SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Pursuant to section 12(b) or (g) of The Securities Exchange Act of
1934
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
2123 Garnet Avenue, Suite B
San Diego, CA 92109
(858) 581-2120
CALIFORNIA 33-0770631
---------- ----------
(State of incorporation) (I.R.S. Employee Identification Number)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
VOTING COMMON STOCK
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TABLE OF CONTENTS
PART I
Item 1. Description of Business ........................ 2
Item 2. Management's Discussion and Analysis or
Plan of Operation ............................. 3
Item 3. Description of Property ........................ 4
Item 4. Security Ownership of Certain Beneficial
Owners and Management ......................... 5
Item 5. Directors, Executive Officers, Promoters
and Control Persons ........................... 5
Item 6. Executive Compensation ......................... 7
Item 7. Certain Relationships and Related
Transactions ................................. 8
Item 8. Description of Securities .................... 8
PART II
Item 1. Market for Common Equity and Related
Stockholder Matters ........................... 9
Item 2. Legal Proceedings .............................. 9
Item 3. Changes in and Disagreements with Accountants On
Accounting and Financial Disclosure ........... 9
Item 4. Recent Sale of Unregistered Securities ......... 9
Item 5. Indemnification of Directors and Officers ...... 10
PART F/S
PART III
Items 1 & 2 Index to and Description of Exhibits ........ 11
Signatures .............................................. 11
2
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Registration Statement on Form 10SB are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects," "estimates" or words of similar meaning. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this report. Shareholders, potential investors and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking statements to reflect subsequent events
or circumstances.
PART I
- ------
ITEM 1. DESCRIPTION OF BUSINESS
Business
- --------
San Diego Soccer Development Corporation, a California corporation, was founded
in 1997 to develop, own, and run a professional soccer team in San Diego, with
the ultimate goal of becoming a Major League Soccer franchise. The Company is
headquartered at 2123 Garnet Avenue, Suite B, San Diego, CA 92109.
The Company has elected to file this Form 10-SB registration statement on a
voluntary basis in order to become a reporting company under the Securities
Exchange Act of 1934. The primary purpose for this is that the Company wants to
maintain a listing for its common stock on the OTC Electronic Bulletin Board.
Under the current NASD rules, in order to maintain such a listing on the OTC
Electronic Bulletin Board, a company now must be a reporting company under the
Securities Exchange Act of 1934.
San Diego Soccer Development Corporation (the "Company") operates as The San
Diego Flash soccer club. The Company stages professional soccer games and
competes in the A-League, America's Division II professional league. The
sanctioning body for the league is USL, or United Soccer Leagues, formerly known
as USISL. In its inaugural season in San Diego, the team won the championship of
the Pacific Division, and nearly captured the A-League title. Currently in its
second season, the Flash team has captured its second straight Pacific Division
crown, the first of the A-Leagues 30 teams nationwide to win back-to-back
division championships in its first two years of competition. The team is
currently engaged in the 1999 playoffs.
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The Company presently employs its officers and directors, and certain clerical
staff on an "as needed" basis. This includes 10 full-time and 1 part-time
management personnel, and 26 part-time player and coaching personnel.
The team currently claims trademark protection for the brand name "San Diego
Flash". It holds a franchise with the USL as an A-League team, the top division
of the USL. The A-League is currently regarded as the `second division' of
American soccer, behind the MLS (Major League Soccer). The Company has sublease
agreements with concessionaires at its games for sales of food and non-alcoholic
beverages.
Year 2000
- ---------
The Company has assessed its computer systems to determine their ability to
correctly identify the Year 2000 and has determined that they will correctly
identify the Year 2000. The Company intends to implement a program to review the
status of key suppliers to ensure they are also Y2K compliant. Management does
not expect the Y2K issue to pose significant operational or financial problems
for the Company.
ITEM 2: MANAGEMENT'S DISSUSSION AND ANALYSIS
Management Discussion and Analysis of Financial Conditions and
Results of Operations.
As noted, the Company operates a top-ranked team in Soccer's A-League (Division
II). The Company gate receipts for the first six months of 1999 are behind 1998
by 1.24%. Operating costs of the Company increased 69% from 1998 to 1999. It is
important to mention that the revenues in the 1998 season were not enough to
cover expenses and the Company experienced significant losses. This is also true
so far in 1999.
When starting a new sports franchise, the first two to three years are rarely
profitable. The reasons for this are quite straightforward: the team needs to
build recognition in the community and get the word out about its games. It also
needs to build a fan base, and to do that it is necessary to give away many (if
not most) of the tickets to get potential fans in the seats and acquainted with
the product (the team). Once the fan base is established, a team will typically
begin to reduce the number of complimentary tickets and begin to build the
perceived value of the ticket. This process has already begun with the Flash.
Beginning July 18, 1999, Michael Elfman will become the Director of Ticket
Sales. Mr. Elfman comes to the Flash from the Women's World Cup, where he has
been responsible for selling tens of thousands of tickets.
The liabilities grew from 1998 to 1999, due to sale of the notes issued by the
Company to investors. A portion of these liabilities will be reduced by 5% when
these notes are redeemed or converted by the Company into common stock.
The Company, as part of its regular business and promotion of its San Diego
Flash brand name, currently sells branded merchandise at its home games. Through
the 1998 season and thus far into the 1999 season, the Company has had its
merchandise produced and sold through a local vendor. This contract has recently
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ended because of the vendor's non-performance, and the merchandise operation has
been brought in-house. The Company believes that this change will allow the
Company to make a much greater margin on the sales of merchandise, plus it will
allow greater control of price points, quality, and product mix.
The merchandise operation is due to be expanded to include merchandising at
kiosk-based locations in selected malls in San Diego County. These kiosks will
also be a prime outlet for selling tickets to home games. The initial plan is to
place kiosks in 5 major malls in the greater San Diego area.
The food and beverage concession contract has also been revoked for the previous
contract holder, again due to lack of performance (the vendor was the same as
for the merchandise.) This change is material to the Company as the margins
granted to the Company for the sales of food and beverages at all Flash events
will be increased from approximately 17% of gross sales to approximately 25% of
gross sales, while at the same time improving the quality of the food and of the
service.
Seasonal aspects of the sport of Soccer have a material effect on the company's
operations. These effects are largely self-evident in the attached financials
and audit of the Company. One factor mitigating this seasonality is that the
team plans to operate an indoor soccer team in the 2000 fiscal year, which plays
in the fall (the outdoor team plays in the summer months). This will
significantly reduce the seasonality of the business as well as increase the
value of sponsor sales packages; it will also allow some economies of scale as
the front office functions can be utilized for both indoor and outdoor
operations.
From December 31, 1998 to June 30, 1999, there have been no significant changes
in the financial condition of the company, no new trends or changes in the
industry, nor material changes in the business that could significantly alter
the revenues of the Company.
ITEM 3. PROPERTIES
The Company presently utilizes approximately 1,350 square feet of office space
and related equipment and resources, including computers, printers, typewriters,
desks, conference table and cabinets.
Building leases.
- ----------------
The Company, through Yan K Skwara and Marta Glodkoska, Yan Skwara's mother, who
are lessees, leases 1,350 sq. ft. from Donn Lowry and Russell Thurman under a
three year lease agreement. The lease will run out in January 1, 2002.
Currently, the lease payment is $1,350 a month. The terms of lease agreement
does not call for any increase in the payments. Mr. Skwara and Mrs. Glokoska
pass the lease cost direct to the Company with out any compensation.
San Diego Mesa College: Use of Facilities Agreement
- ---------------------------------------------------
The Company has signed a Use of Facilities Agreement with San Diego Mesa
College. The agreement provides a "pre game rental charge" of $1450 per game and
seasonal cost of $3,000 per year to be paid on or before December 15 of each
year. The terms of contract are for one year and renewable by mutual consent of
the parties.
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ITEM 4. SECURITIES OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT.
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of June 30, 1999 by (i) each person who is known
by the Company to own beneficially more that 5% of the Company's Common Stock,
(ii) each of the Company's Directors, (iii) each of named executive officers as
a group. Each named beneficial owner has sole voting and investment power with
respect to the shares listed unless otherwise indicated.
<TABLE>
<CAPTION>
Title of Name and Address Amount of and Nature
Class of Beneficial Owner of the Beneficial Ownership Percent of Class
----- ------------------- --------------------------- ----------------
<S> <C> <C> <C>
Common Trisha Bollman 571,428 12.8 %
Stock 1560 Chalcedony #H
San Diego, Ca 92109
Common Sarkis Kaloustian 571,428 12.8 %
Stock 1246 Roslyn Lane
La Jolla, Ca 92037
Common Yan Skwara 571,428 12.8 %
Stock 1680 Chalcedony #H
San Diego, Ca. 92109
Common Altomare Trust 237,000 5.3 %
Stock 3883 Ruffin Road
San Diego, Ca 92123
Common Lloyd Wade Securities 116,000 2.6 %
Stock 5005 LBJ Freeway
Dallas, TX 75246
Common Peacock Financial Corporation 200,000 4.5 %
Stock 2531 San Jacinto Ave
San Jacinto, Ca 92583
Common Christopher M. Payne 30,000 0.7 %
Stock 8510 Costa Verde Blvd.
Unit 2411
San Diego, Ca 92122
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth the names, ages and positions of the executive
officers and directors of the COMPANY:
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Name Age Position
Yan K. Skwara 34 President, CEO and Director (1997)
Sarkis Kaloustian 30 Chairman of the Board (1997), VP and
General Manager
Trisha Bollman 28 Corporate Secretary and Director (1997)
Steven R. Peacock* 50 Director (1999)
Christopher M. Payne 31 COO and Director (1999)
* Mr. Peacock is also a Director of Peacock Financial Corporation.
Directors are elected for one year terms at the Company's annual meeting.
Yan K. Skwara. Mr. Skwara is founder, and has been President and a
Director of the Company since its inception; he was elected CEO of the Company
in September, 1998. For the past 10 years, Mr. Skwara has been employed as an
investment banker, holding various securities licenses through several
investment banking firms. Mr. Skwara is currently employed full-time with the
Company and brings his prior experience in the investment banking world to the
Company. Mr. Skwara has significant experience in management, product support
and overall knowledge in the investor relations arena. Mr. Skwara also maintains
a significant background in the soccer industry. He is a student of the game and
has been actively playing the game for 17 years and began his professional
career in soccer at age nineteen where he signed his first professional contract
with a club in Germany. Prior to playing overseas, Mr. Skwara studied and played
at California State University of Los Angeles. He played in Germany for two
years before coming back to the States to finish his career in Los Angeles.
After a professional career, Mr. Skwara acquired his North Texas Soccer `D'
Coaching License and also was founder and partner of a semi-pro franchise in
Dallas, Texas in 1994.
Sarkis Kaloustian. Mr. Kaloustian has been Chairman of the Board of
Directors since the inception of the Company, and was elected Vice President and
General Manager in September. Prior to that date, Mr. Kaloustian served as CEO
of the Company. Mr. Kaloustian is an attorney licensed to practice law in the
State of California and has been a legal practitioner in a civil law firm
predominantly engaged in business and corporate transaction and litigation
matters for the past four years. Mr. Kaloustian, aside from his duties as Vice
President and General Manager, is also the Company's in-house corporate counsel.
Prior to practicing law as a civil trial attorney and joining Company's
management team, Mr. Kaloustian interned for the United States Attorneys'
Office, the District Attorney's Office as well as the San Diego Attorney's
Office. He is currently a volunteer and vice-president for the San Diego County
Soccer League; a San Diego based Premier amateur adult league. Mr. Kaloustian
has also served as a volunteer member for the City of San Diego Recreation
Department Sports Council for Mira Mesa from 1995 until present. Mr. Kaloustian
has extensive experience in corporate legal and management matters, as well as
over twelve years of experience in coordinating and operating soccer clubs and
leagues. Mr. Kaloustian has played soccer for over 21 years and has played
semi-professional soccer for club teams in both Los Angeles and Glendale,
California. He has also been coaching collegiate level players in San Diego for
the past seven years.
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Trisha Bollman. Ms. Bollman has been Corporate Secretary and Director of
Investor Relations since the Company's inception. Prior to joining the Company,
she was employed from 1989 to 1992 as an Insurance Underwriter and from 1992 to
present has worked in several Investment Banking Firms in the corporate finance
division as well as head of operations. She is a licensed Series 11 Assistant
Representative registered with the National Association of Securities Dealers.
Utilizing her skills in investment banking, Ms. Bollman is assisting in the
Company's investor relations and marketing division.
Mr. Steven R. Peacock, Director, is President and founder of Peacock
Financial Corporation for which he has worked for 22 years. He has extensive
experience in real estate development, property management and construction. His
vision, creative mind, persistence and direction have positioned Peacock
Financial Corporation to take advantage of the upturn in the real estate
marketplace, but also to increase shareholder value through the creation or
acquisition of subsidiaries strategically positioned within their own
industries.
Christopher M. Payne. Mr. Payne was elected a Director of the Company on
June 30, 1999 and has been Chief Operating Officer since April, 1999. Between
May 1998 and April 1999, Mr.Payne was the Chief Operating Officer of a startup
sportswear Company where he developed relationships with third-party vendors
and manufacturers. From December 1994 until April 1998, Mr. Payne was Vice
President of a gaming development Company which financed and built hotels
and casinos in the Philippines and Cost Rica. He is experienced in both the
creation and evaluation of business plans and private placement memoranda.
He also has extensive construction and project management experience and is
a valuable asset in the scheduling of tight deadlines and complex projects. Mr
Payne holds a Bachelor of Arts in Psychology from the University of California,
San Diego that he received in 1992. Mr. Payne is a native of England but is
currently a resident of San Diego.
Yan Skwara and Trisha Bollman are married.
ITEM 6. EXECUTIVE COMPENSATION.
The following tables set forth certain information concerning compensation
paid by the Company to Officers and Directors.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -----------------------------------------------------------------------------------------------------------------
Restricted
Name and Other Stock LTIP All
Principal Annual Awards(s) Payouts Other
Position Year Salary($) Bonus Compensation ($) Options ($) Compensation
- -------- ---- --------- ----- ------------ --- ------- --- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yan K. 1998 $60,000* N/a N/a N/a 150,000 N/a N/a
Swara, CEO
</TABLE>
* Indicated salary is an amount currently being accrued by Company.
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Employment Agreements
Currently there are no written contracts with any officers or director of the
Company. At the present time, the officers and directors serve at the pleasure
of the Board of Directors of the Company.
ITEM 7. CERTAIN RELATIONS AND RELATED TRANSACTIONS
All of the Company's officers and directors have been in the past and may
continue to be active in business with other companies and on their own behalf.
All officers and directors have retained the right to conduct their own
independent business interests; these activities may give rise to conflicts of
interest with the Company. The officers and directors have agreed that if a
business opportunity relating to the Company's business comes to the attention
of its officers or directors, such opportunity will be made available to the
Company and the Company shall have the right of first refusal with regard to
such opportunity, after full disclosure of the opportunity to the Company. If an
officer or director owes a fiduciary duty to another entity similar to the duty
owed to the Company, it is possible that the conflict may be impossible to
resolve in a manner that is equitable to both entities.
A majority of disinterested directors may reject a corporate opportunity for
various reasons. If the Company rejects such opportunity, then any director or
officer may avail themselves of such opportunity. In addition, if an opportunity
is presented to the Company, and one or more of the Company's officers or
directors has an outside interest in the opportunity, the opportunity will be
reviewed at a meeting of the Board of Directors and the interested director(s)
will not vote on issues relating to such opportunity. To the best ability and in
the best judgment of the officers and directors of the Company, any conflicts of
interest between the Company and the personal interest of the officers and
directors of the Company will be resolved in a fair manner which will protect
the interests of the Company.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue up to 20,000,000 shares of Common Stock, no
par value. Holders of Common Shares are entitled to one vote per Common Share on
any matters entitled to be voted on by shareholders. The Common Shares have
cumulative voting rights as to the election of directors only if candidates'
names have been placed in nomination prior to voting and the shareholder has
giving notice at the meeting of shareholder's intention to cumulate the vote. A
majority vote is sufficient for most other actions requiring the vote or
approval of shareholders. The Company's Officers and Directors as a group own
directly approximately 43.6% of the Issuer's capital stock.
The Company is also offering up to $480,000 in debt securities in the form of
convertible promissory notes. Principle and interest on such notes become due
and payable on December 31, 1999, with an annual percentage rate of 8%, and are
convertible into common shares, (i) if Company files an IPO and the holder
wishes to register the share in the IPO, or (ii) 6 months following the filing
of an IPO, at the rate of 1 share per dollar held in the notes.
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It is also important to note that the Company has outstanding certain options
and warrants issued by the Company. As of June 30, 1999, there were 138,760
warrant shares outstanding at an exercise price of $1.25/share. These warrants
will expire between October 2001 and June 2003.
PART II
- -------
ITEM 1. MARKET PRICE OF - AND - DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
Currently, the shares of the Company are not listed on any national exchange
including the "Pink Sheets" or on the over-the-counter Bulletin Board.
As of June 30, 1999, there were approximately 55 holders of Common Stock and 49
holders of debt securities.
Holders of the Company's Common Stock are entitled to dividends when and if
declared by the Board of Directors out of funds legally available therefor. The
Company does not anticipate the declaration or payment of any dividends in the
foreseeable future.
The Company intends to retain earnings, if any, to finance the development and
expansion of the its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be based upon future earnings, the
financial condition of the Company and general business conditions along with
other factors. Therefore, there can be no assurance that any dividend of any
kind will ever be paid.
ITEM 2: LEGAL PROCEEDINGS
The Company is not currently subject to any legal proceeding. Further, the
Company is not aware of any contemplated action or proceeding by any
governmental authority to which Company is a participant.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreement with its independent
accountants on accounting and financial disclosure during the two most recent
fiscal years. The Company recently engaged the services of Logan, Throop & Co.,
to prepare compiled financial statements for prior interim periods, as well as
audited financial statements which are part of this Registration Statement.
Logan, Throop & Co.'s appointment as the auditor was approved by the Company's
Board of Directors.
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ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES.
From October 13, 1997 to January 31, 1999 the Company offered and privately sold
513,000 shares of Common Stock at $1.00 per share for a total of $513,000. The
offering was underwritten by Lloyd Wade Securities, 5005 LBJ Freeway, Suite 360,
Dallas, TX. No general forms of advertising were used in connection with the
issuance of the shares. This issuance was exempt from the registration
provisions of the Act by virtue of Section 4(2) and Regulation D as promulgated
thereunder.
From February 3, 1999 to present, the Company is offering and has privately sold
143,000 shares of Common Stock at $1.00 per share for a total of $143,000. The
Company may sell up to a total of 1,000,000 shares under this offering before it
is closed. No underwriters were used in connection with the issuance of these
shares. No general forms of advertising were used in connection with the
issuance of the shares. This issuance is exempt from the registration provisions
of the Act by virtue of Section 4(2) and Regulation D as promulgated thereunder.
From April 22, 1999 to present the Company is offering, pursuant to the February
3, 1999 private offering, 40 convertible promissory notes in the amount of
$12,000 per note. To date, the company has sold a total of $124,000 of these
notes. No underwriters are being used in connection with the issuance of these
shares. No general forms of advertising are used in connection with the issuance
of the shares. This issuance is exempt from the registration provision of the
Act by virtue of Section 4(2) and Regulation D as promulgated thereunder.
The Company has used the proceeds from the offerings for general working
capital.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has in the Articles of Incorporation a section on Indemnification of
Directors, Officers, employees and agents. The indemnification terms and
conditions are specified in section 317 of California Business Code as provided
by law. Neither the articles nor the Bylaws give any other indemnification
except for those provided under California Law.
PART F/S
San Diego Soccer Development Corporation
Financial Statements
December 31, 1997 and 1998
And
June 30, 1999
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Index to Financial Statements.
Page
Report of independent auditor................................................ 13
Balance Sheet as of June 30, 1999............................................ 14
Statements of Operations..................................................... 15
Statements of Shareholders' (Deficit)
Equity....................................................................... 16
Statements of Cash Flows..................................................... 17
Notes to Financial Statements................................................ 18
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
San Diego Soccer Development Corporation
San Diego, California
We have audited the accompanying balance sheets of San Diego Soccer Development
Corporation as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity and cash flows for the year 1998 and the period
from August 22, 1997 (inception) to December 31, 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 that our audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of San Diego Soccer Development
Corporation as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the year and period then ended in conformity with
generally accepted accounting principles.
/s/ Logan Throop & Co., LLP
- ---------------------------
September 8, 1999
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SAN DIEGO SOCCER DEVELOPMENT CORPORATION
DBA SAN DIEGO FLASH
BALANCE SHEETS
<TABLE>
<CAPTION>
Period from
January 1, 1999 to
June 30, 1999
(unaudited) December 31, 1998 December 31, 1997
----------- ----------------- -----------------
<S> <C> <C> <C>
Assets
Current assets
Cash $ 17,094 $ 298 $ 17,763
Restricted cash 50,102 - 50,000
Shareholder advances - 100 18,143
Due from other company's 12,000 - -
Advances to players 2,327 - -
Trading securities - 22,725 -
Total current assets 81,523 23,123 85,906
Property and equipment, net 19,896 9,695 6,000
Soccer franchise, net 140,000 143,000 149,000
------- ------- -------
Total assets $ 241,418 $ 175,818 $ 240,906
========= ========= =========
- -------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Current liabilities
Bank overdraft $ 43 $ 7,871 $ -
Accounts payable 0 40,138 27,634
Accrued liabilities 279,016 162,912 30,000
Accrued payroll and payroll taxes 332,382 154,236 -
Shareholder loans 27,839 45,090 30,593
Note payable 16,798 16,979 6,059
Promissory Notes 124,000 - -
Accrued Interest Payable 886 - -
Deferred revenue - 18,066 -
-------- ------- -------
Total current liabilities 780,963 445,292 94,286
------- ------- ------
Stockholders' equity
Common stock, no par value,
20,000,000 shares
authorized, 3,801,484
and 2,352,284 shares
issued and outstanding
at December 31, 1998
and 1997, respectively. 1,308,593 941,163 187,893
Stock subscriptions receivable - (172,500) -
Accumulated deficit (795,003) (1,011,864) (41,273)
Total stockholders' equity 513,591 (243,201) 146,620
------- -------- -------
Total liabilities and stockholders'
Equity $ 1,294,554 $ 202,091 $ 240,906
=========== ========= =========
</TABLE>
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SAN DIEGO SOCCER DEVELOPMENT CORPORATION
DBA SAN DIEGO FLASH
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
January 1, 1999 to Period from August 22, 1997
June 30, 1999 Year ended (inception) to
(unaudited) December 31, 1998 December 31, 1997
----------- ----------------- -----------------
<S> <C> <C> <C>
Revenue:
Ticket sales $ 25,355 $ 82,534 $ -
Corporate sponsorships 198,529 199,489 -
Other revenue 2,561 10,361 111
----- ------ ---
Total revenue 226,445 292,384 111
------- ------- ---
Operating expenses
General and administrative 444,517 504,738 26,925
Game and player expenses 291,016 458,418 10,000
Advertising and promotion 305,342 311,124 4,170
------- ------- -----
Total operating expenses 1,040,876 1,274,280 41,095
--------- --------- ------
Loss from operations (814,431) (981,896) (40,984)
Realized gain securities 27,050
Loss on trading securities - (25,136) -
Interest expense (3,211) (4,832) (289)
Other Expense (4,411) - -
------
Net loss $ (795,003) $ (1,011,864) $ (41,273)
========== ============ =========
Loss per share $ (0.22) $ (0.35) $ (0.02)
</TABLE>
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SAN DIEGO SOCCER DEVELOPMENT CORPORATION
DBA SAN DIEGO FLASH
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Stock Total
-------------------- subscriptions Accumulated Stockholders'
Shares Amount receivable Deficit (deficit) equity
------ ------ ---------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Initial capitalization 8/22/97 1,864,284 $ 18,643 $ -- $ -- $ 18,643
Issuance of stock for cash 88,000 88,000 -- -- 88,000
Issuance of stock for franchise and
equipment 150,000 106,000 -- -- 106,000
Issuance of stock for syndication cost 250,000 -- -- -- --
Syndication costs paid -- (24,750) -- -- (24,750)
Net loss -- -- -- (41,273) (41,273)
------- --------- --------- ------- -------
Balance at December 31, 1997 2,352,284 187,893 -- (41,273) 146,620
========= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------
Issuance of stock and warrants for cash 354,300 354,300 -- -- 354,300
Issuance of stock for services 100,000 80,000 -- -- 80,000
Issuance of stock for trading securities 650,000 118,770 -- -- 118,770
Warrants exercised 72,400 36,200 -- -- 36,200
Stock subscriptions receivable 172,500 172,500 (172,500) -- --
Issuance of stock for syndication cost 100,000 -- -- -- --
Syndication costs paid -- (8,500) -- -- (8,500)
Net loss -- -- -- (1,011,864) (1,011,864)
--------- --------- -------- ---------- ----------
Balance at December 31, 1998 3,801,484 491,163 (172,500) (1,053,137) (284,474)
========= ======= ======== ========== ========
- ----------------------------------------------------------------------------------------------------------------------
Issuance of stock for cash (unaudited) 139,100 139,063 -- -- 139,063
Issuance of stock for services 148,500 118,800 -- -- 118,800
Issuance of stock for assets 15,000 12,000 -- -- 12,000
Warrants exercised 21,400 9,500 -- -- 9,500
Issuance of stock for syndication cost 70,135 -- -- -- --
Issuance of stock for trading securities 95,000 88,068 -- -- 88,068
Syndication costs (unaudited) -- -- -- -- --
Stock subscriptions paid 172,500 -- 172,500 -- 172,500
Net loss (unaudited) -- -- -- (795,003) (795,003)
-------- -------- ------- -------- --------
Balance at June 30, 1999 (unaudited) 4,463,119 $ 1,308,593 $ -- $ (1,848,140) $ (539,547)
========= =========== =========== ============ ===========
</TABLE>
16
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
DBA SAN DIEGO FLASH
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
January 1, 1999 to Period from August 22, 1997
June 30, 1999 Year ended (inception) to
(unaudited) December 31, 1998 December 31, 1997
----------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (795,003) $(1,011,864) $ (41,273)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 4,800 8,020 1,000
Loss (gain) on trading securities (27,050) 25,136 --
Stock issued for services 118,800 80,000 --
Stock subscription paid for services 110,500
Corporate sponsorship for trading securities -- (35,537) --
Decrease (increase) other current assets (8,796) -- --
Increase (decrease) accounts payable 232,170 42,504 27,634
Increase (decrease) bank overdraft -- 7,871 --
Increase (decrease) accrued liabilities -- 302,036 --
Increase (decrease) deferred revenue (18,066) 18,066 --
------- ------ -------
Net cash (used) by operating activities (382,644) (563,768) (12,639)
-------- -------- -------
Cash flows from investing activities:
Purchase of soccer franchise -- -- (20,000)
Proceeds from sale of trading securities 134,736 106,558 --
Purchase of property and equipment -- (5,716) --
------- ------ ------
Net cash provided (used) by investing activities 134,736 100,842 (20,000)
------- ------- -------
Cash flows from financing activities:
Proceeds from sale of stock, net issuance 148,563 382,000 63,250
Payment of obligation for soccer franchise -- (30,000) --
Proceeds from note payable (1,000) 10,920 6,059
Proceeds from promissory notes 124,000 -- --
Proceeds from stock subscriptions 62,000
Proceeds from shareholder loans, net (18,756) 32,541 31,093
Net cash provided by financing activities 314,806 395,461 100,402
------- ------- -------
Net increase(decrease) in cash 66,898 (67,465) 67,763
Cash at beginning of period 298 67,763 --
------- ------ -------
Cash at end of period $ 67,196 $ 298 $ 67,763
=========== =========== ===========
</TABLE>
17
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
DBS SAN DIEGO FLASH
NOTES TO FINANCIAL STATEMENTS
1. Organization and Operations
Organization
------------
San Diego Soccer Development Corporation, (the "Company"), was
incorporated on August 22, 1997 in the state of California. The Company is
engaged in the management and marketing of a professional soccer team. The
majority of the Company's revenues are currently generated from corporate
sponsorships and ticket sales.
2. Summary of Significant Accounting Policies
Trading Securities
------------------
Equity securities are classified as Trading Securities and are
available-for-sale to support current operations. These securities are
stated at estimated fair value based upon market quotes. Unrealized gains
and losses are recognized as income or loss during the current period.
Property and Equipment
----------------------
Property and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (one to five years) using the
straight-line method.
Soccer Franchise
----------------
The membership in the United System Independent Soccer Leagues (USISL)
represents the original purchase price of the franchise recorded at cost
and is amortized using the straight-line method over a 25 year period.
Revenue and Expense Recognition
-------------------------------
Revenue from ticket sales is recognized at the time the home game, to
which such proceeds relate, is played. Accordingly, advance ticket sales
for the next season are recorded as deferred revenues and recognized at
the start of the next season. Revenue from advertising and promotions is
recognized ratably during the season the promotion relates to is played.
Professional league team expenses, principally player compensation, are
recorded as expense over the entire Professional Soccer League regular
season. Administrative, general, advertising and promotional expenses are
charged to operations as incurred.
18
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Income Taxes
------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS). SFAS No. 109 requires that
all deferred tax asset and liability balances be determined by application
to temporary differences of the tax rate expected to be in effect when
taxes will become payable or receivable. Deferred income taxes are
provided for the estimated tax effects of timing differences between
income for tax and financial reporting. Temporary differences are
differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements that will result in taxable
or deductible amounts in future years. The Company's temporary differences
consist primarily of net operating losses and depreciation. A valuation
allowance is provided against deferred tax assets, where realization is
uncertain.
Net Earnings Per Common Share
-----------------------------
Net earnings per common share are based on the weighted average number of
common shares outstanding during each period.
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Restricted Cash
Restricted cash is pledged to support a letter of credit to the USISL. The
letter of credit was established to fulfill a requirement of a $50,000
performance bond that expires at the end of the soccer season or September
30 each year.
19
<PAGE>
4. Trading Securities
Following is a summary of trading securities:
December 31 1998 1997
----------- ---- ----
Aggregate cost $ 37,819 $ 0
Gross unrealized holding loss (15,094) 0
------- -------
Aggregate fair value $ 22,725 $ 0
========= =========
5. Property and equipment
Property and equipment consist of the following:
December 31 1998 1997
----------- ---- ----
Soccer equipment $ 6,000 $ 6,000
Computers and software 5,715 0
----- ------
11,715 6,000
Less accumulated depreciation (2,020) (0)
------ ------
$ 9,695 $ 6,000
======== =========
6. Soccer Franchise
The soccer franchise was purchased at the end of 1997 and was valued
according to the cash price of a 1998 A-League franchise which was the
first season the Company could participate in the league. The Company paid
cash and common stock for the franchise. The franchise has been amortized
as follows:
December 31 1998 1997
----------- ---- ----
Soccer Franchise $ 150,000 $ 150,000
Accumulated amortization (7,000) (1,000)
------ ------
$ 143,000 $ 149,000
=========== ===========
20
<PAGE>
7. Shareholder loans
Certain shareholders of the Company incurred expenses on behalf of the
Company. The amount still owed is included in the ending balance payable
to stockholders at December 31, 1998 and 1997. The balances payable to
stockholders are due on demand and accrue interest at 8%. Accrued interest
is included in the ending balance.
8. Note Payable
The Company has a note payable to an individual bearing interest at 10%.
The note is due on demand.
9. Commitments
The Company leases its office facilities under an operating lease that
expires on January 16, 2002. The base rent under the lease is $1,350 per
month. The Company also leases a soccer field from a local community
college on an annual lease that expires at the end of 1999. The base rent
is $1,450 per home game. The Company has one other operating lease for
equipment. Operating lease expense for 1998 and 1997 was $40,103 and $0,
respectively.
The future annual minimum lease payments at December 31, 1998 are as
follows:
Operating
Year Ending December 31, Leases
------------------------ ------
1999 $ 46,628
2000 17,628
2001 16,914
---- ------
Total Minimum Lease Payments $ 81,170
==========
21
<PAGE>
10. Stockholders' Equity
October 28, 1997, the Company prepared a private placement memorandum
offering 1,000,000 Common Shares (the Offering). The 1,000,000 common
shares were offered at a price per share of $5.00 per unit, each unit
included 5 common shares and entitled the investor to 2 warrants to
purchase the Company's common stock for $1.25 per share, this price was
subsequently reduced to $.50 per share.
At December 31, 1998, the Company had sold 442,300 shares and raised
$409,050 net of syndication costs, under the Offering. An additional
$36,200 was raised from warrants exercised resulting in the issue of
72,400 common shares.
A total of 176,920 warrants were issued with the Offering. The warrants
expire three years after the close of the Offering. At December 31, 1998
104,520 warrants were still
outstanding.
The Company also issued 450,000 shares of common stock for various
services. Of these shares 350,000 were issued for syndication costs in
connection with the Offering, 50,000 for marketing services and 50,000 for
bonus compensation to various employees.
During the last quarter of 1998 the Company traded 650,000 shares of its
stock for stock of a publicly trading company's stock at a highly
discounted rate in order to get cash for operations. Most of the stock
received in the trade was liquidated, however, stock valued at $22,725 was
still held in trading securities at December 31, 1998.
Income Taxes
At December 31, 1998, the Company had federal and state tax net operating
loss carryforwards of approximately $889,000. The federal and state tax
loss carryforwards will expire in 2012 and 2013, respectively, unless
previously utilized and may be significantly limited in use as a result of
changes in ownership of the Company.
22
<PAGE>
11. Income Taxes (Continued)
Significant components of the Company's deferred tax assets are shown
below. A valuation allowance of $313,000 has been recognized to offset the
deferred tax assets as realization of such assets is uncertain.
December 31 1998 1997
----------- ---- ----
Deferred tax assets computed at 34%:
Net operating loss carryforwards $ 274,000 $ 14,000
Accrued bonus compensation 39,000 0
------ ------
Net deferred tax assets 313,000 14,000
------- ------
Valuation allowance for deferred
tax assets (313,000) (14,000)
-------- -------
Total deferred tax assets $ 0 $ 0
========= =========
12. Non-cash Investing and Financing Activities
The Company had the following non-cash investing and financing activities:
December December
December 31,1998 31, 1997
-------- ------- --------
Stock issued in exchange for
franchise and equipment $ 0 $ 106,000
Short term obligation for franchise $ 0 $ 30,000
Stock issued in exchange for
trading securities $118,770 $ 0
Stock issued against shareholder notes $ 0 $ 18,643
13. Year 2000 (Unaudited)
The Company has been working to update its information technology to be
ready for the Year 2000. The Company has not assessed the effects of the
Year 2000 on its vendors, customers and other third-party organizations.
The cost of the Year 2000 initiatives is not expected to be material to
the Company's results of operation or financial position.
23
<PAGE>
13. Year 2000 (Unaudited) (Continued)
The year 2000 issue is grounded in that many computer systems process
transactions based on storing two digits for the year of a transaction
(for example, "96" for 1996), rather than a full four digits. Systems that
process year 2000 transactions with the year "00" may encounter
significant processing inaccuracies and even inoperability. Many companies
will incur significant costs to make the needed software changes.
14. Contingencies - Going Concern
As reported in the financial statements, the Company has a deficit in
working capital of approximately $1,038,000 at December 31, 1998 and has
incurred a loss from operations for the period ended June 30, 1999.
These factors create uncertainty about the Company's ability to continue as
a going concern. The ability of the Company to continue as a going concern
is dependent on the Company obtaining adequate capital to fund operating
losses until it becomes profitable. If the Company is unable to obtain
adequate capital it could be forced to cease operations.
Subsequent to December 31, 1998 the Company has proceeded with its business
plan by operating the soccer team, pursuing new facilities and raising
additional capital. The Company has been successful in settling some of its
short term obligations by issuing warrants to purchase the Company's common
stock.
Management expects to achieve profitable operations in the year 2000 and to
be successful in raising capital.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
24
<PAGE>
15.Subsequent Events
Private Placement Offering
--------------------------
The Company continued to raise capital through the private placement
offering in 1999. A second private placement memorandum dated February 3,
1999 offered 1,000,000 common shares at a price of $1.00 per share. At the
time of this report an additional 159,000 shares had been issued adding
$159,000 in proceeds from the offerings. $10,700 had been raised from
warrants exercised resulting in the issue of 21,400 common shares. An
additional 211,500 shares had been issued in return for various services
and syndication costs.
Convertible Promissory Notes
----------------------------
In order to obtain "bridge" funds while a public offering is being
prepared, the Company has issued convertible notes with a face amount
totaling $186,000 as of the date of this report. The notes bear interest
at 8% per annum and are convertible into common stock at $1.00 per share
at the option of the holder. The notes mature on December 31, 1999.
16. Certain Relationships With Other Companies (unaudited)
Las Vegas Soccer Development Corporation
----------------------------------------
The Company's strategy for the future is to assist in the development of
the USL (United Soccer League). Corporation was formed by Yan Skwara,
CEO/President, with the primary efforts of establishing an A-League team
in Las Vegas implementing the same format and image of the San Diego
Flash. Creating additional teams in the league will allow a stronger
structure for all affiliates of the league.
Transactions To And From Other Companies
----------------------------------------
As of 6/30/99 Las Vegas Soccer Development Corporation (LVSDC) is indebted
to San Diego Soccer Development Corporation (SDSDC) a total amount of
$12,000.00, this amount was repaid in two transactions - 7,000.00 on
8/4/99 and 5,000.00 on 8/5/99. As of today's date San Diego Soccer
Development Corporation (SDSDC) is indebted to Las Vegas Soccer
Development Corporation (LVSDC) a total amount of $9,930.00. Las Vegas
Soccer Development
To And From Other Companies (unaudited) (continued) Corporation intends to
receive all monies due by December 31, 1999. There is no interest attached
to any of the above mentioned loan transactions.
25
<PAGE>
PART III
- --------
ITEMS 1 AND 2: INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit Index.
3(i) Articles of Incorporation, filed on August 28, 1997, State of California
3(ii) Bylaws of corporation, dated August 29, 1997
4.1 San Diego Soccer Development Corporation Certificate for Common Stock
4.2 Form of Convertible Promissory Note
10.1 Lease agreement by and between Yan K. Skwara & Marta Glodkoska and Donn
Lowrey & Russell Thurman, dated January 11, 1999
10.2 Stadium Agreement by and between San Diego Soccer Development Corporation
and San Diego Mesa College, dated November 2, 1998
23 Consent of Logan Throop & Co., LLP, dated September 29, 1999
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 29, 1999 SAN DIEGO SOCCER DEVELOPMENT
CORPORATION
By: /s/ Yan K. Skwara
-----------------------------
Yan K. Skwara, President
26
<PAGE>
ARTICLES OF INCORPORATION
I.
NAME: The name of this corporation shall be
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
II.
PURPOSE: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporations
Law of California, other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
INITIAL AGENT: The name and address of the corporation's initial agent for
service of process is
LESLIE ANN GRIESBAUM
5465 Morehouse Drive, Suite 190
San Diego, California 92121-4713
IV.
DIRECTOR LIABILITY: The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
V.
INDEMNIFICATION OF AGENTS: The corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the Corporations Code
for breach of duty to the corporation and its stockholders through bylaw
provisions or through agreements with the agents, or both, in excess of the
indemnification otherwise permitted by Section 317 of the Corporations Code,
subject tot the limits on such excess indemnification set forth in Section 204
of the Corporations Code.
VI.
CAPITAL STOCK: The corporation is authorized to issue only one class of
stock. The total number of shares the corporation is authorized to issue is
20,000,000.
DATED: August 22, 1997 /s/ Leslie Ann Griesbaum
-----------------------------
LESLIE ANN GRIESBAUM, INCORPORATOR
I declare that I am the person who executed the above Articles of
Incorporation, and such instrument is my act and deed.
/s/ Leslie Ann Griesbaum
-------------------------------
LESLIE ANN GRIESBAUM, INCORPORATOR
1
<PAGE>
BY LAWS OF
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(A CALIFORNIA CORPORATION)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and for the
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: 10:00 o'clock a.m.. Date of Meeting: The 29th day of
August, 1997
Section 2. PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meetings
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage thereon prepaid, or
sent by other means of written communication addressed to the shareholder at his
address as it appears on the stock transfer books of the corporation. The notice
of any meeting at which directors are to be elected shall include the names of
nominees intended at the time of notice to be presented by management for
election. At an annual meeting of shareholders, any matter relating to the
affairs of the corporation, whether or not stated in the notice of the meeting,
may be brought up for action except matters which the General Corporation Law
requires to be stated in the notice of the meeting. The notice of any annual or
1
<PAGE>
special meeting shall also include, or be accompanied by, any additional
statements, information, or documents prescribed by the General Corporation Law.
When a meeting is adjourned to another time or place, notice of the adjourned
meeting need not be given if the time and place thereof are announced at the
meeting at which the adjournment is taken; provided that, if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
and wherever held. shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written wavier of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a wavier of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
the attendance at a meeting shall not constitute a waiver of any right to object
to the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but, if neither the
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to replace
2
<PAGE>
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. RUM; VOTE; WRITTEN CONSENT. The holders of a majority of the voting
shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidate's names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
3
<PAGE>
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706, and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances.
(Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300(b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300(d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be two. Thereafter, the authorized number
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of directors constituting the Board shall be at least three provided that,
whenever the corporation shall have only two shareholders, the number of
directors may be at least two, and, whenever the corporation shall have only one
shareholder, the number of directors may be at least one. Subject to the
foregoing provisions, the number of directors may be changed from time to time
by an amendment of these By-Laws adopted by the shareholders. Any such amendment
reducing the number of directors to fewer than five cannot be adopted if the
votes cast against its adoption at a meeting or the shares not consenting in
writing in the case of action by written consent are equal to more than sixteen
and two-thirds percent of the outstanding shares. No decrease in the authorized
number of directors shall have the effect of shortening the term of any
incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President the Secretary or the Board of Directors, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to the
office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
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PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board,
if any and acting, by the Vice Chairman of the Board, if any, by the
President, if any, by any Vice President or Secretary, or by any two
directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
only one director is required by the By-Laws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
Section 8. QUORUM AND ACTION A majority of the authorized number of directors
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of the
authorized number of directors or at least two directors, whichever is larger,
or unless the authorized number is only one. A majority of the directors
present, whether or not a quorum is present, may adjourn any meeting to another
time and place. If the meeting is adjourned for more than twenty-four hours,
notice of any adjournment to another time or place shall be given prior to the
time of the adjourned meeting to the directors, if any, who were not present at
the time of the adjournment. Except as the Articles of Incorporation, these
By-Laws and the General Corporation Law may otherwise provide, the act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be the act of the Board of Directors.
Members of the Board of Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another, and participation by such
use shall be deemed to constitute presence in person at any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
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Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all directors
are so removed, new directors may be elected at the same meeting or by such
written consent. The Board of Directors may declare vacant the office of any
director who has been declared of unsound mind by an order of court or convicted
of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
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ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
such an officer, shall, if present, preside at all meetings of the Board of
Directors or prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
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Section 8. VICE PRESIDENT. In the absence or disability of the President, the
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
of the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
office or at the office of the corporation's transfer agent, a share register,
or duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including amounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. he shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
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State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue the whole or any part
of its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to such issuance, the corporation may require any
such owner of the allegedly lost, stolen or destroyed certificate or any such
owner's legal representative to give the corporation a bond, or other adequate
security, sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
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action by the Board of Directors has been taken, shall be the day on which the
first written consent is given; and the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record or outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may provide for more
than one class or series of shares, one or more of which are limited or denied
such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418(c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300(b) shall only
be effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close organizations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports, 16 (Rights of Inspection),
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18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any other provisions
of the Code or these By-Laws may be altered or waived thereby, but to the extent
they are not so altered or waived, these By-Laws shall be applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation. Such authority may be general or confined to specific instances.
Unless so authorized by the Board of Directors, no officer, agent or employee
shall have any power or authority to bind the corporation by any contract or
agreement, or to pledge its credit, or to render it liable for any purposes or
any amount, except as provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted
by the incorporator or incorporators of the corporation, the By-Laws may be
amended or repealed or new By-Laws may be adopted by the shareholders entitled
to exercise a majority of the voting power or by the Board of Directors;
provided, however, that the Board of Directors shall have no control over any
By-Law which fixes or changes the authorized number of directors of the
corporation; provided, further, than any control over the By-Laws herein vested
in the Board of Directors shall be subject to the authority of the aforesaid
shareholders to amend or repeal the By-Laws or to adopt new By-Laws; and
provided further that any By-Law amendment or new By-Law which changes the
minimum number of directors to fewer than five shall require authorization by
the greater proportion of voting power of the shareholders as hereinbefore set
forth.
ARTICLE VIII
BOOKS AND RECORDS - STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
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Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of
process within the State of California is:
LESLIE ANN GRIESBAUM
5465 Morehouse Drive, Suite 190
San Diego, CA 92121
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S)
The undersigned person(s) appointed in the Articles of Incorporation
to act as the Incorporator(s) or First Director(s) of the above-named
corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 29th day of August, 1997.
/s/ Yan Skwara
------------------------------
Yan Skwara
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation; that the foregoing By-Laws were adopted as the By-Laws
of said corporation on the date set forth above by the person(s) appointed in
the Articles of Incorporation to act as the Incorporator(s) or First Director(s)
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 18th day of June, 1995.
/s/ Trisha Bollman
------------------------------
Trisha Bollman, Secretary
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(SEAL)
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE.
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation and that the above and foregoing Code of By-Laws was
submitted to the shareholders at their first meeting held on the date set forth
in the By-Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of
June, 1997.
/s/ Trisha Bollman
-----------------------------
Trisha Bollman, Secretary
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Date
See Restrictive Legend on Reverse
incorporated under the laws of the state of california
number _____________ _____________ Shares
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
Authorized Capital Stock: 20,000,000 Common Shares
This Certifies that ______________________________________ is the registered
holder of __________________________________________________________ shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be4 hereunto
affixed.
This _________ day of _________________ A.D. _______
- --------------------------- -----------------------------
Secretary (seal) President
Trisha M. Bollman Yan K. Skwara
1
<PAGE>
(reverse side)
For value received ____________ hereby sell, assign and transfer unto
___________________________________________________________ (please insert
social security or other identifying number of assignee). Name and address of
transferee should be printed or typewritten.___________________________________
________________________________________________________________________________
Shares represented by the within certificate and, if required, do hereby
irrevocably constitute and appoint ____________________________________________
Attorney to transfer the said Shares on the books of the within named
Corporation, with full power of substitution in the premises.
Dated _____________________________
In presence of _____________________________,
- -----------------------------------
Notice: The signature on this assignment must correspond with the name as
written upon the face of this certificate, in every particular, without
alteration or enlargement, or any change whatever.
The Securities represented by this certificate have not been registered or
qualified under the Securities Act of 1933 or the Securities Laws of any state.
The Securities may be offered or sold only if registered and/or qualified
pursuant to the relevant provisions of applicable Federal and State Securities
Laws, or if an exemption from such registration and/or qualification is
applicable.
2
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ATTACHMENT A - FORM OF SERIES 99-1 PROMISSORY NOTE
THIS PROMISSORY NOTE (THE "SECURITY") HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
506 PROMULGATED UNDER THE ACT, AND THIS SECURITY HAS NOT BEEN REGISTERED OR
QUALIFIED UNDER THE STATE SECURITIES LAWS OF ANY RELEVANT JURISDICTION IN WHICH
THIS SECURITY HAS BEEN OFFERED AND SOLD PURSUANT TO AN APPLICABLE EXEMPTION
THEREFROM. IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY
WITHOUT PROVIDING THE COMPANY WITH AN OPINION OF COUNSEL TO THE EFFECT THAT A
PROPOSED TRANSFER OR SALE OF THIS SECURITY (I) DOES NOT AFFECT THE ORIGINAL
ISSUANCE AND SALE OF SECURITIES IN COMPANY PURSUANT TO THE EXEMPTIONS FROM
REGISTRATION PROVIDED BY RULE 506 UNDER THE ACT AND PURSUANT TO ANY APPLICABLE
STATE EXEMPTION FROM REGISTRATION AND QUALIFICATION RELIED UPON BY THE COMPANY
AND (II) IS IN COMPLIANCE WITH ALL APPLICABLE STATE OR FEDERAL SECURITIES LAWS.
Series 99-1 Promissory Note
Maturing December 31, 1999
$12,000.00 ______________________, 1999
San Diego, California
1. Payment of Principal and Interest; Term.
1.1 Payment of Principal and Interest. For good and valuable
consideration, receipt of which is hereby acknowledged, SAN DIEGO SOCCER
DEVELOPMENT CORPORATION, a California corporation (the "COMPANY"), whose address
is 2123 Garnet Avenue, Suite B, San Diego, CA 92109, hereby agrees to pay to
______________________________________________ (the "LENDER"), whose address is
______________________________________________________________, the sum of
__________________________________________________ Dollars ($_______________),
with simple interest on the unpaid principal balance at the Maturity Date, at
the rate of eight percent (8%) per annum from the date advanced.
1.2 Term. The maturity date ("Maturity Date") of this promissory note
("Promissory Note") shall mean the date that the LENDER gives COMPANY a written
demand for payment, which demand may be made by LENDER on December 31, 1999, or,
at the election of the LENDER, any later date which is within 180 days following
the effective date of a registration statement filed by the COMPANY with respect
to any of the COMPANY's shares of common stock ("Common Shares")("Registration
Statement").
2. Events of Default; Remedies.
2.1 Events of Default Defined; Acceleration of Maturity. If any of the events
specified in this Paragraph 2.1 shall occur (herein individually referred to as
an "Event of Default"), whatever the reason for such Event of Default and
whether its shall be voluntary or involuntary or by operation of law or
otherwise, unless expressly waived by LENDER, then upon the occurrence of any
such Event of Default, LENDER may, so long as such condition exists, by written
notice to the COMPANY, declare the unpaid principal amount of this Promissory
Note to be, and the same shall forthwith become, due and payable, together with
any unpaid interest accrued thereon.
(i) Default in the payment of any sums when due and payable
hereunder, or the performance of any other obligation hereunder, if such default
is not cured by the COMPANY within thirty (30) days after the LENDER has given
the COMPANY written notice of such default;
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(ii) The institution by the COMPANY of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Act, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
COMPANY, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the COMPANY in furtherance of any such action; or
(iii)If, within sixty (60) days after the commencement of an
action against the COMPANY (and service of process in connection therewith on
the COMPANY) seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the COMPANY or
all orders or proceedings thereunder affecting the operations or the business of
the COMPANY stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the COMPANY of any trustee, receiver or
liquidator of the COMPANY or of all or any substantial part of the properties of
the COMPANY, such appointment shall not have been vacated.
2.2 Suits for Enforcement. If any Event of Default shall have
occurred and be continuing, LENDER may proceed to protect and enforce its
rights, either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant or agreement contained in this Promissory
Note or in aid payment of all sums due hereunder or to enforce any other legal
or equitable rights as the LENDER thereof. In the event of litigation to enforce
or interpret any provision of this Promissory Note, a court of competent
jurisdiction may aware either party reasonable attorneys fees and costs.
2.3 Remedies Cumulative. No remedy herein conferred upon LENDER is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
2.4 Remedies Not Waived. No course of dealing between the COMPANY and
LENDER and no delay or failure in exercising any rights hereunder or under this
Promissory Note shall operate as a waiver of any of LENDER's rights with respect
thereto.
3. Restrictions on Transferability. This Promissory Note shall not be
transferable by LENDER except upon the conditions specified herein, which
conditions are intended solely to insure compliance with the provisions of the
Securities Act and applicable state law. Neither LENDER nor any other permitted
holder of this Promissory Note shall transfer same unless same has been
registered with the Commission under the Securities Act and appropriately
qualified under applicable state law, or unless the proposed transferor shall
have caused to have been delivered to the COMPANY, prior to such transfer, an
opinion from counsel satisfactory to the COMPANY, in form and substance, to the
effect that such transfer may be effected without such registration or
qualification, which opinion may be waived by COMPANY in its sole discretion.
Upon delivery to the COMPANY of such opinion, the transfer may be effected in
the manner contemplated by such opinion.
4. Conversion of Principal Amount into Common Shares.
4.1 Conversion. Any Holder of this Note has the right, before the
filing of an Initial Public Offering ("IPO") by the COMPANY, to convert this
note in to Common Shares to be registered as part of the IPO. In the
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alternative, any Holder of this Note shall have the right to convert this Note
into freely tradable Common Shares six months following the close of the IPO.
The number of Common Shares into which this Note may be converted ("Conversion
Shares") shall be determined by dividing the aggregate principal amount by the
Conversion Price (as defined below) in effect at the time of such conversion.
The initial Conversion Price shall be equal to $1.00/share.
4.2 Notice of Conversion. Before the Holder shall be entitled to
convert this Note into Common Shares, it shall surrender this Note at the office
of the Company and shall give written notice by mail, postage prepaid, to the
Company at its principal corporate office, of the election to convert the same
pursuant to this Section 4.1, and shall state therein the name or names in which
the certificate or certificates for Common Shares are to be issued. The Company
shall, as soon as practicable thereafter, issue and deliver at such office to
the Holder of this Note a certificate or certificates for the number of Common
Shares to which the Holder of this Note shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of this Note, and the person or persons
entitled to receive the Common Shares issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Shares
as of such date.
4.3 Delivery of Stock Certificates. As promptly as practicable after
the conversion of this Note, the Company at its expense will issue and deliver
to the Holder of this Note a certificate or certificates for the number of full
Common Shares issuable upon such conversion.
4.4 Mechanics and Effect of Conversion. No fractional shares shall be
issued upon conversion of this Note. In lieu of the Company issuing any
fractional shares to the Holder upon the conversion of this Note, the Company
shall pay to the Holder the amount of outstanding principal that is not so
converted, such payment to be in the form as provided below. Upon the conversion
of this Note pursuant to Section 4.1 above, the Holder shall surrender this
Note, duly endorsed, at the principal office of the Company. At its expense, the
Company shall, as soon as practicable thereafter, issue and deliver to such
Holder at such principal office a certificate or certificates for the number of
such Common Shares to which the Holder shall be entitled upon such conversion
(bearing such legends as are required by applicable state and federal securities
laws in the opinion of counsel to the Company), together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described above. In the event of any conversion of this
Note pursuant to Section 4.1 above, such conversion shall be deemed to have been
made immediately prior to the closing of the issuance and sale of such Common
Shares and on and after such date the Holder of this Note entitled to receive
the Common Shares issuable upon such conversion shall be treated for all
purposes as the record Holder of such shares. Upon conversion of this Note, the
Company shall be forever released from all its obligations and liabilities under
this Note.
5. Conversion Price Adjustments.
5.1 Adjustments for Stock Splits and Subdivisions. In the event the
Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding Common Shares or the determination of holders of Common Shares
entitled to receive a dividend or other distribution payable in additional
Common Shares or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional Common Shares
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<PAGE>
(hereinafter referred to as "Common Share Equivalents") without payment of any
consideration by such holder for the additional Common Shares or the Common
Share Equivalents (including the additional Common Shares issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of this Note shall be appropriately decreased so that the
number of Common Shares issuable upon conversion of this Note shall be increased
in proportion to such increase of outstanding shares.
5.2 Adjustments for Reverse Stock Splits. If the number of Common
Shares outstanding at any time after the date hereof is decreased by a
combination of the outstanding Common Shares, then, following the record date of
such combination, the Conversion Price for this Note shall be appropriately
increased so that the number of Common Shares issuable on conversion hereof
shall be decreased in proportion to such decrease in outstanding shares.
5.3 Notices of Record Date, etc. In the event of:
(i) Any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or
(ii) Any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all of the assets of the Company to any
other person or any consolidation or merger involving the Company; or
(iii) Any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company will mail to the holder of
this Note at least ten (10) days prior to the earliest date specified therein, a
notice specifying:
(a) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and
(b) The date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective and the record date
for determining stockholders entitled to vote thereon.
5.4 Reservation of Shares Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
Common Shares solely for the purpose of effecting the conversion of the Note
such number of its Common Shares as shall from time to time be sufficient to
effect the conversion of the Note; and if at any time the number of authorized
but unissued Common Shares shall not be sufficient to effect the conversion of
the entire outstanding principal amount of this Note, in addition to such other
remedies as shall be available to the holder of this Note, the Company will use
its best efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued Common Shares to
such number of shares as shall be sufficient for such purposes.
5.5 Registration. The Company shall determine to register any of its
Common Shares, other than a registration relating solely to employee benefit
plans, or a registration relating to a corporate reorganization or other
transaction under Rule 145, or a registration on any registration form that does
not permit secondary sales, the Company will:
(i) promptly give LENDER written notice thereof; and
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(ii) include in such registration (and any related qualification under blue sky
laws or other compliance), all the Common Shares specified in a written request
made by LENDER and received by the Company within ten (10) days after the
written notice from the company described in clause (1) above is delivered by
the Company. Such written request may specify all or a part of the Common Shares
issuable to LENDER upon conversion. All expenses incurred in connection with any
registration, qualification or compliance shall be borne by the COMPANY.
6. Miscellaneous.
6.1 Notes in Series. This Promissory Note is one of an issue of
promissory notes of the COMPANY designated as "SERIES 99-1 PROMISSORY NOTES"
limited to the maximum aggregate principal amount of Two Hundred Thousand
Dollars ($200,000), unless a higher amount is designated at the absolute
discretion of the COMPANY. In the event that the COMPANY is unable to make full
payment of principal and/or interest on all the Series 99-1 Promissory Notes
when due, whether in the normal course or upon acceleration, the total amount
paid at such time by the COMPANY in respect of all of such notes shall be
applied ratably to the payment of the amounts then due and unpaid, without
preference or priority of any kind, according to the amounts due and payable on
each of such notes. By acceptance of this Promissory Note, LENDER hereby agrees
and consents to such ratable application; however, any acceptance of a partial
payment by LENDER shall not be considered a forgiveness of indebtedness or a
waiver of timely payment.
6.2 Unsecured Obligation. The obligation evidenced by
this Promissory Note shall be unsecured.
6.3 Place of Payment. The COMPANY shall pay all amounts which become
due and payable hereunder to LENDER at its address set forth above, except as
otherwise provided in Paragraph 5.4.
6.4 Notices. All notices, opinions and other communications provided
for in this Promissory Note shall be in writing and, together with any payments
to be made hereunder, either personally delivered or mailed, first class postage
prepaid, addressed:
(i) If to the COMPANY, at its address set forth above, or at
such other address as the COMPANY may hereafter designate by notice to LENDER,
or
(ii) If to LENDER, at its address set forth above, or at such
other address as LENDER may hereafter designate by notice to the COMPANY. Any
item to be given or delivered hereunder shall be deemed given or delivered ten
(10) days after the date it is mailed as herein provided, or upon the date
personal delivery is made.
6.5 Venue; Attorneys Fees and Costs. All issues relating to the
legality, enforcement and interpretation of all provisions of Promissory Note
and any other matters relative to the sale of the Securities shall be resolved
in a court of competent jurisdiction in the Southern District of California. The
court may award either party in such litigation reasonable attorneys fees and
costs, in addition to any other appropriate relief.
6.6 Amendments. This Promissory Note may be amended only with the
mutual written consent of COMPANY and LENDER.
6.7 Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Promissory
Note.
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Executed at San Diego, California, as of the date first set forth above.
San Diego Soccer Development Corporation,
A California Corporation
By: _______________________________________________
Yan Skwara, President and CEO
By: _______________________________________________
Trisha Bollman, Secretary
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NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Note)
TO SAN DIEGO SOCCER DEVELOPMENT CORPORATION
The undersigned, the holder of the foregoing Note, hereby surrenders such
Note for conversion of $ _________________ unpaid principal at a conversion
price of $1.00/share into ____________ shares of Common Stock of SAN DIEGO
SOCCER DEVELOPMENT CORPORATION, and requests that the certificates for such
shares be issued and delivered to:
------------------------------------
Name
------------------------------------
Address
------------------------------------
Address
Dated: ___________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Note)
---------------------------------------------
Signature of Holder
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Standard Office Lease - Net
American Industrial Real Estate Association
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposed only, January 11,
1999, is made by and between Donn Lowrey and Russell Thurman (herein called
"Lessor" and Yan K. Skwara & Marta Glodkoska, doing business under the name of
San Diego Flash Pro Soccer, (herein called "Lessee").
1.2 Premises: Suite Number(s) See Exhibit "A" floors, consisting of
approximately N/A square feet , more or less, as defined in paragraph 2 as shown
on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 2123 Garnet Avenue,
Suite B, in the City of San Diego, County of San Diego, State of California, as
more particularly described in Exhibit A hereto, and as defined in paragraph 2.
1.4 Use: General Office use, subject to paragraph 6.
1.5 Term: Three (3) years commencing January 17, 1999 ("Commencement Date")
and ending January 16, 2002 , as defined in paragraph 3.
1.6 Base Rent: One Thousand Three Hundred Fifty and 00/100 per month,
payable on the 16th day of each month per paragraph 4.1.
1.7 Base Rent Increase: One N/A the monthly Base Rent payable under
paragraph 1.6 above shall be adjusted as provided in paragraph 4.3 below.
1.8 Rent Paid Upon Execution: One Thousand Three Hundred Fifty and 00/100
Dollars ($1,350.00) for First month's rent.
1.9 Security Deposit: One Thousand Three Hundred Fifty and 00/100 Dollars
($1,350.00).
2. Premises, Parking and Common Areas
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the Office
Building Project". Lessor hereby leases to Lessee and lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises", including rights to the Common Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and subject to the
rules and regulations attached hereto, and as established by Lessor from time to
time, Lessee shall be entitled to rent and use 2 parking spaces in the Office
Building Project at the monthly rate applicable from time to time for monthly
parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly rate per parking space will be $ N/A per month at the
commencement of the term of this Lease, and is subject to change upon five (5)
days prior written notice to Lessee. Monthly parking fees shall be payable one
month in advance prior to the first day of each calendar month.
2.3 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 Common Areas - Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including by not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries of the
Office Building Project to be a part of the Common Areas, provided that such
other land and improvements have a reasonable and functional relationship to the
Office Building Project;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes in, to
or with respect to the Common Areas and Office Building Project as Lessor may,
in the exercise of sound business judgment deem to be appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as specified
in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date
and subject to paragraph 3.2.2, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof; but in such case,
Lessee shall not be obligated to pay rent or perform any other obligation of
Lessee under the terms of this Lease, except at may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and lessee, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this lease, in which event the
parties shall be discharged from all obligations hereunder; provided, however,
that, as to Lessee's obligations, Lessee first reimburses Lessor for all costs
incurred for Non-Standard Improvements and, as to Lessor's obligations, Lessor
shall return any money previously deposited by Lessee (less any offsets due
Lessor for Non-Standard Improvements); and provided further, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of
no further force or effect.
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3.2.1 Possession Tendered - Defined. Possession of the Premises shall be
deemed tendered to Lessee ("Tender of Possession") when (1) the improvements to
be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2.1.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent, and
the sixty (60) day period following the Commencement Date before which Lessee's
right to cancel this Lease accrues under paragraph 3.2, shall be deemed extended
to the extent of any delays caused by acts of omissions of Lessee, its agents,
employees and contractors.
3.3 Early Possession. If Lessee occupies the premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease term is
defined as the completion of the improvements, Lessee and Lessor shall execute
an amendment to this Lease establishing the date of Tender of Possession (as
defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided In paragraph
4.3, and except as may be otherwise expressly prodded in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay Lessor
upon execution hereof the advance Base Rent described in paragraph 1.8 of the
Basic Lease Provisions. Rent for any period during the term hereof which is for
less than one month shall be prorated based upon the actual number of days of
the calendar month involved. Rent shall payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor In an amount sufficient to restore said deposit to the
full amount then required of Lessee. If the monthly Base Rent shall, from time
to time, Increase during the term of this Lease, Lessee shall, at the time of
such Increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shell at all times
bear the same proportion to the then current Base Rent as the initial security
deposit bears to the initial Base Rent set forth in paragraph 1.6 of the Basic
Lease Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor's options, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.
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6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1,4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state existing on
the date that the Lease term commences, but without regard to alterations or
improvements made by Lessee or the use for which Lessee will occupy the
Premises, does not violate any covenants or restrictions of record, or any
applicable building code, regulation or ordinance in effect on such Lease term
Commencement Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Lessor, after written notice
from Lessee, to promptly, at Lessor's sole cost and expanse, rectify any such
violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expanse, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants aha restrictions al record, and requirements of
any fire Insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the Premises.
Lessee shall conduct its business in a lawful manner and shall not use or permit
the use of the Premises or the common Areas in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the
Office Building Project.
6.3 Condition of Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises and the Office Building Project in their condition existing as of the
Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for Its
Intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement o! rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or: repairs made by Lessor to the Office Building Project or any
part thereof. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises In good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may at its option, upon reasonable notice,
elect to have Lessee perform any particular such maintenance or repairs the cost
of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alteration, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on or
about the Premises, or the Office Building Project. As used in this paragraph
7.3 the term "Utility Installation" shall mean carpeting, window and wall
coverings, power panels, electrical distribution systems, lighting fixtures, air
conditioning, plumbing, and telephone and telecommunication wiring and
equipment. At the expiration of the term, Lessor may require the removal of any
or all of said alterations, improvements, additions or Utility Installations,
and the restoration of the Premises and the Office Building Project to their
prior condition, at Lessee's expanse. Should Lessor permit Lessee to make its
own alterations, improvements, additions or Utility Installations, Lessee shall
use only such contractor as has been expressly approved by Lessor, and Lessor
may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien
and completion bond in an amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for mechanic's
and materialmen's liens and to Insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use e contractor not expressly approved by Lessor,
Lessor may, at any time during the term of this Lease, require that Lessee
remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in
or about the Premises or the Office Building Project that Lessee shall desire to
make shall be presented to Lessor In written form, with proposed detailed plans.
If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use
in-the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work In the Premises by Lessee, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises or the
Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at Its sole
expanse defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand Indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim In addition, Lessor may require Lessee to
pay Lessor's reasonable attorneys fees and costs in participating in such action
if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alteration, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made to the Premises by Lessee, including but not limited to, floor
coverings, panelings, doors, rapes, built-ins, moldings, sound attenuation, and
lighting and telephone or communication systems, conduit, wiring and outlets,
shall be made and done in a good and workmanlike manner and of good and
sufficient quality and materials and shall be the property of Lessor and remain
upon and be surrendered with the Premises at the expiration of the lease term,
unless Lessor requires their removal pursuant to paragraph 7.3(a). Provided
Lessee is not in default, notwithstanding the provisions of this paragraph
7.3(e), Lessee's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises or the Building, and other than Utility Installations, shall remain
the property of Lessee and may be removed by Lessee subject tot he provisions of
paragraph 7.2.
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(f) Lessee shall provide Lessor with as-built plans and specifications for
any alterations, improvements, additions or Utility Installations.
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, security systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably interfere
with Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent, in an
amount of not less than $1,000,000 per occurrence of bodily injury and property
damage combined or In a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional Insured against liability
arising out of the use, occupancy or maintenance of the Premises. Compliance
with the above requirement shall not, however, limit the liability of Lessee
hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep In force
during the term of this Lease a policy of Combined Single Limit. Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project In an amount not less than $5,000,000.00 per
occurrence.
8.3 Property Insurance--Lessee. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease for the benefit of Lessee,
replacement cost fire and extended coverage Insurance, with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance-Lessor. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of Insurance covering loss or damage
to the Office Building Project improvements, but not Lessee's personal property,
fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition. Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carded by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an Insured loss as defined In paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense, Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the Increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
Commencement Date of this Lease. No such policy shall be cancelable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to
the expiration of such policies, furnish Lessor with renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and relieve
the other, end waive their entire right of recovery against the other, for
direct or consequential loss or damage arising out of or incident to the perils
covered by property insurance carried by such party, whether clue to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees or invitees and from and against all costs, attorney's
fees expenses and liabilities incurred Lessor as me result or any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding Involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for Injury to Lessee's business or any loss of Income
therefrom, or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee s employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is Inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified in this paragraph 8
are adequate to cover Lessee's property or obligations under this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or destroyed
to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of which
the Premises are a pert is damaged or destroyed to the extent that the cost to
repair Is less than fifty percent (50%) of the then Replacement Cost of the
Building.
(c) "Premises Building Total Destruction" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the buildings on
the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean if
the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused by an
event required to be covered by the Insurance described in paragraph 8. The fact
that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those Installed by Lessor at Lessee's expense.
9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject tot he provisions of paragraphs 9.4 and 9.5, if
at any time during the term of this Lease there is damage which an Insured Loss
and which falls into the classifications of either Premises Damage or Premises
Building Partial Damage, then Lessor shall, as soon as reasonably possible and
to the extent the required materials and labor are readily available through
usual commercial channels, at Lessor's expense, repair such damage (but not
Lessee's fixtures, equipment or tenant improvements originally paid for by
Lessee) to its conditions existing at the time of the damage, and this Lease
shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and 9.5,
if at any time during the term of this lease there is damage which is not an
Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
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9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classification of either (i) Premises Building Total
destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures, equipment or
tenant Improvements, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) clays after the date of
occurrence of such damage of Lessor's Intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last twelve
(12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than twenty (20) days after the occurrence of an
Insured Loss falling within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly exercises such
option during said twenty (20) day period, Lessor shall, at Lessor's expense,
repair such damage, but not Lessee's fixtures, equipment or tenant improvements,
as soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said twenty (20) day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said twenty (20) day period by giving written notice to Lessee
of Lessor's election to do so within ten (10)days after the expiration of said
twenty (20) day period, notwithstanding any term or provision in the grant of
option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expenses) for
the period during which such damage, repair or restoration continues shall be
abated, provided (1) the damage was not the result of the negligence of Lessee,
and (2) such abatement shall only be to the extent the operation and
profitability of Lessee's business as operated from the Premises is adversely
affected. Except for said abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Promises or the
Building under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option cancel and terminate this Lease
by giving Lessor written notice of Lessee's election to do so at any time prior
to the commencement or completion, respectively, of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any such
restoration and repair, Including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination-Advance Payments. Upon termination of this Lease pursuant to
this paragraph 9, an equitable adjustment shall be made concerning advance rent
and any advance payments made by Lessee to Lessor. Lessor shall, in addition,
return to Lessee so much of Lessee's security deposit as has not theretofore
been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property 18 destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property tax, as defined in
paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying any
increase in real property tax specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall Include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bend or bonds, levy or tax (other than inheritance, personal income
or estate taxes imposed on the Office Building Project or any portion thereof by
any authority having the direct or Indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other Improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessor's right to rent or other income therefrom,
and as against Lessor's business of leasing the Office Building Project. The
term "real property tax" shall also Include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove Included within the definition of "real
property tax',' or (ii) the nature of which was hereinbefore included within the
definition of "real property taxes" or (Iii) which is Imposed for a service or
right not charged prior to June 1,1978, or, if previously charged, has been
increased since June 1,1978, or (iv) which is Imposed as a result of a change in
ownership, as defined by applicable local statutes for property tax purposes, of
the Office Building Project or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such change of
ownership, or (v) which is Imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the taxes for which
are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. Utilities.
11.1 Services Provided by Lessee. Lessee shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas, heat,
light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately metered
to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided during
generally accepted business days and hours or such other days or hours as may
hereafter be set forth. Utilities and services required at other times shall be
subject to advance request and reimbursement by Lessee to Lessor of the cost
thereof.
11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess use or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall not
be liable in any respect whatsoever for the inadequacy, stoppage, interruption
or discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor'8 reasonable control or
in cooperation with governmental request or direction.
12. Assignment and Subletting.
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12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) if Lessee is a corporation more than
twenty-five percent (25%) of the voting stock of such corporation, or (b) if
Lessee is a partnership, more than twenty-five percent (25%) of the profit an
loss participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee my assign or sublet the Premises, or any portion thereof, without
Lessor's consent, to any corporation which controls, is controlled by or is
under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate";
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall
be given written notice of such assignment and assumption. Any such assignment
shall not, In any way, affect or limit the liability of Lessee under the terms
of this Lease even if after such assignment or subletting the terms of this
Lease are materially changed or altered without the consent of Lessee, the
consent of whom shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the primary liability
of Lessee to pay the rent and other sums due Lessor hereunder Including Lessee's
Share of Operating Expenses, and to perform all other obligations to be
performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such assignment or
subletting, nor the acceptance of rent, shall constitute a waiver or estoppel of
Lessor's right to exercise Its remedies for the breach of any of the terms or
conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by third
parties, then an assignment or sublease, and Lessor's consent thereto, shall not
be effective unless said guarantors give their written consent to such sublease
and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shell not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the subleases. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent and such
action shall not relieve such parsons from liability under this Lease or said
sublease; provided, however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or Increases the obligations of the
Lessee or subleases under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied upon by
Lessor in giving Its consent to an assignment or subletting wall materially
false shall, at Lessor's election, render Lsssor'8 said consent null and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and sheu be deemed
included in all subleases under this Lease whether or not expressly Incorporated
therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all rentals and income arising from any sublease, heretofore or hereafter
made by Lessee, and Lessor may collect such rent and Income and apply same
toward Lessee's obligations under this Lease; provided, however, that until a
default shall occur in the performance of Lessee's obligations under this Lease,
Lessee may receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of this or any other assignment of such sublease to
Lessor nor by reason of the collection of the rents from a subleases, be deemed
liable to the subleases for any failure of Lessee to perform and comply with any
of Lessee's obligations to such subleases under such sublease. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a default exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents due and to become due
under the sublease. Lessee agrees that such subleases shall have the right to
rely upon any such statement and request from Lessor, end that such subleases
shall pay such rents to Lessor without any obligation or right to inquire as to
whether such default exists and notwithstanding any notice from or claim from
Lessee to the contrary. Lessee shall have no right or claim against said
subleases or Lessor for any such rents so paid by said subleases to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and until
it has been approved in writing by Lessor. In entering into any sublease, Lessee
shall use only such form of sublease as is satisfactory to Lessor, and once
approved by Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublessee shall, by reason of entering into
a sublease under this Lease, be deemed, for the benefit of Lessor, to have
assumed and agreed to conform and comply with each and every obligation herein
to be performed by Lessee other than such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default In the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however. Lessor shall not be liable for any prepaid rents or security deposit
paid by such subleases to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No subleases shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented, Lessor
agrees to deliver a copy of any notice of default by Lessee to the subleases.
Such sublessee shall have the right to cure a default of Lessee within three (3)
days after service of said notice of default upon such sublessee, and the
subleases shall have a right of reimbursement and offset from and against Lessee
for any such defaults cured by the sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee snail conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or subleases be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lessee or of such assignment
or subletting, whichever is greater. 13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation of the
Premises shall include the failure to occupy the Premises for a continuous
period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or provisions
of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or subletting),
13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f) (false
statement), 16(a) (estoppel certificate), 30(b) (subordination), 33 (auctions),
or 41.1 (easements), all of which are hereby deemed to be material, non-curable
defaults without the necessity of any notice by Lessor to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of three (3) days after written notice thereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay
Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or Quit shall also constitute the notice required by this subparagraph.
(d) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee
other than those referenced in subparagraphs (b) and Cc), above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Lessee shall not be deemed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
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(f) The discovery by Lessor that any financial statement given to Lessor
by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of this Lease
by Lessee, Lessor may at any time thereafter, with or without notice or demand
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shell terminate and Lessee
shall immediately surrender, possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including,
necessary renovation and alteration of the premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease shall
continue In effect whether or not Lessee shall have vacated or abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, Including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located. Unpaid
installments of rent and other unpaid monetary obligations of Lessee under the
terms of this Lease shall bear Interest from the date due at the maximum rate
then allowable by law
13.3 Default by Lessor. Lessor shall not be in default unless Lessor falls to
perform obligations required of Lessor within a reasonable time, but in no event
later than thirty (30) days after written notice by Lessee to Lessor and to the
holder of any first mortgage or deed of trust covering the Premise whose, name
and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of lessor's obligation is such that more than thirty
(30) days are required for performance, then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to
Lessor of Base Rent, Lessee's Share of Operating Expanses or other sums due
hereunder will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed on Lessor by the terms of any mortgage or trust
deed covering the office building Project. Accordingly, if any installment of
Base Rent, Operating Expenses, or any other sum due from Lessee shall not be
received by Lessor or Lessor's designee within ten (10) days after such amount
shall be due, then without any requirement for notice to Lessee, Lessee shall
pay to Lessor a late charge equal to 6% of such overdue amount. The parties
hereby agree that such late charge represents a fair and reasonable estimate of
the costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs; provided that if so
much of the Premises or the Office Building Project are taken by such
condemnation as would substantially and adversely affect the operation and
profitability of Lessee's business conducted from the Premises, Lessee shall
have the option, to be exercised only in writing within thirty (30) days after
Lessor shall have given Lessee written notice of such taking {or in the absence
of such notice, within thirty (30) days after the condemning authority shall
have taken possession), to terminate this Lease as of the date the condemning
authority, takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent and Lessee's
Share of Operating Expenses shall be reduced in the proportion that the floor
area of the Premises taken bears to the total floor area of the Premises. Common
Areas taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof. Lessor
shall have the option in its sole discretion to terminate this Lease as of the
taking of possession by the condemning authority, by giving written notice to
Lessee of such election within thirty (30) days after receipt of notice of a
taking by condemnation of any part of the premises or the Office Building
Project. Any award for the taking of all or any part of the Premises of the
Office Building Project under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Lessor shall to the extent of severance damages received
by Lessor in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) The brokers involved in this transaction are Pinnacle Realty Management
Company as "listing broker" and N/A as "cooperating broker", licensed real
estate broker(s). A "cooperating broker" is defined as any broker other then the
listing broker entitled to a share of any commission arising under this Lease.
Upon execution of this Lease by both parties, Lessor shall pay to said brokers
jointly, or in such separate shares as they may mutually designate in writing, a
fee as set forth in a separate agreement between Lessor and said broker(s), or
in the event there is no separate agreement between Lessor and said broker(s),
the sum of $ AS PER AGREEMENT, for brokerage service rendered by said broker(s)
to Lessor in this transaction.
(b) Lessor further agrees that (i) if Lessee exercises any Option, as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or (ii) if Lessee acquires any rights
to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (iii) if Lessee remains in possession of
the Premises after the expiration of the term of this Lease after having failed
to exercise an Option, or (iv) if said broker(s) are the procuring cause of any
other lease or sale entered Into between the parties pertaining to the Premises
and/or any adjacent property in which Lessor has an interest, or (v) if the Base
Rent is increased, whether by agreement or operation of an escalation clause
contained herein, then as to any of said transactions or rent increases, Lessor
shall pay said broker(s) a fee in accordance with the schedule of said
broker(s)in effect at the time of execution of this Lease. Said fee shall be
paid at the time such increased rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real Property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Each listing and cooperating broker
shall be a third party beneficiary of the previsions of this paragraph 15 to the
extent of their interest in any commission arising under this Lease and may
enforce that right directly against Lessor; provided, however, that all brokers
having a right to any part of such total commission shall be a necessary party
to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that neither
has had any dealings with any person, firm, broker or finder (other than the
person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity 18 entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby Indemnify and hold the other
harmless from and against any costs, expanses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less than
ten (10) days' prior written notice from the other party ("requesting party"}
execute, acknowledge and deliver to the requesting party a statement in writing
(i) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent and other charges are paid in advance, if any, and (ii) acknowledging that
there are not, to the responding party's knowledge, any uncured defaults on the
part of the requesting party, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Office Building Project or of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such statement
within such time shall be a material default of this Lease by the party who is
to respond, without any further notice to such party, or it shall be conclusive
upon such party that (i) this Lease is in full force and effect, without
modification except as may be represented by the requesting party, (ii) there
are no uncured defaults in the requesting party's performance, and (iii) if
Lessor is the requesting party, not more than one month's rent has been paid in
advance.
(c) If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
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17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such title
or interest, Lessor herein named (an in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of other
provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear Interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
20.Time of Essence. Time is of the essence with respect to the obligations to be
performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, Including but not limited to Lessee's Share of Operating
Expense and any other expenses payable by Lessee hereunder shall be deemed to be
rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
In this Lease, Lessee hereby acknowledges that neither the real estate broker
listed In paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mall, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision, Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be two hundred percent (200%) of the rent payable immediately preceding
the termination date of this Lease, and all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further effect
during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by. the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county In which the
Office Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted hereby,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet possession
of the Premises shall not be disturbed if Lessee in not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact and in Lessee's name,
place and stead, to execute such documents in accordance with this paragraph
30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the same
or a separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fees award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all attorneys'
fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notices of default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.
8
<PAGE>
35. Merger. The voluntary or other surrender of this Lease by Lessee, of a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever In this Lease the consent of one party is required to an act of the
other party such consent snail not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease,
38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Office Building Project.
39.Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
.right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property or Lessor or the right of first offer to
purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or Involuntarily, by or to any
parson or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary, (i) during the time commencing
from the date Lessor gives to Lessee a notice of default pursuant to paragraph
13.1(c) or 13.1(d) and continuing until the noncompliance alleged in said notice
of default is cured, or (ii) during the period of time commencing on the day
after a monetary obligation to Lessor 18 due from Lessee and unpaid (without any
necessity for notice thereof to Lessee) and continuing until the obligation is
paid, or (iii) in the event that Lessor has given to Lessee three or more
notices of default under paragraph 13.1(c), or paragraph 13.1(d), whether or not
the defaults are cured, during the 12 month period of time Immediately prior to
the time that Lessee attempts to exercise the subject Option, (iv) If Lessee has
committed any non-curable breach, including without limitation those described
in paragraph 13.1(b), or is otherwise In default of any of the terms, covenants
or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall not
be extended or enlarged by reason of Lessee's Inability to exercise an Option
because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee falls to pay to Lessor a monetary obligation of Lessee for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, (iii)
Lessor gives to Lessee three or more notices of default under paragraph 13.1(c),
or paragraph 13.1(d), whether or not the defaults are cured, or (iv) If Lessee
has committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise In default of any of the terms,
covenants and conditions of this Lease.
40. Security Measures - Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and Invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the coat thereof shell be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building Project or
building in which the Premises are located upon not lass than 10 days prior
written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business as
long as such exclusive does not conflict with any rights expressly given herein;
(d) To place such signs, notices or displays as Lessor reasonably deems
necessary or advisable upon the roof, exterior of the buildings or the Office
Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building or
the Office Building Project or their name(a) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof of
the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure erected
in the vicinity of the Building, whether by Lessor or third parties, shall in no
way affect this Lease or impose any liability upon Lessor.
42. Performance Under Protest. If at any time a dispute shall arises 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 recovery of such sum. 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.
43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity, represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or hand written provision.
45. No Offer. Preparation of this lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
9
<PAGE>
47. Multiple Parties. If more than one party or entity is named either Lessor or
Lessee herein, except otherwise expressly provided herein, the obligations of
the Lessor or Lessee herein shall be the joint and several responsibility of all
persons or entities named herein as such Lessor or Lessee, respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee attached hereto as Exhibit C and incorporated
herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
50. Lessee shall pay a base rent of One Thousand Three Hundred Fifty and 00/100
Dollars ($1,350.00) per month during the term. Lessee shall pay for and arrange
for janitorial services to the premises. Lessee shall pay for utilities either
through a separate meter or a pro rata share of utility charges. Lessor shall
pay for water.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE
INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
Donn Lowrey and Russell Thurman Yan K.Skwara
By /s/ Donn Lowrey By /s/ Yan K. Skwara
- ----------------------------------- ------------------------------------------
Its Its CEO
------------------------- -------------------------------
By /s/ Russell Thurman By /s/ Marta Glodkowska
- ----------------------------------- -----------------------------------------
Its Its
-------------------------- --------------------------------
Executed at Executed at
- ------------------------------------------------------------------------------
On On
- -------------------------------------------------------------------------------
Address Address
- -------------------------------------------------------------------------------
10
<PAGE>
STANDARD OFFICE LEASE
FLOOR PLAN
Floor Plan Office/Warehouse
[Graphic of Floor Plan is Inserted Here]
The Premises is the east side indicated in the
non-cross hatched areas.
EXHIBIT A
11
<PAGE>
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated:________________________________________
By and Between ________________________________________________________________
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persona Lessor in good
faith judges to be a threat to the safety, reputation, or properly of the Office
Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the Inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
Premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be .moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity
11. Lessee shall not employ any service or contractor for services or work
to be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of _____ P.M.
and ________ A.M. of the following day If Lessee uses the Premises during such
periods, Lessee shall be responsible for securely locking any doors it may have
opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars
or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines upon
the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking or
food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein celled "Permitted Size Vehicles".
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles".
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces
from floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same complies with applicable laws, ordinances and
regulations.
6. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.
7. Unless otherwise Instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method or
methods as Lessor and/or Its licensee may establish at rates generally
applicable to visitor perking.
9. The maintenance, washing, waxing or cleaning of vehicles In the parking
structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem necessary
for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a license
only and no bailment is intended or shall be created hereby.
EXHIBIT B
12
<PAGE>
13
<PAGE>
EXHIBIT C
Work Letter
Landlord, at Landlord's expense, shall provide the following improvements:
1. In office 1, indicated on the floor plan, the south door shall be locked,
an approximate 4'x7' cased opening shall be provided in the north wall,
the existing built-in desk shall be relocated south within the office and
new carpet shall be provided to match existing carpet as best as possible.
2. In office 2, indicated on the floor plan, the existing built-in desk shall
be removed and new carpet provided to match existing carpet as best as
possible.
3. One (1) new 1/2 wall work area shall be provided in the reception area
approximately 10'x10' with a wood cap on the 1/2 wall. The 1/2 wall shall
be approximately 4' high. Location shall be determined.
4. The Premises shall be demised with approximately 4 linear feet of new
wall.
5. The building systems shall be provided in good working order.
6. All tenant improvements shall be Tenant's responsibility and require
Landlord approval.
BY: ___________________________ BY:______________________________
Lessor Lessee
14
<PAGE>
SAN DIEGO MESA COLLEGE
USE OF FACILITIES AGREEMENT
Between San Diego Community College District and San Diego Flash
(Professional Soccer)
This supplemental agreement outlines the basic terms and conditions related to
the use of San Diego Mesa College (Mesa) facilities by San Diego Flash
Professional Soccer (Flash). Nothing contained herein shall restrict the terms
and conditions set forth in the "Application For Use Of College District
Property" and "Permit For Use Of College District Property."
1. Per Game Rental Charge - The basic rent will be set at a reduced rate of
$1450 per game, payable one (1) week prior to each game. This basic rate
has been reduced, for the first soccer season, to help cover the cost o
removing the existing goal posts and replacing them with new padded
removable field goal posts. Two (2) checks will be issued, $1200 to
"San Diego Mesa College" and $250 to "Mesa College Athletics." The rental
fee will insure: stadium use, lights, lining of field, clean up of
field and parking lots, clean up of restrooms, College Police presence,
Mesa staff being available for any lighting or facility problems, and
rights to concession sales.
2. New Removable Goal Posts - The Flash will remove the existing goal posts
and replace them with padded removable goal posts. The Flash will submit
the specifications and installation procedures for the new goal posts to
Mesa for approval, prior to the removal of the current goal posts.
3. Annual Field Preparation - For the first soccer season, the Flash will pay
a reduced share of $3000 towards field renovation and preparation
expenses. This reduced rate is to offset the cost of removing the existing
track runway and replacing with grass. The field preparation will include
items such as fertilizer, sand, seed, irrigation, and aerification. This
$3000 is payable by December 15, 1998.
4. Discount Tickets To Mesa College Faculty, Staff and Students The Flash
will offer a 50% discount to faculty, staff, and students at Mesa College
(full or part-time). The Flash will receive coverage and advertising in
the "Mesa College Press" in exchange.
1
<PAGE>
5. Services Provided By Mesa College - Mesa College will provide the
following services at no cost to the Flash: o Cut and clean shrubbery on
west side of stadium.
- Remove all track equipment.
- Provide paint for repainting of ticket booth and other
buildings as needed.
6. Services Provided By The Flash - The Flash will be responsible for the
following services: o Provide storage bin for Flash equipment if needed. o
Install and remove signage for each game. o Provide storage bin for Mesa
College equipment if needed.
7. Insurance
Flash shall provide policies of:
Worker's Compensation Insurance covering all of its
Employees.
Commercial Liability Insurance, including Broad form Contractual Liability,
name District as additional insured, in force during all Flash's use of the
premises of Mesa College, with limits of liabilit of at least $3,000,000
personal injury and $1,000,000 property damage.
Automobile Liability: The San Diego Flash will provide proof of insurance
of any vehicle that is owned, rented or leased by the Flash that is used
during game-day operations.
Flash shall insure to its own benefit all property brought to the premises
and shall waive all liability of District for any damages to its property.
All such policies shall contain a Waiver of Subrogation to the benefit of
District.
8. Hold Harmless
Excepting the Services described in paragraph 5 of this supplemental
agreement, District offers the premises at Mesa in an "as is" condition
and Flash accepts all risks of loss arising from its use. Flash agrees to
save and hold harmless District, its Trustees and employees, for any loss
liability, cost or other damage, arising from any claim or allegation
of injury or death to any person, including employees of the Flash
find District, student, or spectators or; from any claims of damage t
property; which either directly or indirectly arise from Flash's use of the
premises.
/s/ Terry D. Davis 11/4/98 /s/ Yan K. Skwara 11/4/98
-------------------------------- ----------------------------------
For Community Date For the San Diego Date
College District Flash
2
<PAGE>
APPLICATION FOR USE OF COLLEGE DISTRICT PROPERTY DISTRIBUTION
Prepare two copy set Original to campus office shown at left.Copy for your file.
FOR CAMPUS
The San Diego Flash Professional Soccer COORDINATION
Represented by Yan K. Skwara, President/General Manager Master Calendar
1940 Garnet Avenue, Suite 303, San Diego, CA 92109
Telephone 581-2120 Fax 581,9419 Instructional
Hereby applies for permit to use Mesa Stadium Student Affairs
for the purpose of Flash Soccer Games Security
for the below-listed dates and times: Plant Supervisor
Food Services
-------------
Date Hours Yes No
---- ----- --- --
April-October 1998 Open Close
Four (4) hour use per da Admission will be charged [X] [ ]
Funds will be solicited [ ] [ ]
Other considerations [ ] [ ]
Specify: See attached agreement.
Special services/equipment requested:
See attached agreement.
I, the undersigned, state that the property for which application for use is
herein made will not be used for the commission of any act prohibited by law.
Further, I and the organization named herein agree to hold harmless the
District, its employees/officials, from all claims for damages or injuries
arising from use of any property granted under this application; to fulfill the
conditions and to observe the rules listed below.
(1) Royalty payments under U.S. copyright law shall be paid by the permittee.
(2) No activity shall be allowed which degrades the race, religion, nationality,
color, sex, age, or handicap of any person.
(3) No smoking shall be permitted, except as otherwise posted.
(4) No selling or vending of any article shall be permitted.
(5) No food or confections may be served in any auditoriums.
(6) No alcoholic beverages may be on District property at any time, except
in connection with a course of instruction sponsored by the District.
(7) No furniture or equipment may be moved, except under District supervision.
(8) The permittee is responsible for the care and protection of the property
in their charge.
(9) No religious doctrine may be taught or practiced, except as specified
in the permit.
I certify or declare under penalty of perjury that the foregoing is true
and correct.
Signature
- ---------------------------------------------------------------
Date 11/4/98
SDCCD Form 7325.2 10/84
3
<PAGE>
PERMIT FOR USE OF COLLEGE DISTRICT PROPERTY
The San Diego Flash Professional Soccer is permitted use of San Diego Mesa
College Stadium pursuant to California Education Code and San Diego Community
College District (SDCCD) POLICY 7325 during the times and for the purposes
specified below; subject to the terms and conditions contained herein and in the
APPLICATION FOR USE OF DISTRICT PROPERTY incorporated herein by reference.
Hours Category of Use: Fair Rental
Date Open Close Room (see sdccd POLICY 7325)
April-October 1998. Based on Charges each day for property: $1450
four (4) hours use per day.
Charges each day for custodian: Included above
Charges each day for College Police: Included
above
Charges each day for equipment: Included above
Other (Locker room (upstairs)
half-time Rooms Soccer None
Goals)
COMMENTS: There is a written a greement outlining the terms and conditions of
this use permit. This covers an estimated twenty (20) games at Mesa
College during 1998.
Total charges each day $1450
TOTAL CHARGES TO PERMITTEE UNDER THIS PERMIT-(Estimate based on 20 games)$29,000
Terms of Payment:
$1450 paid not later than one week prior to each game, and Received ___________
_______________ paid not later than ______________________ Received ____________
The primary use of College District property is to support educational programs
of the District. This permit is issued subject to the proviso that the District
reserves the right to unilaterally change or revoke the permit in part or in its
entirety without notice should permits be issued for conflicting dates or should
the property be needed for any District purposes whatsoever.
Any violation or infraction of the conditions of this permit by the permittoe
will constitute sufficient cause for tile District to take whatever action
against the permittee and the organization in which name the permit was applied
for. Such action may include, but iS not limited to, the immediate cancellation
of this permit and disapproval of future applications to use District property.
FOR THE SAN DIEGO COMMUNITY COLLEGE DISTRICT
/s/ Terry D. Davis Terry D. Davis, Business Manager 11/2/98
- --------------------------------------------------------------------------------
Signature Name (typed) Title Date
DISTRIBUTION:
Prepare two-copy set-
Original to permittee
Attach copy to application file in issuing office
(District record copy)
SDCCD Form 7325.2a 1/97
4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
San Diego Soccer Development Corporation
2123 Garnet Ave #B
San Diego, CA 92109
We consent to the use in this Registration Statement of San Diego Soccer
Development Corporation on Form 10-SB, of our report dated September 8, 1999 of
San Diego Soccer Development Corporation for the years ended December 31, 1998
and 1997, which are part of this Registration Statement, and to all references
to our firm included in this Registration Statement.
LOGAN THROOP & CO., LLP
September 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of San Diego Soccer Development Corporation for the year
ended December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 298 67,196
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 23,123 81,523
<PP&E> 175,818 241,418
<DEPRECIATION> 8,020 4,800
<TOTAL-ASSETS> 175,818 241,418
<CURRENT-LIABILITIES> 445,292 780,963
<BONDS> 0 0
0 0
0 0
<COMMON> 941,163 1,308,593
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 202,091 1,294,554
<SALES> 82,534 25,355
<TOTAL-REVENUES> 292,384 226,445
<CGS> 0 0
<TOTAL-COSTS> 1,274,280 1,040,876
<OTHER-EXPENSES> 0 4,411
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,832 3,211
<INCOME-PRETAX> (1,011,864) (795,003)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,011,864) (795,003)
<EPS-BASIC> (.22) (.35)
<EPS-DILUTED> (.22) (.35)
</TABLE>
