility to correct any defects to Tenant's Building pad. EX-23.1 13 CONSENT Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 333- 18509, No. 333-21841, No. 333-27325, No. 333-59533, No. 333-59535, No. 333-84401 and No. 333-96399 of Silver Diner, Inc. on Forms S-8 of our report dated March 2, 2000, appearing in this Annual Report on Form 10-K of Silver Diner, Inc. for the year ended January 2, 2000. /s/ Reznick Fedder & Silverman ______________________________ Bethesda, Maryland April 3, 2000 EX-27 14 FINANCIAL DATA SCHEDULE
5 YEAR JAN-02-2000 JAN-02-2000 1,122,755 813,452 0 0 134,698 2,484,850 21,497,425 5,913,522 20,594,533 2,024,801 0 0 0 8,563 17,265,831 20,594,533 29,157,366 29,157,366 7,609,271 7,609,271 19,124,267 0 23,826 0 0 (971,879) 0 0 0 (971,879) (0.08) (0.08)
-----END PRIVACY-ENHANCED MESSAGE-----