Exhibit 10.12
RESTAURANT MANAGEMENT AGREEMENT made as of the 18th day of April, 1996 by
and between 00 XXXX 00XX XXXXXX CORPORATION, a domestic corporation with offices
at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx ("NEWCO") and RESTAURANT GROUP
MANAGEMENT SERVICES, L.L.C., a domestic limited liability company with offices
at 0000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx ("MANAGEMENT COMPANY").
WITNESSETH
WHEREAS, NEWCO is the owner of the Restaurant located at 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, and doing business as GLOUCESTER CAFE ("the
Restaurant"); and,
WHEREAS, the MANAGEMENT COMPANY is a New York Limited Liability Company
the principals of which are experienced in the business of Restaurant design and
administration and,
WHEREAS, upon the terms and conditions herein set forth, NEWCO wishes to
retain the MANAGEMENT COMPANY to provide administrative, managerial and
operating services in connection with the operation of the Restaurant and,
WHEREAS, the parties wish to set forth their agreement with respect to
such retention,
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. HIRING OF THE MANAGEMENT COMPANY. NEWCO hereby retains the MANAGEMENT
COMPANY to provide new restaurant concept design, construction, administrative,
managerial and operating services in connection with the operation of the
Restaurant, and in connection with operation of banquet services at the
Restaurant, and off the premises. The MANAGEMENT COMPANY shall render such
services upon the terms and conditions hereafter set forth. NEWCO acknowledges
that the MANAGEMENT COMPANY renders similar services to other Restaurants, which
Restaurants may be competitive with the Restaurant, and agrees that, except as
hereinafter provided in Section 9, it may continue to render such services to
those entities and accept similar employment with other entities. The MANAGEMENT
COMPANY acknowledges that it is the essence of this agreement that the
Restaurant will be constructed and operated as a first-class Manhattan
Restaurant, with white tablecloth service during the term of this agreement.
MANAGEMENT COMPANY acknowledges and agrees that, while all business decisions
will be made in its sole discretion, NEWCO has entered into this agreement in
reliance on the belief that the MANAGEMENT COMPANY will make business decisions
and exercise business judgment in good faith and without personal bias or
conflict of interest between the objectives of MANAGEMENT COMPANY and its
principals on the one hand, and NEWCO, its principals and shareholders on the
other.
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2. ADDITIONAL SERVICES BY THE MANAGEMENT CO. The administrative
services rendered by the MANAGEMENT COMPANY shall include the maintenance of
all bookkeeping and accounting records as are necessary to prepare and file
timely all tax withholding forms for all Restaurant employees and all sales
and tax records and returns for the Restaurant and pay timely to the
appropriate tax authorities all taxes required to be reported on such forms
or returns. In addition, the MANAGEMENT COMPANY shall perform at the expense
of the NEWCO, the following: comply with all governmental health and safety
regulations, including the maintenance of all necessary business, food and
beverage licenses; maintain all reasonably required fire, theft, accident and
other insurance policies and renewals thereof; purchase all supplies and
equipment, food, food products and beverages to be used in the operation of
the Restaurant; supervise, manage, hire and discharge Restaurant personnel,
all of whom shall be deemed to be employees of NEWCO; supervise the making of
all necessary repairs, decorations and alterations to the Restaurant;
implement promotional and advertising programs; provide menu and wine list
content and pricing; manage collections, cash receipts and deposit
arrangements and make payments for those items chargeable under this
Agreement out of the account referred to in, and as otherwise provided, in
Section 5 hereof; prepare financial budgets and information; generally act as
liaison between NEWCO and the employees of the Restaurant, and continue such
operating policies so as to maintain the Restaurant as a first-class
Manhattan Restaurant. The MANAGEMENT COMPANY will make all discount and bulk
purchase arrangements which it has with third parties available to the
Restaurant on the same basis and furnish the Restaurant with appropriate
vouchers and backup information to support the charges to NEWCO. These
discount and bulk purchase arrangements shall include advertising and public
relations. NEWCO acknowledges that the MANAGEMENT COMPANY shall be
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permitted to advertise the Restaurant, and utilize public relations with the
Restaurant in joint campaigns with other Restaurants with which the MANAGEMENT
COMPANY is involved, or shall become involved.
Without limiting the generality of the foregoing, the MANAGEMENT COMPANY
shall:
a. Within thirty (30) business days after the end of each calendar
month commencing with the effective date of this agreement, furnish to NEWCO a
monthly report of income, sales, expenses, cash flow, and balance sheet changes,
including inventory. Comparable quarterly reports will be delivered within
thirty (30) business days of the end of each calendar quarter. A weekly sales
report will also be furnished within seven (7) business days after the end of
each week.
b. Furnish to NEWCO an annual financial statement of Restaurant
operations prepared (at the sole cost and expense of NEWCO) by a firm of
certified public accountants chosen by the MANAGEMENT COMPANY. The entire cost
of all expenses of the business of NEWCO (other than salaries of the MANAGEMENT
COMPANY employees) including, without limitation, the cost of business licenses,
taxes, insurance premiums, food, beverages, payroll servicing, salaries of
employees at the Restaurant, office supplies, advertising, and legal and outside
accounting fees for services rendered to NEWCO shall be paid by NEWCO.
3. COMPENSATION.
a. As partial compensation for the MANAGEMENT COMPANY'S services
hereunder, in addition to the compensation set forth in Section 4 hereof, NEWCO
shall pay to the
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MANAGEMENT COMPANY an amount equal to three (3) per cent of all Restaurant
Sales (as hereinafter defined) with respect to each month (or portion hereof at
the beginning and end of the term of this Agreement). Such amount shall be paid
within seven (7) days after the end of each calendar month and, until adjusted
by the parties as hereafter provided, the amount paid shall equal three (3) per
cent of the Restaurant Sales for the immediately preceding month.
b. If at the close of any calendar year (but not later than 90 days
thereafter) it is determined that the aggregate of the monthly payments for the
fiscal year has either exceeded or fallen short of three (3) per cent of
Restaurant Sales for such fiscal year, then the MANAGEMENT COMPANY and the NEWCO
shall promptly adjust the amount owing not later than 90 days after such
calendar year.
c. For the purposes of this paragraph, the parties shall be bound by the
certified financial statement of the certified public accountants retained by
the MANAGEMENT COMPANY as accountants for the Restaurant.
d. The term "Restaurant Sales" shall mean all monies received by NEWCO or
for their account from the operation of the Restaurant, including, but not
limited to, banquet services, on and off premises catering, and sale of
merchandise in the ordinary course of business, in cash, by credit card or
otherwise, but less, as to all the foregoing, bona fide refunds to customers,
uncollected amounts, gratuities and tips in fact paid out by the Restaurant to
employees of the Restaurant, and taxes imposed and paid by the Restaurant on
customer checks.
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e. NEWCO agrees to provide to MANAGEMENT COMPANY copies of NEWCO federal
and state tax returns, on an annual basis and NEWCO agrees to indemnify and hold
MANAGEMENT COMPANY harmless with respect to any liability to the MANAGEMENT
COMPANY based on errors and omissions in such returns.
4. ADDITIONAL COMPENSATION.
a. As additional compensation for its management services hereunder,
MANAGEMENT COMPANY shall be paid by NEWCO a sum equal to the lessor of (i)50% of
the operating cash flow of NEWCO and (ii) cash flow of NEWCO minus the sums
retained by NEWCO from operating cash flow under Article 4(b). Said additional
compensation shall be payable quarterly, but adjusted on an annualized basis.
For the purposes of this Article 4, any difference between the compensation paid
to the MANAGEMENT COMPANY under this Article 4(a), in any calendar year prior to
2001 and 50% of the operating cash flow for said year shall be defined as
"Shortfall".
b. MANAGEMENT COMPANY guarantees that, during the periods below set
forth, and notwithstanding whether or not, for any such period, NEWCO has
realized a positive operating cash flow sufficient to do so, NEWCO will receive
or retain the greater of 50% of operating cash flow, or the amounts set forth
below, such payments to be paid, pro-rata, on a monthly basis before the tenth
(10th) day of each month.:
Calendar 1996 50% of operating cash flow,
but not less than zero
Calendar 1997 $144,000
Calendar 1998 $240,000
Calendar 1999 $300,000
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Calendar 2000 $360,000
Calendar 2001 $360,000
Calendar 2002 $360,000
Calendar 2003 $360,000
Calendar 2004 $480,000
To end of term
of this agreement $480,000
In any year that Restaurant sales reach $7,000,000, the guaranteed
payments shall be in the amount of the greater of $300,000 or the amounts set
forth above.
c. For the purposes of this article, operating cash flow shall equal
Restaurant Sales, minus cost of goods sold, compensation paid under Article 3(a)
hereof, and actual operating expenses as calculated and prepared for reporting
purposes under generally accepted accounting principles and as adjusted to
exclude the following:
1. The initial cash paid by the MANAGEMENT COMPANY under
Article 9(a), (b) and (c) hereof.
2. Any additional cash infusions by the MANAGEMENT COMPANY or
by NEWCO.
3. The principal amount of any debt financing for any other
cash flow items outside the normal course of business (e.g., insurance proceeds
other than business interruption). The intention of the parties for calculation
of operating cash flow is set forth on the document entitled "GLOUCESTER HOUSE
ILLUSTRATIVE INCOME STATEMENT" attached hereto and Schedule "A".
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d. In any calendar year prior to 2001 for which (1) the operating
cash flow of NEWCO exceeds twice the guaranteed payments for such year as
specified in Article 4(6), above, and (2) there is an outstanding Shortfall for
any prior year or years of this Agreement, whether the year immediately or
otherwise, said excess amount shall be applied first toward satisfaction of such
Shortfall, and any balance thereafter remaining shall be shared by NEWCO and
MANAGEMENT COMPANY as otherwise provided in this article 4.
5. BANK ACCOUNTS. NEWCO shall establish a bank account at a bank of their
choice. One (1) person designated by the MANAGEMENT COMPANY and one (1)
designated by NEWCO who might be changed from time to time by the MANAGEMENT
COMPANY and NEWCO, shall be the authorized signatories for the account. Persons
designated as signatories by the MANAGEMENT COMPANY and NEWCO shall not have the
authority to sign a check for an amount in excess of $20,000; rather, same
shall only be authorized by Xxxxx Xxxxxxx, for NEWCO, and Xxxx Xxxxxx, for the
MANAGEMENT COMPANY. All monies received from the operation of the Restaurant,
and any and all expenses paid by the MANAGEMENT COMPANY on account of the
operation of the Restaurant, shall pass through this account. NEWCO agrees to
sign all checks presented to it by the MANAGEMENT COMPANY within forty-eight
(48) hours of receipt of same.
6. INSURANCE. The MANAGEMENT COMPANY shall seek insurance coverage for
fire, public liability, automobile, theft, casualty and property damage,
comprehensive dishonesty, disappearance and destruction, and workmen's
compensation insurance, as required by the lease for the premises, and as
reasonably necessary in the sole discretion of the MANAGEMENT COMPANY.
MANAGEMENT COMPANY shall arrange for NEWCO coverage during the term
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of this Agreement naming NEWCO and the MANAGEMENT COMPANY as insureds as their
interests shall appear under such policies. MANAGEMENT COMPANY shall not be
required to arrange for coverage which cannot be generally obtained at
commercially reasonable rates unless required by the lease for the premises. The
MANAGEMENT COMPANY shall advise and assist in the review and renewal of such
insurance and, to the extent possible, make available to NEWCO bulk rates for
such insurance coverage as are available to the MANAGEMENT COMPANY.
7. INDEMNITY. NEWCO agrees:
A. To the extent an insurance carrier does not assume the defense in
respect of any claim, action or proceeding against the MANAGEMENT COMPANY or
NEWCO for actions allegedly within the scope of this Agreement, to defend
promptly and diligently, at the expense of NEWCO any claim, action or proceeding
brought against the MANAGEMENT COMPANY, or its employees or agents, or NEWCO
jointly or severally arising out of or connected with any of the foregoing, and
to hold harmless and fully indemnify the MANAGEMENT COMPANY, its employees or
agents, from any judgment, loss or settlement on account thereof to the extent
not covered by insurance, regardless of the jurisdiction in which any such
claims, actions or proceedings may be brought, and whether brought against the
MANAGEMENT COMPANY alone or the MANAGEMENT COMPANY and NEWCO.
B. To the extent not covered by insurance, to indemnify and hold the
MANAGEMENT COMPANY, its employees and agents, free and harmless from any
liability finally determined pursuant to paragraph (A) above for injury to
persons or damage to property
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by reason of any cause whatsoever, either in and about the Restaurant, as a
result of the performance of this Agreement by the MANAGEMENT COMPANY, its
agents or employees, irrespective of whether negligence on the part of the
MANAGEMENT COMPANY is alleged.
C. Notwithstanding the foregoing, NEWCO shall not be liable to
indemnify and hold the MANAGEMENT COMPANY harmless, and the MANAGEMENT COMPANY
hereby indemnifies and holds NEWCO free and harmless, from any liability which
results from the gross negligence, fraud, or willful misconduct of the
MANAGEMENT COMPANY, its agents or employees.
D. If, as part of this indemnification, it shall be necessary for
the MANAGEMENT COMPANY to retain counsel, same shall be at the expense of NEWCO.
E. This indemnification shall be unlimited, and shall include
attorneys' fees and related costs and expenses.
8. STATE LIQUOR AUTHORITY.
a. NEWCO and MANAGEMENT COMPANY agree to cooperate in notifying the
New York State Liquor Authority ("NYSLA") of the arrangement entered into
herein. Additionally, the parties agree, at the expense of NEWCO, if required by
the New York State Liquor Authority, to make any application as may be required
by the New York State Liquor Authority as a result of the NYSLA's having been
notified of the terms of this agreement.
b. The parties acknowledge that it may be necessary, in connection
with the addition of the banquet area to the premises, to file an application
with the New York State
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Liquor Authority for permission to make alterations. The parties each agree to
cooperate with such application.
9. PURCHASE OF RIGHT TO MANAGE. In consideration of NEWCO granting to
MANAGEMENT COMPANY the within managing agreement, the MANAGEMENT COMPANY shall
make payments to NEWCO as follows:
a. Upon the execution of this agreement, the sum of $250,000; to be
held in escrow by Xxxxxxx & Xxxxxxx, the attorneys for NEWCO subject to the
terms hereinafter set forth;
b. The sum of $750,000, on and after the Commencement Date (as
defined in Article 10) and before the Restaurant is opened to the public by the
MANAGEMENT COMPANY, in such installments and amounts as are reasonably needed to
meet the objectives of this Agreement.
c. The sum of no more than $500,000, at any time during the term of
the agreement, if, in the reasonable judgment of the MANAGEMENT COMPANY, such
additional sum is required to accomplish the objectives set forth in
subparagraph (d) and (e) hereof.
d. The sums set forth in paragraphs (a), (b), and (c), above shall
be utilized, in the reasonable discretion of the MANAGEMENT COMPANY, for the
renovation of the premises; as an infusion of operating capital; and for the
creation of a wine inventory, of a value on the commencement date of no more
than $200,000, it being the intent of the parties that the premises be open to
the public on or about August 1, 1996 as a steak and seafood American
Restaurant. Ambiance, decor, menu style, wine list and naming of the Restaurant
shall be in the sole discretion
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of the MANAGEMENT COMPANY, subject only to its exercise of its exercise of its
reasonable business judgment. NEWCO acknowledges that any name used in the
operation of the Restaurant shall remain the sole and exclusive property of the
MANAGEMENT COMPANY but that the MANAGEMENT COMPANY and its affiliates and
related companies will not use the name, during the time this agreement is in
effect, in any other Restaurant in the five boroughs of New York City or within
a circle having a five mile radius and a center of the Restaurant. NEWCO agrees
to seek all consents necessary under its leases to permit the name chosen by the
MANAGEMENT COMPANY to be utilized. If such consent cannot be obtained, this
agreement may be canceled at any time prior to the commencement date and all
monies paid hereunder refunded to the MANAGEMENT COMPANY.
Subject to the foregoing paragraph, the MANAGEMENT COMPANY shall
have the right to use the name or names utilized at the Restaurant elsewhere
without liability to NEWCO, and NEWCO acknowledges that it has no rights
whatsoever to the name or names.
e. The sums deposited in escrow pursuant to subparagraph (a) hereof,
shall be released into the regular account of NEWCO, to be utilized as operation
capital upon written notice by the attorneys and the accountants for the
MANAGEMENT COMPANY, upon their review of the books and records of NEWCO, and
upon their review of any other relevant documentation, all of which NEWCO agrees
to make available to the attorneys and accountants for the MANAGEMENT COMPANY,
that:
1. The lease to the premises has been assigned to NEWCO, with
landlord's consent.
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2. NEWCO is a newly formed corporation, in existence only
since April 10, 1996, at the earliest, and formed solely for the purposes of the
Agreement;
3. NEWCO has no debts whatsoever to any third party including,
but not limited to, the landlord at the premises, except for commitments to
Xxxxx Xxxxx, Media Resources International, Ltd., and The Guest Informant. Such
agreements do not include obligations of either more than $100,000 in cash or
more than $200,000 in "in kind" payments, all of which involve future work to
be done by these entities or persons, and not work done in the past;
4. The Restaurant, and the furniture, fixtures and equipment
at the premises, are free and clear of liens, encumbrances and chattel mortgages
of any kind or description;
5. The premises are in compliance with all rules, regulations
and licensing requirements of all state, federal and local authorities including
obtaining a temporary retail permit from the New York State Liquor Authority, if
necessary;
6. They have received certification by NEWCO that, in its
reasonable opinion, the premises have been opened to the public by the
MANAGEMENT COMPANY;
7. NEWCO represents and warrants that the statements set forth
in Article 9(e), 1, 2, 3, 4, and 5, are true as of the date of this Agreement,
shall be true as of the commencement date, as defined in Article 10 hereof; and
shall deliver, on the commencement date, an opinion letter of its attorneys with
respect to the truth of Paragraphs 1, 2, and 4,; and of its accountants with
respect to Paragraph 3.
f. NEWCO represents and warrants that items (1), (2), and (3) of
paragraph (e) shall be true as of May 1, 1996. If these representations and
warranties are not true, in the
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reasonable opinion of the attorneys and accountants for the MANAGEMENT COMPANY,
and after ten (10) days notice to NEWCO any condition complained of has not been
cured, the MANAGEMENT COMPANY shall have the right to cancel this agreement; the
deposit under subparagraph (a) hereof shall be released to it, and the parties
shall have no further rights each to the other.
g. Nothing herein contained shall be construed to give any ownership
rights in the Restaurant to the MANAGEMENT COMPANY All assets of the Restaurant
shall remain the property of NEWCO.
10. TERM.
A. The management of the Restaurant by the MANAGEMENT COMPANY shall
commence the date NEWCO closes the premises to the public (the "Commencement
Date"), and shall continue so long as NEWCO occupies the premises for the
operation of a Restaurant. NEWCO represents that the operating lease to the
premises expires on 2011; that the ground lease expires in 2015; and that upon
the expiration of the fixed term of the operating lease, it will make best
efforts further to renew its lease for the Restaurant premises. MANAGEMENT
COMPANY acknowledges that it has received and reviewed a copy of the operating
lease. NEWCO represents that it will continue to operate the Restaurant unless
MANAGEMENT COMPANY consents to a cessation of restaurant operations.
The parties acknowledge that it is their intention that the following
transpire:
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a. That NEWCO close the premises to the public within 20 days of the
date of this agreement, and book no banquets from the date of this agreement, to
take place more than 20 days hence;
b. That from the date NEWCO closes to the public, the MANAGEMENT
COMPANY shall assume the management of the premises, and begin the process of
capitalizing, designing, building and staffing the Restaurant, the parties
intending that the Restaurant re-open within 90 days of the Commencement Date.
During the period following the Commencement Date but prior to re-opening,
MANAGEMENT COMPANY will provide NEWCO with reasonable reports on its progress
including, but not limited to, providing proof of disbursement of funds toward
the opening of the Restaurant, that is toward designing, constructing,
furnishing the Restaurant and providing inventory.
Should the MANAGEMENT COMPANY not reopen the Restaurant to the
public within 180 days of the Commencement Date, unless because of forces beyond
its control, the sums held in escrow under Article 9 (a) together with all other
property situated at the Restaurant will be released to NEWCO as liquidated
damages hereunder; MANAGEMENT COMPANY shall surrender the premises and its
contents; all sums expended through such time by the MANAGEMENT COMPANY will be
forfeited and, except for the provisions of subsection B.a.5 of this Article 10,
which shall survive as if termination had occurred in accordance with that
section, this Agreement shall become null and void.
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B. Except as provided for in subsection A of this Article 10 and in
Articles 12 and 13, this agreement may only be terminated as follows:
a. At the election of NEWCO, upon thirty (30) days notice to the
MANAGEMENT COMPANY of default, which default remains uncured, and which the
MANAGEMENT COMPANY does not commence diligent effort to cure, or "for cause",
which shall be limited to the following grounds:
1. The repeated failure or refusal by the MANAGEMENT COMPANY,
after written notice thereof, substantially to perform its duties and
responsibilities under this agreement.
2. Any willful or gross negligent act which materially injures
the reputation, business or any business relationship of the Restaurant, or of
NEWCO, or of any principals of NEWCO.
3. Any act of moral turpitude or violation of law which
materially effect the reputation of the Restaurant, NEWCO, or any principals of
NEWCO.
4. Any act of willful malfeasance, fraud, bad faith or
reckless disregard of the interests of NEWCO or its shareholders.
5. The failure of the MANAGEMENT COMPANY to make the
guaranteed payments under Article 4 hereof.
Upon any such termination under this Article B.a., the
MANAGEMENT COMPANY, shall immediately return control of the premises to NEWCO,
and guarantee that on such date of surrender, the Restaurant:
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i. Shall have no debts whatsoever to any third party,
including, but not limited to, the landlord at the premises;
ii. And the furniture, fixtures and equipment at the premises
will be free and clear of liens, encumbrances and chattel mortgages of any kind
and description;
iii. Will be in compliance with all rules, regulations and
licensing requirements of all state, federal and local authorities.
b. At the election of the MANAGEMENT COMPANY, upon the following
grounds:
(i) Upon 60 days notice, provided that at the end of the
notice period the MANAGEMENT COMPANY will have managed the Restaurant open to
the public for no less than 3 years, so long as no uninsurable cataclysmic
physical disaster of a level that would justify lease termination, or
extraordinary financial disaster of a magnitude equivalent to the stock market
crash of 1929, shall have occurred during such three year period in such a
manner as to directly affect NEWCO, MANAGEMENT COMPANY or any GUARANTOR
hereunder to such a degree as would reasonably render such guarantee impossible
to perform, and expended, pursuant to Article 9, no less than $1,500,000, it
being understood and agreed that upon the MANAGEMENT COMPANY electing to so
terminate, it will forthwith return control of the premises to NEWCO and, on
such date the Restaurant:
1. Will have no debts whatsoever to any third party, including, but
not limited to, the landlord at the premises and the furniture, fixtures and
equipment at the premises will be free and clear of liens, encumbrances and
chattel mortgages of any kind or description.
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2. Will be in compliance with all rules, regulations and licensing
requirements of all state, federal and local authorities.
MANAGEMENT COMPANY hereby agrees to indemnify, defend and hold NEWCO
and its principals and guarantors, if any, harmless from any liability for any
of the foregoing, including costs of defense.
(ii) Upon the election of the MANAGEMENT COMPANY to terminate
the agreement as set forth in the foregoing paragraph (i), all wine inventory on
the premises on the date of control is returned to NEWCO shall become the
property of MANAGEMENT COMPANY. The parties agree to cooperate with all filings
required by all relevant agencies to effectuate the intent of this subparagraph.
Notwithstanding the foregoing, if the wine inventory shall have a value in
excess of $200,000, utilizing prices paid for such wine when purchased by NEWCO,
only $200,000 of such wine shall become the MANAGEMENT COMPANY property, the
identity of such wines being at the sole discretion of the MANAGEMENT COMPANY.
Upon any termination of this agreement as set forth in
subparagraph B of Article 10, all wine inventory on the premises on the date
control is returned to NEWCO shall become the property of MANAGEMENT COMPANY.
The parties agree to cooperate with all filings required by all relevant
agencies to effectuate the intent of this subparagraph. If the wine inventory
shall have a value in excess of $200,000, utilizing prices paid for such wine
when purchased by NEWCO, only $200,000 of such wine shall become the MANAGEMENT
COMPANY'S property, the identity of such wines being at the sole discretion of
the MANAGEMENT COMPANY, the balance of such wine to be divided 50/50 between the
parties.
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11. Guarantee. For good and valuable consideration, sufficiency of which
is hereby acknowledged by the NEW YORK RESTAURANT GROUP, L.L.C., (the
"RESTAURANT GROUP"), the RESTAURANT GROUP hereby guarantees the performance by
the MANAGEMENT COMPANY of the provisions of this agreement in all respects.
For good and valuable consideration sufficiency of which is hereby
acknowledged, LOFT INTERNATIONAL RESTAURANT CORP., Xxxxx Xxxxxxx and Xxxxx
Xxxxxx hereby guarantee the performance by NEWCO of the provisions of this
Agreement in all respects, provided, however, that the guarantees of XXXXX
XXXXXXX, and XXXXX XXXXXX shall be guarantees of collection, and not of payment,
and subject, without limitation, to the prior exhaustion of all remedies against
the following parties in the following order of priority: (1) The proceeds of
any applicable insurance, either of NEWCO, LOFT INTERNATIONAL RESTAURANT CORP.,
or of any joint obligor's applicable insurance; (2) any and all assets of any
joint obligor; (3) any and all assets of NEWCO, including the lease; and (4) any
and all assets of LOFT INTERNATIONAL RESTAURANT CORP. The Guarantee of Xxxxx
Xxxxxxx and Xxxxx Xxxxxx shall expire three years from the Commencement Date.
In any event the guarantee of NEWCO's guarantors hereunder, as qualified
above, shall be limited in gross amount to the lesser of the amount of any
applicable claim, or the aggregate amounts actually expended by MANAGEMENT
COMPANY pursuant to Article 9.
To evidence the obligations of NEWCO under this agreement, NEWCO shall
deliver to MANAGEMENT COMPANY, prior to the Commencement Date:
1. UCC-l Franchising Statements, covering all fixtures and equipment at
the premises, and all replacement fixtures.
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2. An assignment of the lease to the premises to MANAGEMENT COMPANY, in
recordable form. Same will be held in escrow by the attorneys for the Management
Company pursuant to an escrow receipt consistent with this agreement.
12. Sale of the Premises.
a. Should NEWCO receive a bona fide offer to sell the Restaurant, or
to sell all of the outstanding shares of stock of NEWCO or to sublet the
premises or sell a majority interest in itself; the following shall transpire:
i. NEWCO shall give MANAGEMENT COMPANY written notice of the
terms of any such offer.
ii. The MANAGEMENT COMPANY shall have a sixty (60) day period
within which to purchase the Restaurant or sublet the Restaurant or purchase the
majority interest upon the same terms and conditions as set forth in the
third-party offer.
iii. If the MANAGEMENT COMPANY decides not to purchase the
Restaurant or sublet the premises or sell the majority interest, or does not
reply to NEWCO'S notice, NEWCO shall be free to sell the Restaurant, except that
any sale shall include an obligation on the part of the purchaser to assume the
obligations under this Agreement.
iv. Any internal share transfers among Xxxxx Xxxxxx, Xxxxx
Xxxxxxx, Xxx Xxxxxxxxxxx and their families shall not be considered bona-fide
offers to sell for the purpose of this paragraph.
13. Option to Purchase. MANAGEMENT COMPANY shall have an option to
purchase all of the assets of NEWCO, subject to the following terms, conditions,
and counter-option of NEWCO:
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a. Price.
Date of Exercise Price in Cash
---------------- -------------
7/1/97-6/30/2001 $ 7,500,000
7/1/01 - 6/30/02 $ 8,500,000
7/1/02 - 6/30/03 $ 9,500,000
7/1/03 - 6/30/04 $10,500,000
b. Method of Exercise. Should the MANAGEMENT COMPANY desire to exercise
its purchase option hereunder, it shall present to NEWCO at any time on or
before 6/30/2004, a written notice of election to purchase the assets of NEWCO
pursuant to the provisions of this Article 13 together with an xxxxxxx money
deposit by way of a cashier's or certified check, or other good funds, for an
amount equal to 10% of the applicable purchase price as set forth in
subparagraph (a).
c. Upon receipt of such notice and xxxxxxx money deposit NEWCO shall have
a period of sixty (60) days to preempt MANAGEMENT COMPANY'S purchase option by
presenting to MANAGEMENT COMPANY a written notice of election to repurchase
MANAGEMENT COMPANY'S right to manage under this Agreement, and a cashier's or
certified check or other good funds in the amount of 20% of the applicable
purchase price (based upon the date of the notice of exercise presented by a
MANAGEMENT COMPANY), said amount to constitute a refund of MANAGEMENT COMPANY'S
deposit together with a 10% xxxxxxx money deposit of NEWCO.
d. Closing. A closing shall take place within ninety (90) calendar days
following the later of (1) the expiration of the period set forth in subsection
(c), above, if NEWCO shall not have exercised its counter-option as therein set
forth, or (2) sixty (60) days following the
21
presentation by NEWCO of a notice of exercise of its counter-option pursuant to
subsection (c), above.
At the closing the purchaser shall remit by cashier's or certified check
or other good funds the balance of the purchase price, and the Seller shall
deliver, (i) if NEWCO, a Xxxx of Sale and such other documents reasonably
necessary and sufficient to duly convey and transfer title to all of the assets
of NEWCO (excluding any cash amounts on hand representing NEWCO's share of
operating cash flow or excluded from operating cash flow by definition) or, (ii)
if MANAGEMENT COMPANY, a general and specific release of all claims referencing
this agreement and the right to manage provided for herein, together with such
other document or documents as may reasonably be required to extinguish the
contractual relationship among NEWCO, MANAGEMENT COMPANY and all guarantors
hereunder.
e. Upon closing and the payment of the consideration provided for
hereunder, subject to collection, this contract shall become null and void and
neither party shall thereafter have any claim or cause of action based upon the
provisions of this contract against the other, or against any guarantor of
either party.
f. In the event that it should reasonably become necessary at any time
hereafter for any party hereto, including any guarantor, to execute any further
document or instrument to effectuate the purposes of this Article 13, then such
party agrees promptly to do so upon request. This provision shall survive the
closing of any sale under this Article 13.
14. Liens and Encumbrances. During the term of this agreement, neither
NEWCO nor the MANAGEMENT COMPANY will create any debt for NEWCO; place any liens
and
22
encumbrances on NEWCO or on the assets of the Restaurant; or create any other
diminution of the value or operating cash flow of the Restaurant without a prior
consent of the other party.
15. Loans to NEWCO. The MANAGEMENT COMPANY may, but shall not be required
to, make available to NEWCO additional funds, in the nature of loans to the
corporation, upon terms as may be agreed upon by the parties, but in any event
only after expending the sums required to be invested in pursuant to Article 9.
16. House Account. On the Commencement Date, the MANAGEMENT COMPANY shall
establish a house account entitled "Xxxxx Xxxxxx, Xxxxx Xxxxxxx and Xxx
Xxxxxxxxxxx". MANAGEMENT COMPANY shall grant to Xxxxxx, Xxxxxxx and Xxxxxxxxxxx
an annual credit on such house account in the amount of $10,000.00. Any amounts
over $10,000.00 shall carry a 50% discount.
17. Applicable Law. This Agreement shall be interpreted according to the
laws of New York State.
18. Notices. Notices provided for hereunder shall be deemed given when
either hand-delivered or mailed by certified mail, return receipt requested,
duly marked "Deliver to Addressee Only" to the parties and addresses as set
forth below (or to such other revised addresses and addresses as either party
may furnish by a like notice, similarly given):
23
As to NEWCO:
Xxxxx Xxxxxxx
c/x Xxxxxxx & Xxxxxxx
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
As to MANAGEMENT COMPANY:
Restaurant Management Group
c/o Maloney & Xxxxxxxx
000 Xxxxxxxx
Xxx Xxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.
00 XXXX 00XX XXXXXX CORPORATION
BY: /s/ [ILLEGIBLE]
--------------------------------
RESTAURANT GROUP
MANAGEMENT SERVICES, L.L.C.
BY: /s/ [ILLEGIBLE]
--------------------------------
NEW YORK RESTAURANT GROUP, L.L.C.
BY: /s/ [ILLEGIBLE]
--------------------------------
LOFT INTERNATIONAL REST. CORP.
BY: /s/ [ILLEGIBLE]
--------------------------------
24
/s/ Xxxxx Xxxxxx
--------------------------------
XXXXX XXXXXX
/s/ Xxxxx Xxxxxxx
--------------------------------
XXXXX XXXXXXX
25
-----------------------------
SCHEDULE A GLOUCESTER HOUSE -----------------
ILLUSTRATIVE INCOME STATEMENT AVERAGE 300 SEATS
----------------------------- -----------------
-------------------------------------------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4
-------------------------------------------------------------------------------------------
TOTAL SALES 5,457,500 100.00% 6,495,425 100.00% 6,994,800 100.00% 8,460,478 120.95%
COST OF SALES 1,746,400 32.00% 1,948,628 30.00% 1,993,518 28.50% 2,411,236 34.47%
-------------------------------------------------------------------------------------------
GROSS PROFIT 3,711,100 68.00% 4,546,798 70.00% 5,001,282 71.50% 6,049,242 86.48%
MISCELLANEOUS INCOME 15,000 0.27% 20,000 0.31% 25,000 0.36% 25,000 0.36%
-------------------------------------------------------------------------------------------
OPERATING INCOME 3,726,100 68.27% 4,566,798 70.31% 5,016,282 71.86% 6,074,242 86.84%
-------------------------------------------------------------------------------------------
PAYROLL 1,900,000 34.81% 2,180,000 33.56% 2,289,000 32.72% 2,403,450 34.36%
PAYROLL TAXES 204,250 3.74% 234,350 3.61% 246,068 3.52% 258,371 3.69%
EMPLOYEE BENEFITS 261,000 6.61% 414,200 6.38% 434,910 6.22% 456,656 6.53%
MANAGEMENT FEE @ 3% 163,725 3.00% 194,863 3.00% 209,844 3.00% 253,814 3.63%
-------------------------------------------------------------------------------------------
TOTAL SALES 2,628,975 48.17% 3,023,413 46.55% 3,179,822 45.46% 3,372,291 48.21%
-------------------------------------------------------------------------------------------
OTHER EXPENSES:
RENT 281,000 5.15% 292,000 4.50% 304,000 4.35% 304,000 4.35%
WATER 35,000 0.64% 36,050 0.56% 37,132 0.53% 38,245 0.55%
HEAT, LIGHT AND POWER 142,000 2.60% 146,260 2.25% 150,648 2.15% 155,167 2.22%
TELEPHONE 20,000 0.37% 20,600 0.32% 21,218 0.30% 21,855 0.31%
[ILLEGIBLE] 54,000 0.99% 55,620 0.86% 57,289 0.82% 59,007 0.84%
OFFICE EXPENSES 50,000 0.92% 65,000 1.00% 66,950 0.96% 68,959 0.99%
[ILLEGIBLE] 5,000 0.09% 6,000 0.09% 6,180 0.09% 6,365 0.09%
TRAVEL AND ENTERTAINMENT 30,000 0.55% 35,000 0.54% 35,000 0.50% 35,000 0.50%
[ILLEGIBLE] 1,000 0.02% 1,500 0.02% 1,500 0.02% 1,500 0.02%
[ILLEGIBLE] - MACH. $ EQUIPMENT 35,000 0.64% 35,000 0.54% 35,000 0.50% 35,000 0.50%
PROFESSIONAL FEES 25,000 0.45% 25,000 0.38% 25,000 0.36% 25,000 0.36%
SECURITY 3,000 0.05% 3,090 0.05% 3,183 0.05% 3,278 0.05%
CONSULTANTS FEES 10,000 0.18% 10,000 0.15% 10,000 0.14% 10,000 0.14%
MISCELLANEOUS INCOME 7,500 0.14% 7,500 0.12% 75,000 0.11% 7,500 0.11%
OPERATING SUPPLIES 218,300 4.00% 259,817 4.00% 279,792 4.00% 338,419 4.84%
DECORATING 30,000 0.55% 40,000 0.62% 41,200 0.59% 42,436 0.61%
PUBLIC RELATIONS 111,000 2.03% 123,000 1.89% 128,640 1.84% 151,800 2.17%
INSURANCE 100,000 1.83% 115,000 1.77% 120,000 1.72% 120,000 1.72%
EXPENSES 10,000 0.18% 10,000 0.15% 10,000 0.14% 10,000 0.14%
REPAIRS AND MAINTENANCE 75,000 1.37% 125,000 1.92% 128,750 1.84% 132,613 1.90%
ADVERTISING 250,000 4.58% 250,000 3.85% 250,000 3.57% 250,000 3.57%
FEES & SUBSCRIPTIONS 1,500 0.03% 1,500 0.02% 1,500 0.02% 1,500 0.02%
REAL ESTATE TAXES 92,000 1.69% 97,000 1.49% 102,000 1.46% 102,000 1.46%
CREDIT CARD CHARGES 147,353 2.70% 175,376 2.70% 188,860 2.70% 228,433 3.27%
COMMERCIAL RENT TAX 18,265 0.33% 18,980 0.29% 19,760 0.28% 19,760 0.28%
-------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 1,751,918 32.10% 1,954,293 30.09% 2,031,100 29.04% 2,167,837 30.99%
-------------------------------------------------------------------------------------------
TOTAL EXPENSES 4,380,893 80.27% 4,977,706 76.63% 5,210,922 74.50% 5,540,128 79.20%
-------------------------------------------------------------------------------------------
NET INCOME BEFORE DEPRECIATION,
BANQUET PROFITS & TAXES (654,793) (12.00%) (410,909) (6.33%) (184,640) (2.64%) 534,114 7.64%
BANQUET PROFITS 260,000 4.76% 300,000 4.62% 400,000 5.72% 400,000 5.72%
-------------------------------------------------------------------------------------------
NET INCOME BEFORE DEPRECIATION,
TAXES (394,793) (7.23%) (110,909) (1.71%) 215,360 3.08% 934,114 13.35%
DEPRECIATION (100,000) (1.83%) (100,000) (1.54%) (100,000) (1.43%) (100,000) (1.43%)
-------------------------------------------------------------------------------------------
INCOME BEFORE TAXES (494,793) (9.07%) (210,909) (3.25%) 115,360 1.65% 834,114 11.92%
-------------------------------------------------------------------------------------------
------------------------------
STATEMENT OF CASH FLOW
(PREPARED IN ACCORDANCE GAAP)
------------------------------
----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
----------------------------------------------
NET INCOME--FROM SCHEDULE A (494,793) (210,909) 115,360 834,000
----------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
----------------------------------------------
DEPRECIATION AND AMORTIZATION 100,000 100,000 100,000 100,000
CHANGES IN OPERATING ASSETS AND LIABILITIES: 2,000
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE 10,000 (5,000) 2,000 (24,000)
(INCREASE) DECREASE IN INVENTORY (15,000) (20,000) 28,000 (2,000)
(INCREASE) DECREASE IN PREPAID EXPENSES (25,000) 5,000 8,500 [ILLEGIBLE]
(INCREASE) DECREASE IN OTHER ASSETS 793 (1,091) 1,140 [ILLEGIBLE]
INCREASE (DECREASE) IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 50,000 25,000 (5,000) [ILLEGIBLE]
------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (374,000) (107,000) 250,000 890,000
CASH USED TO PURCHASE PROPERTY & EQUIPMENT 0 (25,000) (20,000) (25,000)
------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH -- GAAP (374,000) (132,000) 230,000 865,000
------------------------------------------------------------------------
----------------------------------------------
OTHER CASH CHANGES
----------------------------------------------
GUARANTEED PAYMENT 0 (144,000) (240,000) (300,000)
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AFTER
GUARANTEED PAYMENT (374,000) (276,000) (10,000) 565,000
MANAGEMENT COMPANY LOAN 0 150,000
MANAGEMENT COMPANY ADDITIONAL FUNDING 374,000 126,000
------------------------------------------------------------------------
CASH BALANCE 0 0 (10,000) 565,000
------------------------------------------------------------------------
----------------------------------------------
CASH AVAILABLE FOR DISTRIBUTION
----------------------------------------------
NET INCREASE (DECREASE)
IN CASH -- GAAP (374,000) (132,000) 230,000 865,000
------------------------------------------------------------------------
CASH TO NEWCO 0 144,000 240,000 300,000
CASH TO MANAGEMENT COMPANY 0 0 0 300,000
PAYMENT OF LOAN TO MANAGEMENT COMPANY 0 0 0 150,000
PAYMENT OF SHORTFALL 0 0 0 115,000
SHORTFALL 0 0 115,000
