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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934
ROYAL FINANCIAL CORPORATION
(Exact name of Small Business Issuer in its charter)
NEVADA 13-3961109
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 BALLPARK WAY, SUITE 210, ARLINGTON,
TX 76011 (Address of principal
executive office)
(817) 861-4000
(Issuer's telephone number)
Securities to be registered under Section 12 (b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of class)
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TABLE OF CONTENTS
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Page
PART I
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Item 1. Description of Business.................................................................................1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................................................6
Item 3. Description of Property.................................................................................9
Item 4. Security Ownership of Certain Beneficial Owners and Management ........................................10
Item 5. Directors, Executive Officers, Promoters and Control Persons ..........................................11
Item 6. Executive Compensation.................................................................................13
Item 7. Certain Relationships and Related Transactions.........................................................13
Item 8. Description of Securities..............................................................................13
PART II
Item 1. Market price of and Dividends of the Registrant's Common Equity
and Other Shareholder Matters......................................................................14
Item 2. Legal Proceedings......................................................................................14
Item 3. Changes in and Disagreements with Accountants..........................................................15
Item 4. Recent Sales of Unregistered Securities................................................................15
Item 5. Indemnification of Directors and Officers..............................................................16
PART F/S
Financial Statements
PART III
Index to Exhibits
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Explanatory Note:
Unless otherwise indicated or the context otherwise requires, all
references herein to the "Company" are to Royal Financial Corporation, a Nevada
corporation, and its wholly-owned subsidiaries, Royal Mortgage Corporation,
Royal Mortgage Brokerage, Inc., Walden Woods of Sugarmill, Inc. and Walden Woods
of Sugarmill Sales, Inc.
The Company is filing this Form 10-SB voluntarily. The Company's Common
Stock has traded on the OTC Bulletin Board since May 1998 and the Company
believes the market for its stock will be enhanced by being a reporting company.
In addition, the Company intends to seek listing on the NASDAQ SmallCap Market
in the near future, for which a registration under the 1934 Act will be
required.
PART I
Item 1. Description of Business
General
Royal Financial Corporation (the "Company") is a real estate financial
holding company which invests in the asset backed real estate and mortgage
markets. The Company was incorporated in August 1993 as Davenport Ventures,
Inc. ("Davenport") and is duly organized and in good standing under the laws
of the State of Nevada. The Company has a limited operating history and has
experienced losses from inception through August 31, 1998. Future operating
results will depend on many factors, including, but not limited to, the
Company's ability to successfully integrate and expand its business
operations and the revenues generated from its acquired operations.
There can be no assurance that such losses will not continue. In early
1998, controlling interest in the Company was acquired by a former officer
and director of Davenport to initiate the business of purchasing, developing
and operating manufactured housing communities.
Davenport completed its first acquisition of a manufactured housing
community, located in Florida, on June 1, 1998 for a purchase price of
approximately $1,611,000 which was financed by Royal Mortgage Corporation.
There are currently 87 pad sites 95% of which are rented with an annual
revenue from rents of approximately $180,000. The business objective is to
increase the size of the community by increasing the number of pad sites to
approximately 215. Although there can be no assurances, Management
anticipates that this expansion will be completed by March 31, 1999. In
addition, the Company anticipates that the rents will be raised to
approximately $225 per month, per site, on January 1, 2000 from the current
rent of $175 per month. Once the community is fully rented, the Company
believes that the annual revenue from rents will be approximately $487,000
per year which the Company believes will substantially increase the value of
the community. Although there can be no assurances, the Company anticipates
that the community will be fully rented within three years. This property
acquisition was completed through the purchase of 100% of the outstanding
shares of common stock of Walden Woods of Sugarmill, Inc., a Florida
corporation ("Walden Woods"). Walden Woods and its subsidiary, Walden Woods
of Sugarmill Sales, Inc., a Florida corporation ("Walden Sales"), are now
wholly-owned subsidiaries of the Company.
Effective August 18, 1998, the Company acquired Royal Mortgage
Corporation, a Texas corporation ("RMC"), through an exchange offer on the
basis of one share of its common stock for one share of RMC's common stock.
RMC was founded in December 1994 to invest in U.S. mortgage instruments (not
including origination of mortgages), and to obtain safe, high yields and
capital gains on these investments. The approval of the shareholders of both
companies was received on August 10, 1998.
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The terms of the exchange offer required that the name of Davenport be
changed to Royal Financial Corporation and that the existing officers and
directors of RMC become the officers and directors of the Company. The
exchange offer also resulted in the Company and RMC changing their fiscal
year ends to August 31.
Principal Business Activities
The Company believes that RMC has identified several unique, secure sectors
of the real estate market on which to focus as follows:
(1) Acquisition and resolution of sub and non-performing mortgage loans;
(2) Acquisition of distressed properties and foreclosure sales; and
(3) Purchase of tax lien certificates resulting from unpaid mortgages or
unpaid property taxes owed to municipal and county taxing authorities.
Mortgage Loans
According to the Mortgage Banker's Association of America (October 1997)
the great majority of homes purchased within the U.S. are financed through
banks, savings and loans associations, credit unions and other financing
companies, with the dollar amount of homes financed each year within the U.S.
consistently exceeding $600 billion over the past six years. On average, 4% of
these mortgages become sub and non-performing loans, which has created a $160
billion niche within the mortgage paper market.
Existing mortgage loans can be purchased at a discount in the secondary
market of the U.S. mortgage market. The level of discount achieved will vary
depending upon numerous factors, including but not limited to, (i) payment
history of subject mortgage loan, (ii) how motivated the seller is to sell
the loan, (iii) the terms of the loan, (iv) the condition of the property and
(v) the location of the property. RMC has purchased loans at discounts
ranging from approximately 15 to 60 percent of the face value of the loan.
The Company's discounted loan portfolio totaled approximately $2,808,902 or
26% of the Company's total assets, as of August 31, 1998.
Level of Discount
RMC has acquired performing loans at discounts of approximately 10 to 15
percent and has acquired non-performing loans at discounts of approximately
40 to 60 percent. Performing loans offer cash flow as well as an opportunity
for a moderate capital gain when RMC sells the loans. Non-performing loans
offer no cash flow, but the Company believes that they may offer capital gain
potential upon disposition. RMC purchases discounted loans for the purpose of
realizing a capital gain within four to eighteen months of acquisition,
although no assurances of a capital gain can be given.
Source of Loans
RMC has acquired discounted mortgage loans from banks and other originators
of loans, large U.S. conglomerates that participate in the secondary mortgage
market and at public auctions. Performing loans are typically purchased from
originators and secondary market participants. Non-performing loans are
generally purchased from secondary market participants and at public auctions.
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Due Diligence
Whether purchasing performing or non-performing loans, RMC must carry
out several due diligence steps. First and foremost, RMC must locate sources
of these loans, then RMC evaluates and narrows its selections to pursue only
those mortgages that meet RMC's investment criteria. Generally, RMC targets
loans collateralized by residential real estate, located in Texas and
Florida, which are under or non-performing. RMC's due diligence procedures
include obtaining lien searches, inspecting properties, and evaluating the
market values of properties by obtaining brokers' price opinions, reviewing
market data for comparable properties and consulting with local real estate
agents. The Investment Committee consists of three members, the President,
the Secretary and the Vice-President of Legal Affairs of the Company.
Distressed Properties and Foreclosure Sales
When a property owner fails to pay property tax, school tax or other
taxes or to make mortgage payments to his or her mortgage company for an
extended period of time, that person's home can be placed on the auction
block by the mortgage company or local governmental authorities. As evidenced
by county foreclosure listings, this occurs on a regular basis in the U.S.
and creates an opportunity to purchase homes out of mortgage foreclosure. RMC
has had the opportunity to purchase homes in mortgage foreclosure sales for
as little as 40 to 60 percent of their fair market value. At August 31, 1998,
the Company's real estate owned, net, totaled approximately $1,357,744 or 12%
of the Company's total assets.
RMC also contacts lenders and major secondary market participants to look
at portfolios of loans that are slated for foreclosure. RMC may purchase several
loans at once and then foreclose on each loan as the holder of the unpaid
mortgage and potentially realize a capital gain when the property is resold.
These portfolios of loans, purchased just prior to foreclosure, are available at
discounts ranging from approximately 40 to 80 percent of the face value of the
unpaid loan. The same due diligence is performed on distressed properties and
foreclosure sales as the Company would perform on other assets acquired.
Tax Lien Certificates
The Company believes that RMC has identified a specific market niche
that offers a low-risk and high-yield opportunity: Tax Lien Certificates.
When property taxes are not paid promptly by the property owner, certain
local taxing authorities auction tax lien certificates for that particular
property. The sale of the certificates provides immediate funds to the taxing
authority. In certain states and counties in the United States, purchasers of
tax lien certificates are able to realize a rate of interest of approximately
17 to 24 percent on these certificates based on statutory rates set by the
local taxing authorities. Currently 31 states in the U.S. auction tax lien
certificates at the local government level.
According to Fitch Investor Service Inc. ("Fitch"), approximately 2 to 3
percent of all tax liens are not redeemed by the property owner and the
purchaser of the tax lien must wait until the property is sold at auction to
make a profit. However, in those instances when the taxes are not paid by the
property owner the property is sold at auction and the investor's lien is
ultimately satisfied.
To date, RMC has purchased approximately 250 tax lien certificates
yielding approximately 17 to 24 percent annually. The redemption rate the
Company has experienced is consistent with the findings of the research
conducted by Fitch. RMC purchased $553,915 in tax lien certificates in June
1997. As of August 31, 1998, $127,520 of these certificates were still
outstanding.
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Royal Mortgage Brokerage, Inc.
Royal Mortgage Brokerage, Inc., a Texas corporation, which is also
authorized to do business in Florida, arranges for individuals, partnerships,
trusts or corporations to obtain mortgages from outside mortgage lenders on
properties owned by or outside of the Company. Customarily, Royal Mortgage
Brokerage, Inc. obtains a financing "broker's" commission for each mortgage it
arranges. These fees range from 1 to 4% depending upon the size of the mortgage
and the "broker's" fee paid by a particular lender. Royal Mortgage Brokerage,
Inc. is a wholly-owned subsidiary of the Company.
Manufactured Housing
Davenport completed its first acquisition of a manufactured housing
community on June 1, 1998 when it purchased Walden Woods Retirement Village (the
"Park"), a manufactured housing community in Homosassa, Florida. The Park is a
45 acre site. 18 of the 45 acres are developed with approximately 87 pad sites.
The Company is currently developing an additional 20 acres. It is anticipated
that the development will be completed by March 1999 at which time the
Company believes the Park will contain an aggregate of approximately 215 pad
sites. The Company believes, although no assurances can be given, that once the
community is fully rented, the annual revenue from rents will be approximately
$487,000 per year which the Company believes will significantly increase the
value of the community.
This property acquisition was completed through the purchase of 100% of
the capital stock of Walden Woods. Walden Woods is now a wholly-owned
subsidiary of the Company.
A manufactured home community is designed and improved with sites for the
placement of manufactured homes and related infrastructure and amenities.
Manufactured homes are detached, single-family homes that are built off-site by
manufacturers and installed on sites within each community. The owner of each
home in the community leases the site on which the home is located. Modern
manufactured home communities are similar to typical residential subdivisions
containing centralized entrances, paved streets, curbs, gutters and parkways. In
addition, these communities often provide a clubhouse for social activities,
recreation and other amenities, which may include swimming pools, shuffleboard
courts, tennis courts, laundry facilities and cable television services. The
Park will be a gated community in which all residents must be age 55 or over.
The Park contains amenities which include, but are not limited to, a
clubhouse with full kitchen, heated outdoor pool, a detached billiards room,
shuffleboard courts, paved and curbed streets, parkways and lush landscaping
throughout.
According to the Manufactured Housing Institute, manufactured housing is
the fastest growing segment in the United Sates housing market. According to
the Manufactured Housing Institute, nearly one out of every three new homes
sold in the U.S. is a manufactured home and shipments of manufactured homes
have increased 20% annually since 1992.
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The Company generates revenue from its manufactured housing community from
three major sources:
(1) Land Leasing: The Company owns the manufactured home community,
including the land and any community developments thereon. The Company generates
revenue by leasing lots to home owners.
(2) Sale of manufactured homes: Through Walden Sales, the Company
intends to engage in the sale of manufactured homes, currently costing
approximately $50,000 to $125,000.
(3) Arranging third party mortgages: Through its wholly-owned subsidiary,
Royal Mortgage Brokerage, Inc., the Company arranges third party mortgage
financing for the homes which it sells. The earned commission results in a 2%
margin of profit for the Company.
The Company, through its wholly-owned subsidiaries, Walden Woods and
Walden Sales, is currently analyzing several sites in Florida with the intent
to acquire and develop additional manufactured housing communities. The
Company plans on acquiring and beginning development on approximately three
additional sites sometime prior to December 31, 1999. Currently, the Company
has engaged an engineering firm to perform specific due diligence on the
three sites being considered for acquisition and development. The Company
anticipates being able to fully develop a site within 11 months of finalizing
acquisition of the land. Although there can be no assurances, once a site is
fully developed, the Company believes that it will realize revenues from the
sale of new homes, leasing of lots, mortgage brokerage activities and Company
controlled utilities within the development. Although there can be no
assurances that the Company will be successful or if successful that such
results will continue, the Company anticipates participation in the
manufactured housing industry to comprise approximately 30 to 40 percent of
its overall portfolio by the end of 1999.
Competition
The acquisition of discounted loans and tax lien certificates is highly
competitive due to the shear size of this segment of the mortgage and tax
lien industries and the competitive bidding that occurs in most transactions.
Although these segments make up a sizable portion of the Company's investment
portfolio, in relation to the overall market, the Company's discounted loan
and tax lien certificate holdings make up far less than one half of one
percent of the national market. While there can be no assurances, the Company
believes it will be able to successfully participate in these segments of the
industry by purchasing smaller packages that the industry giants do not
consider because of their small size.
The Company competes with companies that are much larger and have far
greater financial resources than the Company. While the Company focuses on
local markets, its competition would be able to extend greater resorces than
the Company to penetrate local markets if they so elected. However, while
there can be no assurances, the Company believes it is able to better
concentrate its efforts locally and has greater flexibility to spend as much
time as needed to familiarize itself with local market conditions than its
competitors.
Environmental Impact
The Company believes that none of its activities utilize any hazardous
materials or result in the discharge of any pollutants into the environment. The
Company believes it complies fully with all state and federal environmental laws
and regulations. In addition, the properties owned by the Company or for which
the Company holds a mortgage or tax lien generally have been subjected to a
Phase I or similar environmental audit (which involves general inspections
without soil sampling or ground water analysis) completed by independent
environmental consultants whose audits have not revealed, nor is the Company
aware of, any material adverse affect on the Company's business, results of
operations, financial condition or liquidity.
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Employees
The Company employs a total of ten full-time persons, two commission-based
personnel and several contract personnel who perform due diligence procedures
on behalf of the Company. None of the Company's employees, commission-based
personnel or contract personnel are represented by a union and the Company
believes its relationship with its employees is very good. There are no
employment contracts between the Company and any of its employees.
Regulation
The Company is subject to certain State of Florida regulations
concerning the resale of real estate, its mortgage brokerage activities and
its operation of manufactured housing communities. Presently the Company is
subject to oversight by the Florida Department of Banking and Finance for
mortgage brokering and licensing matters. The Company is subject to
regulation promulgated under Florida Statutes Chapter 723 (Florida Business
and Professional Regulations) for its manufactured housing operations.
Management of the Company believes it is in compliance with all such
applicable rules and regulations.
Item 2. Management's Discussion and Analysis or Plan of Operation
General
The Company, through its wholly-owned subsidiaries:
(1) acquires sub and non-performing mortgage loans and real properties
that meet the Company's investment criteria;
(2) acquires tax lien certificates which result from property owners not
paying their property taxes. At a minimum, the Company receives statutory
interest yields which range from approximately 17 to 24%. Any tax lien
certificates which are not redeemed are converted into real estate assets;
(3) owns and operates a manufactured housing community in Florida.
Revenues and expenses for the eight months ended August 31, 1998 include
Walden Woods for only three months since its acquisition. The results of the
Company (formerly Davenport Ventures, Inc.) are included for the whole eight
month period presented. Revenues and expenses for the fiscal year ended
December 31, 1997 applied to RMC only. No results from the Company or Walden
Woods are included in the revenues and expenses for the year ended December 31,
1997.
For the three months ended November 30, 1998, the Company's revenues and
expenses include Walden Woods and the Company for the whole period. No results
from these two businesses are included in the comparable period for 1997.
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial information
of the Company as of the dates and periods indicated in the following table.
The summary historical financial data for the eight months ended August 31,
1998 is derived from financial statements of the Company which have been
audited by Grant Thornton LLP, independent public accountants, appearing
elsewhere herein. The financial statement for the three month periods ended
November 30, 1997 and 1998, included herein, have not been audited, but are
believed by Management to contain all accruals and adjustments required for a
fair presentation of the financial condition and results of operations of the
Company in accordance with generally accepted accounting principles. The
summary historical financial data as of and for the years ended December 31,
1996 and 1997 is derived from the financial statements of RMC which have been
audited by William C. Spore & Company, P.C., independent public accountants.
The information below should be read in conjunction with the Financial
Statements and related notes thereto of the Company and RMC.
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Royal Mortgage Corporation Company
Year Ended Eight Months Three Months Ended
December 31, Ended November 30,
1996 1997 August 31, 1998 1997 1998
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Statement of Operations Data(1):
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Revenues $ 34 $ 277,031 $ 220,776 $ 121,267 $ 138,758
Expenses (493,162) (1,790,821) (2,406,304) (565,473) (552,550)
Other income (expense) -- (4,723) -- -- --
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Net loss $ (493,128) $ (1,518,513) $ (2,185,528) $ (444,206) $ (413,792)
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Net loss per share $ 0.24) $ (0.68) $ (0.40) $ (.19) $ (.06)
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Weighted average shares outstanding 2,050,000 2,266,437 5,450,599 2,380,700 7,464,382
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As of December 31, As of As of
1996 1997 August 31, 1998 November 30, 1998
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Balance Sheet Data:
Working capital (deficit) $ (265,398) $ 3,511,816 $ 4,008,714 $ 3,104,294
Investments -- 4,052,123 4,330,802 4,552,995
Property and equipment, net(2) 268,690 313,927 2,198,979 2,368,200
Total assets 329,358 9,058,000 10,755,724 10,278,107
Total long-term debt -- 50,000 1,290,000 1,290,000
Total liabilities 282,114 10,090,193 1,370,250 1,306,425
Stockholders' equity 47,244 (1,031,949) 9,385,474 8,971,682
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(1) To give effect to the August 1998 merger, the Statement of Operations Data
includes the operating results of RMC and the Company as though the entities had
been combined as of January 1, 1996. In addition, the Park was acquired on June
1, 1998. The Statement of Operations Data includes the operating results of the
Park for the period from June 1, 1998 to August 31, 1998.
(2) Property and equipment, net as of August 31, 1998 includes the land and
improvements, buildings and equipment obtained in connection with the
acquisition of the Park. The net balance of these assets as of August 31, 1998
was $1,771,391.
Effective August 18, 1998, the Company acquired all of the outstanding
capital stock of RMC, in exchange for shares of the Company. See notes to the
"Consolidated Financial Statements."
The Company has a limited operating history and conducts its operations
through its wholly owned subsidiaries, Walden Woods, which owns a
manufactured housing community and Walden Sales, which sells manufactured and
modular homes, as well as its other subsidiaries, RMC and Royal Mortgage
Brokerage, Inc.
The Consolidated Financial Statements of the Company for the eight
months ended August 31, 1998, reflect the combined results of RMC and the
Company which includes manufactured housing operations and real estate
investment activities. Prior to the exchange offering, the Company and its
subsidiaries used December 31 as their fiscal year end. As a result of the
exchange agreement, the shareholders of both Davenport Ventures, Inc. and RMC
approved a change to an August 31 fiscal year end, as well as a name change
from Davenport Ventures, Inc. to Royal
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Financial Corporation. In addition, the existing officers resigned and the
officers and directors of RMC were approved by the shareholders of both
companies to become officers and directors of the Company.
RMC began its operations in May 1997 after the completion of a $9,850,000 8
1/2% convertible debentures offering. This gave RMC the ability to initiate its
operations in the market niches that the Company is currently exploiting today
in the acquisition and profitable disposition of mortgage and real estate
assets. As a whole, the Company has successfully used its market niches to
obtain investment returns that management believes were and are available.
Although no assurances can be given, the Company intends to acquire an
increasing number of properties at daily and monthly judicial and
non-judicial foreclosure auctions in all major counties in Florida and Texas
through RMC. In addition, the Company intends to acquire and develop
additional manufactured housing communities. Management believes that this
will provide solid predictable growth patterns in this segment of the
Company's business for its wholly-owned subsidiaries, Walden Woods and Walden
Sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
NOVEMBER 30, 1997
REVENUES
Revenues increased by approximately 14% from $121,267 in the three
months ended November 30, 1997 to $138,758 in the three months ended November
30, 1998. This increase was primarily from the inclusion of revenues from
Walden Woods which totaled $43,321 for the three months ended November 30,
1998.
EXPENSES
Expenses decreased approximately 2% from $565,473 in the three months
ended November 30, 1997 to $552,550 in the three months ended November 30,
1998. The largest decrease was in interest expense which decreased from
$318,853 for the three months ended November 30, 1997 to $27,413 for the
three months ended November 30, 1998. This was due to $9,850,000 in 8 1/2%
Senior Convertible debentures that were outstanding in 1997. $8,560,000 of
these debentures were converted to common stock in 1998; therefore, no further
interest was payable on the converted debentures.
Offsetting the decrease in interest expense discussed above was an
increase in promotional expenses of $63,573 due to the Company's efforts to
raise additional capital. In addition, taxes, payroll and other, increased
from $9,421 for the three months ended November 30, 1997 to $137,570 for the
three months ended November 30, 1998 due to the Company incurring holding
costs related to its real estate investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity were the net proceeds from
the 8 1/2% Senior Convertible Debentures that were issued in 1997 and the net
proceeds from the sale of common stock during the eight months ended August 31,
1998. As of November 30, 1998 the Company had cash and cash equivalents of
approximately $2,754,000 and working capital of approximately $3,104,000.
This represents a decrease in cash and cash equivalents and working capital
from August 31, 1998 of approximately $1,158,000 and $904,000, respectively.
This decrease is due to additional real estate investments of approximately
$716,000, investment in the expansion of Walden Woods of approximately
$185,000 and the payment of approximately $99,000 in financing costs in the
three months ended November 30, 1998.
Future cash resources available to the Company are expected to come from
the proceeds of future issuances of debt and/or equity securities and from
operations of current businesses as well as planned acquisitions and
development of manufactured housing communities.
The Company's cash flow and working capital requirements are primarily
affected by the timing of receipt of proceeds from sales of investment
properties, redemption of tax lien certificates, receipt of payments from
tenants of Walden Woods, payment of operating expenses and servicing of the
Company's indebtedness.
Year 2000 Compliance
The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four year digits, to indicate the year. Such
computer systems will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, leading to disruptions of
a company's operations.
The Company has developed a plan to ensure its computer programs are
compliant with system requirements to process transaction after the year 1999.
In June 1998, the Company installed a new Y2K compliant computer system and the
Company obtained a certificate of Y2K readiness from the software vendor. As a
result, although no assurances can be given, the Company does not expect that
any costs relating to the Y2K issue will be material to its financial condition
or result of operations.
The Company is working with its suppliers and processing banks to ensure
that their systems will be Y2K compliant. Such compliance costs will be borne by
those suppliers and processing banks. In the event that such suppliers or
processing banks are unable to convert their systems appropriately, the Company
anticipates, although no assurances can be given, that it will switch suppliers
and/or processing banks to new suppliers and/or processing banks which are fully
Y2K compliant.
Forward Looking Statements
Statements that are not historical facts included in this registration
statement are "forward-looking statements" (as that term is defined in the
Private Securities Litigation Reform Act of 1995) and involve risks and
uncertainties that could cause actual results to differ from projected results.
Such statements address activities, events or developments that the Company
expects, believes, projects, intends or anticipates will or may occur, including
such matters as future capital, business strategies, expansion and growth of the
Company's operations and future net cash flows. Factors that could cause actual
results to differ materially ("Cautionary Disclosures") are described throughout
this registration statement. Cautionary disclosures include, among others:
general economic conditions, the markets for and market price of the Company's
acquired properties, the Company's ability to find, acquire, market and sell
properties, the
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strength and financial resources of the Company's competitors, the Company's
ability to find and retain skilled personnel, the results of financing efforts,
and regulatory developments and compliance. All forward-looking statements
attributable to the Company are expressly qualified in their entirety by the
Cautionary Disclosures. The Company disclaims any obligation to update or revise
any forward-looking statement to reflect events or circumstances occurring
hereafter or to reflect the occurrence of anticipated or unanticipated events.
Item 3. Description of Property
The Company maintains its principal executive offices at 1000 Ballpark
Way, Suite 210, Arlington, Texas. The premises are leased from an
unaffiliated party at a current rate of approximately $7,600 per month. Total
lease expense for the eight months ended August 31, 1998 was $95,931. The
lease expires in February 2005 and contains rent escalation clauses, which
are based on pre-determined rent increases specified in the lease agreement.
The Company also maintains an office in Naples, Florida and subleases space
from an unaffiliated party for approximately $3,700 per month. This lease
expires in October, 2000 with an option to renew for two years.
The Company believes that these facilities are adequate for its current
needs and anticipated future needs.
The Company invests in various types of real estate, primarily residential,
but also including commercial and multi-family properties. Whenever the
Company invests in property, the ultimate goal is to realize a specific
targeted capital gain, although no assurances can be given that the Company
will be successful in achieving this goal.
Certain of the Company's investments consist of non-performing loans. Most
of the mortgage loans purchased by the Company are first liens. The Company
believes, although no assurances can be given, that generally, the turnover of
mortgage loan investments is fairly quick at an average holding period of four
to nine months.
The Company also owns Walden Woods Retirement Village (the "Park"), a
manufactured housing community in Homosassa, Florida. The Park is a 45-acre
site. 18 of the 45 acres are developed with approximately 87 home sites. The
Company is currently developing an additional 20 acres. It is anticipated that
the development will be completed by December 1998 at which time the Company
believes the Park will contain an aggregate of approximately 215 home sites.
Upon completion of the development, new sites will rent for $225 per month. Rent
for existing cites is $175 per month. This increase will be made in January
2000. The current occupancy level at the Park is approximately 95%. The book
value of assets related to the Park at August 31, 1998 was approximately
$1,771,000, which was approximately 16% of consolidated assets at August 31,
1998.
Most of the Company's investment properties, as well as the Park discussed
above, are located in the state of Florida. The Company also owns properties,
or loans on properties, in the States of California, Connecticut and Texas.
Currently, the Company is conducting due diligence on several tracts of land
in Florida which may be purchased and developed as manufactured housing
communities. The Company intends to purchase and begin development, as
manufactured housing communities, on a minimum of three tracts of land prior
to the end of 1999. These tracts of land and the ensuing development will be
financed via existing capital and conventional financing.
All of the Company's properties are covered by property and casualty
insurance, which the Company believes is adequate.
9
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of August 31, 1998 with
respect to persons known to the Company to be the beneficial owners of more than
5% of its voting common stock and with respect to the beneficial ownership of
such common stock by each director of the Company and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
(Assuming No Exercise (Assuming Exercise
Name and Address of of Options of Options
Beneficial Owner by Holder (1) Percent by Holder (1) Percent
- ------------------------ ----------------------------- ------- ---------------------- -------
<S> <C> <C> <C> <C>
Bank of Liechtenstein 454,545 6% -- --
c/o Brown Brothers
Harriman & Co.
59 Wall Street
New York, NY 10005
Swiss Bank Corp. 977,955 13% -- --
2 Bahnhof Plotz
Zurich, Switzerland
Von Graffenried Private Bank 567,727 8% -- --
Marktgass Passage 3
Portfach 3000
Bern 3, Switzerland
Michael J. Pilgrim 231,667 3% 541,667 7%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011
Mark J. Teinert 221,667 3% 521,667 7%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011
David E. Wentsch -0- -- 120,000 1%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011
Richard Bergner -0- -- 10,000 --
1000 Ballpark Way, Suite 210
Arlington, Texas 76011
Dr. Raymond Wicki -0- -- 10,000 --
1000 Ballpark Way, Suite 210
Arlington, Texas 76011
Susan M. Stein -0- -- 10,000 --
1000 Ballpark Way, Suite 210
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Arlington, Texas 76011
Directors and executive 453,334 6% 1,223,334 14%
officers as a group
( 6 persons)
</TABLE>
- ------------------------------------
(1) Messrs. Pilgrim, Teinert and all executive officers and directors as a
group beneficially own options exercisable at an average exercise price of $2.34
for 310,000, 300,000 and 770,000 shares of common stock, respectively.
The Company is not aware of any arrangement which might result in a change
in control in the future.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The following table sets forth certain information about the directors,
executive officers and significant employees of the Company.
<TABLE>
<CAPTION>
Name Age Position with Company
<S> <C> <C>
Michael J. Pilgrim 45 President and Chief Executive Officer, Chairman
Mark J. Teinert 44 Secretary and Treasurer
David E. Wentsch 46 Vice President-Legal Affairs and Director
Richard Bergner 68 Director
Raymond Wicki 55 Director
Susan M. Stein 39 Vice President - Finance
</TABLE>
Mr. Michael J. Pilgrim has been President and C.E.O. of the Company since
August 1998. Prior to such time and since 1994, Mr. Pilgrim as a co-founder of
RMC, where he serves as President and C.E.O. Mr. Pilgrim's duties include, but
are not limited to, supervising the Company's operations, serving on the
Company's mortgage evaluation and acquisition team and leading the Company's
manufactured housing activities. From 1992 to present, Mr. Pilgrim has been and
currently is a principal of Rockford Management Inc., which manages an
investment partnership, Gladiator Partners L.P. Mr. Pilgrim's employment history
also includes three years with the accounting firm of Arthur Young, five years
with Merrill Lynch, where he served as Senior Vice President and three years as
Vice President with Prudential Bache Securities. Mr. Pilgrim is a Licensed
Mortgage Broker in Florida and currently serves as the Principal Mortgage Broker
for Royal Mortgage Brokerage, Inc. Mr. Pilgrim received a Bachelor of Business
Administration degree from the University of Missouri in 1975.
Mr. Mark J. Teinert has been Secretary and Treasurer of the Company since
August 1998. Prior to such time and since 1994, Mr. Teinert was a co-founder of
RMC, where he served as Secretary and Treasurer. Mr. Teinert's duties include,
but are not limited to, serving on the Company's mortgage evaluation and
acquisition team, providing financial analysis, tax lien certificate acquisition
and
11
<PAGE>
coordinating auction activities. Mr. Teinert's employment history includes eight
years as a financial analyst for Dorchester Oil & Gas (a Fortune 500 Company),
three years with Merrill Lynch, where he served as Vice President of Retail
Equity sales, four years with California Federal Savings Bank where he oversaw
various home mortgage activities and four years as Vice President with
Professional Practice Insurance Brokers. Mr. Teinert received a Bachelor of
Business Administration degree from Texas Tech University.
Mr. David E. Wentsch has been Vice President of the Company since August
1998. Prior to such time and since April 1998, Mr. Wentsch served as Vice
President of RMC, where he served on the Company's mortgage evaluation and
acquisition team. From April 1997 to April 1998, Mr. Wentsch was engaged on a
contract basis to provide various legal services relating to the Company's
mortgage acquisition activities. Prior experience includes working as a trust
banker and practicing law in the areas of real estate, tax and bankruptcy
matters. Mr. Wentsch is a Florida Licensed Mortgage Broker. Mr. Wentsch received
a Bachelor of Business Administration from the University of Texas El Paso and
Jurist Doctor degree from the University of Texas School of Law.
Mr. Richard Bergner has been a director of the Company since August 1998.
Prior to such time and since April 1998, Mr. Bergner was a director of RMC. Mr.
Bergner has a general civil law practice in Houston, Texas which includes
business litigation in federal and state courts, corporation, general and
limited partnerships, including formation, stock issuance, acquisitions,
mergers, and liquidation and commercial and residential real estate
transactions. Mr. Bergner served in the United State Marine Corps from 1948
through 1952. Mr. Bergner received a B.A. and law degree from the University of
Texas.
Dr. Raymond Wicki has been a director of the Company since August 1998.
Prior to such time and since April 1998, Dr. Wicki was a director of RMC. From
1990 to present, Dr. Wicki has been and currently is the CEO of Bank Von
Graffenried, a family-owned private bank in Berne, Switzerland. From 1983 to
1990, Dr. Wicki focused on private and industrial portfolio management. This
included the assignment to build and manage the institutional asset management
business of a large Swiss bank. In the late 1970's, Dr. Wicki pioneered the
venture capital industry in Europe when, together with two partners, he
established one of the first venture capital funds that invested in the U.S. and
in Germany and Switzerland. Prior to such time and for eight years Dr. Wicki was
with the industrial organization of Aga Khar where he served as Head of Finance.
Dr. Wicki started his professional career in the investment department of
Hoffmann-La Roche, a Swiss pharmaceutical group. Dr. Wicki received a business
administration degree and a Ph. D. in finance and taxation from the University
of Berne, Switzerland. He also holds an MBA degree from Kent State University in
Ohio.
Mrs. Susan Stein has been Vice President of Finance of the Company since
August 1998. Prior to such time and since April 1998, Mrs. Stein was the
Controller of RMC. From 1994 to 1997, Mrs. Stein was with Arthur Andersen LLP in
Dallas, Texas where she served as engagement manager for a variety of public and
privately-owned client companies in the real estate and financial services
industries. Mrs. Stein's employment history includes five years with Coopers &
Lybrand, where she served as engagement manager for several clients including a
trust company, savings & loan, commercial banks and the FDIC. Mrs. Stein also
worked in the banking industry for three years. Mrs. Stein received a Bachelor
of Business Administration degree in Accounting from Baylor University.
Directors serve for a term of one year or until their successors are
elected and qualified.
Executive officers are appointed by and serve at the will of the Board of
Directors. There are no family relationships between or among any of the
directors or executive officers of the Company.
12
<PAGE>
Item 6. Executive Compensation
The following summary compensation and option grants in last fiscal year
tables set forth certain information regarding compensation paid to the
persons serving as the Company's chief executive officer and each executive
officer whose annual compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Awards
Annual Compensation ------------
----------------------- Securities
Name and Principal Other annual Underlying
Position Year Salary Compensation Options (#)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael J. Pilgrim 1998 $132,000 5,000 10,000
President & CEO 1997 75,000 5,000 260,000
Mark J. Teinert 1998 126,000 5,000 10,000
Secretary/Treasurer 1997 75,000 DELETED 250,000
David E. Wentsch 1998 96,000 5,000 10,000
Vice President & Director 1997 Contract 5,000 110,000
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Percent of
Securities Total options
Underlying granted to Exercise or
Options Employees in base price Expiration
Name granted (#) fiscal year ($/Sh) Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael J. Pilgrim 10,000 20% $4.25 March 2003
Mark J. Teinert 10,000 20% 4.25 March 2003
David Wentsch 10,000 20% 4.25 March 2003
</TABLE>
Options were granted to individuals by RMC pursuant to individual stock
option grants. Such options will be ratified by the Company. The Company is
in the process of adopting a stock option plan for 1999.
There is no employment agreement with any executive officer.
Item 7. Certain Relationships and Related Transactions
The Company has entered into a long-term lease agreement for its Arlington,
Texas office. The premises are leased from an unaffiliated party at a current
rate of approximately $7,600 per month. The lease expires in February 2005
and contains rent escalation clauses which are based on predetermined rent
increases specified in the lease.
Item 8. Description of Securities
The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, par value $.001 per share (the "Common Stock"), of which
7,464,382 shares were outstanding as of August 31, 1998.
Voting Rights. Each holder of shares of Common Stock is entitled to one
vote for each share of Common Stock for the election of directors and on each
other matter submitted to a vote of the stockholders of the Company. The holders
of Common Stock have exclusive voting power on all matters at any time.
Liquidation Rights. Upon liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
distributions of any assets after payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.
13
<PAGE>
Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock, on such record dates as may be
determined by the Board of Directors, out of the net profits or surplus of the
Company.
PART II
Item 1. Market Price of and Dividends on the Registrants Common Equity and Other
Shareholder Matters
Market Information
The Company's Common Stock began trading on the OTC Electronic Bulletin
Board (the "Bulletin Board") of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "ROYF" in May 1998. The
following table sets forth, for the periods indicated, the high and low sales
prices for the Common Stock since it was initially quoted in May 1998 until
August 31, 1998. The quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
BID ASK
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Third Quarter 1998 (May only) .85 .40 1.15 .65
Fourth Quarter 1998 2 15/16 1.20 3 1/16 1 1/2
First Quarter 1999 2 1/2 1 9/16 2 7/8 1 27/32
</TABLE>
Holders
As of December 31, 1998, there were approximately 93 holders of record
of the Company's common stock.
Dividends
Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors out of funds legally available therefor. The Company
has never paid cash dividends on its Common Stock. The Board of Directors does
not anticipate paying cash dividends in the foreseeable future as it intends to
retain future earnings to finance the growth of the Company's businesses. The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements, the operating and financial condition of the
Company and its subsidiaries and such other factors that the Board of Directors
of the Company may deem relevant.
Item 2. Legal Proceedings
The Company is currently involved as plaintiff in various lawsuits of a
nature regularly incurred in the ordinary course of the Company's business.
Neither the Company nor any of its subsidiaries is involved in any litigation,
arbitration or other proceedings relating to claims which are material to the
Company's results of operations nor, so far as the Company is aware, are any
such litigation, arbitration or other proceedings pending or threatened.
14
<PAGE>
Item 3. Changes in and Disagreements with Accountants
RMC, predecessor to the Company, terminated the services of its existing
accountant, William C. Spore & Company, P.C., on May 31, 1998. Mr. Spore's
audit report on the December 31, 1997 financial statements was unqualified,
and there were no disagreements between Mr. Spore and RMC.
The Company engaged Grant Thornton LLP, independent public accountants,
on September 3, 1998. This change was approved by the Board of Directors of
the Company on June 12, 1998.
Item 4. Recent Sales of Unregistered Securities
The following paragraphs set forth certain information for all securities
the Company sold during the past three years without registration under the
Securities Act of 1933 (the "Securities Act"). All transactions were effected in
reliance on the exemption from registration afforded by Rule 144 of the
Securities Act for transactions not involving a public offering.
Royal Mortgage Corporation
In March 1995, Royal Mortgage Corporation ("RMC") completed a Regulation D
Rule 506 offering of 800,000 shares at a price of $.75 per share, receiving
gross proceeds of $600,000 from 26 investors, all of whom were accredited
investors as defined by Rule 501 of Regulation D.
In September 1995, RMC completed a Regulation S offering in the amount
of $120,000. The Regulation S offering was in the form of a one year $3.00
convertible debenture with the $120,000 raised accruing interest at an annual
rate of 8.00%. Pursuant to Section 4(2), RMC elected to convert this debt
instrument in September 1996 at $3.00 per share plus the accrued interest to
the holder of the Convertible Debenture for a total of 43,210 shares.
In July 1996, RMC completed a $75,000 Regulation D Rule 506 offering of
37,500 shares at a price of $2.00 per share from three investors, all of whom
were accredited investors as defined by Rule 501 of Regulation D.
In August 1997, RMC completed a 250,000 share Regulation S offering at
$2.00 per share.
In September 1997, RMC completed a Regulation D Rule 506 offering raising
$9,850,000 through the sale of 8 1/2% Convertible Debentures due March 2000
to 15 investors, all of whom were accredited investors as defined by Rule 501
of Regulation D. Pursuant to Section 4(2), during the April-June 1998 time
periods, $8,560,000 of the $9,850,000 debenture holders voluntarily converted
their debentures into shares of RMC for a total of 1,556,363 shares at $5.50
per share at the option of the Debenture Holders.
In connection with the issuance of debt in 1997 and common stock in
1998, RMC issued warrants to purchase common stock expiring December 31, 2000
to the placement agent, which provided for the purchase of 223,864 shares of
common stock at $4.40 per share pursuant to Section 4(2). Pursuant
to an offer made by RMC in August 1998 and in reliance upon Section 4(2),
220,465 of these warrants were exchanged for 73,485 shares of common stock.
Davenport Ventures, Inc.
In May 1998, Davenport Ventures, Inc. issued 1,500,000 shares at $.05
per share for $75,000 pursuant to a Regulation D Section 504 Offering. In
early August 1998, Davenport Ventures, Inc. sold 440,000 shares at $2.00 per
share pursuant to a Regulation D 504 Offering.
Pursuant to the exchange offer by Davenport Ventures, Inc. to RMC's
shareholders a one-for-one share exchange was made and approved by both
company's shareholders on August 10,1998. Concurrent with the merger, Davenport
Ventures, Inc. charged its name to Royal Financial Corporation.
15
<PAGE>
Item 5. Indemnification of Directors and Officers
Article V of the Company's Bylaws provides for indemnification of officers
and directors against expenses incurred in connection with any legal action they
become a party to by reason of being or having been a director or officer of the
Company, unless such officer or director is adjudged to be liable for negligence
or misconduct in the performance of their duties.
Under Section NRS 78.7502 of the Nevada Law, a corporation may indemnify a
past or present director or officer against liability incurred in a proceeding
if (1) the director or officer conducted himself in good faith, (2) the director
or officer reasonably believed that his conduct was in, or not opposed to, the
corporation's best interest, and (3) in the case of any criminal action or
proceeding, the director or officer had no reasonable cause to believe his
conduct was unlawful; provided, however, that a corporation may not indemnify a
director or officer (1) in connection with a proceeding by or in the right of
the corporation in which the director or officer is adjudged liable to the
corporation, unless, and only to the extent that, the court in which the action
or suit was brought or other court of competent jurisdiction determines that the
director or officer is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances.
In addition, pursuant to subsection 3 of Section NRS 78,7502 of the
Nevada Law, a corporation shall indemnify a director or officer who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he is a party because he is or was a director or officer against
reasonable expenses incurred by him in connection with the proceeding.
16
<PAGE>
PART F/S
The following financial statements are filed as part of this
registration statement on Form 10-SB. The financial statements as of August
31, 1998 and for the eight months then ended have been audited by Grant
Thornton LLP, as stated in their report appearing herein. The financial
statement for the three month periods ended November 30, 1997 and 1998,
included herein, have not been audited, but are believed by Management to
contain all accruals and adjustments required for a fair presentation of the
financial condition and results of operations of the Company in accordance
with generally accepted accounting principles. The financial statements as of
December 31, 1997 and 1996 and for the years then ended have been audited by
William C. Spore & Company, P.C., independent auditors, as stated in their
reports appearing herein.
Index to Financial Statements
<TABLE>
<CAPTION>
August 31, 1998
<S> <C>
Report of Independent Certified Public Accountants..............................................................F-2
Consolidated Balance Sheet as of August 31, 1998 (audited) and
November 30, 1998 (unaudited)..............................................................................F-3
For the eight month period ended August 31, 1998 (audited) and for
the three month periods ended November 30, 1997 and 1998 (unaudited)
Consolidated Statement of Operations....................................................................F-4
Consolidated Statement of Changes in Stockholder's Equity...............................................F-5
Consolidated Statement of Cash Flows....................................................................F-6
Notes to Consolidated Financial Statements......................................................................F-7
December 31, 1997
Report of Independent Certified Public Accountants.............................................................F-19
Consolidated Balance Sheet as of December 31, 1997.............................................................F-20
Consolidated Statement of Operations for the year ended December 31, 1997......................................F-22
Consolidated Statement of Changes in Stockholder's Equity for the
year ended December 31, 1997...................................................................................F-23
Consolidated Statements of Cash Flow for the year ended December 31, 1997......................................F-24
Notes to Consolidated Financial Statements.....................................................................F-27
December 31, 1996
Report of Independent Certified Public Accountants.............................................................F-35
Consolidated Balance Sheet as of December 31, 1996.............................................................F-36
Consolidated Statement of Operations for the year ended December 31, 1996......................................F-37
Consolidated Statement of Changes in Stockholders Equity for the
year ended December 31, 1996...................................................................................F-38
Consolidated Statements of Cash Flow for the year ended December 31, 1996......................................F-41
Notes to Consolidated financial Statements.....................................................................F-42
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Consolidated Statement of Changes in Stockholder's Equity for the
year ended December 31, 1997...................................................................................F-37
Consolidated Statements of Cash Flow for the year ended December 31, 1996......................................F-40
Notes to Consolidated Financial Statements.....................................................................F-41
</TABLE>
<PAGE>
Royal Financial Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31, November 30,
ASSETS 1998 1998
-------------------------- -----------------------------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,912,255 $ 2,753,938
Prepaid expenses and other current assets 149,009 223,012
Manufactured home inventory 27,700 143,789
------- -------
Total current assets 4,088,964 3,120,719
INVESTMENTS
Mortgage loan portfolio, net $ 2,808,902 $ 2,865,315
Real estate portfolio, net 1,357,744 1,646,953
Tax lien certificates 127,520 40,727
Other investments 36,636 4,330,802 -- 4,552,995
------- -------
PROPERTY AND EQUIPMENT, NET 2,198,979 2,368,200
OTHER ASSETS
Deferred stock offering costs 35,000 35,000
Deferred debenture costs 79,340 79,340
Deposits and sundry assets 22,639 136,979 121,853 236,193
------- -------- ------- --------
Total assets $10,755,724 $10,278,107
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 80,250 16,425
8-1/2% SENIOR CONVERTIBLE DEBENTURES DUE MARCH 2000 1,290,000 1,290,000
---------- ----------
Total liabilities 1,370,250 1,300,425
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 50,000,000 shares;
issued and outstanding, 7,464,382 shares $ 7,464 $ 7,464
Additional paid-in capital 14,062,657 14,062,657
Accumulated deficit (4,684,647) 9,385,474 (5,098,439) 8,971,682
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $10,755,724 $10,278,107
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
Royal Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Eight Months Ended November 30,
August 31, 1998 1997 1998
------------------------ --------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Interest $ 114,772 $ 101,554 $ 31,016
Gains (losses) on sales of
operating assets
Loans $ 82,073 -- --
Real estate (22,846) 19,713 67,407
Other repossessed assets -- 59,227 -- 19,713 (3,771) 63,636
-------- -------- --------
Lot rental income 46,777 -- 43,321
Other -- -- 785
--------- --------- ----------
Total revenue 220,776 121,267 138,758
Expenses
Interest 1,053,750 318,853 27,413
Salaries and benefits 272,111 68,020 121,380
Contract labor 26,000 22,300 --
Directors fees 25,000 -- --
Professional fees 215,633 20,342 45,244
Promotional 103,283 -- 63,573
Travel and lodging - operations 79,283 28,946 4,893
Travel and lodging - financing 43,372 -- --
General and administrative 129,788 31,246 31,629
Depreciation 61,290 13,408 28,984
Filing fees 4,498 -- 2,431
Office rent 85,687 24,951 33,939
Insurance 64,801 1,369 11,111
Taxes - payroll and other 120,393 9,421 137,570
Real estate property maintenance 58,501 -- 13,548
Due diligence expenses 62,914 2,406,304 26,617 565,473 30,846 552,550
------- ---------- ------- ---------- ------- ----------
Net loss $(2,185,528) $ (444,206) $ (413,792)
------------ ------------ ------------
------------ ------------ ------------
Loss per share - basic and diluted $(0.40) $(0.19) $(0.06)
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares outstanding 5,450,599 2,380,700 7,464,382
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
Royal Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Eight months ended August 31, 1998
and the three months ended November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Common stock Additional
-------------------- paid-in Accumulated
Shares Amount capital deficit Total
--------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1998,
as previously reported 520,000 $ 520 $ (520) $ - $ -
Merger with Royal Mortgage
Corporation (RMC) 2,380,700 2,381 1,464,789 (2,499,119) (1,031,949)
--------- ----- ---------- ---------- ----------
Balances at January 1, 1998,
restated 2,900,700 2,901 1,464,269 (2,499,119) (1,031,949)
RMC
Sale of common stock 892,500 893 3,168,818 - 3,169,711
Conversion of 8-1/2% senior
convertible debentures 1,556,364 1,556 8,558,444 - 8,560,000
Exercise of stock options 1,333 1 1,332 - 1,333
Conversion of warrants 73,485 73 (73) - -
Royal Financial Corporation
(formerly DVI)
Sale of common stock 1,940,000 1,940 864,967 - 866,907
Common stock issued for
services 100,000 100 4,900 - 5,000
Net loss - - - (2,185,528) (2,185,528)
--------- ------- ---------- ------------ -----------
Balance at August 31, 1998 7,464,382 $7,464 $14,062,657 $(4,684,647) 9,385,474
========= ===== ========== ========== ===========
Net loss (unaudited) - - - (413,792) (413,792)
--------- ------- ---------- ------------ -----------
Balance at November 30, 1998 (unaudited) 7,464,382 $7,464 $14,602,657 $(5,098,439) $(5,098,438)
========= ====== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
Royal Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months
Ended
Eight Months November 30,
Ended ---------------------------------------------
August 31, 1996 1997 1998
----------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(2,185,528) ($444,206) ($413,792)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation $ 61,290 13,408 28,984
Amortization/write-off of debenture costs 781,559 109,548 --
Common stock issued for services 5,000 847,849 -- 122,958 -- 920,904
------ --------- -------
Changes in operating assets and liabilities
Prepaid expenses and other assets (43,445) (84,634) (190,135)
Accounts payable and accrued liabilities (159,937) (203,382) (120,944) (205,578) (66,960) ($257,095)
--------- --------- --------- --------- ------- ---------
Net cash used in operating activities (1,541,061) (526,828) ($641,903)
Cash provided by (used in) investing activities
Purchase of Walden Woods of Sugarmill, Inc. (1,611,625) -- --
Purchase of additional land (18,000) -- --
Principal collections on tax lien certificates 102,410 319,077 86,793
Purchases of property and equipment (177,921) (54,368) (12,057)
Purchases of loans (1,531,515) (2,134,079) (63,922)
Collections on loans 111,449 1,050 7,509
Disposition of loans 416,380 -- --
Sale of real estate and other assets 1,192,392 -- 402,091
Purchases of real estate properties (572,327) -- (652,440)
Investment in park development (138,798) (2,227,555) -- (1,868,320) (185,173) (417,199)
--------- ------- --------- ---------
Cash provided by (used in) financing activities
Sale of common stock, net of offering costs 4,057,904 -- --
Exercise of stock options 1,333 -- --
Financing costs on debt (100,027) (99,215)
Issuance of debentures 150,000 --
Additional stock offering costs (36,281) --
Other (8,639) 4,050,598 -- 13,692 (99,215)
---------- ---------- ------- --------- --------- ---------
Net increase in cash and cash equivalents 281,982 (2,381,456) (1,158,317)
Cash and cash equivalents, beginning of period 3,630,273 5,167,833 3,912,255
---------- --------- ---------
Cash and cash equivalents, end of period $ 3,912,255 3,786,177 2,753,938
----------- --------- ---------
----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
ROYAL MORTGAGE CORPORATION
SECURITIES OF MORTGAGE INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MANAGEMENT
ESTIMATE
OF FMV OF
UNDERLYING
FACE COLLATERAL
INVESTMENT AMOUNT COST (UNAUDITED)
----------- ------ ---- -----------
<S> <C> <C> <C>
90% Interest In a Pool of Notes $11,562,584 $1,614,870 $4,222,501
Three Mortgages--California 717,185 607,906 775,000
Twenty One Mortgages--Florida 1,874,020 1,559,466 2,396,240
Residential Mortgage--Florida 39,951 39,951 94,000
---------- --------- ----------
TOTAL $14,193,740 $3,822,193 $7,487,741
---------- --------- ----------
---------- --------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-47
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this Amendment No. 1 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized this 25th day of February 1999.
ROYAL FINANCIAL CORPORATION
BY: /s/ Michael J. Pilgrim
---------------------------------
President, Chief Executive
Officer and Chairman
<PAGE>
INDEX TO EXHIBITS
Exhibit Number
2.1 Restated and Amended Agreement and Plan of Merger*
3.1 Articles of Incorporation, as amended of Davenport Ventures, Inc.*
3.2 By Laws of Davenport Ventures, Inc.*
3.3 Articles of Merger of Royal Mortgage Corporation into Davenport Ventures,
Inc.*
3.4 Articles of Incorporation, as amended, of Royal Mortgage Corporation*
3.5 By Laws of Royal Mortgage Corporation
3.6 Articles of Incorporation, as amended, of Royal Mortgage Brokerage, Inc.*
3.7 By Laws of Royal Mortgage Brokerage, Inc.*
3.8 Authorization to Transact Business in Florida of Royal Mortgage Brokerage,
Inc.*
3.9 Articles of Incorporation of Walden Woods of Sugarmill, Inc.*
3.10 By Laws of Walden Woods of Sugarmill, Inc.*
3.11 Articles of Incorporation of Walden Woods of Sugarmill Sales, Inc.*
3.12 By Laws of Walden Woods of Sugarmill Sales, Inc.*
4.1 Specimen Common Stock Certificate
10.1 Texas Office Lease Agreement
10.2 Florida Sublease Agreement
10.3 Form of Option Agreement
16.1 Letter of William C. Spore & Company, P.C.
*Previously filed.
<PAGE>
CODE OF BYLAWS
OF
ROYAL MORTGAGE CORPORATION
ARTICLE I
Identification
Section 1.01. Name. The name of the Corporation is ROYAL MORTGAGE CORPORATION.
Section 1.02. Registered Office and Resident Agent. The address of the
registered office of the Corporation is 1575 Delucchi Lane, Suite 224, Reno,
Nevada, 89502, and the name of the registered agent at this address is BECKLEY,
SINGLETON, JEMISON, COBEAGA & LIST.
Section 1.03. Other Offices. Branch or subordinate offices may at any time be
established by the Board of Directors at any place or places within or without
the State of Nevada where the Corporation is authorized to do business.
Section 1.04. Seal. The seal of the Corporation shall state the name of the
Corporation and Nevada as its state of incorporation.
Section 1.05. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
ARTICLE II
Capital Stock
Section 2.01. Consideration for Shares. The capital stock may be issued for
such consideration, expressed in dollars, not less than the par value thereof,
as shall be fixed from time to time by the Board of Directors. Treasury shares
may be disposed of by the Corporation for such consideration expressed in
dollars as may be fixed from time to time by the Board of Directors.
<PAGE>
Section 2.02. Payment for Shares. The consideration for the issuance of shares
may be paid, in whole or in part, in money, in other property, tangible or
intangible, or in labor or services actually performed for the Corporation. When
payment of the consideration for which shares are to be issued has been received
by the Corporation, the shares shall be considered to be fully paid and
nonassessable. Neither promissory notes nor future services shall constitute
payment for shares of the Corporation. In the absence of fraud in the
transaction, the judgment of the Board of Directors as to the value of the
consideration received for shares shall be conclusive. No certificate shall be
issued for any share until the share is fully paid.
Section 2.03. Certificates Representing Shares. Each holder of the capital
stock of the Corporation shall be entitled to a certificate signed by the
President or a Vice-President, and the Secretary or an Assistant Secretary of
the Corporation, and sealed with the seal of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2.04. Transfer of Stock. The Corporation shall register a transfer of
a stock certificate presented to it for transfer if the following conditions
have been fulfilled:
(a) Endorsement. The certificate is properly endorsed by the registered holder
or by his duly authorized attorney;
(b) Witnessing. The endorsement or endorsements are witnessed by one witness
unless this requirement is waived by the Secretary of the Corporation;
(c) Adverse Claims. The Corporation has no notice of any adverse claims or has
discharged any duty to inquire into any such claims; and
(d) Collection of Taxes. There has been compliance with any applicable law
relating to the collection of taxes.
ARTICLE III
The Shareholders
Section 3.01. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at the principal office of the Corporation, or at such
other place as may be designated by the President or the Board of Directors, or
by the written consent of all shareholders entitled to vote thereat given either
before or after the meeting and filed with the Secretary of the Corporation.
Section 3.02. Annual Meetings. The annual meeting of the shareholders shall be
determined by the Board of Directors. Failure to hold the annual meeting at the
designated time shall not cause a forfeiture or dissolution of the Corporation.
<PAGE>
Section 3.03. Special Meetings. Special meetings of the shareholders may be
called by the President, the Board of Directors, or the holder or holders of not
less than 50% of all the shares entitled to vote at the meeting.
Section 3.04. Notice of Meetings -- Waiver. Written notice stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten (10), nor more than fifty (50) days before the date of the meeting, either
personally, or by mail, or by other means of written communication, charges
prepaid, by or at the direction of the President, the Secretary, or the Officer
or persons calling the meeting, to each registered holder entitled to vote at
such meeting. If mailed, such notice shall be considered to be delivered when
deposited in the United States mail addressed to the registered holder at his
address as it appears on the stock transfer books of the Corporation, with
postage prepaid. If a shareholder gives no address, notice shall be deemed to
have been given him if sent by mail or other written communication addressed to
the place where the principal office of the Corporation is situated, or if
published at least once in some newspaper of general circulation in the county
in which said office is located. Waiver by a shareholder in writing of notice of
a shareholders meeting, shall be equivalent to giving such notice. Attendance by
a shareholder, without objection to the notice, whether in person or by proxy,
at a shareholders meeting shall constitute a waiver of notice of the meeting.
Section 3.05. Quorum. A majority of the shares entitled to vote, represented
in person, by proxy, or by telephone shall constitute a quorum at a meeting of
shareholders. The shareholders present at a duly organized meeting may continue
to do business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 3.06. Adjourned Meetings and Notice Thereof. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at any such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary
to give any notice of the time and place of the adjourned meeting or of the
business to be transacted thereat, other than by announcement at the meeting at
which such adjournment is taken.
<PAGE>
Section 3.07. Entry of Notice. An entry in the minutes of any meeting of
shareholders, whether annual or special, to the effect that notice has been duly
given shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to all shareholders as required by law and these Bylaws.
Section 3.08. Voting. Except as otherwise provided by law, only persons in
whose names shares entitled to vote stand on the stock records of the
Corporation on the day three (3) days prior to any meeting of shareholders, or,
if a record date for voting purposes is fixed as provided in Article VI, Section
6.01, of these Bylaws, then on such record date, shall be entitled to vote at
such meeting. Such vote may be viva voce or by ballot; provided, however, that
all elections for directors must be by ballot upon demand by a shareholder at
any election and before the voting begins. Except as otherwise provided by the
Articles of Incorporation or by law, each full share is entitled to one vote;
fractional shares shall not be entitled to any voting rights whatsoever.
Section 3.09. Consent of Absentees. The transactions of any meeting of
shareholders, either annual or special and however called and noticed, shall be
as valid as though had at a meeting duly held after regular call and notice if a
quorum be present either in person or by proxy and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice, or a consent to the holding of such
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 3.10. Action or Ratification of Action Without Meeting. Any action
which, under applicable provisions of law, may be taken or ratified at a meeting
of the shareholders, may be taken or ratified without a meeting if authorized in
writing by shareholders holding the percentage of the voting power required by
law for taking such action by written consent and such writing is filed with the
Secretary of the Corporation.
Section 3.11. Proxies. Every person entitled to vote or execute consents shall
have the right to do so either in person or by an agent or agents authorized by
a written proxy executed by such person or his duly authorized agent and filed
with the Secretary of the Corporation; provided that no such proxy shall be
valid after the expiration of eleven (11) months from the date of its execution
unless the person executing it specified therein the length of time for which
such proxy is to continue in force, which in no event shall exceed seven (7)
years from the date of its execution.
Section 3.12. Definition of "Shareholder". As used in these Bylaws, the term
"shareholder", and any term of like import, shall include all persons entitled
to vote the shares held by a shareholder, unless the context in which such term
is used indicates that a different meaning is intended.
<PAGE>
ARTICLE IV
The Board of Directors
Section 4.01. Number of Directors. The members of the governing board of the
corporation shall be styled directors. The governing board of the corporation
shall consist of at least one director and no more than six (6) directors, with
the number to be subject to determination and change, from time to time, by duly
adopted resolutions of the Board of Directors. The number of seats of the Board
of Directors may be increased or decreased from time to time as provided in
Section 4.02 below.
Section 4.02. Increase or Decrease of Directors. The number of seats for
Directors of the Corporation may be increased or decreased from time to time, at
a meeting of the shareholders, by the affirmative vote of a majority of the
issued and outstanding shares of stock of the Corporation; provided, however,
that the Board shall consist of less than three (3) members only if all of the
issued and outstanding shares of the Corporation are owned beneficially and of
record by less than three (3) shareholders, in which case the number of
Directors may be less than three (3), but not less than the number of beneficial
and record owners of shares. This Section of the Code of Bylaws may be amended
only by the affirmative vote, at a meeting of the shareholders, of a majority of
the issued and outstanding shares of stock of the Corporation.
Section 4.03. Election. Members of the initial Board of Directors shall hold
office until the first annual meeting of shareholders or until their successors
shall have been elected and qualified. At the first annual meeting of
shareholders and at each annual meeting thereafter, the shareholders shall elect
Directors to hold office until the next succeeding annual meeting. If any such
annual meeting is not held, or the Directors are elected thereat, the Directors
may be elected at any special meeting of shareholders held for that purpose.
Each Director shall hold office for the term for which he is elected or until
his successor shall be elected and qualified.
Section 4.04. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors, or by a sole remaining
Director. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
<PAGE>
A vacancy or vacancies in the Board of Directors shall be deemed to exist in
case of the death, resignation or removal of any directors, or if the authorized
number of directors be increased, or if the shareholders fail at any annual or
special meeting of shareholders at which any Director or Directors are elected
to elect the full authorized number of Directors to be voted for at that
meeting, or if a vacancy is declared by the Board of Directors for any reason
permitted by law.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors. If the Board of Directors
accepts the resignation of a Director tendered to take effect at a future time,
the Board or the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 4.05. Place of Meetings. Immediately after the annual meeting of the
shareholders, at the same place as the meeting of the shareholders, the Board of
Directors shall meet each year for the purpose of organization, election of
officers, and consideration of any other business that may properly be brought
before the meeting. No notice of any kind to either old or new members of the
Board of Directors for this annual meeting shall be necessary unless the meeting
is to be held at a place other than the principal office of the Corporation, in
which case notice of the place of the meeting shall be given as provided in
Section 4.08.
Section 4.06. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places within or without the State of Nevada as
may be designated from time to time by resolution of the Board or by written
consent of all members of the Board. No notice of any kind to members of the
Board for these regular meetings shall be necessary unless the meeting is to be
held at a place other than the principal office of the Corporation, in which
case notice of the place of the meeting shall be given as provided in Section
4.08. Any director may participate in a meeting by telephone conference or
similar method of communication.
Section 4.07. Other Meetings. Other meetings of the Board of Directors for any
purpose or purposes may be held at any time upon call by the President or, if he
is absent or unable or refuses to act, by any Vice President or by any two (2)
Directors. Such meetings may be held at any place within or without the State
of Nevada as may be designated from time to time by resolution of the Board or
by written consent of all members of the Board. Any director may participate in
a meeting by telephone conference or similar method of communication.
<PAGE>
Written notice of the time and place of other meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charged prepaid, addressed to him at his address as it is
shown upon the records of the corporation or, if it is not so shown on such
records or is not readily ascertainable, at the place in which the meetings of
the Directors are regularly held. In case such notice is mailed or telegraphed,
it shall be deposited in the United States mail or delivered to the telegraph
company in the place in which the principal office of the Corporation is located
at least seventy-two (72) hours prior to the time of the holding of the meeting.
In case such notice is delivered as above provided, it shall be so delivered at
least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, telegraphing or delivery as above provided shall constitute due,
legal and personal notice to such Director.
Section 4.08. Notice of Adjourned Meetings. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned.
Section 4.09. Entry of Notice. An entry in the minutes of any special meeting
of the Board of Directors to the effect that notice has been duly given shall be
conclusive and incontrovertible evidence that due notice of such special meeting
was given to all Directors as required by law and by these Bylaws.
Section 4.10. Waiver of Notice. 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 be
present, and if, either before or after the meeting, each of the Directors not
present signs a written waiver of notice or a consent to holding such 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 4.11. Quorum. A majority of the then sitting number of Directors,
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every 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 regarded as the act of the Board of Directors unless a
greater number be required by law or by the Articles of Incorporation. If the
number of Directors pursuant to the Articles of Incorporation is one or two, the
unanimous consent of said Directors shall be necessary for Board of Directors'
action.
Section 4.12. Adjournment. A quorum of the Directors may adjourn any
Directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum, a majority of the Directors present at any
Directors' meeting either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
<PAGE>
Section 4.13. Action Without Meeting. Any action required or permitted to be
taken by the Board of Directors under the Articles of Incorporation, these
Bylaws, or under applicable law, may be taken without a meeting if all members
of the Board of Directors shall individually or collectively consent, in
writing, to such action. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board.
Section 4.14. Fees and Compensation. Directors shall not receive any stated
salary for their services as Directors or as members of committees, but, by
resolution of the Board, a fixed fee, with or without expenses of attendance,
may be allowed to Directors for such services. Nothing herein contained shall
be construed to preclude any Director from serving the Corporation in any other
capacity as an officer, agent, employee or otherwise, and receiving compensation
therefor.
Section 4.15. Indemnification of Directors and Officers.
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid or owed
in settlement actually and reasonably paid or incurred by him or rendered or
levied against him in connection with such action; suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
<PAGE>
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorney's fees,
actually and reasonably paid or incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, provided, however, that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable for misfeasance or nonfeasance in the performance of his duty to
the Corporation unless and only to the extent that, despite the adjudication of
liability but in view of all circumstances of the case, such person fairly and
equitably merits indemnification.
(c) To the extent that a person who may be entitled to indemnification by the
Corporation under this section is or has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b), or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses, including attorneys' fees, actually and
reasonably paid or incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsection (a) or (b). Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by either independent legal counsel in a written opinion, or the
stockholders, or (iii) if required by law, by the court in which such action,
suit or proceeding was brought or another court of competent jurisdiction.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding if such payment is authorized in the manner
provided in subsection (d) upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this section.
(f) The indemnification provided by this section shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(g) The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this section.
<PAGE>
(h) For the purposes of this section, references to "the Corporation" include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
(i) The provisions of this section shall apply to the estate, executors,
administrators, heirs, legatees or devisees of a person entitled to
indemnification hereunder and the term "person," where used in the section shall
include the estate, executors, administrators, heirs, legatees or devisees of
such person.
Section 4.16. Powers of Directors. Subject to limitations of the Articles of
Incorporation, of these Bylaws, and of applicable law as to action to be
authorized or approved by the shareholders and subject to the duties of
Directors as prescribed by these Bylaws, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be controlled by, the Board of Directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the Directors shall have the following powers, to wit:
First: To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or the Bylaws, fix
their compensation, and require from them security for faithful service.
Second: To conduct, manage and control the affairs and business of the
Corporation and to make such rules and regulations therefor not inconsistent
with law, with the Articles of Incorporation or these Bylaws, as they may deem
best.
Third: To change the principal office for the transaction of the business of
the Corporation from one location to another within the same county; to fix and
locate from time to time one or more subsidiary offices of the Corporation,
within or without the State of Nevada; to designate any place within or without
the State of Nevada for the holding of any shareholders' meeting or meetings;
and to adopt, make and use a corporate seal, and to prescribe the forms of
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law.
<PAGE>
Fourth: To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecation or other evidences of debt and securities therefor.
Fifth: To authorize the issue of shares of stock of the Corporation from time
to time, upon such terms as may be lawful, in consideration of money paid, labor
done or services actually rendered, debts or securities canceled, tangible or
intangible property actually received or such other consideration as may be
authorized by law.
Sixth: To adopt and administer, or provide for the administration of, employee
stock purchase plans, employee stock option plans and any other plans or
arrangements whereby directors, officers, employees or agents of the Corporation
or any other entity may be entitled to acquire authorized but unissued or
treasury stock or other securities of the Corporation, upon such terms and
conditions as may from time to time be permitted by law.
Seventh: To appoint an Executive Committee and other committees, and to
delegate to such Executive Committee any of the powers and authority of the
Board in the management of the business and affairs of the Corporation except
the power to declare dividends and to adopt, amend or repeal Bylaws. The Board
of Directors shall have the power to prescribe the manner in which proceedings
of the Executive Committee and other committees shall be conducted. The
committees shall keep regular minutes of their meetings and report the same to
the Board when required. Any such Executive Committee shall be composed of two
(2) or more Directors.
Eighth: To lend money in furtherance of any of the purposes of the Corporation;
to invest the funds of the Corporation from time to time; and to take and hold
any property as security for the payment of funds so loaned or invested.
Ninth: To lend money to employees, officers and Directors, and to otherwise
assist employees, officers and Directors. Loans to members of the Board of
Directors shall be made only upon the approval of a majority of the Board of
Directors excluding the Director to whom the loan is to be made.
<PAGE>
Tenth: To declare dividends upon the capital stock of the Corporation in cash,
in property, or in shares of the capital stock, subject to the limitation of the
Articles of Incorporation and of applicable law. Before payment of any
dividend, there may be set aside out of the funds of the Corporation available
for dividends such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, of for repairing or maintaining any
property of the Corporation, or for such other purpose as the Directors shall
think conducive to the interests of the Corporation, and the Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE V
The Officers
Section 5.01. Officers. The Officers of the Corporation shall be a President,
a Vice President, a Secretary and a Treasurer. The Corporation may also have
such other executive officers, including one (1) or more Vice Presidents, one
(1) or more Assistant Secretaries and one (1) or more Assistant Treasurers, as
may be appointed by the Board of Directors, and such subordinate officers as may
be appointed in accordance with the provisions of Section 5.03 of this Article
V. Officers, other than the President, need not be Directors. One person may
hold two (2) or more offices, except those of President and Secretary. However,
if the Corporation only has one shareholder, then one person may hold the
offices of both President and Secretary.
Section 5.02. Election. The Officers of the Corporation, except such Officers
as may be appointed in accordance with the provisions of Section 5.03 or Section
5.05 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; provided that officers may be appointed at any time by the Board of
Directors, or, as permitted by Section 5.03 of this Article, by the President,
for the purpose of initially filling an office or filling a newly created or
vacant office.
Section 5.03. Subordinate Officers. The Board of Directors may appoint, and
may empower the President to 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 these Bylaws or as the
Board of Directors may from time to time determine.
Section 5.04. Removal and Resignation. Any Officer may, subject to any
contractual arrangements between the Officer and the Corporation, be removed,
either with or without cause, by a majority of the Directors in office at the
time, 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.
<PAGE>
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 any
later time specified therein, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5.05. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.
Section 5.06. President. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to an Officer senior to the President, 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 officer senior to the President, 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 such other powers and duties as
may be prescribed by the Board of Directors or these Bylaws.
Section 5.07. Vice Presidents. 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 may be
prescribed for them respectively by the Board of Directors, the President or
these Bylaws.
Section 5.08. Secretary. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a book
of minutes of all meetings of directors and shareholder, 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, in any form permitted by law, at
the principal office or at the office of the Corporation's transfer agent, a
share register, or a 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 shares, and the number and date
of cancellation of every certificate surrendered for cancellation.
<PAGE>
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 these Bylaws or by
law to be given, and 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, the President or these Bylaws.
Section 5.09. Treasurer. The Treasurer shall keep and cause to be done, or
cause to be kept and maintained, adequate and correct accounts of the properties
and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any Director.
The Treasurer shall deposit or cause to be deposited all monies and other
valuables in the name and to the credit of the Corporation with such
depositories 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 of his transactions as Treasurer 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, the President or these Bylaws. If
required by the Board of Directors, he shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
The Treasurer may delegate any or all of the above duties at his discretion.
Section 5.10. Corporate Bank Accounts. Bank accounts in the name of the
Corporation may be opened without the approval of the Board of Directors if
opened with the consent of both the President and Treasurer of the Corporation.
The Treasurer shall inform the Board of Directors of any bank account opened by
the President and Treasurer of the Corporation pursuant to the authority granted
in this section at the next meeting of the Board of Directors.
Section 5.11. Transfers of Authority. In case of the absence of any Officer of
the Corporation, or for any reason that the Board of Directors may consider
sufficient, the Board of Directors may transfer the powers or duties of that
Officer to any other Officer or to any Director or employee of the Corporation,
provided a majority of the full Board of Directors concurs.
<PAGE>
ARTICLE VI
Miscellaneous
Section 6.01. Record Date and Closing Stock Books. The Board of Directors may
fix a time in the future, as a record date for the determination of the
shareholders, or entitled to receive any dividend or distribution, or any
allotment of rights, or to exercise rights in respect to any change, conversion
or exchange of shares. The record date so fixed shall not be more than fifty
(50) days prior to the date of the meeting or event for the purposes of which it
is fixed. When a record date is so fixed, only shareholders of record on that
date shall be entitled to notice of and to vote at the meeting, or to receive
the 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. The Board of Directors may close the books
of the Corporation against transfers of shares during the whole or any part of
any such fifty (50) day period.
Section 6.02. Inspection of Corporate Records. The share register or duplicate
share register, the books of account and minutes of proceedings of the
shareholders and the Board of Directors and the Executive Committee, if any,
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate, at any reasonable time, and for a purpose
reasonably related to his interests as a shareholder or as the holder of a
voting trust certificate, and shall be exhibited at any time when required by
the demand at any shareholders' meeting of fifty percent (50%) of the shares
represented at the meeting. Such inspection may be made in person or by an
agent or attorney, and shall include the right to make extracts. Demand of
inspection other than at a shareholders' meeting shall be made in writing upon
the President, Secretary or Assistant Secretary or general manager if any, of
the Corporation.
Section 6.03. Checks, Drafts, etc. All checks, drafts, bonds, bills of
exchange, 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, from time to time,
shall be determined by resolution of the Board of Directors.
<PAGE>
Section 6.04. Contracts, etc., How Executed. The Board of Directors, except as
in these Bylaws otherwise provided, may authorize any officer or officers, agent
or agents to enter into any contract or execute any instrument or document in
the name or on behalf of the Corporation, and such authority may be general or
confined to specific instances. Unless otherwise specifically determined by the
Board of Directors or otherwise required by law, formal contracts, promissory
notes and other evidences of indebtedness, deeds of trust, mortgages and
corporate instruments or documents requiring the corporate seal, and
certificates for shares of stock owned by the Corporation shall be executed,
signed or endorsed by the President or any Vice President and by the Secretary
(or any Assistant Secretary) or the Treasurer (or any Assistant Treasurer). The
Board of Directors may, however, authorize any one (1) of such officers to sign
any of such instruments, for and on behalf of the Corporation, without necessity
of countersignature; may designate officers or employees of the Corporation,
other than those named above, who may, in the name of the Corporation, sign such
instruments; and may authorize the use of facsimile signatures or any of such
persons. No officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement or to pledge its credit to
render it liable for any purpose or to any amount except as specifically
authorized in these Bylaws or by the Board of Directors in accordance with these
Bylaws.
Section 6.05. Certificates of Stock. A certificate or certificates for shares
of the capital stock of the Corporation shall be issued to each shareholder when
any such shares are fully paid up. All such certificates shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary or be
authenticated by facsimiles of the signatures of the President and Secretary or
by a facsimile of the signature of the President and the written signature of
the Secretary or an Assistant Secretary. Before it becomes effective every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk and registered by an incorporated bank or
trust company, either domestic or foreign, as registrar of transfers, as
required or permitted by law.
Each stock certificate issued by the corporation shall be endorsed with a legend
reading substantially as follows: The shares of stock represented by this
certificate are subject to the provisions of the corporation's Articles of
Incorporation. The Articles of Incorporation, among other things, give both the
corporation and the other shareholders of the corporation a preemptive and prior
first right of refusal option in the event that a shareholder desires to effect
a sale, assignment, transfer, hypothecation or other disposition of stock;
create certain transfer restrictions relative to stock; and restrict the right
of shareholders to pledge, collaterally assign or otherwise encumber stock. The
foregoing list of provisions is not intended to be, nor is it complete. By
acceptance of this certificate, the holder hereof agrees to be bound by the
terms of, and agrees to attorn to the provisions of, the Articles of
Incorporation.
<PAGE>
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificate may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificate, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be the Officer or Officers of such Corporation.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or these Bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state the amount remaining unpaid and the terms of payment
thereof.
Section 6.06. Lost Certificates of Stock. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
destroyed, or stolen, upon the making of an affidavit of the fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion, and as a condition precedent to the issuance thereof, require
the owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
Section 6.07. Representation of Shares of Other Corporations. The President or
any Vice President and the Secretary or any Assistant Secretary of this
Corporation are authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any persons authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 6.08. Inspection of Bylaws. The Corporation shall keep in its
principal office for the transaction of business the original or a copy of the
Bylaws as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
<PAGE>
ARTICLE VII
Amendments
Section 7.01. Power of Shareholders. New Bylaws may be adopted or these Bylaws
may be amended or repealed by the vote or written assent of shareholders
entitled to exercise a majority of the voting power of the Corporation, except
as otherwise provided by law or by the Articles of Incorporation.
Section 7.02. Power of Directors. Bylaws may be adopted, amended, or repealed
by the Board of Directors; provided, however, that a Bylaw or amendment thereof
changing the authorized number of Directors may be adopted, amended or repealed
only by the shareholders, except that if a flexible number of Directors is
authorized by the Articles of Incorporation or these Bylaws, a Bylaw or
amendment thereof fixing the exact number of Directors within the limits
specified in the Articles of Incorporation or these Bylaws may be adopted,
amended or repealed by the Board of Directors.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected Secretary of ROYAL MORTGAGE CORPORATION;
2. That the foregoing Bylaws, consisting of Eighteen (18) pages, including
this page, constitute the Bylaws of said Corporation as duly adopted at a
meeting of the Board of Directors thereof duly held on the 23rd day of
September, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said Corporation this 23rd day of September, 1998.
(SEAL)
/s/ Mark J. Teinert
-------------------
SECRETARY
<PAGE>
Exhibit 4.1
CUSIP 780275 10 3
ROYAL FINANCIAL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
COMMON STOCK
SEE REVERSE FOR
CERTAIN DEFINITIONS
- ------------------- [GRAPHIC OMITTED] -------------------
NUMBER ROYAL SHARES
FINANCIAL
- ------------------- CORPORATION -------------------
- --------------------------------------------------------------------------------
This
certifies
that
SPECIMEN
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.001 PAR VALUE, OF
ROYAL FINANCIAL CORPORATION
(hereinafter called the "Corporation"), transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney, upon
surrender of the Certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions of
the Certificate of Incorporation, as amended, and the Bylaws of the Corporation,
as amended (copies of which are on file at the office of the Transfer Agent), to
all of which the holder of this Certificate by acceptance hereof assents. This
Certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar. Witness the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
DATE:
/s/ [ILLEGIBLE] Countersigned:
SECURITIES TRANSFER CORPORATION
PRESIDENT P.O. Box 701629
[SEAL OMITTED] Dallas, Tx. 75370
/s/ [ILLEGIBLE] By: VOID
-------------------------------------
SECRETARY TRANSFER AGENT - AUTHORIZED SIGNATURE
<PAGE>
ROYAL FINANCIAL CORPORATION
TRANSFER FEE $15.00 PER NEW CERTIFICATE ISSUED
A FULL STATEMENT OF THE RELATIVE RIGHTS, INTERESTS, PREFERENCES AND
RESTRICTIONS OF EACH CLASS OF STOCK WILL BE FURNISHED BY THE
CORPORATION TO ANY SHAREHOLDER UPON WRITTEN REQUEST, WITHOUT CHARGE.
The following abbreviations, when used In the Inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - .........Custodian..........
TEN ENT - tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act..........................
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received .................................. hereby sell, assign
and transfer unto
Please Insert Social Security or other
Identifying number of assignee
- ---------------------------------------
- --------------------------------------- .......................................
................................................................................
Please print or typewrite name and address including postal zip code of assignee
................................................................................
................................................................................
..........................................................................Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint .............................................
................................................................................
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated ............, 19......
Signature:
X....................................
VOID
X....................................
Signature Guarantee:
- ---------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE MEDALLION STAMP GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION PURSUANT TO S.E.C. RULE 17AD-15.
- ---------------------------------------------------------------
Signature(s) guaranteed by:
- ---------------------------------------------------------------
<PAGE>
Exhibit 10.1
TEXAS
OFFICE LEASE
by and between
Emerald Diamond, L.P.
and
ROYAL MORTGAGE CORPORATION
DEC. 27, 1994
<PAGE>
TABLE OF CONTENTS
OFFICE LEASE
ARTICLE I
DEFINED TERMS.......................................................... 1
1.1. Tenant .......................................................... 1
1.2. Premises ........................................................ 1
1.3. Term ............................................................ 1
1.4. Base Rental ..................................................... 1
1.5. Landlord's Share of Building Operating Costs .................... 1
1.6. First Year Estimated Energy Costs ............................... 1
1.7. Prepaid Rent .................................................... 1
1.8. Security Deposit ................................................ 1
1.9. Premises Use .................................................... 1
1.10. Tenant's Comprehensive General Liability Insurance .............. 2
1.11. Addresses for Notices and Payment of Rent and Other Charges ..... 2
1.12. Broker .......................................................... 2
1.13. Exhibits and Riders ............................................. 2
1.14. Incorporation ................................................... 2
ARTICLE II
PREMISES, COMMON AREAS................................................. 2
2.1. Demise .......................................................... 2
2.2. Computation of Rentable Area .................................... 3
2.2.1. Usable Square Feet ........................................ 3
2.2.2. Rentable Square Feet ...................................... 3
2.3. Acceptance of Premises and Building by Tenant ................... 3
2.4. Walls, Ceilings ................................................. 4
2.5. Common Areas .................................................... 4
2.6. Parking ......................................................... 4
ARTICLE III
TERM................................................................... 4
3.1. Lease Term ...................................................... 4
3.2. Delivery of Premises ............................................ 4
3.3. Holding Over by Tenant .......................................... 5
ARTICLE IV
TENANT'S MONETARY OBLIGATIONS.......................................... 5
4.1. Base Rental ..................................................... 5
4.2. Tenant's Share of Certain Building Costs ........................ 5
4.2.1. Pro Rata Share ........................................... 5
4.2.2. Building Operating Costs ................................. 5
4.2.3. Energy Costs ............................................. 5
4.2.4. Estimated Costs .......................................... 6
4.2.5. Adjustment for Occupancy ................................. 6
4.3. Prepaid Rent .................................................... 6
4.4. Security Deposit ................................................ 6
4.5. Taxes on Tenant's Property ...................................... 7
<PAGE>
4.6. Late Payments ................................................... 7
4.7. Interest ........................................................ 7
4.8. Supervision Fee ................................................. 7
4.9. Additional Rental ............................................... 7
ARTICLE V
CONSTRUCTION........................................................... 7
ARTICLE VI
SERVICES AND UTILITIES................................................. 8
6.1. Services by Landlord ............................................ 8
6.2. Tenant's Obligations ............................................ 8
6.3. Additional Services ............................................. 8
6.3.1. Heating and Air Conditioning ............................. 8
6.3.2. Electricity .............................................. 9
6.3.3. Cleaning ................................................. 9
6.3.4. Delivery Charges ......................................... 9
6.4. Interruption .................................................... 9
ARTICLE VII
USE AND OCCUPANCY...................................................... 9
7.1. Quiet Enjoyment ................................................. 9
7.2. Tenant's Use .................................................... 10
7.3. Rules and Regulations ........................................... 10
7.4. Additional Covenants of Tenant .................................. 10
7.4.1. Applicable Laws .......................................... 10
7.4.2. Waste, Hazards ........................................... 10
7.5. Entry by Landlord ............................................... 10
7.6. Building Name ................................................... 10
7.7. Access to Premises .............................................. 11
ARTICLE VIII
REPAIRS, ALTERATIONS................................................... 11
8.1 Repair and Maintenance .......................................... 11
8.2. Surrender of Premises ........................................... 11
8.3. Alterations and Additions by Tenant ............................. 11
8.4. Mechanics and Materialmen's Liens ............................... 12
ARTICLE IX
INSURANCE.............................................................. 12
9. 1. Tenant's Insurance .............................................. 12
9.1.1. Liability Insurance ...................................... 12
9.1.2. Property Insurance ....................................... 12
9.1.3. Policy Form .............................................. 12
9.2. INDEMNITY ....................................................... 12
9 3. Waiver of Subrogation ........................................... 13
9.4. Control of Proceeds.............................................. 13
<PAGE>
ARTICLE X
ASSIGNMENT AND SUBLETTING.............................................. 13
10.1. Consent ......................................................... 13
10.2. Landlord's Option ............................................... 13
10.3. Definition of Assignment ........................................ 14
10.4. Bankruptcy, Insolvency .......................................... 14
10.5. Landlord's Assignment ........................................... 14
ARTICLE XI
FIRE AND OTHER CASUALTY................................................ 15
11.1. Total Destruction ............................................... 15
11.2. Partial Destruction ............................................. 15
ARTICLE XII
EMINENT DOMAIN ........................................................ 15
12.1. Permanent Taking ................................................ 15
12.2. Temporary Taking ................................................ 16
ARTICLE XIII
DEFAULT BY TENANT ..................................................... 16
13.1 Events of Default ............................................... 16
13.1.1. Monetary Default .................................... 16
13.1.2. Nonmonetary Default ................................. 16
13.1.3. Assignment to Creditors ............................. 16
13.1.4. Insolvency .......................................... 16
13.1.5. Receivership ........................................ 16
13.1.6. Abandonment ......................................... 16
13.2 Remedies ........................................................ 16
13.2.1. Termination of Lease ................................ 17
13.2.2. Removal from Premises ............................... 17
13.2.3. Relet Premises ...................................... 17
13.2.4. Cure Default ........................................ 17
13.2.5. Injunctive Relief ................................... 17
13.3 Landlord's Damages .............................................. 17
13.4 Remedies Cumulative ............................................. 18
13.5. Joint and Several Liability ..................................... 18
13.6. Lien for Rent ................................................... 18
13.7. Attorneys' Fees ................................................. 18
13.8. Waiver .......................................................... 18
ARTICLE XIV
SUBORDINATION AND ATTORNMENT .......................................... 19
14.1 Subordination ................................................... 19
14.2 Attornment ...................................................... 19
14.3 Further Documentation ........................................... 19
<PAGE>
ARTICLE XV
ESTOPPEL CERTIFICATES ................................................. 20
15.1 Tenant's Certificate ............................................ 20
15.2 Landlord's Certificate .......................................... 20
ARTICLE XVI
INTEREST OF LANDLORD .................................................. 20
16.1 Consents ........................................................ 20
16.2 Force Majeure ................................................... 20
16.3 Best Efforts .................................................... 20
16.4 Exculpation ..................................................... 20
ARTICLE XVII
NOTICES ............................................................... 21
ARTICLE XVIII
BROKERS ............................................................... 21
ARTICLE XIX
RELOCATION OF TENANT .................................................. 21
19.1 Substitute Premises ............................................ 21
19.2 Substitute Premises Rental ..................................... 21
19.3 Landlord's Obligations ......................................... 22
19.4 Tenant's Obligations ........................................... 22
19.5 Status of Lease ................................................ 22
ARTICLE XX
MISCELLANEOUS ......................................................... 22
20.1. No Implied Waiver .............................................. 22
20.2. No Recording ................................................... 22
20.3. Independent Contractor ......................................... 22
20.4. Survival ....................................................... 22
20.5. Severability ................................................... 23
20.6. Amendments ..................................................... 23
20.7. Binding Effect ................................................. 23
20.8. Gender ......................................................... 23
20.9. Captions ....................................................... 23
20.10. Exhibits ....................................................... 23
20.11. Entire Agreement ............................................... 23
20.12. Counterparts ................................................... 23
20.13. GOVERNING LAW AND VENUE ........................................ 23
20.14. No Reservation ................................................. 23
<PAGE>
INDEX OF DEFINED TERMS
Term Section
Addresses for Notices and Payment of Rent and Other Charges ................1.11
Adequate Assurances of Future Performance ..................................10.4
Applicable Laws ...........................................................7.4.1
Assign, Assignment .........................................................10.3
Bankruptcy Code ............................................................10.4
Base Rental .................................................................1.4
Broker .....................................................................1.12
Building ....................................................................1.2
Building Operating Costs ..................................................4.2.2
Common Areas ................................................................2.5
Common Area Factor ........................................................2.2.2
Commencement Date ...........................................................3.1
Encumbrances ...............................................................14.1
Energy Costs ..............................................................4.2.3
Estimated Building Operating Costs ........................................4.2.4
Estimated Energy Costs ....................................................4.2.4
Expiration Date .............................................................3.1
First Year Estimated Energy Costs ...........................................1.6
Landlord ...............................................................Preamble
Landlord's Share of Building and Operating Costs ............................1.5
Lease ..................................................................Preamble
Premises ....................................................................1.2
Premises' Pro Rata Share ..................................................4.2.1
Prepaid Rent ................................................................1.7
Property ....................................................................1.2
Public Area Factor ........................................................2.2.2
Purchaser ..................................................................14.2
Rentable Square Feet ......................................................2.2.2
Security Deposit ............................................................1.8
Sublet, Subletting .........................................................10.3
Substitute Premises ........................................................19.1
Tenant ......................................................................1.1
Term ........................................................................1.3
Usable Square Feet ........................................................2.2.1
<PAGE>
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is entered into as of the 27 day of December,
1994 between Emerald Diamond, L.P., a Texas limited partnership ("Landlord") and
the Tenant named below.
ARTICLE I
DEFINED TERMS
For purposes of this Lease, the following terms shall have the respective
meanings set forth below.
1.1. Tenant: Royal Mortgage Corporation, a Texas Corp. organized under the
laws of the State of Texas.
1.2. Premises: Designated as "Suite 214", outlined and crosshatched on
Exhibit A hereof and containing approximately four thousand three hundred one
(4,301) Rentable Square Feet on floor(s) 2 in the office structure ("Building")
more particularly described in Exhibit B attached hereto (the Building and the
real property upon which the Building is located are sometimes hereinafter
referred to as the "Property").
1.3. Term: Beginning on Commencement Date (which in no event shall be
later than March 1, 1995) and ending one hundred twenty (120) full calendar
months following Commencement Date.
1.4. Base Rental: Seventy thousand nine hundred sixty-six and 50/100
Dollars ($70.966.50) annually [computed on the basis of sixteen and 50/100
Dollars ($16.50) per Rentable Square Foot] payable in equal monthly installments
of five thousand nine hundred thirteen and 87/100 Dollars ($5,913.87), from
March 1, 1995, through and including February 27, 2000 and eighty-eight thousand
six hundred-six and 62/100 Dollars ($88,686.00) annually [computed on the basis
of twenty and 62/100 Dollars ($20.62) per Rentable Square Foot] payable in equal
monthly installments of seven thousand three hundred ninety and 55/100 Dollars
($7,390.55) from March 1, 2000, through and including February 27, 2005.
1.5. Landlord's Share of Building Operating Costs: Seventeen thousand two
hundred four and no/100 Dollars ($17,204.00) annually (computed on the basis of
four and no/100 Dollars ($4.00) per Rentable Square Foot in the Premises).
1.6. First Year Estimated Energy Costs: Six thousand eight hundred
eighty-one and 60/100 Dollars ($6,881.60) annually [computed on the basis of
One and 60/100 Dollars ($1.60) per Rentable Square Foot] payable in equal
monthly installments.
1.7. Prepaid Rent: Five thousand nine hundred thirteen and 87/100 Dollars
($5,913.87) applicable to the first month (s) of the Term.
1.8. Security Deposit: Six Thousand and no/100 Dollars ($6,000.00).
1.9. Premises Use: Office space.
1.10. Tenant's Comprehensive: Two million and no/100 Dollars
($2,000,000.00).
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1.11. Addresses for Notices and Payment of Rent and Other Charges:
To Tenant: To Landlord:
Prior to Commencement Date: Emerald Diamond, L.P.
1000 Ballpark Way, Suite 400
G. William Barnett, II Arlington, Texas 76011
3407 Avenue E, Suite A Attn: Mr. Jack Hill
Arlington, Texas 76011
After Commencement Date: With a copy to:
To the Premises Emerald Diamond, L.P.
1000 Ballpark Way, Suite 400
Arlington, Texas 76011
Attn: Vice President of Legal Affairs
1.12. Broker: Palisades Realty, Inc. d/b/a Reilly Brothers Property
Company, c/o Michael A. Reilly or T. W. Reilly III.
1.13. Exhibits and Riders: The following Exhibits and Riders are attached
to this Lease and made a part of this Lease for all purposes:
Exhibit A: Floor Plan of Premises
Exhibit B: Legal Description of Building
Exhibit C: Building Operating Cost Examples
Exhibit D: Rules and Regulations
Exhibit E: Estoppel Certificate
Exhibit F: Tenant Improvements
Rider 6.1: Balcony and Patio Furniture
1.14. Incorporation: Each reference in this Lease or in any exhibit,
attachment or rider to this Lease to any definition set forth in this Article I
will be construed to incorporate all of the terms provided under the referenced
provision in this Article I. In the event of any conflict between a provision in
this Article I, on the one hand, and a provision in any other article of or
exhibit or attachment to this Lease, on the other hand, the latter will control.
ARTICLE II
PREMISES, COMMON AREAS
2.1. Demise: Landlord, in consideration of the rent to be paid and of the
covenants and agreements in this Lease to be performed by Tenant, does hereby
lease and demise unto Tenant the Premises described in Section 1.2, in the
Building.
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2.2. Computation of Rentable Area.
2.2.1. Usable Square Feet. As used in this Agreement the term
"Usable Square Feet" means:
(i) in the case of a single tenant floor, the number of square
feet computed by measuring from the glass line of permanent outer walls, or, if
the Premises includes balconies, from the exterior railing line of such
balconies, including all areas within outside walls less any area which contains
Building stairs, elevator shafts, flues, pipe shafts and vertical ducts; and
(ii) in the case of a multiple tenant floor, the number of
square feet computed by measuring from the glass line of permanent outer walls,
or if the Premises includes balconies, from the exterior railing line of such
balconies, to the center of corridor partitions, to the finished face of the
core walls of the Building and to the center of partitions that separate the
Premises from adjoining rentable areas.
No deduction shall be made from any of the foregoing for columns or projections
necessary for the support of the Building.
2.2.2. Rentable Square Feet. As used in this Lease, the term
"Rentable Square Feet" means:
(i) in the case of a single tenant floor, the product of the
number of Usable Square Feet computed in accordance with Section 2.2.1 (i)
multiplied by a Public Area Factor (hereinafter defined); and
(ii) in the case of a multiple tenant floor, the product of
the number of the Usable Square Feet, computed in accordance with Section 2.2.1
(i) multiplied by a Common Area Factor (hereinafter defined), and the resulting
product multiplied by a Public Area Factor.
The "Public Area Factor" is Tenant's pro rata share of the first floor lobbies
of the Building and the mail and service areas for Tenant's use located on the
first floor of the Building and in the Building basement. The "Common Area
Factor" is Tenant's pro rata share of Common Areas (hereinafter defined) located
on the same floor. The Common Area and Public Area Factors for the Premises will
be determined by reference to Landlord's schedule of Common Area and Public Area
Factors for each floor of the Building, which is on file in Landlord's office.
2.2.3 Rentable Area of Building. Landlord and Tenant hereby agree
that there are 133,882 Rentable Square Feet contained in the Building based upon
the system of measurement described above. For all purposes of this Lease, the
number of Rentable Square Feet contained in the Building will be the number set
forth in the preceding sentence.
2.3. Acceptance of Premises and Building by Tenant. Except for the
completion of any remaining items of Landlord's Work (as defined in the
Leasehold Improvements Agreement, if any), the taking of possession of the
Premises by Tenant shall be conclusive evidence as to Tenant that: (i) the
Premises are suitable for the purposes for which the Premises are leased and
their intended commercial use; (ii) the Building and each and even part and
appurtenance thereof are in good and satisfactory condition; and (iii) Tenant
waives any defects in the Premises and in all other parts of the Building and
the appurtenances thereto. Except as expressly set forth in this Lease, Landlord
shall be under no obligation to perform any repair, maintenance or management
service in the Premises or the Common Areas and Tenant shall be fully
responsible at its expense for all repair, maintenance and management services
other than those which are expressly assumed by Landlord in this Lease. Tenant
acknowledges that a full and complete inspection of the Premises and the Common
Areas has been made by Tenant and Landlord has fully and adequately disclosed
the existence of any defects which would interfere with Tenant's use of the
Premises for the purposes for which the Premises are leased and their intended
commercial purpose. Tenant specifically acknowledges that as a result of such
inspection and disclosure, Tenant has taken possession of the Premises and has
made its own determination to fully accept same in their as-is-condition.
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In further consideration of such inspection and disclosure, Tenant, to the
maximum extent permitted by law, waives all claims for misrepresentation, breach
of warranty (express or implied) or unconscionable acts as to the Premises and
the Common Areas.
2.4. Walls, Ceilings: Landlord reserves the right to use all of the
Building, including, without limitation, the Premises, the exterior Building
walls, core corridor walls and doors and any core corridor entrance, any
terraces or roofs adjacent to the Premises, and any space in or adjacent to the
Premises used for shafts, stacks, pipes, conduits, fan rooms, duets, electric or
other utilities, sinks or other Building facilities, as well as access thereto
through the Premises for the purposes of operation, maintenance, decoration and
repair, so long as same does not unreasonably interfere with Tenant's use and
occupancy of the Premises.
2.5. Common Areas: Tenant is hereby granted a nonexclusive right to use
the Common Areas during the term of this Lease for their intended purposes, in
common with others, subject to the terms and conditions of this Lease,
including, without limitation, the Rules and Regulations described in Section
7.3. For purposes hereof, "Common Areas" will mean all areas, spaces, facilities
and equipment made available by Landlord for the common and joint use of
Landlord, Tenant and others, including, but not limited to, sidewalks, lobbies,
loading areas, Building stairs, elevators, and such other areas and facilities,
if any, as are designated by Landlord from time to time as Common Areas.
Notwithstanding anything to the contrary contained in this Lease or otherwise,
in no event shall the Common Areas, or any portion thereof, be deemed a part of
the Premises. All Common Areas shall have finishes and systems consistent with a
first class office building and will be accessible to and useable by the
physically handicapped and shall comply with the requirements of the Americans
with Disabilities Act and local codes. Tenant shall be responsible for the
compliance of the Premises and Tenant's use thereof with the requirements of the
Americans with Disabilities Act and local codes.
2.6. Parking: Landlord will provide Tenant with a total of twelve (12)
surface parking spaces in a parking area designated by Landlord. Any parking
spaces which are not reserved spaces for Tenant's use shall be subject to the
mutual use of such parking lots in common with others. Landlord shall have the
right to interrupt use of the parking areas for maintenance, safety or other
management reasons, and to rearrange the configuration of such parking. If
Landlord shall ever charge fees for the use of such parking, Tenant agrees to
pay such fees for the spaces which may be designated for its use at such rates
as Landlord establishes for other tenants of the Building. ARTICLE III
ARTICLE III TERM
3.1. Lease Term Lease Term. The Term of this Lease will commence on the
date ("Commencement Date") on which Landlord delivers possession of the Premises
to Tenant and will expire on a date ("Expiration Date") which is the number of
full calendar months after Commencement Date set forth in Section 1.3 plus the
partial calendar month, if any, following Commencement Date, unless sooner
terminated in accordance with the provisions of this Lease.
3.2. Delivery of Premises: If possession of the Premises is not actually
delivered to Tenant on the Commencement Date for any reason (except as provided
below in this Section 3.2), the obligations of Landlord and Tenant will continue
in full force and effect; provided, however, in the event of a delay directly
caused by Landlord and not due, in whole or in part, to any action or inaction
which is the responsibility of Tenant, the rental payable hereunder shall not
commence until the date that Landlord has actually delivered possession of the
Premises. In addition, this Lease will not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting from any delay in
delivering possession of the Premises to Tenant, but suspension of rental, if
applicable as provided in the preceding sentence, shall constitute full
settlement of all claims that Tenant might otherwise have against Landlord by
reason of the Premises' not having been delivered to Tenant on the contemplated
Commencement Date.
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3.3. Holding Over by Tenant. Should Tenant continue to hold the Premises
after Expiration Date or earlier termination of this Lease, Tenant shall pay to
Landlord, as Base Rental, for each month of such holding over, two (2) times
either the amount of the current monthly installments of Base Rental, or at
Landlord's option, the then current fair market monthly rental for the Premises,
which amount will be due and payable in advance on the first day of each
calendar month. During such time as Tenant will continue to hold the Premises
after the termination hereof, such holding over will be a tenancy at sufferance,
subject to all of the terms, provisions, covenants and agreements of this Lease
except as modified by this Section 3.3 with respect to the length of the Term
and the amount of the Base Rental. No payments of money by Tenant to Landlord
after the termination of this Lease or after the giving of any notice of
termination by Landlord to Tenant will reinstate, continue or extend the Term or
affect any such notice given by Landlord to Tenant, and no extension of the Term
of this Lease will be valid unless and until the same shall be reduced to
writing and signed by both Landlord and Tenant.
ARTICLE IV
TENANT'S MONETARY OBLIGATIONS
4.1. Base Rental. Tenant agrees and promises to pay to Landlord at
Landlord's offices in the Building (or at such other place as Landlord may
designate from time to time, in lawful money of the United States of America,
the Base Rental set forth in Section 1.4 hereof. The monthly installments of
Base Rental will be due and payable in advance on the first day of each calendar
month during the Term of this Lease without notice or demand and without any
offset or deduction whatsoever. Should this Lease commence on a day other than
the first day of a calendar month or terminate on a day other than the last day
of a calendar month. Base Rental for such partial month will be prorated on a
daily basis. Base Rental for the first partial month, if any, will be payable on
Commencement Date. No payment by Tenant or receipt or acceptance by Landlord of
a lesser amount than the correct installment of Base Rental or any amount due
from Tenant shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance or
pursue any other remedy provided by this Lease or by applicable law. The
acceptance by Landlord of rental payment (s) on a date after the due date of
such payment(s) will not be construed to be a waiver of Landlord's right to
declare a default for a subsequent late payment.
4.2. Tenant's Share of Certain Building Costs.
4.2.1. Pro Rata Share. The Term "Premises' Pro Rata Share" of any
cost will mean the amount obtained by multiplying the fraction having as its
numerator the number of Rentable Square Feet in the Premises and as its
denominator the number of Rentable Square Feet in the Building, times the cost
in question.
4.2.2. Building Operating Costs. Tenant will pay to Landlord, as
additional rental hereunder, in the manner set forth below, an amount equal to
the excess of the Premises' Pro Rata Share of Building Operating Costs for each
calendar year of the Term over Landlord's Share of Building Operating Costs
("Tenant's Pro Rata Share"). For purposes hereof, the term "Building Operating
Costs" means all costs, charges, and expenses incurred by Landlord in connection
with owning, operating, maintaining, repairing, insuring and managing the
Building and Common Areas except those costs, charges, and expenses included
within the definition of Energy Costs. Building Operating Costs include, without
limitation, the items enumerated on Exhibit C to this Lease. If it is
determined, for any reason, that the Building or the leasehold interests therein
are subject to real estate taxes and assessments, Tenant's Pro Rata Share shall
be appropriately adjusted to take into account such additional expenses. If the
Premises' Pro Rata Share of Building Operating Costs for any calendar year
should ever be less than Landlord's Share of Building Operating Costs, then the
Premises' Pro Rata Share of Building Operating Costs will be deemed to be equal
to Landlord's Share of Building Operating Costs.
4 2.3. Energy Costs. Tenant will pay to Landlord, as additional
rental hereunder, in the manner set forth below, the Premises' Pro Rata Share of
Energy Costs for each calendar year of the Term. For purposes hereof, the term
"Energy Costs" means the costs charged to or incurred by Landlord for any and
all forms
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of energy for the Building, including all costs of metering the Building's use
of energy and all indirect costs of providing such energy, such as, but not
limited to, any sales, use or other taxes and insurance.
4.2.4. Estimated Costs. Within ninety (90) days after the end of
each calendar year, or as soon thereafter as is reasonably practicable, Landlord
shall deliver to Tenant a statement ("Statement") setting forth for the previous
calendar year the Building Operating Costs, the Energy Costs, Tenant's Pro Rata
Share of Building Operating Costs and the Premises' Pro Rata Share of Energy
Costs, the amounts paid by Tenant toward Building Operating Costs and Energy
Costs and the amounts remaining due from or overpaid by Tenant. In addition, the
Statement shall contain Landlord's estimate of Tenant's Pro Rata Share of
Building Operating Costs ("Estimated Building Operating Costs") and Landlord's
estimate of the Premises' Pro Rata Share of Energy Costs ("Estimated Energy
Costs") for the then current calendar year. Any Statement delivered to Tenant by
Landlord will be conclusively presumed to be true and correct unless Tenant
delivers a written objection to such Statement to Landlord within fifteen (15)
days after delivery thereof
4.2.4.1. Commencing on the first day of the first month
following the delivery to Tenant of each Statement referred to above and on the
first day of each month thereafter until delivery to Tenant of the next such
Statement, Tenant will pay to Landlord, one-twelfth (1/12th) of Tenant's Pro
Rata Share of Estimated Building Operating Costs and one-twelfth (1/12) of the
Premises' Pro Rata Share of Estimated Energy Costs, as contained in the
Statement.
4.2.4.2. In addition, within thirty (30) days after the date
of delivery of the Statement, Tenant will pay to Landlord the balance of the
amounts, if any, required to be paid pursuant to Section 4.2.4 for the previous
calendar year, or if Tenant has overpaid such amount, Landlord will refund the
amount of such overpayment to Tenant within thirty (30) days, except that
Landlord may at Landlord's option credit any amounts due from Landlord to Tenant
against the monthly installments of Base Rental next thereafter coming due.
4.2.4.3. In the event that the Commencement Date of this Lease
occurs on a day other than the first day of a calendar year, Landlord will
notify Tenant of the monthly installments of Estimated Building Operating Costs,
if any, for the remainder of such calendar year, no later than thirty (30) days
prior to Commencement Date. For such initial calendar year, the Tenant's Pro
Rata Share of the Building Operating Costs will be prorated based on a fraction
the numerator of which will be the number of days from the Commencement Date to
December 31 and the denominator of which is three hundred sixty-five (365).
4.2.4.4. During the initial calendar year, the Premises'
Estimated Energy Costs will be the amount set forth in Section 1.6 hereof.
4.2.4.5. In the event that this Lease terminates on a date
other than the last day of a calendar year, then upon termination Tenant will
pay to Landlord a sum equal to Landlord's estimate of the amount due as of the
date of termination, such estimate to be based on the facts currently available
to Landlord on the termination date. Landlord and Tenant will thereafter settle
the actual amounts owing within thirty (30) days of the final establishment of
Building Operating Costs and Energy Costs for such year.
4.2.5. Adjustment for Occupancy. During any calendar year in which
the Building has less than full occupancy, Building Operating Costs and Energy
Costs will be computed as though the Building had been completely occupied for
the entire calendar year.
4.3. Prepaid Rent. Contemporaneously with Tenant's execution of this
Lease, Tenant will pay to Landlord the sum specified in Section 1.7 hereof,
which sum will be credited to monthly installments of Base Rental as specified
in Section 1.7.
4.4 Security Deposit. Upon execution hereof, Tenant shall deposit in cash
with Landlord the Security Deposit in the sum stated in Section 1.8. The
Security Deposit is not an advance payment of rental nor
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the full measure of liquidated damages in case of default by Tenant. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord's written request, and
Tenant's failure to do so shall be a material default under this Lease. No
interest shall be paid to Tenant on the Security Deposit. Landlord shall not be
required to keep the Security Deposit separate from its other accounts and no
trust relationship is created with respect to the Security Deposit. Upon any
termination of this Lease not resulting from Tenant's default, and after Tenant
has surrendered the Property in the manner required in Section 8.2, Landlord
shall refund the unused portion of the Security Deposit to Tenant. Tenant will
not assign or encumber Tenant's interest in the Security Deposit and neither
Landlord nor Landlord's successors or assigns will be bound by any such
attempted assignment or encumbrance.
4.5. Taxes on Tenant's Property. Tenant will be liable for and shall pay
before delinquency all taxes, assessments, license fees, excise and other
charges levied or assessed by any governmental or quasi-governmental authority
against personal property, furniture or fixtures placed by Tenant in the
Premises, the leasehold estate created hereby, or operations at, occupancy of,
or conduct of business in or from the Premises. If any taxes for which Tenant is
liable are levied or assessed against Landlord or Landlord's property and if
Landlord elects to pay the same or if the assessed value of Landlord's property
is increased by inclusion of personal property, furniture or fixtures placed by
Tenant in the Premises or the leasehold estate created hereby, and Landlord
elects to pay the taxes based on such increase, then Tenant will be liable to
Landlord for the payment by Landlord, and Tenant shall pay to Landlord upon
demand that part of the taxes for which Tenant is so liable.
4.6. Late Payments. Should Tenant fail to pay when due any installment of
Base Rental on or before the fifth (5th) day of each calendar month during the
Term interest will accrue from the date on which such sum is due and such
interest, together with a late charge in an amount equal to ten percent (10%) of
the installment then due, will be paid by Tenant to Landlord at the time of
payment of the delinquent sum. The late charge is agreed by Landlord and Tenant
to be a reasonable estimate of the extra administrative expenses incurred by
Landlord in handling such delinquencies.
4.7. Interest. All monetary obligations of Tenant to Landlord under this
Lease remaining unpaid after the due date therefor, will bear interest from and
after such date until paid at the lesser of (i) the highest lawful rate or (ii)
three percent (3%) over the "prime interest rate" announced from time to time by
First Interstate Bank of Texas, N.A., or its successors or assigns. If no due
date is established under the other terms and provisions of this Lease, such due
date will be five (5) days after the date upon which Landlord delivers to Tenant
written demand for payment.
4.8. Supervision Fee. If Tenant fails to perform any obligation of Tenant
under this Lease, Landlord may enter the Premises and perform such obligation
without liability to Tenant for any loss or damage to Tenant thereby incurred,
and Tenant will reimburse Landlord for the costs incurred by Landlord in
connection with such performance, plus twenty percent (20%) of such cost for
overhead and supervision, within ten (10) days of receipt of Landlord's invoice
therefor.
4.9. Additional Rental. All amounts payable by Tenant to Landlord under
this Lease in addition to Base Rental will be deemed to be additional rental and
will be payable and recoverable as rent in the manner prescribed in this Lease.
ARTICLE V
CONSTRUCTION
Construction of any tenant improvements for the Premises shall be
accomplished by Landlord and the cost of such construction will be borne by
Tenant in accordance with Exhibit F attached hereto. Except as expressly
provided in this Lease or in the work letter, if any, Tenant acknowledges that
Landlord has not undertaken to perform any modification, alteration or
improvement to the Premises.
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ARTICLE VI
SERVICES AND UTILITIES
6.1. Services by Landlord. Landlord agrees to furnish the following
services:
(i) Electric current to the Premises for lighting and machines of
low electrical consumption, as may, in the judgment of Landlord, be reasonably
required for use and occupancy under normal office operations;
(ii) Air conditioning to the Premises, both heating and cooling (as
required by the seasons), as may, in the judgment of Landlord, be reasonably
required for comfortable use and occupancy under normal office operations;
(iii) Cold water (at the normal temperature of the supply of water
to the Building) for lavatory and toilet purposes, refrigerated water for
drinking purposes and hot water (from the regular Building supply at prevailing
temperatures) for lavatory purposes, all of such water service to be supplied
from the Building's regular water supply;
(iv) Janitorial cleaning service to the Premises including such
window washing and wall cleaning as may in the judgment of Landlord be
reasonably required;
(v) Passenger elevators to the floor(s) on which the Premises are
located for ingress to and egress from the Premises and freight elevator service
in common with other tenants but only when scheduled through Landlord in
advance; and
(vi) Electric lighting for all public areas and special service
areas of the Building in the manner and to the extent deemed by Landlord to be
reasonable and standard.
Landlord. Landlord's cleaning contractor and such cleaning contractor's
employees will have access to the Premises after 6:00 p.m. and before 6:00 am
and will have the right to use, without charge therefor, all light, power and
water in the Premises reasonably required to clean the Premises as required
under this Lease. Landlord will be deemed to have observed and performed the
terms and conditions to be performed by Landlord under this Lease, including
those relating to the provision of utilities and services, if in so doing
Landlord acts in accordance with a directive, policy or request of any
governmental or quasi-governmental authority.
6.2. Tenant's Obligations. Tenant will pay for, prior to delinquency, all
telephone charges and all other materials and services not expressly the
obligation of Landlord that are furnished to or used on or about the Premises
during the Term of this Lease.
6.3. Additional Services.
6.3.1. Heating and Air Conditioning. If Tenant requires heating or
air conditioning after normal business hours or on days other than normal
business days. Landlord will furnish such services upon not less than
twenty-four (24) hours' advance notice from Tenant. For purposes of this Section
6.3.1 "normal business hours" and "normal business days" shall mean those hours
and days in which Landlord agrees to provide air conditioning (both heating and
cooling) to the Premises pursuant to paragraph 2 of Exhibit D hereto. Tenant
will pay Landlord, as additional rental hereunder, the hourly rate determined
annually by Landlord for the use of heating and air conditioning after normal
business hours and on days other than normal business days. Such rate shall be
the lesser of (i) the actual cost to Landlord for such use, or (ii) $75.00 per
hour. Tenant will not, without Landlord's prior written consent in each
instance, install in the Premises equipment (including telephone equipment)
which generates sufficient heat to affect the temperature otherwise maintainable
in the Premises by the air conditioning system as normally operated. If any such
heat generating equipment is installed, Landlord may
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install such supplementary air conditioning units, facilities or services in the
Premises, or make such modifications to the Premises' air conditioning system,
as may in Landlord's reasonable opinion be required to maintain proper
temperature levels, and Tenant will pay Landlord within ten (10) days of receipt
of an invoice for the cost thereof, including installation plus Landlord's
supervision fee, operation and maintenance expenses.
6.3.2. Electricity. Tenant's use of electric current in the Premises
will not at any the exceed the capacity of any of the electrical conductors and
equipment in or serving the Premises. Tenant will not, without Landlord's prior
consent in each instance, connect any fixtures, appliances or equipment to the
Building's electric distribution system other than through outlets existing on
Commencement Date or make any alteration or addition to the electric system of
the Premises existing on the Commencement Date. If Landlord grants such consent,
all additional risers or other equipment required therefor will be provided by
Landlord and the cost thereof will be paid by Tenant to Landlord within ten (10)
days after receipt of an invoice therefor. If Landlord grants such consent or if
Landlord from time to time reasonably determines that Tenant's use of
electricity or any other utility or service in the Premises may be
disproportionate to the use of other tenants, Landlord may separately charge
Tenant for the excess costs attributable to such disproportionate use. Landlord
may install separate metering for any utility service, the cost of which
separate metering, including installation and Landlord's supervision fee, Tenant
will reimburse to Landlord within ten (10) days after invoicing by Landlord.
6.3.3. Cleaning. Tenant will pay to Landlord within ten (10) days
after receipt of an invoice from Landlord, the costs incurred by Landlord for
(a) extra cleaning work in the Premises required because of the nature of the
use and occupancy of the Premises by Tenant, and (b) removal from the Premises
and the Building of any refuse and rubbish of Tenant in excess of that
ordinarily accumulated in business office occupancy or at times other than
Landlord's standard cleaning times. If Tenant desires to have cleaning work done
in the Premises in addition to that provided by Landlord pursuant to Section 6.1
hereof. Tenant, will employ Landlord's janitorial cleaning contractor for such
services, and the cost of such additional services will be borne solely by
Tenant.
6.3.4. Delivery Charges. In the event Landlord is asked to hold a
mail delivery or similar delivery for Tenant due to Tenant's inability to
receive it. Tenant shall promptly pay to Landlord a charge of $25.00 for each
delivery so held by Landlord. Such payment shall in any event be made no later
than the payment date on which the next installment of Base Rental is due.
Landlord shall have no responsibility whatsoever with respect to any delivery so
held by Landlord.
6.4. Interruption. Landlord reserves the right, without any liability to
Tenant and without affecting Tenant's covenants and obligations hereunder, to
stop or interrupt or reduce any of the services listed in this Section 6.1 or to
stop or interrupt or reduce any other services required of Landlord under this
Lease, whenever and for so long as may be necessary, by reason of (i) the making
or repairs of changes in which Landlord is required or is permitted by this
Lease or by law to make or in good faith deems necessary or (ii) any other cause
beyond Landlord's reasonable control. Landlord does not warrant that the
services provided for in Section 6.1 or elsewhere in this Lease will be free
from interruption or stoppage and no such interruption or stoppage shall in any
manner relieve Tenant of any of Tenant's obligations under this Lease except as
expressly provided in this Lease.
ARTICLE VII
USE AND OCCUPANCY
7.1. Quiet Enjoyment. During the Term of this Lease, Landlord agrees to
warrant and defend Tenant in the quiet enjoyment and possession of the Premises
subject to the terms of this Lease, so long as Tenant is not in default under
this Lease. This covenant will be constructed as a covenant running with the
land, and is not, nor shall this covenant be constructed as, a personal covenant
of Landlord, except to the extent of Landlord's interest in this Lease and only
for so long as such interest shall continue, and thereafter this covenant shall
be binding only upon subsequent successors in interest of Landlord's interest in
this Lease, to the extent of such successor's respective interests, as and when
they shall acquire the same, and for so long as such successors shall retain
such interest.
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7.2. Tenant's Use. Tenant agrees that the Premises shall be used and
occupied by Tenant only for those uses permitted by Section 1.9 of this Lease.
7.3. Rules and: Regulations. Tenant will comply fully with all
requirements of the "Rules and Regulations" (herein so called) of the Building
which are contained in attached Exhibit D, provided that, in the event of any
conflict between the provisions of this Lease and the Rules and Regulations, the
provisions of this Lease will control. Landlord will at all times have the right
to change the Rules and Regulations or to promulgate other Rules and Regulations
in such reasonable manner as may be deemed advisable for the safety, care, or
cleanliness of the Building and Common Areas, and for the preservation of good
order therein, all of which Rules and Regulations, changes and amendments will
be forwarded to Tenant in writing and will be carried out and observed by
Tenant. Tenant further will be responsible for the compliance with such Rules
and Regulations by the agents, employees, licensees and invitees of Tenant.
Nothing contained in this Lease will be construed to impose upon Landlord any
duty or obligation to enforce the Rules and Regulations against any other tenant
or any employees or agents of any other tenant, and Landlord will not be liable
to Tenant for violation of the Rules and Regulations by any other tenant or such
other tenant's employees, agents, invitees or licensees.
7.4. Additional Covenants of Tenant.
7.4.1. Applicable Laws. Tenant agrees to use and maintain the
Premises in a clean, careful, safe and proper manner and to comply with all
applicable laws, ordinances, orders, rules and regulations of all governmental
and quasi-governmental bodies, federal, state, county and municipal
(collectively "Applicable Laws") from time to time in force which will affect
Tenant's use or occupancy of the Premises. Tenant will pay all costs, expenses,
fines, penalties and damages which may be imposed upon Landlord by reason of or
arising out of Tenant's failure to fully and promptly comply with and observe
such Applicable Laws. Tenant will, at Tenant's expense, procure and maintain all
governmental licenses or permits required for the proper and lawful conduct of
Tenant's business in the Premises. Tenant will give prompt notice to Landlord of
any notice Tenant receives of the violation of any Applicable Laws.
7.4.2. Waste, Hazards. Tenant agrees not to commit waste or permit
waste to be committed or to allow or permit any public nuisance on or in the
Premises. Tenant will not use the Premises or allow or permit the same to be
used in any way which will increase the rate of fire or other insurance for the
Building or the Building's contents or which may render the Building uninsurable
at normal rates by responsible insurance carriers authorized to do business in
the State of Texas or which may render void or voidable any insurance on the
Building or the Building's contents. Tenant will not violate, or permit the
violation of any condition imposed by any insurance policy covering the Building
and or the Property and will not do, or permit anything to be done in the
Premises which would result in the cancellation of, or limit the assertion of
any defense by the insured, in whole or in part to claims under any policy of
insurance in respect of the Building or the Property. In the event that by
reason of Tenant's acts or conduct of business there is an increase in the rate
of insurance on the Building or the contents thereof, then Tenant hereby agrees
to pay such increase but such payment shall not be deemed a waiver of Landlord's
rights to enforce the covenants herein contained.
7.5 Entry by Landlord. Landlord will have the right at any time to enter
the Premises for the purpose of examining and inspecting the Premises and to
make such repairs, additions or alterations to the Premises or other portions of
the Building as Landlord may deem necessary or proper for the safety,
improvement or preservation of the Premises or of the Building, so long as same
do not unreasonably interfere with Tenant's use and occupancy of the Premises.
During the period of eighteen (18) months prior to the expiration date of this
Lease, Landlord and Landlord's agents may exhibit the Premises to prospective
tenants.
7.6 Building Name. Landlord reserves and retains the right at any time and
from time to time to change the name by which the Building is designated.
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7.7. Access to Premises. Tenant and clients having business with Tenant
shall be permitted access to the Premises twenty-four (24) hours a day, seven
(7) days a week, three hundred and sixty five (365) days a year. Deliveries of
less than a van load will be allowed from 9 a.m. to 5 p.m. seven days a week
through the main lobby and without prior notice from Tenant to Landlord, from a
delivery vehicle standing location approved by the City of Arlington traffic
department. It is anticipated that this location will be on the east side of the
Building. Landlord will specify to Tenant the arrangements to be made to allow
routine access before, during and following sporting and other events at the
major league ballpark including the Building. Landlord will provide an emergency
vehicle access plan applicable during sports and entertainment events prior to
Tenant's occupancy of the Premises.
ARTICLE VIII
REPAIRS, ALTERATIONS
8.1. Repair and Maintenance. Landlord will repair and maintain the
structural components of the Building, the basic Building core, the basic
Building facilities systems which pass through the Premises and the Common
Areas. Tenant will, at Tenant's expense, repair and maintain the Premises,
except as provided in the preceding sentence. Tenant will be liable for any
damage to the Premises or to any other part of the Building which arises out of
any act, omission, misuse or neglect of Tenant or any of Tenant's subtenant's
employees, agents, contractors or invitees or any other person entering upon the
Premises. Tenant, at Tenant's expense, promptly will replace all scratched,
damaged or broken doors and glass in and about the Premises and will be
responsible for all repairs, maintenance and replacement of wall and floor
coverings in the Premises and replacement of all light bulbs and fluorescent
tubes in the Premises. Any repairs in or to the Premises or the Building for
which Tenant is responsible will be performed by Landlord at Tenant's expense
(including Landlord's supervision fee under Section 4.8 hereof).
8.2. Surrender of Premises. Upon termination or earlier expiration of this
Lease, or upon the exercise by Landlord or Landlord's right to re-enter the
Premises without terminating this Lease, Tenant will deliver the Premises to
Landlord in a condition comparable to the condition existing on the Commencement
Date, ordinary wear, tear and obsolescence only excepted. Tenant will deliver to
Landlord all keys for the Premises and combinations to safes located in the
Premises. Tenant will, at Landlord's option, remove, or cause to be removed,
from the Premises or the Building, at Tenant's expense and as of Expiration Date
or earlier termination of this Lease, all signs, notices, displays, millwork,
non-movable trade fixtures, or, subject to Section 8.3 of this Lease, any
non-Building standard tenant improvements placed in the Premises or the
Building. Tenant agrees to repair, at Tenant's expense, any damage to the
Premises or the Building resulting from the removal of any articles of personal
property, movable business or trade fixtures, machinery, equipment, furniture,
movable partitions or non-Building standard tenant improvements, including
without limitation, repairing the floor and patching and painting the walls
where reasonably required by Landlord. Tenant's obligations under this Section
8.2 will survive the expiration or earlier termination of this Lease. If Tenant
fails to remove any item of property permitted or required to be removed at the
expiration or earlier termination of the Term, Landlord, may, at Landlord's
option, (a) remove such property from the Premises at the expense of Tenant and
sell or dispose of same in such manner as Landlord deems advisable, or (b) place
such property in storage at the expense of Tenant. Any property of Tenant
remaining in the Premises ten (10) days after the Expiration Date or earlier
termination of this Lease will be deemed to have been abandoned by Tenant, and
in such case such items may be retained by Landlord as Landlord's property or
disposed of by Landlord without accountability to Tenant, in such manner as
Landlord determines, at Tenant's expense.
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8.3. Alterations and Additions by Tenant. Tenant will make no alterations
in or additions to the Premises without the prior written consent of Landlord,
which consent may be withheld in Landlord's sole discretion. If Landlord
consents to any alterations or additions, at the end of the Term of this Lease,
Tenant shall, at Landlord's option, remove any such alterations or additions
from the Premises at Tenant's sole cost and expense. All alterations made by or
for Tenant (other than the Tenant's movable trade fixtures) will immediately
upon completion of installation become the property of the Landlord, without
compensation to the Tenant; provided, however, Landlord will have no obligation
to repair, maintain or insure such alterations. Carpeting, shelving cabinetry
will be deemed improvements of the Premises and not movable trade fixtures,
regardless of how or where affixed. Such alterations will not be removed by
Tenant from the Premises either during or at the expiration or earlier
termination of the Term and will be surrendered as a part of the Premises unless
such alteration is not Building standard and Landlord has requested that Tenant
remove same. In addition, Tenant will reimburse Landlord for the cost of all
damage done to the Premises or the Building by the installation and/or removal
of such alterations or additions.
8.4. Mechanics and Materialmen's Liens. Tenant will not permit any
mechanics' or materialmen's lien or liens to be placed upon the Premises, the
Building, the Common Areas or the Property during the term hereof caused by or
resulting from any work performed, materials furnished or obligations incurred
by or at the request of Tenant, and in the case of the filing of such a lien,
Tenant promptly will pay the same. If default in payment thereof continues for
twenty (20) days after written notice thereof from Landlord to Tenant, Landlord
will have the right and privilege at Landlord's option of paying the same or any
portion thereof without inquiry as to the validity thereof, and any amounts so
paid, including expenses and interest, will be additional rental hereunder due
from Tenant to Landlord and will be repaid to Landlord within ten (10) days
after delivery to Tenant of an invoice therefor.
ARTICLE IX
INSURANCE
9.1. Tenant's Insurance.
9.1.1. Liability Insurance. Tenant agrees to carry comprehensive or
commercial general liability insurance, with contractual liability protection in
the amount set forth in Section 1.10 hereof.
9.1.2. Property Insurance. Tenant will also carry "all risks"
property insurance in the amount of one hundred percent (100%) of replacement
cost on all leasehold improvements, betterments, fixtures and other contents
located in the Premises.
9.1.3. Policy Form. Such insurance will be written by an insurance
carrier acceptable to Landlord which carries a Best's Insurance Report's rating
of A XII (or an equivalent rating if Best's ratings are substantially revised or
discontinued) and will name Landlord as either an "additional insured" or
insured "as interest shall appear". Landlord will be furnished, within thirty
(30) days after execution hereof, with a certificate of insurance of the
original policy, and of all renewals within thirty (30) days before the
effective dates of such renewals. Such certificate will contain an endorsement
to the effect that the insurance company will give Landlord thirty (30) days,
prior written notice by certified mail in the event of cancellation, non-renewal
or material change in any such policy. Landlord may from time to time, require
that the amount of liability insurance to be maintained by Tenant under Section
9.1.1 be increased so that the amount thereof adequately protects Landlord's
interest.
9.1. INDEMNITY. LANDLORD WILL NOT BE LIABLE TO TENANT OR TO ANY OF
TENANT'S AGENTS, EMPLOYEES, LICENSEES OR INVITEES FOR ANY DAMAGE TO PERSON OR
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PROPERTY HOWSOEVER CAUSED, EXCEPT TO THE EXTENT CAUSED BY LANDLORD'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, TENANT HEREBY AGREES TO INDEMNIFY AND HOLD
LANDLORD HARMLESS FROM ANY LOSS, COST, EXPENSE, LIABILITY OR CLAIMS FOR DAMAGE
(INCLUDING REASONABLE ATTORNEY'S FEES) WHICH RESULT FROM ANY OCCURRENCES ON THE
PREMISES OR WHICH RESULT DIRECTLY OR INDIRECTLY FROM TENNANT'S USE AND OCCUPANCY
OR THE PREMISES, INCLUDING WITHOUT LIMITATION, FROM ANY OCCURRENCE ARISING FROM
THE NEGLIGENCE OF LANDLORD OR LANDLORD'S AGENTS, EMPLOYEES OR CONTRACTORS,
EXCEPT TO THE EXTENT CAUSED BY LANDLORD'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. FOR PURPOSES OF THIS SECTION 9.2, THE TERM "LANDLORD" WILL BE DEEMED
TO INCLUDE ANY SHAREHOLDER, OWNER, PARTNER, PRINCIPAL, DIRECTOR, OFFICER, AGENT,
SERVANT, EMPLOYEE OR AFFILIATE OF LANDLORD.
9.3. Waiver of Subrogation. Each party agrees to notify such party's
property insurance carrier of the existence of this waiver of subrogation
provision and to have included in each of the property insurance policies
required to be carried by such party under this Lease a waiver of the insurer's
right of subrogation against the other party during the Term of this Lease or,
if such waiver should be unobtainable or unenforceable, (i) an express agreement
that such policy will not be invalidated if the insured waives the right of
recovery against any party responsible for a casualty covered by the policy
before the casualty or (ii) any other form of permission for the release of the
other party. If such waiver, agreement or permission is, or will cease to be,
obtainable from either party's then current insurance company, the insured party
will so notify the other party promptly after learning thereof, and shall use
its best efforts to obtain same from another acceptable insurance company. Each
party hereby releases the other party, with respect to any claim (including a
claim for negligence) which such party might otherwise have against the other
party, for loss, damage or destruction with respect to such party's property
occurring during the Term of the Lease with respect to any loss, damage or
destruction insured under a policy or policies containing a waiver of
subrogation or permission to release liability, as provided above.
9.4. Control of Proceeds. Any insurance which may be carried by Landlord
or Tenant against loss or damage to the Building or to the Premises will be for
the sole benefit of the party carrying such insurance and under such party's
sole control.
ARTICLE X
ASSIGNMENT AND SUBLETTING
10.1. Consent. Tenant will not assign this Lease or sublet all or any
portion of the Premises without the prior written consent of the Landlord. If
consent to any assignment or subletting is given by Landlord, such consent will
not relieve the Tenant or any guarantor of this Lease from any obligation or
liability under this Lease. If this Lease is assigned or any part of the
Premises is occupied by any person other than the Tenant without the consent of
Landlord, the Landlord may nevertheless collect Base Rental and additional rent
from the assignee or occupant, and apply the net amount collected to the Base
Rental and other amounts payable under this Lease, but in no event will such
collection be construed as a waiver of this covenant.
10.2. Landlord's Option. If the Tenant desires to assign this Lease or
sublet all or part of the Premises, Tenant will notify Landlord at least sixty
(60) days in advance of the date on which Tenant desires to make such assignment
or enter into such sublease. Tenant will provide Landlord with a copy of the
proposed assignment or sublease, and sufficient information concerning the
proposed sublessee or assignee to allow Landlord to make informed judgments as
to the financial condition, reputation, operations and general desirability of
the proposed assignee or subtenant(s). Within thirty (30) days after Landlord's
receipt of Tenant's proposed assignment or sublease and all required information
concerning the proposed subtenant(s) or assignee, Landlord will have the option
to:
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(i) Cancel the Lease as to all of the Premises on the effective or
commencement date of such proposed assignment or subletting, if Tenant proposes
to assign the Lease or sublet more than fifty percent (50%) of the Premises, or
cancel the Lease as to the portion of the Premises proposed to be sublet if
Tenant proposes to sublet less than fifty percent (50%) of the Premises; or
(ii) Consent to the proposed assignment or sublease, provided,
however, if the rent due and payable by any assignee or sublessee under any such
permitted assignment or sublease (or a combination of the rent payable under
such assignment or sublease plus any bonus or any other consideration for the
assignment or sublease or any payment incident to the assignment or sublease)
exceeds the rent payable under the Lease for such space, Tenant will pay to
Landlord all of such excess rent and other excess consideration within ten (10)
days following receipt of such excess rent and/or consideration by Tenant; or
(iii) Refuse to consent to the proposed assignment or sublease but
allow Tenant to continue in the search for an assignee or sublessee that will be
acceptable to Landlord, which option will be deemed to be elected unless
Landlord gives Tenant notice providing otherwise.
10.3 Definition of Assignment. The use of the words "assignment",
subletting", "assign", "assigned" or "sublet" in this Article X will include (i)
the pledging, mortgaging or encumbering of Tenant's interest in this Lease, or
the Premises or any party thereof, (ii) the total or partial occupation of all
or any part of the Premises by any person, firm, partnership, or corporation, or
any groups of persons, firms, partnerships, or corporations, or any combination
thereof, other than Tenant, (iii) an assignment or transfer by operation of law,
and (iv) with respect to a corporation, partnership, or other business entity, a
transfer or issue by sale, assignment, bequest, inheritance, operation of law,
or other disposition, or by subscription, any part or all of the corporate
shares of or partnership or other interests in the Tenant, so as to result in
any change in the present effective voting control of the Tenant by the party or
parties holding such voting control on the date of this Lease. Upon the request
of Landlord, Tenant will make available to the Landlord or to Landlord's
representatives for inspection all books and records of the Tenant necessary to
ascertain whether there has, in effect, been a change in control of Tenant. Item
(iv) of this Section 10.3 will not apply to a corporation whose shares are
traded on a nationally recognized stock exchange.
10.4 Bankruptcy, Insolvency. For purposes of Section 365(f)(2) of the
Federal Bankruptcy Code, 11 U.S.C. ss.101, et. seq., as subsequently amended,
("Bankruptcy Code") "adequate assurance of future performance" will include, but
not be limited to, a Security Deposit, net worth, solvency, and creditworthiness
equal to that of Tenant on the date of this Lease. For purposes of this Lease,
"solvent" shall mean that on such date (i) the fair value of the property of
such person is greater than the total amount of liabilities, including without
limitation contingent liabilities, of such person, (ii) the present fair value
of the assets of such person is not less than the amount that will be required
to pay the probable liability of such person on its debts as they become
absolute and matured, (iii) such person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such person's ability to pay as
such debts and liabilities mature, (iv) such person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such person's property would constitute an unreasonably small capital,
and (v) there is no reasonable expectation that such person's net operating
income will not be sufficient to pay its debts and liabilities as they mature.
Any person or entity to which this Lease is assigned pursuant to the provisions
of the Bankruptcy Code, will be deemed without further act or deed to have
assumed all of the obligations arising under this Lease on and after the date of
such assignment. Any such assignee will upon demand execute and deliver to
Landlord an instrument confirming such assumption.
10.5 Landlord's Assignment. Landlord shall have the right to sell, convey,
transfer, assign, pledge, mortgage or encumber, in whole or in part, all and
every feature of Landlord's rights and obligations hereunder and in the Building
and the Property. Upon the occurrence of any sale, conveyance, transfer or
assignment, such successor in interest shall be deemed to have assumed
Landlord's rights and obligations under this Lease. Landlord
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shall be released from all obligations hereunder and Tenant agrees to look
solely to such successor in interest of Landlord for the performance of such
obligations.
ARTICLE X
FIRE AND OTHER CASUALTY
11.1. Total Destruction. In the event that the Building is totally
destroyed by fire, tornado or other casualty or in the event the Premises or the
Building is so damaged that rebuilding or repairs cannot be completed within one
hundred eighty (180) days after the date of such damage, either Landlord or
Tenant may terminate this Lease, in which event the rent will be abated during
the unexpired portion of the Term of this Lease effective from the date of such
damage. If Tenant wishes to terminate this Lease, Tenant must do so by notifying
Landlord in writing of such election within thirty (30) days after the date of
the occurrence of the casualty. In determining whether rebuilding or repair can
be completed within one hundred eighty (180) days, a statement of the estimated
time for rebuilding or repair certified to by Landlord's architect will be
conclusive.
11.2. Partial Destruction. In the event the Building or the Premises is
damaged by fire, tornado or other casualty, but only to such extent that
rebuilding or repairs can be completed within one hundred eighty (180) days
after the date of such damage, or if the damage is more serious but neither
Landlord nor Tenant elects to terminate this Lease. In either such extent
Landlord will within sixty (60) days after the date of such damage commence to
rebuild or repair the Building and/or the Premises and proceed with reasonable
diligence to restore the Building and/or the Premises to substantially the same
condition in which they existed immediately prior to the happening of the
casualty, except that Landlord will not be required to rebuild, repair or
replace any part of the furniture, equipment, fixtures and other improvements
which may have been placed by Tenant on or within the Premises. Landlord will
allow Tenant a fair diminution of rental during the time the Premises is unfit
for occupancy. In the event any mortgage under a deed of trust, security
agreement or mortgage on the Building requires that the insurance proceeds be
applied to the debt secured thereby. Landlord will have no obligation to
rebuild, and if Landlord elects not to rebuild, this Lease will terminate upon
notice of such election to Tenant. Except as specifically provided above, there
will be no reduction of rental and Landlord will have no liability to Tenant by
reason of any injury to or interference with Tenant's business or property
arising from fire or other casualty, howsoever caused, or from the making of any
repairs resulting therefrom in or to any portion of the Building or the
Premises. Notwithstanding anything contained herein, rental payable by Tenant
hereunder will not be abated if the damage is caused by any act or omission of
Tenant, Tenant's agents, invitees, servants, employees or any other person
entering upon the Premises under the express or implied invitation of Tenant.
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ARTICLE XII
EMINENT DOMAIN
12.1. Permanent Taking. If the whole or substantially the whole of the
Building or of the Premises is condemned or taken in any manner, including a
voluntary conveyance by Landlord in lieu of condemnation, during the Term of
this Lease by any governmental or quasi-governmental agency through the power of
eminent domain, this Lease will cease and terminate as of the date of taking of
possession for such purpose. If less than the whole or substantially the whole
of the Building or the Premises is taken but the portion of the Premises taken
is so great that Tenant cannot continue to conduct business in a manner
comparable to the manner in which Tenant conducted Tenant's business prior to
the taking, Tenant may elect to terminate this Lease by delivering written
notice thereof to Landlord and thereupon this Lease will terminate upon the date
of the taking. If less than the whole or substantially the whole of the Building
or the Premises is taken but the portion of the Building or the Property taken
is such that the taking materially adversely affects the value of the Property
or the Building, Landlord may elect to terminate this Lease by delivering
written notice thereof to Tenant and thereupon this Lease will terminate upon
the date of the taking. Any election to terminate this Lease pursuant to the
preceding sentences must be exercised within sixty (60) days after the date of
taking. Upon any condemnation of less than the whole of the Building or the
Premises which does not result in the termination of this Lease as described
above, this Lease will nevertheless terminate as to the portion of the Premises
so taken and will continue in full force and effect as to the remaining portion
of the Premises and the rent payable hereunder will abate with respect to the
portion of the Premises so taken (with no effect on the rental payable for the
remainder of the Premises). In any event, Landlord will be entitled to receive
the entire award in any condemnation proceeding affecting the Building or the
Premises. Tenant hereby expressly assigns to Landlord all of Tenant's right,
title and interest in and to any such award or payment.
12.2. Temporary Taking. If the temporary use or occupancy of all or any
part of the Premises is condemned or taken for any public or quasi-public use
during the Term of this Lease, this Lease will be and remain unaffected by such
condemnation or taking and Tenant will continue to pay in full the Base Rental,
and all other sums payable hereunder for any period during such temporary use or
occupancy during the Term of this Lease. In the event of any such condemnation
or taking, Tenant will be entitled to appear, claim, prove and receive the
entire award for such taking (as described in this subparagraph) as represents
compensation for use or occupancy of the Premises during the Term of this Lease
and Landlord will be entitled to appear, claim, prove and receive the entire
award as represents the cost of restoration of the Premises and the award
representing use or occupancy of the Premises after the end of the Term of this
Lease.
ARTICLE XIII
DEFAULT BY TENANT
13.1. Events of Default. The occurrence of any of the following will
constitute a default by Tenant under this Lease.
13.1.1 Monetary Default. Tenant fails to pay any monetary obligation
of Tenant under this Lease at the time such monetary obligation is due and such
failure continues for five (5) days thereafter.
13.1.2. Nonmonetary Default.Tenant fails to comply with any term,
provision or covenant of this Lease (including the exhibits hereto), other than
the payment of monetary obligations, within thirty (30) days after written
notice from Landlord that Tenant has failed to comply with such term, provision
or covenant, provided, however, that such notice and cure period shall not apply
to Tenant's obligations under Section 9.1 hereof.
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13.1.3. Assignment to Creditors. Tenant makes a general assignment
for the benefit of creditors.
13.1.4. Insolvency. Tenant is no longer Solvent, or becomes unable
to pay Tenant's debts as the same become due, or Tenant files or there is filed
against Tenant and not dismissed within a period of sixty (60) days, a petition
seeking entry as to Tenant of an order for relief under any chapter of the
Bankruptcy Code, or under any similar law or statute of the United States or any
State thereof.
13.1.5. Receivership. A receiver, custodian, examiner, sequestrator
or trustee is appointed for all or substantially all of the assets of Tenant and
the same is not be terminated or stayed within sixty (60) days.
13.1.6. Abandonment. Tenant fails to take possession or delivery of
the Premises within ten (10) days after tender by Landlord or deserts or vacates
any substantial portion of the Premises for a period of ten (10) or more
consecutive days.
As used in this Section 13.1, the term "Tenant" will be deemed to include any
guarantor of Tenant's obligations under this Lease.
13.2. Remedies. Upon the occurrence of any event of default specified in
Sections 13.1.1, 13.1.2, or 13.1.6, Landlord will have the option to pursue any
one or more of the following remedies without any further notice or demand
whatsoever in addition to those remedies provided in Section 13.4. Upon the
occurrence of any other event of default under Section 13.1. this Lease will
automatically terminate without action on the part of Landlord and Section
13.2.1 shall control.
13.2.1. Termination of Lease. Landlord may terminate this Lease, in
which event Tenant will immediately surrender the Premises to Landlord. If
Tenant fails to surrender the Premises, Landlord may, without prejudice to any
other remedy which Landlord may have for possession of the Premises or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other party who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim for damages therefor.
Tenant will pay to Landlord on the date of such termination damages in an amount
equal to the excess, if any, of the present value of the total amount of all
rental and other amounts to be paid by Tenant to Landlord hereunder for the
period which would otherwise have constituted the unexpired portion of the Term
of this Lease over the present value of the fair market rental value of the
Premises of such unexpired portion of the Term of this Lease.
13.2.2. Removal from Premises. Landlord may terminate Tenant's right
to occupy the Premises without terminating this Lease, in which event Tenant
will immediately surrender the Premises to Landlord. If Tenant fails to
surrender the Premises, Landlord may, without prejudice to any other remedy
which Landlord may have for possession or arrearages in rent, enter upon and
take possession of the Premises and expel or remove Tenant and any other party
who may be occupying the Premises or any part thereof, without being liable for
prosecution or any claim for damages therefor. Tenant will pay to Landlord on
demand the amounts of all loss and damage which Landlord may suffer by reason of
such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise, including the loss of rental for the remainder
of the Term of this Lease.
13.2.3. Relet Premises. Landlord may enter upon and take possession
of the Premises and expel or remove Tenant and any other party who may be
occupying the Premises or any part thereof without being liable for prosecution
or any claim for damages therefor, and if Landlord so elects, relet the Premises
on such terms as Landlord deems advisable and receive the rental thereof. Tenant
will pay to Landlord on demand any deficiency that may arise by reason of such
reletting for the remainder of the Term of this Lease. If the Premises or any
portion thereof are relet by Landlord during the unexpired portion of the Term
of this Lease, or any part thereof.
<PAGE>
before presentation of proof of such damages to any court, commission or
tribunal, the amount of rental reserved upon such relenting shall prima facie be
the fair and reasonable rental value for the Premises, or part thereof so relet
during the Term of the reletting. Landlord will not be liable in any way
whatsoever for Landlord's failure or refusal to relet the Premises or any
portion thereof are relet, for Landlord's failure to collect the rental under
such reletting, and no such refusal or failure to relet or failure to collect
rental will release or affect Tenant's liability for damages or otherwise under
this Lease. No re-entry or taking of possession of the Premises by Landlord will
be construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. Notwithstanding any
reletting or re-entry or taking possession. Landlord may at any time thereafter
elect to terminate this Lease for a previous default
13.2.4. Cure Default. Landlord may enter upon the Premises without
being liable for prosecution or any claim for damages therefor, and do whatever
Tenant is obligated to do under the terms of this Lease. Tenant will reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease together with Landlord's
supervision fee, and Tenant further agrees that Landlord shall not be liable for
any damages resulting to Tenant from such action.
13.2.5. Injunctive Relief. In the event or threatened breach by
Tenant of any of Tenant's obligations under this Lease, Tenant expressly
acknowledges and agrees that Landlord will also have the right of injunction.
13.3. Landlord's Damages. The loss or damage suffered by Landlord by
reason of termination of this Lease or the deficiency from any reletting as
provided for above will include the expense of repossession and any repairs or
remodeling undertaken by Landlord following repossession and brokerage fees
resulting from reletting the Premises. Should Landlord at any time terminate
this Lease for any default, in addition no any other remedy Landlord may have,
Landlord may recover from Tenant in addition to any sum set forth above all
damages Landlord may incur by reason of such default, including the cost of
recovering the Premises and any other consequential damages.
13.4.Remedies Cumulative. The special remedies to which Landlord may
resort hereunder are cumulative and are not intended to be exclusive of any
other remedies to which Landlord may lawfully be entitled at any time and
Landlord may invoke any remedy allowed at law or in equity as if specific
remedies were not provided for herein. Pursuit of any of the foregoing remedies
will not preclude pursuit of any of the other remedies herein provided or any
other remedies provided by law, nor will pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rental due to Landlord hereunder or of
any damages accruing to Landlord by reason of the violation of any of the terms,
provisions and covenants herein contained.
13.5. .Joint and Several Liability. If more than one party is defined as
Tenant in this Lease, all of the duties, obligations, promises, covenants and
agreements contained in this Lease to be paid and performed by Tenant will be
the joint and several obligation of all parties defined as Tenant. Each party
defined as Tenant agrees that Landlord in Landlord's sole discretion may (i)
institute or bring suit against each such party, jointly and severally, or
against any one or more of such parties, (ii) comprise or settle with any one or
more of such parties for such consideration as Landlord may deem proper, and
(iii) release one or more of such parties from liability hereunder, and that no
such action by Landlord will impair or affect Landlord's right to collect costs,
expenses, losses or damages incurred or suffered by Landlord from other parties
defined as Tenant, or any of such parties, not so sued, compromised, settled
with or released.
13.6. Lien for Rent. Tenant hereby grants to Landlord an express
contractual lien upon all property of Tenant now or hereafter placed in or upon
the Premises, except such part of such property as may be exchanged, replaced or
sold from time to time in the ordinary course of the operations of Tenant, and
at such property will be and remain subject to such lien of Landlord, subject to
judicial foreclosure in accordance with the applicable laws
<PAGE>
of the State of Texas, to secure Landlord in the payment by Tenant of all rental
and other sums herein agreed and provided to be paid by Tenant to Landlord
hereunder. Such express lien shall be in addition to and cumulative of the
landlord's lien provided by the laws of the State of Texas. For the purpose of
securing all rental and other sums due hereunder, this Lease will also be deemed
a security agreement under the Uniform Commercial Code as such is in effect in
the State of Texas, and Landlord will have all rights and remedies provided by
such Uniform Commercial Code. Landlord and Tenant agree that five (5) days
notice of public or private sale in the event of foreclosure of the rights of
Landlord under this security agreement will be reasonable notice. Tenant agrees
to execute from time to time financing statements required by Landlord to
perfect the lien hereby created.
13.7. Attorneys' Fees. If legal action is necessary in order for Landlord
to enforce this Lease against Tenant. Landlord will be entitled to reasonable
attorneys' fees, costs and disbursements in addition to any other relief to
which Landlord is entitled.
13.8. Waiver. Forbearance by Landlord no enforce one or more of the
remedies herein provided upon an event of default will not be deemed or
construed to constitute a waiver of any other violation or default. Landlord's
acceptance of rental following an event of default will not be construed as a
waiver by Landlord of such event of default, nor be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained.
ARTICLE XIV
SUBORDINATION AND ATTORNMENT
14.1. Subordination. Tenant hereby subordinates this Lease and all rights
of Tenant hereunder and this Lease be subject to any ground lease, master lease,
mortgage or deed of trust and all liens created pursuant to future advances
thereunder which are now or which may from time to time be placed upon the
Premises, the Building, the Property or any part thereof, and any such ground
lease, master lease, sublease(s), mortgage or deed of trust and all renewals,
modifications, consolidations, replacements and extensions thereof (all such
encumbrances being collectively referred to herein as the "Encumbrances" or
individually as an "Encumbrance") will be superior to and have priority over
this Lease. If Landlord has delivered to Tenant the name and business address of
the holder of any Encumbrance. Tenant hereby agrees not to enter into any
amendment or modification of this Lease without the prior written consent of
such holder. This Section 14.1 will be self-operative and no further instrument
of subordination will be required.
14.2. Attornment. Tenant further covenants and agrees that if the lessor
of any ground lease acquires title to the Property through termination or
assignment of such ground lease or if the lessor of any sublease acquires the
Premises through a termination or assignment of such sublease or if the holder
of any mortgage or deed of trust acquires the Premises by foreclosure or deed in
lieu of foreclosure, or if any other party acquires the Premises as a purchaser
at any foreclosure sale (any such lessor of any ground lease or sublease, holder
of any mortgage or deed of trust or purchaser at a foreclosure sale being each
hereinafter referred to as the "Purchaser") Tenant will thereafter, but only at
the option of the Purchaser, as evidenced by the written notice of the
Purchaser's election given to Tenant within a reasonable time after the
Purchaser's acquisition of title, remain bound by novation or otherwise to the
same effect as if a new and identical lease containing the terms of this Lease
between the Purchaser, as landlord and Tenant, as tenant, had been entered into
for the remainder of the Term of this Lease effective on the date of the
Purchaser's acquisition of title.
14.3. Further Documentation. Tenant agrees to execute any instrument(s)
which may be deemed necessary or desirable to further effect the subordination
of this Lease to each such Encumbrance or to confirm any election to continue
this Lease in effect in the event of foreclosure or ground lease or sublease
termination or assignment as above provided. Landlord is hereby irrevocably
appointed and authorized as agent and
<PAGE>
attorney-in-fact (such power to be deemed to be coupled with an interest) of
Tenant to execute and deliver all such subordination instruments in the event
that Tenant fails to execute and deliver such instruments within five (5) days
after notice from Landlord requesting the execution thereof. The Purchaser will
not be liable for any act or omission of Landlord, subject to any offsets or
defenses which Tenant might have against Landlord, or bound by any prepayment by
Tenant of more than one (1) month's advance rent or bound by any modification of
this Lease entered into after the date of execution of the mortgage or deed of
trust through which the Purchaser acquired title unless such prepayment or
modification has been approved in writing by the Purchaser. If the Purchaser
requires any modification(s) of this Lease, Tenant will, at Landlord's request.
promptly execute and deliver to Landlord such instruments effecting such
modification(s) as Landlord requires, provided that such modification(s) do not
adversely affect in any material respect any of Tenant's rights under this
Lease.
ARTICLE XV
ESTOPPEL CERTIFICATES
15.1. Tenant's Certificate. Tenant agrees that upon tender of possession
of the Premises and from time to time thereafter, upon not less than ten (10)
days' prior written request by Landlord. any ground lessor of Landlord, any
sublessor of Landlord or any mortgagee of Landlord. Tenant will execute,
acknowledge and deliver to Landlord and for such ground lessor, sublessor or
mortgagee a statement in the form of Exhibit E attached hereto. Any such
statement may be relied upon by any prospective transferee or mortgagee of all
or any portion of the Building or the Property, or any assignee of any such
persons. If Tenant fails to deliver timely such statement, Tenant will be deemed
to have acknowledged that this Lease is in full force and effect, without
modification except as may be represented by Landlord, and that there are no
uncured defaults in Landlord's performance.
15.2. Landlord's Certificate. Landlord agrees that from time to time, upon
not less than ten (10) days' prior to written request by Tenant, Landlord will
deliver to Tenant a statement in writing certifying: (i) that this Lease is
unmodified and in full force and effect (or if there have been modification,
that this Lease as modified is in full force and effect and stating the
modifications); (ii) the dates to which rent and other charges have been paid;
and (iii) that Landlord has no knowledge of any default by Tenant under any term
or provision of this Lease or if in default the nature thereof in detail in
accordance with an exhibit attached thereto.
ARTICLE XVI
INTEREST OF LANDLORD
16.1. Consents. If Tenant requires Landlord's consent under any provision
of this Lease and Landlord fails or refuses to give such consent. Tenant will
not be entitled to any damages for any withholding by Landlord of Landlord's
consent; it is being intended that Tenant's sole remedy will be an action for
specific performance or injunction, and that such remedy will be available only
in those cases where Landlord has expressly agreed in this Lease not to
unreasonably withhold Landlord's consent or where as a matter of law Landlord
may not unreasonably withhold Landlord's consent.
16.2. Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by Landlord, Landlord will not be liable or responsible for,
and there will be excluded from the computation of any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions or any other causes of any kind
whatsoever which are beyond the control of Landlord.
16.3. Best Efforts. Whenever in this Lease or any exhibits or attachments
thereto, if any, there is imposed upon Landlord the obligation to use Landlord's
best efforts or reasonable efforts or diligence. Landlord
<PAGE>
will be required to exert such efforts or diligence only to the extent the
same are economically feasible and will not impose upon Landlord
extraordinary financial or other burdens.
16.4.Exculpation. In any action brought by Tenant against Landlord, Tenant
will look only to Landlord's interest in the Property and the Building for
satisfaction of Tenant's remedies or for the collection of a judgment or other
judicial process requiring the payment of money by Landlord in the event of any
default by Landlord hereunder, and no other property or assets of Landlord,
disclosed or undisclosed, shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this Lease, the relationship of Landlord and Tenant hereunder or
Tenant's use and occupancy of the Premises. As used in this Section 16.4, the
term "Landlord" will be deemed to include any partner. principal, director,
officer, agent, servant or employee of Landlord.
ARTICLE XVII
NOTICES
Each provision of this Lease with reference to the sending, mailing or
delivery of any notice, or with reference to the making of any payment by Tenant
to Landlord, will be deemed to be complied with when and if the following steps
are taken:
(i) All rent and other payments required to be made by Tenant to
Landlord hereunder will be payable to Landlord at the address set forth in
Section 1.11, or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith.
(ii) Any notice or document required to be delivered hereunder will
be deemed to be delivered, whether or not received, when deposited in the United
States mail, postage prepaid, certified or registered mail, with return receipt
requested, addressed to the parties hereto at the respective addresses set in
Section 1.11. or at such other address as they have theretofore specified by
written notice delivered in accordance herewith, provided that after the
Commencement Date Tenant's address for notice or other communication shall be
Tenant's address in the Building.
ARTICLE XVIII
BROKERS
Tenant warrants and represents that Tenant has had no dealings with any
broker or agent (other than the Broker named in Section 1.12) in connection with
the negotiation or execution of this Lease. Landlord and Tenant hereby agree to
indemnify and hold the other party harmless from any such claims or liability
arising or resulting from anyone claiming such a commission by, through or under
the indemnifying party.
ARTICLE XIX
RELOCATION OF TENANT
19.1. Substitute Premises. Landlord may, at Landlord's option, before or
after the Commencement Date, elect by notice to Tenant to substitute for the
Premises other office space in the Building ("Substitute Premises") designated
by Landlord, provided that the Substitute Premises contains approximately the
same number of Rentable Square Feet as the Premises and has a configuration
substantially similar to that of the Premises. Landlord's notice will be
accompanied by a plan of the Substitute Premises, and such notice or plan will
set forth the number or Rentable Square Feet contained in the Substitute
Premises. Tenant will vacate and surrender the Premises and will occupy the
Substitute Premises promptly and, in any event, not later than fifteen (15) days
after Landlord has substantially completed the work to be performed by Landlord
in the Substitute Premises pursuant to Section 19.3.
<PAGE>
19.2. Substitute Premises Rental. The Base Rental for the Substitute
Premises will be the product of the Base Rental rate per Rentable Square Foot
(according to the schedule of Base Rent for the Building which is on file in
Landlord's office an the time of relocation) multiplied by the number of
Rentable Square Feet in the Substitute Premises but in no event more than the
total Base Rental for Premises at such date. In addition to the payment of Base
Rental for the Substitute Premises. Tenant will pay the Tenant's Pro Rata Share
of Building Operating Costs and the Premises' Pro Rata Share of Energy Costs in
accordance with Section 4.2 hereof, except that the Pro Rata Shares of such
costs will be subject to adjustment based upon the number of Rentable Square
Feet contained in the Substitute Premises.
19.3. Landlord's Obligations. Tenant will not be entitled to any
compensation for any inconvenience or interference with Tenant's business due to
relocation of Tenant, nor to any abatement or reduction of Base Rental or
additional rental under this Lease; but Landlord will at Landlord's expense do
the following: (i) furnish and install in the Substitute Premises fixtures,
equipment, improvements and appurtenances at least equal in quantity and quality
to those contained in the Premises at the time such notice of substitution is
given by Landlord, (ii) provide to Tenant personnel to perform under Tenant's
direction the moving of Tenant's personal property and fixtures from the
Premises to the Substitute Premises, (iii) promptly reimburse Tenant for
Tenant's actual and reasonable out-of-pocket costs incurred by Tenant in
connection with the relocation of any telephone or other communications
equipment from the Premises to the Substitute Premises, and (iv) promptly
reimburse Tenant for any other actual and reasonable out-of-pocket costs
incurred by Tenant in connection with the Tenant's move from the Premises to the
Substitute Premises, provided such costs are approved in writing by Landlord in
advance, which approval will not be unreasonably withheld or delayed.
19.4.Tenant's Obligations. Tenant agrees to cooperate within Landlord so
as to facilitate the prompt completion by Landlord of Landlord's obligations
under this Article XIX and the prompt surrender by Tenant of the Premises.
Without limiting the generality of the preceding sentence, Tenant agrees (i) to
provide to Landlord promptly any approvals or instructions, and any plans and
specifications or any other information reasonably requested by Landlord, and
(ii) to promptly perform in the Substitute Premises any work to be performed
therein by Tenant to prepare the same for Tenant's occupancy.
19.5.Status of Lease. From and after the date that Tenant shall actually
vacate and surrender the Premises to Landlord, this Lease (i) will no longer
apply to the Premises, except with respect to obligations which accrued on or
prior to surrender date, and (ii) will apply to the Substitute Premises as if
the Substitute Premises had been the space originally demised under this Lease.
ARTICLE XX
MISCELLANEOUS
20.1. No Implied Waiver. No provision of this Lease will be deemed to have
been released or waived by Landlord or Tenant unless such release or waiver is
in writing and is signed by the party to be bound.
20.2. No Recording. Tenant agrees that Tenant will not record this Lease
or a memorandum thereof or a reference thereto without first securing the prior
written consent of Landlord, which may be withheld at Landlord's sole
discretion. However, Tenant agrees upon the written request of Landlord to
execute, acknowledge and deliver to Landlord a short form lease in recordable
form. Such memorandum will not be deemed to change or affect any of the
obligations or provisions of this Lease.
20.3. Independent Contractor. It is understood and agreed that in leasing
and operating the Premises, Tenant is acting as an independent contractor and is
not acting as agent, partner, joint venturer or
<PAGE>
employee of Landlord, and nothing contained in this Lease shall create any
relationship between the parties hereto other than that of landlord and tenant.
20.4. Survival. All of the terms, conditions, covenants, promises and
agreements contained in this Lease will survive the expiration or termination of
this Lease with respect to all rights or remedies which have accrued prior to
such expiration or termination.
20.5. Severability. If any term or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the Term
of this Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease will not be affected thereby. Each covenant,
agreement, obligation or other provision of this Lease to be performed by Tenant
will be deemed and construed as a separate and independent covenant of Tenant
and not as dependent on any other provision of this Lease.
20.6. Amendments This Lease may non be altered, changed or amended, except
by an instrument in writing signed by both parties hereto. No custom or practice
which may arise between the parties in the administration of the terms,
provisions, covenants and conditions hereof will be construed to modify, waive
or lessen the rights of Landlord hereunder.
20.7. Binding Effect. The terms, provisions, covenants and conditions
contained in this Lease will apply to inure to the benefit of, and be binding
upon the parties hereto, and upon such parties' respective permitted assigns,
successors in interest and legal representatives, except as otherwise herein
expressly provided.
20.8. Gender. Words of any gender used in this Lease will be construed to
include any other gender, and words in the singular number will be construed to
include the plural unless the context otherwise requires.
20.9. Captions. The captions contained in this Lease are for convenience
of reference only, and in no way limit or enlarge the terms, provisions,
covenants and conditions of this Lease.
20.10. Exhibits. All exhibits, attachments, annexed or referenced
instruments and addenda referred to herein will be considered a part hereof for
all purposes with the same force and effect as if copied verbatim herein.
20.11. Entire Agreement. This Lease and the attachments and exhibits
thereto constitute the entire agreement between the parties hereto with respect
to the subject matter of this Lease. Tenant expressly acknowledges and agrees
that Landlord has not made and is not making and Tenant, in executing and
delivering this Lease is not relying upon any warranties, representations,
promises or statements, except to the extent that the same are expressly set
forth in this Lease or in any other written agreement which may be made between
the parties concurrently with the execution and delivery of this Lease and will
expressly refer to this Lease. All understandings and agreements heretofore had
between the parties are merged in this Lease and any other written agreement(s)
made concurrently herewith, which alone fully and completely express the
agreement of the parties and which are entered into after full investigation
with neither party relying upon any statement or representation not embodied in
this Lease or in other written agreements(s) made concurrently herewith.
20.12. Counterparts. This Lease may be executed in several counterparts,
each of which will be deemed an original, and all of which shall constitute but
one and the same instrument.
20.13. GOVERNING LAW AND VENUE. THIS LEASE AND ALL OF THE TRANSACTIONS
CONTEMPLATED HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, AND LANDLORD AND TENANT BOTH IRREVOCABLY AGREE THAT
THEIR RESPECTIVE AGREEMENTS AND OBLIGATIONS HEREUNDER SHALL BE
<PAGE>
PERFORMABLE IN TARRANT COUNTY, TEXAS, AND THAT VENUE FOR ANY ACTION ARISING
UNDER OR RELATING TO THE TERMS OF THIS LEASE SHALL BE IN TARRANT COUNTY, TEXAS.
20.14. No Reservation. Submission by Landlord of this instrument to the
Tenant for examination or signature does not constitute a reservation of or
option for lease. This Lease will be effective as a lease or otherwise only upon
execution and delivery by both Landlord and Tenant.
EXECUTED as of the day, month and year first above written.
TENANT LANDLORD:
ROYAL MORTGAGE CORPORATION EMERALD DIAMOND, L.P.
By: /s/ G. William Barnett, II By: /s/ [ILLEGIBLE]
--------------------------------- -------------------------------------
G. William Barnett, II Authorized Representative
Title: Executive Vice President
------------------------------
ATTEST:
PALISADES REALTY, INC.
dba Reilly Brothers Property Company
By: /s/ [ILLEGIBLE]
---------------------------------
Title: President
------------------------------
24
<PAGE>
EXHIBIT A
to
OFFICE LEASE
between
EMERALD DIAMOND, L.P.
and
ROYAL MORTGAGE CORPORATION
[TO CONTAIN A FLOOR PLAN OF THE PREMISES]
<PAGE>
PRELIMINARY PLAN "B" FOR
SUNBELT CAPITAL COMPANY
[GRAPHIC OMITTED]
<PAGE>
PRELIMINARY PLAN "B" FOR
SUNBELT CAPITAL COMPANY
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT B
to
OFFICE LEASE
between
EMERALD DIAMOND, L.P.
and
ROYAL MORTGAGE CORPORATION
A four (4) story office structure shown as the cross-hatched area on the
drawing below, such structure being included in The Ballpark in Arlington,
located at the northwest corner of the intersection of Randol Mill Road and
Stadium Drive in the City of Arlington, Tarrant County, Texas.
<PAGE>
EXHIBIT B
A four (4) story office structure shown as the cross-hatched area on the
drawing below, such structure being included in The Ballpark in Arlington,
located at the northwest corner of the intersection of Randol Mill Road and
Stadium Drive in the City of Arlington, Tarrant County, Texas.
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT C
to
OFFICE LEASE
between
EMERALD DIAMOND, L.P.
and
ROYAL MORTGAGE CORPORATION
BUILDING OPERATING COST EXAMPLES
1. Cost Examples. The following are, without limitation, examples of
Building Operating Costs:
(a) Labor Costs. Costs, charges and expenses incurred for the
services of the following classes of employees of Landlord and/or independent
contractors performing services required or utilized in connection with the
operation, repair and maintenance of the Building and Common Areas including,
without limitation, all expenses incurred by Landlord or on Landlord's behalf
which shall be directly related to employment of personnel, including amounts
incurred for wages, salaries and other compensation for services, payroll,
social security, unemployment and other similar taxes, worker's compensation
insurance, disability benefits, pensions, hospitalization, retirement plans and
group insurance, uniforms and working clothes and the cleaning thereof, and
expenses imposed on or on behalf of Landlord pursuant to any collective
bargaining agreement.
(i) the building manager, assistants and the clerical staff
attached to the Building;
(ii) window cleaners, elevator operators, and miscellaneous
handymen;
(iii) porters, cleaners and janitors employed in and about the
Building and Common Areas;
(iv) watchmen, caretakers, security guards and persons
engaged in patrolling and protecting the Building, Common Areas and the
Property;
(v) superintendents, assistant superintendents, carpenters,
engineers, firemen, mechanics, electricians and plumbers and any and all other
Building personnel engaged in the operation, repair and maintenance of any part
of the Property, the Building, the Common Areas, and the heating,
air-conditioning, ventilating, plumbing, electrical and elevator systems of the
Building and Common Areas; and
(vi) personnel, but not officers or executives of Landlord if
such personnel are full time on-premises employees an the Building and Common
Areas.
(b) Supplies. The cost of materials and supplies, including, without
limitation, toilet supplies, keys and signs, used in the operation, repair and
maintenance of the Building and Common Areas.
<PAGE>
(c) Replacement. The cost of replacements for tools and equipment
used in the operation, repair and maintenance of the Building and Common Areas.
(d) Professional Fees. Legal or other professional fees incurred in
connection with Building and Common Areas operations excluding fees paid in
connection with leasing activity.
(e) Contractors. Amounts charged to Landlord by contractors for
services, materials and supplies furnished in connection with the operation,
repair and maintenance of any part of the Building, the Common Areas, and the
heating, air conditioning, ventilating, plumbing, electrical, elevator and other
systems of the Building and Common Areas.
(f) Management. Administrative and management fees for the Building
(if Landlord manages the Building, the amount included for management fees will
not exceed the amount typically charged by independent management companies in
the area where the Building is located).
(g) Insurance. Premiums paid by Landlord for property insurance,
whether all risks or fire and extended coverage insurance, earthquake and
extended coverage insurance, liability, comprehensive general liability
insurance, and other insurance customarily carried from time to time by
landlords of first class office buildings or, if Landlord self-insures with
respect to any of the Landlord in an amount equal to the cost of the premiums
for such policies.
(h) Water. Water and sewer charges.
(i) Taxes. Taxes, including (i) real estate taxes and assessments,
if any, on the Property, the Building or the Premises, and taxes and assessments
levied in substitution or supplementation in whole or in part of such taxes,
(ii) personal property taxes for the Building's personal property, including
license expenses, (iii) franchise fees, (iv) taxes imposed on services of
Landlord's agents and employees, and (v) all other taxes or fees now or
hereafter levied by any governmental authority on the Building, the Property or
its contents or on the operation and use thereof but excluding income taxes.
(j) Decorations. The cost of painting or otherwise decorating any
part of the Building including holiday decorations for the lobby and other
public portions of the Building and Common Areas below the second floor.
(k) Landscaping. Landscaping expenses.
(l) Equipment Rentals. Rental costs of equipment or other personal
property used in connection with the management, operation or repair of the
Property, the Building Common Areas and the appurtenances thereto.
(m) Cost Savings and Required Improvements. The amortization of the
cost of the following items, the cost of such items to be amortized over a
minimum period of five (5) calendar years and to be calculated without interest.
(i) improvements, additions, changes or replacements required
by law, ordinance or requirement of any governmental authority having
jurisdiction, to be made to the Property, the Building or the equipment thereof.
(ii) replacements of component parts of the Building and
Building equipment and property, and
(iii) expenditures of a capital nature if such capital
expenditures are reasonably expected to result or do result in cost savings.
<PAGE>
(n) Other Costs. All other incurred costs and charges which are
generally recognized by the City of Arlington, Texas real estate industry as
constituting operating costs of a first-class office building or the land on
which the Building is situated.
2. Net Character. Building Operating Costs shall be "net" only, and for
that purpose shall be reduced by the amounts of any reimbursement or credit owed
to Landlord from any source, including Tenant and other tenants of the Building.
<PAGE>
EXHIBIT D Revised as of 12/14/94
to
OFFICE LEASE
between
EMERALD DIAMOND, LP.
and
ROYAL MORTGAGE CORPORATION
RULES AND REGULATIONS
1. Parties. For purposes of these Rules and Regulations, "tenant" includes
the servants, employees, agents, invitees and licensees of such tenant, others
permitted by such tenant to use or occupy such tenant's premises, and anyone for
whom such tenant is otherwise legally responsible.
2. After Hours Air Conditioning. Air conditioning (both heating and
cooling) shall be provided by Landlord from Monday through Saturday only between
the hours from 6:00 AM. to 6:00 P.M. No air conditioning (heating or cooling)
will be provided on Sundays or on state or national legal holidays. If any
tenant requires air conditioning (heating or cooling) at hours or on days other
than as specified above, Landlord agrees to furnish the same for the area
designated in a written request delivered by such tenant to the Building Manager
not less than twenty-four (24) hours prior to the date upon which such tenant
requests such extra usage, and for such service, such tenant will pay Landlord,
upon delivery of an invoice, Landlord's then established charges therefor.
3. Electrical Equipment. Landlord has not agreed to furnish electrical
capacity for the Premises in excess of three (3) watts per Rentable Square Feet.
If any tenant requires electricity in excess of that which Landlord has agreed
to provide, Landlord will, upon the written request of such tenant and the
written agreement of such tenant to pay all costs and expenses for the same,
make reasonable efforts to supply such service through the then existing feeders
servicing the Building. No machinery or mechanical equipment other than ordinary
portable business machines may be installed or operated in any tenant's premises
without Landlord's prior written consent, which consent will not be unreasonably
withheld or delayed, and in no case (even where the same are of a type so
excepted or as so consented to by Landlord) will any machines or mechanical
equipment be so placed or operated so as to impair or interfere with any of the
Building's services or the proper and economic heating, cooling, cleaning or
other servicing of any portion of the Building or so as to disturb other tenants
but machines and mechanical equipment which may be permitted to be installed and
used in a tenant's premises shall be so equipped, installed and maintained by
such tenant as to prevent any disturbing noise, vibration or electrical or other
interference from being transmitted from such premises to any other area of the
Building.
4. Common Areas. The rights of each tenant in the entrances, corridors and
elevators servicing the Building are limited to ingress to and egress from such
tenant's premises, and no tenant will use, or permit the use of, the entrances,
corridors or elevators for any other purpose. No tenant shall invite to the
tenant's premises or permit the visit of, persons in such numbers or under such
conditions as to interfere with the use and
<PAGE>
enjoyment of any of the plazas, entrances, corridors, elevators and other
facilities of the Building by any other tenants. Fire exits and stairways are
for emergency use only and will not be used for any other purpose by the
tenants. No tenant will encumber or obstruct, or permit the encumbrance or
obstruction of any of the sidewalks, plazas, entrances, corridors, elevators,
fire exits or stairways of the Building. Landlord reserves the right to control
and operate the public portions of the Building and the public facilities, as
well as facilities furnished for the common use of the tenants, in such manner
as Landlord, in its reasonable judgment, deems best for the benefit of the
tenants generally.
5. Nails, Hooks. No nails, hooks or screws will be driven unto or inserted
in any part of the Building, except by Building maintenance personnel.
6. Signs. No signs, posters, advertisements, or notices shall be painted
or affixed on any of the windows or doors, or other parts of the Building,
except of such color, size and style and in such places, as shall be first
approved in writing by the Landlord. No lettering, sign, advertisement, notice
or object shall be displayed in or on the exterior windows or doors, or on the
outside of any tenant's premises, or at any point inside any tenant's premises
where the same might be visible outside of such premises, without the prior
written consent of Landlord. In the event of the violation of the foregoing by
any tenant, Landlord may remove the same without any liability, and may charge
the expense incurred in such removal to the tenant violating this rule. Interior
signs, elevator cab designations and lettering on doors and the Building
directory will, if and when approved by Landlord, be inscribed, painted or
affixed for each tenant by Landlord an the expense of such tenant, and will be
of a size, color and style acceptable to Landlord. Landlord shall have the right
to prohibit any advertising or identifying sign by any tenant which, in
Landlord's reasonable judgment, tends to impair the reputation of the Building
or its desirability as a building for others, and upon written notice from
Landlord, such tenant shall refrain from and discontinue such advertising or
identifying sign.
7. Hazards. Tenant will not do anything, or permit anything to be done, in
or about the Building, or bring or keep anything therein, that will in any way
increase the possibility of fire or other casualty or obstruct or interfere with
the rights of, or otherwise injure or annoy, other tenants, or do anything in
conflict with laws, rules or regulations of any governmental authority. In
addition, tenant will not use or keep in the Building any inflammable explosive
fluid or substance or otherwise dangerous fluid, chemical or substance or any
illuminating material, unless it is battery powered, Underwriters' Laboratory
approved.
8. Heavy Equipment. Landlord will have the power to prescribe the weight
and position of safes or other heavy equipment which may overstress any portion
of the floor. All damage done to the Building by the improper placing of heavy
items which overstress the floor will be repaired at the sole expense of the
tenant which causes such damage. If, in the judgment of Landlord, it is
necessary to distribute the concentrated weight of any heavy object, the work
involved in such distribution will be done at the expense of the tenant and in
such manner as Landlord shall determine.
9. Security. All entrance doors in the premises will be left locked when
the premises are not in use.
10. Deliveries, Removals. All deliveries must be made through the service
entrance and service designated elevator after normal working hours which hours
will be determined by the Landlord from time to time. Prior approval must be
obtained from the Landlord for any deliveries that must be received after normal
working hours. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours, in such elevators and in such
manner as Landlord or its agent may determine from time to time. The persons
employed to move safes and other heavy objects must be acceptable to Landlord.
Arrangements will be made with Landlord by any tenant moving large quantities of
furniture and equipment into or out of the Building. All labor and engineering
costs incurred by Landlord in connection with any moving specified in this rule,
including a reasonable charge for overhead and profit, will be paid by tenant to
Landlord on demand.
<PAGE>
11. Cleaning. All tenants will cooperate with Building employees in
keeping all parts of the Building neat and clean.
12. Hallways. No showcases or other articles will be put in front of or
affixed to any part of the exterior of the Building, nor placed in the halls,
elevator shafts or stairways.
13. Animals. No birds, animals or reptiles, or any other creatures, will
be brought into or kept in or about the Building.
14. Control of Access. Landlord may refuse admission to the Building
outside of normal business hours, which hours will be determined by the Landlord
from time to time, to any person not known to the watchman in charge or not
having a pass issued by Landlord or the tenant whose premises are to be entered
or not otherwise properly identified, and Landlord may require all persons
admitted to or leaving the Building outside of such times to provide appropriate
identification. Tenant will be responsible for all persons for whom it issues
any such pass and shall be liable to Landlord for all acts or omissions of such
persons. Any person whose presence in the Building at any time shall, in the
judgment of Landlord, be prejudicial to the safety, character or reputation of
the Building or of its tenants may be denied access to the Building or may be
ejected therefrom. During any invasion, riot, public excitement or other
commotion, Landlord may prevent all access to the Building by closing the doors
or otherwise for the safety of the tenants and protection of property in the
Building. Tenants and anyone else who desires to enter the Building after normal
working hours will be required to sign in upon entry and sign out upon leaving,
giving their location during their stay and their time of arrival and departure.
15. Evacuation. Landlord has the right to evacuate the Building in the
event of emergency or catastrophe.
16. Window Coverings. No awnings or other projections will be attached to
the outside walls of the Building. Tenants will not install any window shades,
screens, drapes, covers, or other materials on or at any window in the premises
without Landlord's prior written consent. Tenants will ensure that all blinds
are closed on all windows in the premises while they are exposed to the direct
rays of the sun. If Landlord elects to install any energy saving film on the
windows of the premises or to install energy saving windows in place of the
present windows, all tenants shall cooperate with the reasonable requirements of
Landlord in connection with such installation and permit Landlord to have access
to the premises at reasonable times during business hours to perform such work.
17. Damage to Common Areas. The cost of repairing any damage to the public
portions of the Building or the public facilities or to any facilities used in
common with other tenants caused by any tenant will be paid by such tenant. Each
tenant will carry out tenant's repair, maintenance, alterations and improvements
in the premises only during times agreed to in advance by Landlord and in a
manner which will not interfere with the rights of other tenants in the
Building.
18. No Lodging. The Premises will not be used or permitted to be used for
residential, lodging, or sleeping purposes or for the storage of personal
effects or property not required for business purposes.
19. Carpet Protection. In those portions of the premises where carpet has
been provided directly or indirectly by Landlord, tenant will at its own expense
install and maintain pads to protect the carpet under all furniture having
casters other than carpet casters.
20. Control of Soliciting. Landlord reserves the right to restrict or
prohibit canvassing, soliciting or peddling in the Building.
<PAGE>
21. Food Service. Only persons approved from time to time by Landlord may
prepare, solicit orders for, sell, service or distribute foods or beverages in
the Building, or use the elevators, corridors or common areas for any such
purpose. Except with Landlord's prior written consent and in accordance with
arrangements approved by Landlord, no tenant will permit on tenant's premises
the use of equipment for dispensing food or beverages or for the preparation,
solicitation of orders for, sale, serving or distribution of food or beverages.
No tenant will obtain or accept for use in its premises ice, drinking water,
food, beverage, towel, barbering, floor polishing, cleaning or other similar
services from any persons reasonably prohibited in writing from furnishing such
services. Such services will be furnished only at such hours, and under such
reasonable regulations, as may be fixed by Landlord from time to time.
22. Additional Locks and Keys. Additional locks on bolts of any kind which
will not be operable by the master key system for the Building will not be
placed upon any of the doors or windows by any tenant, nor will any changes be
made in locks or the mechanism thereof which will make such locks inoperable by
the master key system. Additional keys for a tenant's premises and toilet rooms
will be procured only from Landlord who may make a reasonable charge therefor.
Each tenant will, upon the termination of its tenancy, turn over to Landlord all
keys to stores, offices and toilet rooms, either furnished to, or otherwise
procured by, such tenant, and in the event of the loss of any keys furnished by
Landlord, such tenant will pay to Landlord the cost thereof.
23. Inspection of Items. Landlord reserves the right to inspect all
objects and matter to be brought into the Building and to exclude from the
Building all objects and matter which violate any of these Rules and Regulations
or the Lease of which this Exhibit is a part. Landlord may require any person
leaving the Building with any package or other object or matter to submit a
pass, listing such package or object or matter and the tenant from whose
premises the package or object or matter is being removed, but the establishment
and enlargement of such requirement will not impose any responsibility on
Landlord for the protection of any tenant against the removal of property from
the premises of such tenant. Landlord will in no way be liable to any tenant for
damages or loss arising from the admission, exclusion or ejection of any person
to or from the premises or the Building under the provisions of these Rules and
Regulations.
24. Prohibition Uses. No tenant will occupy or permit any portion of its
premises to be occupied as an office for the possession, storage, manufacture,
or sale of liquor, narcotics, dope, tobacco in any form, or as a barber, beauty
or manicure shop, or as a school. No tenant will use its premises or any part
thereof for manufacturing, or the sale and retail or auction of merchandise,
goods or property of any kind.
25. Odors. No tenant will cause or permit any unusual or objectionable
odors to emanate from its premises which would annoy other tenants or recreate a
public or private nuisance. No cooking will be done in the premises of any
tenant except as is expressly permitted in such tenant's Lease.
26. Utility Use by Janitors. Landlord, its contractors, and their
respective employees, will have the right to use, without charge therefor, all
light, power and water in the premises of any tenant while cleaning or making
repairs or alterations in the premises of such tenant.
27. Hand Trucks. Hand trucks not equipped with rubber tires and side
guards will not be used within the Building.
28. Requests by Tenant. The requirements of tenants will be attended to
only upon application at the office of the Landlord in the Building. Employees
of Landlord will not perform any work or do anything outside of their regular
duties, unless under special instructions from Landlord.
29. Misuse of Building Systems. No acids, vapors or other materials will
be discharged or permitted to be discharged into the waste lines, vents or flues
of the Building which may damage them. The water and wash closets and other
plumbing fixtures in or serving any tenant's premises will not be used for any
purpose other than the purposes for which they were designed or constructed, and
no sweepings, rubbish, rags, acids or other foreign substances will be deposited
therein. Tenant will not use water fixtures for any purpose for which
<PAGE>
they are not intended nor will water be wasted by tampering with such fixtures.
All damages resulting from any misuse of the fixtures will be borne by the
tenants causing same.
30. Balcony and Patio Furnishings. All balcony and patio furnishings must
be approved in advance in writing by Landlord. All such furnishings must be
manufactured by "Brown & Jordan" and consist of a color scheme approved by
Landlord. Tenant's failure to comply with this provision shall be deemed a
default under this Lease.
31. Lights Visible From The Ballpark. Tenant agrees to comply with all
rules and requirements from time to time established by Landlord, the Texas
Rangers Baseball Club (the "Club"), the American League of Professional Baseball
Clubs (the "League") and/or Major League Baseball ("Baseball") with respect to
lights located in, on or around the Premises which may be visible from other
areas of The Ballpark in Arlington. In particular, without limiting the
generality of the foregoing, Tenant agrees that at no time during Texas Rangers
or Major League Baseball games, or games sponsored by either of them, played in
The Ballpark in Arlington, nor during times prior thereto or thereafter in which
the playing field is in use, will Tenant have any lights or other illuminating
devices lighted which could interfere with activities to be conducted in other
areas of The Ballpark in Arlington as determined in the discretion of any of
Landlord, the Club, the League or Baseball.
32. USE OF BALCONY. IN ADDITION TO ANY OTHER APPLICABLE LAWS, RULES,
REGULATIONS, CODES, ORDINANCES AND OTHER DIRECTIVES OF ANY GOVERNMENTAL OR
QUASI-PUBLIC ENTITIES AND OTHER RULES AND REGULATIONS GOVERNING THIS LEASE AND
THE USE OF THE PREMISES, AS MAY BE IN EFFECT FROM TIME TO TIME, (1) NO PERSONS
UNDER THE AGE OF TWELVE (12) SHALL BE PERMITTED ON THE BALCONY OF THE PREMISES
(IF ANY) OR OTHER BALCONIES OF THE BUILDING UNLESS ACCOMPANIED AT ALL TIMES BY A
PERSON OR PERSONS OF AGE EIGHTEEN (18) OR OLDER; AND (2) NO UNSAFE ACTS SHALL BE
PERMITTED ON THE BALCONY OF THE PREMISES OR OTHER BALCONIES OF THE BUILDING,
PROVIDED THAT, BY WAY OF EXAMPLE ONLY, THE FOLLOWING SHALL NOT BE PERMITTED ON
ANY BALCONIES: ANY RUNNING; THROWING; DROPPING OF ITEMS OR PEOPLE OVER RAILINGS
OR OFF OF BALCONIES; CLIMBING, HANGING, SITTING OR STANDING ON OR OVER RAILINGS,
BEAMS, COLUMNS, BRACES, SUPPORTS, FIXTURES, PIPES, CONDUIT OR ANY OTHER ITEMS
OTHER THAN APPROVED BALCONY FURNISHINGS SUITABLE FOR AND DESIGNED FOR SUCH USE
IN SUCH LOCATION.
33. Access to The Ballpark in Arlington. Tenant's rights to the use and
occupancy of the Premises and common areas of the Building pursuant to this
Lease do not entitle Tenant to any use or occupancy of The Ballpark in
Arlington. Tenant shall not be permitted access to The Ballpark in Arlington
without an admission ticket or other authorization from the Texas Rangers
Baseball Club. Any access and admission to The Ballpark in Arlington shall be
governed by the rules and regulations of the Texas Rangers Baseball Club,
including, without limitation, the requirement that no alcoholic beverages may
be brought into, or taken out of The Ballpark in Arlington.
34. Modification of Rules. Landlord reserves the right to rescind, alter
or waive any of these Rules and Regulations and to make such other and further
Rules and Regulations as in the judgment of Landlord are from time to time be
needed for the safety, protection, care and cleanliness of the Building and its
Common Areas, the operation thereof, the preservation of good order therein, and
the protection and comfort of its tenants, which Rules and Regulations when made
and notice thereof given to a tenant will be binding upon such tenant in like
manner as if originally herein prescribed. In the event of any conflict,
inconsistency, or other difference between the terms and provisions of these
Rules and Regulations, as now or hereafter in effect and the terms and
provisions of any lease now or hereafter in effect between Landlord and Tenant,
the terms and provisions of the Lease will prevail and control.
<PAGE>
35. No Smoking. Landlord has designated the entire Building other than the
Friday's Front Row Grill and the Bullpen Bar of the Diamond Club (including,
without limitation, the Premises and all balconies (if any) constituting a part
of the Building or the Premises) as a non-smoking area pursuant to Article X of
the Health Ordinance of the City of Arlington. Accordingly, no smoking is
permitted in any portions or areas of the Building other than the Friday's Front
Row Sports Grill and the Bullpen Bar of the Diamond Club (including, without
limitation, the Premises and all balconies).
36. No Live Christmas Trees or Space Heaters. Tenant shall not be
permitted to have live or natural Christmas trees or space heaters of any type
in the Building, including without limitation, in the Premises.
37. Parking. Tenant shall comply with all rules and regulations concerning
parking associated with the Premises or the Building as may be posted and/or
distributed from time to time, whether by Landlord or a governmental or
quasi-governmental authority.
<PAGE>
EXHIBIT E
to
OFFICE LEASE
between
EMERALD DIAMOND, L.P.
and
-------------------------
TENANT ESTOPPEL CERTIFICATE
________________________________________, a ___________________ ("Tenant")
executes this Estoppel Certificate to and in favor of __________________________
________________________________________, a ___________________ corporation
("___________________") and its assignee, ________________________________
("_______________"),a ___________ corporation ("Lender") with reference to the
following facts:
A. This Estoppel Certificate is made with respect to that certain
Lease dated ______________ (the "Lease") between _______________________________
__________________________________________ ("Landlord") and Tenant, affecting
premises located on certain real property (the "Premises"), in a building known
as ______________________________ in the City of _________________, Texas (the
"Building"). Unless the context otherwise requires, capitalized terms used
herein but not otherwise defined herein have the meanings set forth in the
Lease.
B. Tenant has been informed by Landlord that Lender has made to
Landlord a loan secured by a Deed of Trust on the Property and by an Assignment
of the Leases.
Tenant hereby certifies to Lender as follows:
1. Attached hereto as Exhibit A is a full, true and correct copy of
the Lease. Except as contained in such exhibit, there are no amendments,
addendums, riders, or supplements, with respect to the Lease.
2. The Commencement and Expiration Dates (without the exercise of
any renewal options) of the Lease are _______________________ and
_______________________, respectively, and the current monthly rent due under
the Lease is $____________.
3. The Lease is in full force and effect, and, to Tenant's best
knowledge and belief, there is no default (as defined in the Lease) or Event of
Default existing thereunder on the part of Landlord or Tenant. Tenant is in
occupancy and has accepted possession of the Premises and the Premises have been
fully constructed as provided in the Lease.
4. Tenant has ______________ (____) options to renew and extend the
lease for a term of ______________ (____) years each, and has [not] yet
exercised Tenant's option for this renewal term.
<PAGE>
5. The Base Rental under the Lease has been paid through and
including the installment due and payable on _____________, 19__. The next
installment of basic rent which shall become due under the Lease will be due and
payable on _____________, 19__.
6. There has been no prepayment of Base Rental, additional rent or
other amounts due under the Lease.
7. Tenant is presently entitled to no offset, credit, or claims
whatever against Base Rental or additional rent under the Lease.
8. The Landlord has completed all of the improvements to the
Premises required to be made by Landlord pursuant to the terms of the Lease.
Tenant acknowledges that Landlord has performed or satisfied all conditions
precedent to occupancy under the Lease.
9. There are no subleases which exist with respect to the Premises.
10. The Premises are in good order and condition and, to the best of
Tenant's knowledge, complies in all respect with all applicable legal
requirements now in effect.
11. Tenant has received no notice or claim of violation of any legal
requirements with respect to the Premises.
12. There has been no damage to Premises caused by fire or other
casualty. To the best of Tenant's knowledge, there are no mechanics' liens or
claims of mechanic lien affecting the Premises.
13. Tenant has received no notice of any threatened or pending
condemnation or other eminent domain proceeding with respect to the Premises
or any interest therein.
14. Tenant has paid in full for all labor and materials and other
services which are presently due and payable in connection with Tenant's work,
if any, in the Premises, so that no lien by reason thereof may attach against
Landlord's interest in the Premises or the Building. Tenant acknowledges receipt
from Landlord of any construction allowance provided to be paid by Landlord to
Tenant under the Lease.
15. Tenant does hereby acknowledge that it is aware that Landlord
has executed or will execute a Collateral Assignment (hereinafter called the
"Collateral Assignment") of the Landlord's interest in the Lease to Lender.
Tenant hereby consents to the assignment by Landlord of the Lease and rents due
thereunder, hereby accepts and agrees to be bound by each of the provisions in
the attached Lease and further agrees, upon notification in writing by Lender,
to make all payments of Base Rent and additional rent due and payable under the
Lease on and after the date of said notice to Lender.
16. Lender and Landlord hereby request Tenant to notify Lender at
the address below in accordance with Section 1.10 and Section 16 of the Lease,
of the following events: (i) any proposed modifications of the Lease and (ii)
any default or claimed defaults on the part of Landlord under the Lease. All
notices and other communications hereunder shall be in writing and shall be
mailed by first-class registered or certified mail, postage prepaid, addressed
if to Lender at _________________________________ Attention: _________________
or at such other address as Lender may have furnished to Tenant in writing.
Lender shall have the right to change the address for notices to it by giving
Tenant written notice of such change. This instrument shall be binding upon the
heirs, personal representatives, successors and assigns of Tenant and shall
inure to the benefit of the successors and assigns of Lender.
17. Tenant acknowledges that this Estoppel Certificate shall be
binding upon the personal representatives, successors and assigns of Tenant and
shall inure to the benefit of the successors and assigns of the party to whom
this estoppel certificate is addressed.
<PAGE>
18. Tenant has not (i) made a general assignment for the benefit of
creditors: (ii) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by Tenant's creditors: (iii) suffered the
appointment of a receiver to make possession of all or substantially all of the
Tenant's assets; (iv) suffered the attachment or other judicial seizure of all,
or substantially all, of Tenant's assets: (v) admitted in writing its inability
to pay its debts as they come due; or (vi) made an offer of settlement,
extension or composition to its creditors generally.
19. Tenant has been informed by Landlord that Lender is extending
credit to Landlord based upon the Lease and the obligation of Tenant to pay Base
Rent and additional rent under the terms of the Lease, which will be assigned to
Lender. In that respect, Tenant acknowledges that Lender is relying upon the
certification made in this Estoppel Certificate.
IN WITNESS WHEREOF, Tenant has caused this certificate to be
thereunto duly authorized this _____ day of ______________________, 19__.
TENANT
Royal Mortgage Corp.
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Executive Vice President
STATE OF _____________ )
)
COUNTY OF _____________ )
On this ________ day of __________________ in the year 19___, before me,
the undersigned, a Notary Public in and for the State of _____________________,
personally appeared ____________________________________________, known to me to
be ________________________ of ___________________________, a ______________
corporation, the corporation that executed the within instrument and known to me
to be the persons who executed the within instruments on behalf of said
corporation.
WITNESS my hand and official seal.
---------------------------
(Seal) Notary Public in and for
the State of ______________
My Commission Expires: ___________________________
Printed Name of Notary
<PAGE>
EXHIBIT F
to
OFFICE LEASE
between
EMERALD DIAMOND, L.P.
and
ROYAL MORTGAGE CORPORATION
TENANT IMPROVEMENTS
CONSTRUCTION BY LANDLORD AT THE EXPENSE OF TENANT: Any finish-out
construction or refurbishing work to the Premises, including all utility
connections, shall be performed by Landlord at the expense of Tenant. This
paragraph is subject to the following terms and conditions:
A. Space Plan; Drawings. Using information supplied by Tenant, Landlord's
architect, interior designer or consulting engineer ("Landlord's Architect")
will, at the sole cost and expense of Landlord, prepare for Tenant's approval a
layout of the Premises (the "Preliminary Space Plan"). After the Preliminary
Space Plan has been prepared, Landlord shall deliver same to Tenant. Unless
Tenant objects to such Preliminary Space Plan within twenty (20) days after
delivery by Landlord, Tenant shall be deemed to have approved such Space Plan.
If Tenant does reasonably object, Landlord shall deliver a revised Preliminary
Space Plan to Tenant within thirty (30) days thereafter until a Space Plan is
approved. The approved or deemed approved Space Plan is hereinafter referred to
as the "Final Space Plan". From the Final Space Plan, Landlord's Architect will,
at the sole cost and expense of Tenant, prepare all one-eighth inch (1/8")
architectural, mechanical and electrical working drawings, together with
specifications necessary to complete all of the leasehold improvements. When
such working drawings and specifications (collectively the "Preliminary
Drawings") have been completed, Landlord shall deliver same to Tenant. Unless
Tenant objects to the Preliminary Drawings within ten (10) days after delivery
by Landlord, Tenant shall be deemed to have approved the Preliminary Drawings.
If Tenant does reasonably object, Landlord shall deliver revised Drawings to
Tenant within thirty (30) days thereafter until Drawings are approved. The
approved or deemed approved drawings are hereinafter referred to as the "Final
Drawings".
B. Changes to Final Drawings. Any changes to the Final Drawings shall
require the prior written consent of Landlord. Tenant shall pay any fees charged
by Landlord's Architect for the preparation of changes to the Final Drawings.
C. Construction; Tenant's Expense. All work shall be performed by the
general contractor or subcontractor selected by Landlord (together with all
subcontractors and employees under the supervision, direction or control of such
selected general contractor or subcontractor, the "Contractor") in conformance
with the Final Drawings in a good and workmanlike manner. Tenant shall pay all
bills for such work within 5 days after delivery by Landlord to Tenant of an
invoice therefor. Failure by Tenant to pay any amounts due hereunder shall have
the same effect under the Lease as the failure to pay rent thereunder, and such
failure shall constitute a default by Tenant under Article XIII of the Lease,
entitling Landlord to all of Landlord's remedies thereunder as well as all
remedies otherwise available to Landlord. All permits required prior to
commencement of construction shall be obtained by Landlord, at Tenant's sole
cost and expense.
<PAGE>
well as all remedies otherwise available to Landlord. All permits required prior
to commencement of construction shall be obtained by Landlord, at Tenant's sole
cost and expense.
D. Rules and Regulations. All work shall be performed by the Contractor in
accordance with the following rules and regulations:
1. Contractor shall carefully study and compare the construction
documents, field verify all dimensions and job conditions, and
notify Landlord of any discrepancies or omissions which would
interfere with the satisfactory completion of the work.
2. Contractor shall perform all work in accordance with the latest
edition of federal, state and local codes, in addition to national
standards. Contractor is responsible for filing and securing all
necessary permits and approvals for all trades.
3. Contractor shall coordinate all construction and design documents
supplied by Landlord's Architect. Contractor shall also refer the
Final Drawings for information pertaining to the systems in the
Premises, including the HVAC system, fire protection system,
security system, and special electrical requirements. Each
Contractor shall be responsible for the complete design,
engineering, specification, coordination and operation of the system
and/or product it designs.
4. Contractor shall furnish "as-built" drawings, at Tenant's expense.
5. All Contractors shall notify Landlord in writing of any
discrepancies and/or omissions which would interfere with the
satisfactory completion of the work.
6. Where applicable, Contractor shall verify all plumbing requirements
and conditions.
7. Where applicable, Contractor shall furnish and install all blocking
for cabinets, shelving, a/v boards, etc., which require mounting or
attaching to partitions.
8. Contractor shall be responsible for arranging for facilities for
handling materials.
9. Contractor shall be responsible for clean up of all trades and
removal of all debris. The Premises shall be left clean and ready
for occupancy.
10. Prior to construction, Contractor shall verify the existing site for
any concrete pour overspills at columns and floors.
11. Prior to construction, Contractor shall verify the existing site for
adequate coverage of fireproofing on any and all steel structural
components.
12. Prior to construction, Contractor shall verify that all HVAC
equipment located within the Premises is in good working order.
13. Contractor shall be responsible for any re-application of
fireproofing on any steel components as may be required by city
building codes.
14. Contractor shall maintain at the site for Landlord and Tenant one
record copy of all drawings, specifications, addenda, change orders
and other modifications, in good order and marked currently to
record all changes made during construction, and all approved shop
drawings, product data and samples.
<PAGE>
15. Any work required to be performed outside normal working hours must
be approved by Landlord. For purposes of this Exhibit F, "normal
working hours" shall mean Monday through Friday between the hours
from 7:00 a.m. to 3:30 p.m. In addition, no work may be performed
during home games of the Texas Rangers Baseball Club or within two
(2) hours prior to, and within one (1) hour after the completion of
such games.
16. Contractor's storage in the Premises of materials and/or equipment
must be approved by Landlord. At no time may materials or equipment
be stored at the entry or atrium area.
17. Any delivery of large amounts of materials or any other activity
that would cause a prolonged use of the service elevator is not
recommended during normal working hours and should be coordinated
with Landlord.
18. The operation of internal combustion engines within the Building is
strictly prohibited.
19. Contractor's application of millwork finishes containing petroleum
based solvents shall not be allowed inside the Building. All natural
finish or stained millwork shall be delivered to the Premises in a
finished condition by the Contractor that applies the finish, unless
specified otherwise.
20. Subject to item 15 above, all required touch up of finished millwork
must be performed outside of normal working hours with a minimum of
8 hours time allowed for drying and dissipation of vapors prior to
8:00 a.m. on the following work day. This provision shall also apply
to the application of all petroleum based solvents, including
contact cement, glues, adhesives, and sealers.
21. Contractor and Contractor's personnel shall use the rest rooms
designated for contractor use.
22. Contractor shall make every reasonable effort to protect the
existing carpet in the Building from the accumulation of excessive
amounts of trash, dirt, dust and debris, and from any spills, spots,
stains, cigarette burns, or other soils.
23. Contractor shall provide 24 hours advance written notice to Landlord
of any fire safety equipment shutdown.
24. Contractor shall cover and protect the lobby floor, exterior plaza
and service elevator cab at all times when delivering and removing
supplies and materials. Contractor shall not use Tenant elevators
for gaining access to or leaving, or transporting materials to or
from the Premises.
25. Any vertical penetration of slab or horizontal penetration of beams
and floors shall be only with Landlord's prior written approval, and
penetration shall occur after 6:00 p.m. unless otherwise approved by
Landlord.
26. Contractor's installation of carpet strips, trash removal and coring
of holes for electrical and telephone floor outlets shall be after
6:00 p.m. unless otherwise approved by Landlord.
27. Contractor shall issue all guarantees and warranties to Tenant and
Landlord.
28. Testing and balancing the air conditioning system shall be
performed, at Tenant's expense, by Landlord's air balance
contractor.
29. All work in connection with the fire alarm system shall be performed
by a contractor selected by Landlord and at Tenant's expense.
<PAGE>
30. Tenant shall be charged for all copies of base Building drawings and
specifications required for completion of Tenant's plans.
31. LANDLORD SHALL NOT BE LIABLE OR RESPONSIBLE FOR ANY ACCIDENT, LOSS,
INJURY (INCLUDING DEATH) OR DAMAGE TO PERSONS AND/OR PROPERTY
HAPPENING OR OCCURRING DURING THE TERM OF THE PERFORMANCE OF THE
WORK OR IN CONNECTION THEREWITH, AND TENANT SHALL AND DOES HEREBY
FULLY INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS LANDLORD, ITS
AFFILIATED COMPANIES, STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, SUCCESSORS AND ASSIGNS OR ANY PERSON OR ENTITY WHOMSOEVER
FROM AND AGAINST ALL LIENS, DEMANDS, LIABILITIES, CAUSES OF ACTION,
JUDGMENTS, COSTS, CLAIMS, DAMAGES, SUITS, LOSSES, AND EXPENSES
(INCLUDING ATTORNEYS' FEES) OF ANY NATURE, KIND OR DESCRIPTION
(COLLECTIVELY "LIABILITIES") ARISING OUT OF, CAUSED BY OR RESULTING
FROM THE PERFORMANCE OF THE WORK OR ANY PART THEREOF BY ANY PERSON
WHOMSOEVER, INCLUDING ANY LIABILITIES CAUSED BY THE NEGLIGENCE OF
LANDLORD, UNLESS SUCH ACCIDENT, LOSS, INJURY OR DAMAGE IS OCCASIONED
SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD,
ITS OFFICERS, AGENTS OR EMPLOYEES, THIS INDEMNITY SHALL NOT BE
LIMITED IN ANY WAY BY ANY LIMITATIONS OF THE AMOUNT OR TYPE OF
PROCEEDS, DAMAGES, COMPENSATION OR BENEFITS PAYABLE UNDER INSURANCE
POLICIES, DAMAGES, COMPENSATION OR BENEFITS PAYABLE ACTS OR OTHER
EMPLOYEE BENEFIT ACTS.
32. All Contractors shall comply with the following minimum insurance
requirements during the finish-out construction of the Premises and
shall insert the following language into any subcontracts they may
enter into for the work:
"All contractors and their subcontractors performing work on the
Premises shall, at their sole expense, maintain in effect at all
times during the full term of such work, insurance coverages with
limits not less than those set forth below with insurers licensed to
do business in Texas and acceptable to Landlord and under forms of
policies satisfactory to Landlord. None of the requirements
contained herein as to types, limits and Landlord's approval of
insurance coverage to be maintained by the above mentioned parties
are intended to, nor shall in any manner, limit or qualify the
liabilities and obligations assumed by such parties under this
contract.
I. Worker's Compensationion Coverage
a) Worker's Compensation Statutory Limits
Employer's Liability $100,000
The policy shall include a waiver of subrogation in favor of
Landlord.
II. Comprehensive General Liability
a) Bodily Injury/Property $100,000,000 each occurrence
Damage or equivalent
$100,000,000 aggregate
This policy shall be on a form acceptable to Landlord,
endorsed to include the Landlord as an additional insured
during the term of the contract, state that this insurance is
the
<PAGE>
primary insurance with regard to any other insurance carried
by Landlord, contain a waiver of subrogation in favor of
Landlord, and shall include the following coverages:
1) Premises/Operations
2) Independent Contractors
3) Completed Operations for a period of two years following
the acceptance of Contractor's work
4) Broad Form Contractual Liability in support of the
Indemnity section of this Contract
5) Broad Form Property Damage
6) Personal Injury Liability with exclusion (a) and (c)
removed
III. Comprehensive Automobile Liability
a) Bodily Injury $250,000 per person
$500,000 per occurrence
b) Property Damage $100,000 per occurrence
IV. Umbrella Excess Liability Insurance
a) Bodily Injury/ $2,000,000 per occurrence
Property Damage $2,000,000 aggregate
This policy' shall be written on an excess basis above the coverages
described in I, II and III above, naming Landlord as additional
insured.
V. Builder's Risk Policy
Unless otherwise provided, the Tenant shall purchase and maintain
property insurance upon the work at the site to the full insurable
value thereof. This insurance shall include the interest of the
Landlord, Tenant, contractor and subcontractors in the work and
shall be written on an all risk form.
The policy will contain a blanket waiver of subrogation in favor of
Landlord.
VI. Contractor's Equipment Policy
Any such insurance policy covering the contractor's or a
subcontractor's equipment and tools against loss by physical damage
shall include an endorsement waiving the insurer's right of
subrogation against the Landlord.
Evidence of the above coverage, represented by a certificate of insurance issued
by the insurance carrier, must be furnished to Landlord prior to the
contractor's starting work. Certificates of insurance shall specity the
additional insured status mentioned above as well as the waivers of subrogation.
Such certificate of insurace shall state that Landlord will be notified in
writing thirty(30) days prior to cancellation, any material change or renewal of
insurance. All such certificates should be sent to Emerald Diamond, L.P., P.O.
Box 90111, Arlington, Texas 76004, Attn: Mr. Jack Hill."
33. No Contractor shall enter upon, or remain or loiter upon, any balconies
included as a part of or adjacent to the premises.
<PAGE>
34. Contractor will employ an independent firm to test and balance both the
chilled water and the air at the completion of construction. Contractor to
submit final test and balance report to Landlord or Landlord's designee
for approval.
35. Contractor to confirm all MED/fire alarm devices are in good working order
prior to start of construction.
E. Inspection and Delivery of Premises. Upon completion of the work,
Landlord's Architect shall inspect the Premises to insure that the work has been
performed in accordance with the Final Drawings. Upon delivery of notice to
Tenant of the acceptance of the work by Landlord's Architect, the Premises shall
be deemed delivered and Tenant shall be deemed to have accepted the Premises,
and the date of such notice shall be deemed to be the Commencement Date.
F. Miscellaneous. The parties acknowledge that Landlord is not an
architect or engineer, and that the Tenant Improvements to be completed pursuant
to the terms of this Exhibit F will be designed and performed by independent
architects, engineers and contractors. Landlord does not guarantee or warrant
that the Final Space Plan or the Final Drawings will be free from errors or
omissions, nor that the Tenant Improvements to be completed pursuant to the
terms of this Exhibit F will be free from defects or in compliance with
applicable laws, rules, codes, ordinances and regulations, and Landlord shall
have no liability therefor.
<PAGE>
RIDER 6.1
BALCONY AND PATIO FURNITURE
At the commencement of the Term of this Lease Landlord shall furnish to
the Premises the following balcony or patio furniture in compliance with
paragraph 30 of the Rules and Regulations set forth on Exhibit D to this Lease,
for which Tenant shall pay to Landlord the amounts shown below as additional
rental. Such additional rental shall be due and payable on the Commencement
Date.
Number Unit Cost Totals
Patio Chairs 12 x $187.06 = $2,244.72
---- ------- ---------
Patio Tables 6 x $157.65 = $ 945.90
---- ------- ---------
Balcony Rail 2 x $663.50 = $1,327.00
---- ------- ---------
Sales Tax 7.75% $ 350.11
---------
Grand Total Due $4,867.73
---------
<PAGE>
Exhibit 10.2
FLORIDA
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") made this 27th day of October, l997,
by and between Integrated Health Services, Inc. ("Sublessor"), with its address
at 8889 Pelican Bay Boulevard, Suite 500, Naples, Florida 33108 and Royal
Mortgage Corp. ("Sublessee"), with its address at 1000 Ballpark Way, Suite 210,
Arlington, Texas 76011.
WHEREAS, Sublessor is the tenant of the property known as Pelican Bay
Financial Center, 8889 Pelican Bay Boulevard, 4th Floor, Naples, Florida 33108
(the "Property"); and
WHEREAS, Sublessee desires to sublet that certain portion of the Property
consisting of 1800 +/- square feet of office space (the "Premises") upon the
terms and conditions set forth in the Lease dated May 1, 1995 (the "Lease") by
and between Sublessor and UCELLO IMMOBILEN GMBH, ("Landlord"), Successor in
interest to WCN Communities, Inc., a copy of which is attached hereto as Exhibit
A and fully incorporated herein.
NOW, THEREFORE, on this 27th day of October, l997, for good and valuable
consideration, including payments provided in this Sublease, and with the
Landlord's consent, as evidenced below, Sublessor hereby leases to Sublessee,
and Sublessee does hereby lease from the Sublessor, office space located at
Pelican Bay Financial Center, 8889 Pelican Bay Boulevard, 4th Floor, Naples,
Florida 33108, as illustrated on the Floor Plan which is attached hereto and
made a part hereof as Exhibit B.
Sublessee shall pay to Sublessor a total annual lease payment in the
initial amount of $ 44,064.00 plus sales tax, calculated at the rate of $16.75
base rent per square foot plus CAM of $7.73 per square foot, payable in advance,
in installments of $ 3,672.00 per month on the first day of each month, except
that the first installment of said rental shall be paid upon the execution of
this Lease. Rental for the first and last monthly installments shall be prorated
at the rate of one-thirtieth (1/30th) of the monthly rent for each day. Annual
rent adjustments shall be made pursuant to Paragraph 3.2 of the Lease. Such
payments shall be made to the Sublessor at 4541 Altama Avenue, Brunswick,
Georgia 31520, Ann: Terri Dakin, subject to the provisions of the Lease.
Sublessee shall also pay a late charge equal to five percent (5%) of the
required monthly payment for each payment that is not mailed within ten (10)
days after the due date for such rental.
The commencement date of this Sublease, and the date of Sublessee's
obligation to make monthly rental payments hereunder, shall be the date the
Landlord notifies Sublessor as Tenant under the Lease with copy to Sublessee (or
the date of which Tenant and/or Sublessee have actual notice) that Landlord's
construction obligations
<PAGE>
for the subleased premises under the Lease have been substantially completed and
that the subleased premises are ready for occupancy and any applicable
certificate of occupancy has been issued, with or without entry by
Sublessor/Tenant and/or Sublessee.
The initial term of the Sublease shall be for a period of 3 years
commencing on the commencement date, as herein defined, with one (1) two-year
option to renew.
This Sublease is subject and subordinate in all respects to the terms and
provisions of the Lease. Without limiting the foregoing, Sublessee hereby
acknowledges and agrees that pursuant to the terms of the Lease, the Landlord is
entitled to certain rights, privileges, reservations and benefits thereunder and
the Sublessee hereby consents to and acknowledges the rights of the Landlord to
enjoy and exercise, as the case may be, all such rights, privileges,
reservations and benefits accorded to the Landlord under the Lease. Except as
otherwise expressly provided herein, Sublessee hereby covenants and agrees to
perform and observe all of the Tenant's obligations under the Lease, in every
respect, as if Sublessee hereunder were the Tenant under the Lease as and when
all such obligations shall be required to be observed and performed, throughout
the term of this Sublease. Sublessor shall not have any rights to any buildout
allowance for the premises, which rights shall exclusively be governed by the
provisions of the Lease and shall be the rights of Tenant under the Lease. By
its consent to the Sublease, Landlord agrees to provide any buildout allowance
to Tenant under the Lease for the area of the subleased premises as if said
premises were occupied by the Tenant only and not also the Sublessee. With the
exception of the tenant build out allowance set forth above, Sublessor agrees to
be bound as landlord pursuant to the term of the Lease to Sublesee only.
Sublessor and Sublessee each agree to indemnify and hold the Landlord
harmless from and against any claim by any real estate broker or agent claiming
a commission, or other form of compensation by virtue of having dealt with one
of the parties hereto.
Sublessee warrants and represents that it is a corporation in good
standing and has the requisite corporate power and authority to enter into this
Sublease agreement and that the persons executing this Sublease have been duly
authorized to do so, and that this Sublease is fully enforceable against
Sublessee in accordance with its terms.
Any notice or demand to be given or served on Sublessee shall be duly
given or served in accordance with article 35 of the Lease at Sublessee's
address set forth in the initial paragraph of the Sublease agreement or if
<PAGE>
different, at Sublessee's address at the property as follows: Pelican Bay
Financial Center, 8889 Pelican Bay Boulevard, Fourth floor, Naples, Florida
33108.
IN WITNESS WHEREOF, the parties hereto, by the properly authorized persons
and with their respective seals attached, have fully executed this Sublease the
day and year first above written.
ATTEST:
/s/ JWT By: /s/ [Illegible] (SEAL)
- ----------------- ---------------------- Sublessor
FOR ROYAL MORTGAGE CORPORATION
By: /s/ DE Wentsch (SEAL)
- ----------------- ---------------------- Sublessor
As Director and Agent
Agreed and consented to this 14th day of November, 1997 provided that and
conditioned upon the following:
1. This consent does not in any way modify the terms of the Lease and
Tenant's obligations thereunder or release Tenant therefrom or be
deemed to be Landlord's consent to any of the terms of the Sublease
agreement which may differ from the Lease terms.
2. Landlord does not hereby consent to any right of Sublessee to
pledge, encumber or assign the sublease or allow any transfer of the
Sublease or the subleased premises or allow any other person or
entity to occupy the subleased premises.
3. Any alteration, installations, improvements, additions or other
physical changes to the subleased premises by the Sublessee shall
require Landlord's written consent which it shall grant or withhold
in its sole discretion, provided that this restriction shall not
affect the initial buildout of the premises performed pursuant to
the Lease.
4. Tenant shall be liable to Landlord and expressly guarantee to
Landlord Sublessee's performance of all obligations under the Lease
and Sublease as they affect Landlord.
Uccello Immobilien GmbH, by its agent
G&K Investments Mgmt., Inc.
By: /s/ Marcel Korman
----------------------------
Marcel Korman, President
<PAGE>
STATE OF FLORIDA, COUNTY OF COLLEIR, to wit.:
I HEREBY CERTIFY, that on this 27th day of October, 1997, before me, a
Notary Public of the State and County aforesaid, personally appeared David E.
Wentsch, who acknowledged himself/herself to be the Director and Agent of Royal
Mortgage Corp. and as such agent, being authorized to do so, executed the
foregoing Sublease for the purposes therein contained by signing, in my
presence, the name of the Corporation by himself as such agent.
FOR ROYAL MORTGAGE CORPORTATION
/s/ DE Wentsch
AS WITNESS my hand and Notarial Seal.
My Commission Expires:
Notary Public
/s/ Judy L. Alvord
[SEAL]
JUDY L. ALVORD
MY COMMISSION # CC 464503
EXPIRES: August 4, 1999
Bonded Thru Notary Public Underwriters
STATE OF Florida, COUNTY OF Dade, to wit.:
I HEREBY CERTIFY, that on this 14th day of November, 1997, before me, a
Notary Public of the State and County aforesaid, personally appeared Marcel
Korman, who acknowledged himself to be the President of G&K Investments Mgmt.
and as such officer, being authorized to do so, executed the foregoing Sublease
for the purposes therein contained by signing, in my presence, the name of the
Corporation by himself, as such officer.
AS WITNESS my hand and Notarial Seal.
/s/ Maria Alexandra Ramirez
Notary Public
Maria Alexandra Ramirez
My Commission 9/25/00 [SEAL] My Commission CC588472
Expires Sep. 25, 2000
|X| Personally known
or produced ID
<PAGE>
EXHIBIT A
OFFICE LEASE AGREEMENT
TENANT AND LANDLORD ACKNOWLEDGE THEY HAVE READ ALL THE PROVISIONS CONTAINED IN
THE ENTIRE LEASE AND ALL ATTACHED EXHIBITS AND AGREE THAT THE LEASE REFLECTS THE
ENTIRE UNDERSTANDING AND REASONABLE EXPECTATIONS OF THE PARTIES REGARDING THE
PREMISES, WHICH LANDLORD AND TENANT NEGOTIATED IN GOOD FAITH AND AT ARM'S
LENGTH. LANDLORD AND TENANT ALSO ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY
TO REVIEW THIS LEASE PRIOR TO ITS EXECUTION WITH LEGAL COUNSEL AND SUCH OTHER
ADVISORS AS LANDLORD AND TENANT DEEM APPROPRIATE.
This Lease Agreement is made and entered into this 1st day of May, 1995, by and
between WCN Communities, Inc., hereinafter referred to as "Landlord", and
Integrated Health Services, Inc., hereinafter referred to as "Tenant",
RECITALS: In consideration of the rents, covenants and agreements given and
exchanged herein, Landlord leases to Tenant, and Tenant leases and accepts from
Landlord, the office space described in Section 1.1, hereinafter referred to as
the "Premises".
All covenants, agreements, terms and conditions between Landlord and Tenant with
respect to the Premises are contained in this Lease and the following Exhibits
attached hereto.
Exhibit A - Floor plan of the Pelican Bay Financial Center office building
located at 8889 Pelican Bay Boulevard, Naples, Florida
33963, referred to herein as the "Building".
Exhibit B - Building Standard Workletter for Tenant Improvements.
Exhibit C - Rules and Regulations.
Exhibit D - Acceptance of Space/Key Receipt Form
The foregoing Exhibits are hereby incorporated into this Lease by this
reference.
ARTICLE 1: PREMISES
1.1 The Premises are located on the 4th floor of the Building at 8889 Pelican
Bay Boulevard. The location of the Premises is outlined and crosshatched on
Exhibit "A".
1.2 As used in this Lease, the term Rentable Area means the sum of (i) the total
area within the Premises as measured from the interior surface of exterior
glass, or exterior walls and from the midpoint of demising walls or walls
separating the Premises from areas devoted to lobbies, corridors, hallways,
elevator foyers and shafts, restrooms, mail rooms, mechanical rooms and shafts,
janitor closets and other similar facilities used by tenants or for the benefit
of tenants on
<PAGE>
a non-exclusive basis ("Interior Common Facilities"); (ii) plus a proportionate
share of the area of the Interior Common Facilities in the Building
(measurements calculated as in (i) above), based upon the ratio which the area
of the Premises (as calculated in (i) above) bears to the aggregate area of all
premises in the Building (calculated on the same basis). No deductions for
Rentable Area will be made for columns or projections. The Rentable Area in the
Premises has been calculated on the basis of the foregoing and is hereby
stipulated for all purposes of this Lease to be 6,217 square feet. If the
Rentable Area should be greater or less as a result of construction and
completion of the Premises or changes to Interior Common Facilities, the
stipulated Rentable Area set forth in this Section 1.2 shall be adjusted.
1.3 Landlord reserves the right to change the Building, the number of floors,
the arrangement and location of the Interior Common Facilities in the Building
and the shape, location, levels, arrangement and dimensions of the Common Areas,
including any space reservations in the Automobile Parking Area. Notwithstanding
the above, Landlord shall not modify or relocated the Premises in any respect
without the prior written approval of Tenant.
2.1 The term of this lease ("Lease Term") shall be for a period of ten (10 )
years, plus the remainder of any partial calendar month in which the term
commences.
2.2 Subject to any adjustments under Article V of Exhibit "B", the Lease Term
and Tenant's obligation to pay rent shall commence on that date upon which
Landlord notifies Tenant (or the date Tenant has actual notice) that Landlord's
construction obligations under this Lease have been substantially completed and
that the Premises are ready for occupancy and the certificate of occupancy has
been issued, with or without actual entry by Tenant ("Commencement Date").
2.3 Upon Tenant's taking possession of the Premises, both parties agree to
execute a written memorandum setting forth the Commencement Date, the date on
which this Lease expires ("Expiration Date") and the stipulated Rentable Area as
adjusted under Section 1.2.
ARTICLE 3: RENTAL
3.1 Tenant covenants and agrees to pay to Landlord, without deduction, setoff,
prior notice or demand, for the use and occupancy of the Premises a Minimum
Monthly Rent of Nine Thousand Three Hundred Twenty-Five Dollars and 50/100
($9,325.50) payable in advance on the first day of each and every calendar month
during the Lease Term. If the Minimum Monthly Rent
-2-
<PAGE>
commences on a date other than the first day of a calendar month, the Minimum
Monthly Rent, for that month shall be prorated on a per diem basis and be paid
to Landlord within five (5) days after the Commencement Date. If the Rentable
Area is adjusted in accordance with Section 1.2 following completion of
construction, the Minimum Monthly Rent shall be adjusted to one-twelfth of the
product obtained by multiplying the actual square foot Rentable Area, as
adjusted, by Eighteen and 00/100 Dollars ($ 18.00).
3.2 Upon each anniversary of the Commencement Date, the Minimum Monthly Rent
shall be adjusted in accordance with the Consumer Price Index for All Urban
Consumers, U.S. City Average (1991 403.1) using the table entitled, "All Urban
Consumers", issued by the U.S. Department of Labor, Bureau of Labor Statistics,
commonly referred to as the Consumer Price Index ("C.P.I."). The first calendar
month shall be deemed the "Base Month". In no event shall the C.P.I. adjustment
to the Minimum Monthly Rent exceed 4% per year.
3.3 The Minimum Monthly Rent for each year of this Lease subsequent to the first
year of this Lease shall be adjusted and the same shall be computed by
multiplying the Minimum Monthly Rent for the "Base Month" by a fraction, the
numerator of which is the said "C.P.I."-for the last month of the preceding year
of this Lease and the denominator of which is the said "C.P.I." for the "Base
Month". If the publication of said "C.P.I." is discontinued, then the parties
shall, in good faith, agree on a suitable substitute.
3.4 In no event shall the Minimum Monthly Rent following an adjustment under
this Article be reduced below the Minimum Monthly Rent preceding an adjustment.
3.5 In the event of any delay in computing the rental adjustment for a
subsequent Lease year, Tenant shall continue payment of the most recent Minimum
Monthly Rent as provided herein, until such time as the rental adjustment has
been computed, at which time an accounting will be made, retroactive to the
beginning of the subsequent Lease year for which adjustment is made, and the
amount then due Landlord shall be paid by Tenant within ten (10) days of receipt
of demand.
ARTICLE 4: ADDITIONAL RENT
4.1 In addition to the Minimum Monthly Rent, Tenant shall pay Landlord as
"Additional Rent" Tenant's pro rata share of "Operating Expenses" and "Taxes".
As used herein, the term:
(a) "Tenant's pro rata share" shall mean the ratio which the Net Rentable
Area leased by the Tenant in the Building bears to the total Net Rentable Area
contained in the Building.
(b) "Operating Year" means the year beginning January 1 and ending
December 31.
(c) "Operating Expenses" shall mean all expenses, costs, and disbursements
by Landlord in connection with the ownership, maintenance, and/or operation of
the Building, the Common Areas and the personal property used in conjunction
there with. Such Operating Expenses shall
-3-
<PAGE>
include all expenses, costs, and disbursements of every kind and nature which
Landlord shall pay or become obligated to pay, including, but not limited to the
following:
(1) wages and salaries of all employees engaged in direct operation
and maintenance of the Building, the Common Areas, and the land upon which the
Building and Common Areas are situated, employee's social security taxes,
unemployment taxes or insurance, and any other taxes which may be levied on such
wages and salaries, the cost of disability and hospitalization insurance,
workers' compensation, pension or retirement, and other fringe benefits for such
employees;
(2) all supplies and materials used in the operation and maintenance
of the Building;
(3) cost of all utilities, including without limitation water,
sewer, and electricity used by the Building and not charged directly to another
tenant;
(4) cost of all maintenance and service agreements for the Building,
the equipment therein, and grounds, including janitorial service, trash removal,
servicing, and maintenance of all systems and equipment, security and alarm
service, window cleaning, landscaping and gardening;
(5) cost of all insurance relating to the Building, including
casualty and liability insurance applicable to the Building and Landlord's
personal property used in connection therewith;
(6) cost of installation of capital investment items which are
installed primarily for the purpose of reducing operating costs or which may be
required by any governmental authority; management fees, legal and accounting
expenses and any other expense or charges whether or not herein above described
which, in accordance with consistently applied generally accepted accounting and
management principles would be considered an expense of managing, maintaining,
operating or repairing the Building and Common Areas.
Base operating expenses shall not include cost of individual Tenant
improvements, management cost associated with leasing activities, or new capital
improvements unless such items and/or improvements result in the operating
efficiency of the Building being increased, in which event the cost shall be
spread over the period necessary to recover the cost of such improvements from
the increased efficiency.
(c) "Taxes" shall mean all real estate taxes and assessments,
special or otherwise, levied or assessed upon or with respect to the land or
building, and all ad valorem taxes for Landlord's personal property used in
connection therewith. Should the State of Florida or any political subdivision
thereof or any other governmental authority having jurisdiction over the land or
the Building either (1) impose a tax, assessment, charge, or fee (or increase a
then existing tax, assessment, charge, or fee) which Landlord shall be required
to pay, either by way of substitution for such real estate taxes or ad valorem
personal property taxes, or (2) impose an income or
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franchise tax or a tax on rents in substitution, in whole or in part, for such
real estate taxes or ad valorem personal property taxes or in lieu of any
increase in such taxes, such taxes, assessments, fees, charges, income,
franchise, or rent tax shall be deemed to constitute "Taxes" hereunder.
(d) "Common Areas" means all areas both interior and exterior provided by
Landlord for the common or joint use and benefit of the occupants of the
Building, their employees, agents, customers, and other invitees including but
not limited to the Automobile Parking Area, (whether spaces are assigned,
reserved or not) as defined in Article 5 of the Lease, public restroom
facilities, landscaping, sidewalks, building lobbies and hallways, mechanical
rooms, elevator shafts and stairway.
4.2 Landlord shall notify Tenant within thirty (30) days of the Commencement
Date and within thirty (30) days after the end of each calendar year hereafter
ensuing or earlier during the term hereof, of the amount which Landlord
estimates (as evidenced by budgets prepared by or on behalf of Landlord) will be
the amount of Tenant's proportionate share of Operating Expenses and Taxes for
the then current calendar year and Tenant shall pay such sum in advance to
Landlord in equal monthly installments during the balance of said calendar year,
on the first day of each remaining month in said calendar year, commencing on
the first day of the first month following Tenant's receipt of such
notification. Within one hundred twenty (120) days following the end of each
calendar year during the term hereof, Landlord shall submit to Tenant a
statement showing the actual amount which should have been paid by Tenant with
respect to Operating Expenses and Taxes for the past calendar year, the amount
thereof actually paid during that year by Tenant and the amount of the resulting
balance due thereon, or overpayment thereof, as the case may be. Any balance
shown to be due pursuant to said statement shall be paid by Tenant to Landlord
within thirty (30) days following Tenant's receipt of notice thereof and any
overpayment shall be immediately credited against Tenant's obligation to pay
expected Additional Rent in connection with anticipated increases in Operating
Expenses and Taxes or, if by reason of any termination of the Lease no such
future obligation exists, refunded to Tenant.
4.3 In determining the amount of Operating Expenses for the purpose of this
Section, if less than 100% of the Building shall have been occupied by tenants
and fully used by them at any time during the year, Operating Expenses shall be
increased to an amount equal to the like Operating Expense which would normally
be expected to be incurred had such occupancy been 100% and had such full
utilization been made during the entire period. In no event shall Tenant be
responsible for any of the pro rated share of Operating Expenses attributable to
vacant office lease space in the Building during the year.
4.4. For any applicable operating year that begins prior to the Commencement
Date or ends after the expiration date of this Lease, the amount due for that
operating year shall be apportioned on a per diem basis so that only that
portion attributable to the portion of such operating year that occurs during
the term of this Lease shall be payable by Tenant.
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4.5 The determination and statement of expenses shall be made by Landlord and a
copy of such, statements shall be made available to Tenant upon written request.
4.6 Notwithstanding anything herein to the contrary, if Landlord should fail to
give the above notices and/or statements within the time specified, such failure
shall not constitute a waiver by Landlord of its right to require increase(s) in
the Tenant's pro rata share of the "Operating Expenses" and "Taxes" specified
herein.
ARTICLE 5: AUTOMOBILE PARKING AREA
5.1 Landlord grants to Tenant and Tenant's customers and employees the right to
use the Automobile Parking Area adjacent to the Building and all other common
areas in and about the Building, subject to rules and regulations from time to
time adopted by Landlord. Such use shall be in common with other Tenant's of the
Building, their customers and employees. Landlord reserves the right to cover
part of the parking area, to construct a parking garage, to assign a reasonable
number of parking spaces for the exclusive use of certain Tenant's, to receive
additional rent for covered or assigned parking spaces, and to designate certain
spaces for the use of visitors.
ARTICLE 6: RENT TAX AND PERSONAL PROPERTY TAXES
6.1 Tenant covenants and agrees to pay to Landlord, in addition to, and
simultaneously with, any other amounts payable to Landlord under this Lease, a
sum equal to the aggregate of any municipal, county, state or federal excise,
sales, use or transaction privilege taxes now or hereafter legally levied or
imposed against or on account of any or all amounts payable under this Lease by
Tenant or the receipts thereof by Landlord (except taxes which are commonly
referred to as income, estate, or inheritance taxes).
6.2 Tenant shall pay, prior to delinquency all taxes levied upon fixtures,
furnishings, equipment and personal property placed on the Premises by Tenant.
If any or all of Tenant's fixtures, furnishings, equipment or personal property
shall be assessed and taxed with the Landlord's real property, Tenant shall
reimburse Landlord for such taxes within fifteen (15) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to the Tenant's property.
ARTICLE 7: PAYMENT OF RENTAL/LATE CHARGES
7.1 Tenant shall pay the rentals and all other charges herein specified to
Landlord at the address set forth on page one of this Lease, or to another
person and at another address as Landlord shall from time to time designate in
writing.
Any payment of rent, additional rent or other charge required to be made by
Tenant to Landlord under the terms of this Lease not received within ten (10)
days after the due date thereof shall be subject to a late charge of five
percent (5%) of the delinquent amount.
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7.2 Any rent, additional rent or other charge, expense or cost due and payable
from Tenant to, Landlord not paid within ten (10) days of the due date shall
bear interest from the due date at the rate equal to the lesser of: (a) eighteen
percent (18%) per annum or, (b) the highest rate permitted by the usury laws of
the State of Florida.
ARTICLE 8: SECURITY DEPOSIT
8.1 Tenant has deposited with Landlord upon delivery of this Lease the sum of
Five Thousand and 00/1 00 Dollars ($ 5,000.00), receipt of which is hereby
acknowledged by Landlord, as security for the full and faithful performance of
each and every term, provision, covenant and condition of this Lease.
8.2 If Tenant defaults in any of the terms, provisions, covenants and conditions
of this Lease, including but not limited to the payment of rent, additional rent
or other charge and said default continues for ten (10) days after Tenant's
receipt of written notice from Landlord of said default, Landlord may, but need
not, use, apply, or retain the whole or any part of this security not as
liquidated damages but for the payment of any rent or charge in default or for
any other sum which Landlord may spend or be required to spend by reason of
Tenant's default. If any portion of said deposit is so used or applied, Tenant
shall, within ten (10) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original
amount. Should Tenant fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this Lease, the security or any balance
of the security shall be returned to Tenant or, at the option of Landlord, to
the last assignee of Tenant's interest in this Lease within ten (10) days after
the Expiration Date and surrender of the Premises by Tenant. Landlord's rights
with reference to the security deposit shall be in addition to and shall not
preclude any other rights, remedies, or recoveries available to Landlord by law
or under the terms of this Lease.
8.3 Tenant agrees that in case the Landlord shall sell or exchange Landlord's
interest in the Premises during the lease Term, Landlord may pay the deposit to
any subsequent owner and in that event, Tenant does hereby agree to release
Landlord from all liability for the return of such deposit. Landlord shall not
be required to maintain such funds in a segregated account, but may deposit such
funds in any general account of Landlord, provided that such commingling shall
in no way affect Landlord's obligations to Tenant regarding such funds
hereunder. Tenant shall not be entitled to any interest on the security deposit.
ARTICLE 9: CONSTRUCTION OF THE PREMISES
9.1 Landlord shall construct the Building and Tenant's Leasehold Improvements,
as defined in Exhibit "B", in accordance with plans and specifications prepared
by Landlord's architect. The respective obligations, covenants and agreements of
Landlord and Tenant to construct the Premises including the division of
responsibilities and procedures for design and construction and for payment of
costs and expenses are more specifically set forth in Exhibit "B", ("Building
Standard Workletter for Tenant Improvements"). Landlord agrees to provide to
Tenant a
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Leasehold Improvement Allowance in an amount equal to the number of square feet
of Net Useable Area within the Premises multiplied by Twenty and 00/100 dollars
($ 20.00 ) (the "Leasehold Improvement Allowance"). Landlord represents that it
will obtain a competitive price for the cost of constructing Tenant Leasehold
Improvements and that Landlord will not add an administrative fee over and above
the contractor's fee for construction of the work.
9.2 Prior to the Commencement Date, any work performed by Tenant, or any
fixtures or personal property moved onto the Premises, shall be at Tenant's own
risk and neither Landlord nor Landlord's agents or contractors shall be
responsible to Tenant for damage or destruction of Tenant's work or property
including damage or destruction occasioned by Landlord's own negligence. Tenant
agrees to indemnify Landlord and hold Landlord harmless against claims made with
respect to damage or destruction of property of third persons moved on the
Premises prior to the Commencement Date at Tenant's request.
9.3 Taking possession of all or any portion of the Premises by Tenant shall be
conclusive evidence as against Tenant that the Premises or such portion thereof
are in satisfactory condition on such date of possession, subject only to any
deficiencies listed in writing in a notice delivered by Tenant to Landlord not
more than thirty (30) days after the Commencement Date.
9.4 "Net Useable Area" shall mean the total area within the Premises as measured
from the interior surface of exterior walls, windows and doors to the midpoint
of all interior demising walls, windows and doors, without deduction for columns
or projections.
ARTICLE 10: ALTERATIONS
10.1 After completion of Landlord's construction obligations under Article 9,
Tenant shall not make, or cause to be made any further additions to, or
alterations of the Premises, or any part thereof, without the prior written
consent of Landlord which consent will not be unreasonably withheld.
Notwithstanding the foregoing, Tenant shall have the right from time to time to
make alterations and/or improvements to the Premises which are consistent with
the nature of the business being conducted by it, provided it submits plans
therefore to Landlord for prior approval. Landlord agrees not to unreasonably
withhold its consent thereto.
ARTICLE 11: FIXTURES/PERSONAL PROPERTY
11.1 All trade fixtures installed by Tenant and movable furniture that are not
permanently affixed to the Premises shall remain the property of Tenant and may
be removed by Tenant not later than the Expiration Date, provided that Tenant is
not then in default hereunder. Tenant shall promptly repair, at its own expense,
any damages occasioned by such removal. All wall covering, floor covering,
window coverings, lighting and other special fixtures that may be placed upon,
installed in or attached to the Premises by Tenant shall, at the Expiration Date
or earlier termination of this Lease for any reason, be the property of Landlord
and remain upon and be surrendered with the Premises, without disturbance,
molestation or injury unless designated by Landlord to be removed.
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ARTICLE 12: LIENS
12.1 Tenant shall keep the Premises and the property on which the Premises are
situated free from any liens arising out of work performed, material furnished
or obligations incurred due to Tenant's actions or the failure of Tenant to
comply with any law excluding, however, security interests in Tenant's personal
property. The interests of the Landlord in the Premises shall not be subject to
liens for improvements made by the Tenant. Any such liability is expressly
prohibited, and a notice pursuant to Section 713.10, Florida Statutes, shall be
recorded in the Public Records of Collier County, Florida by Landlord. In the
event any such lien does attach against the Premises, and Tenant does not
discharge the lien or post bond (which under law would prevent foreclosure or
execution under the lien) within ten (10) days after demand by Landlord,
Landlord may take any action necessary to discharge the lien. Tenant shall pay
Landlord upon demand for or on account of any cost or expense (including
reasonable attorney's fees) incurred by Landlord by reason of attachment or
discharge of such lien and shall indemnify Landlord against any liability
arising out of attachment of such lien.
ARTICLE 13: SECURITY INTEREST
13.1 Tenant hereby pledges and assigns to the Landlord, and grants a lien upon
all furniture, fixtures, goods and chattels of Tenant located on said Premises,
as security for the payment of the sums due hereunder. Tenant agrees that such
lien may be enforced by distress, foreclosure or otherwise at the election of
the Landlord, and does hereby agree to pay reasonable attorneys' fees incurred
by Landlord in perfecting and liquidating such liens, plus all costs and charges
incidental thereto. Tenant agrees that such lien may be enforced by a distress,
foreclosure, or otherwise at the election of the Landlord. Tenant and Landlord
agree that in any such action, the prevailing party shall be entitled to
recoupment of all attorney's fees plus other reasonable costs thereto from the
non-prevailing party.
ARTICLE 14: USE OF PREMISES/RULES AND REGULATIONS
14.1 Tenant shall use the Premises solely for the purpose of conducting its
business, which is: General business office.
Tenant shall not use or permit the Premises to be used for any other purpose or
purposes except with the prior written consent of Landlord, which shall not be
unreasonably withheld.
14.2 Tenant shall comply with all statutes, ordinances, rules, regulations and
orders of all municipal, state and federal authorities now in force or which may
hereafter by in force pertaining to the use of the Premises. Tenant, to the best
of Tenant's knowledge, shall not use or permit the Premises to be used in whole
or in part for any purpose or use in violation of any of the laws, ordinances
regulations or rules of any public authority at any time applicable thereto.
14.3 Tenant shall not:
(a) commit, or suffer to be committed, any waste upon the Premises;
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(b) engage in any activity which will increase the existing premium rate
of insurance on the Premises or cause a cancellation of any insurance polity or
permit to remain in or about the Premises any article that may be prohibited by
standard form fire insurance policies;
(c) use the Premises for or carry on or permit any offensive, noisy, or
dangerous trade, business, manufacture or occupation, or any nuisance or
anything against public policy, or interfere with the business of or disturb the
quiet enjoyment of any other Tenant in the Building;
(d) use the exterior of the roof or walls of the Premises or Building for
any purpose.
14.4 Tenant shall faithfully observe and comply with the rules and regulations
printed on Exhibit "C" to this Lease, all parking regulations that may be
established in accordance with Article 5 and all modifications of and additions
thereto from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the nonperformance by any other Tenant or occupant of
the Building of any such rules and regulations.
14.5 Insolvency Of Tenant. To the extent allowed by applicable law, if Tenant
shall become insolvent or if bankruptcy proceedings shall be instituted by or
against the Tenant, provided Tenant has not cured same within sixty (60) days of
initiation of said bankruptcy proceedings, before the end of the term of this
Lease, Landlord is hereby irrevocably authorized, at its option, to cancel this
Lease as for a default. Landlord may elect to accept rent from any receiver,
trustee, or other person in a fiduciary capacity without affecting Landlord's
rights as contained in this Lease, but no receiver, trustee or other judicial
officer shall ever have any right, title or interest in or to the Premises
described herein by virtue of this Lease.
14.6 Abandonment. Tenant shall continuously occupy the Premises during the Term
and shall not vacate or abandon the Premises at any time during the Term without
Landlord's written consent.
ARTICLE 15: RIGHTS RESERVED BY LANDLORD
15.1 Landlord shall have the following rights, exercisable without notice and
without liability to Tenant for damage or injury to property, persons or
business and without effecting an eviction, constructive or actual, or
disturbance of Tenant's use or possession or giving rise to any claim for setoff
or abatement of rent:
(a) To change the Building's name or street address.
(b) To install, affix and maintain any and all signs on the exterior and
interior of the Building.
(c) To designate and approve, prior to installation, all types of window
shades, blinds, drapes, awnings, window ventilators and other similar equipment,
and to control all internal lighting that may be visible from the exterior of
the Building.
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(d) To designate, restrict and control all sources from which Tenant may
obtain ice, drinking water, towels, toilet supplies, shoe shining, catering,
food and beverages, or like or other services on the Premises and in general, to
reserve to Landlord the exclusive right to designate, limit, restrict and
control any business and any services in or to the Building and its Tenants.
(e) To retain at all times, and to use in appropriate instances, keys to
all doors within and into the Premises. No locks shall be changed or added
without the prior written consent of Landlord.
(f) To decorate and to make repairs, alterations, additions, changes or
improvements, whether structural or otherwise, in and about the Building, or any
part thereof, and for such purposes to enter upon the Premises and during the
continuance of any of said work to temporarily close doors, entryways, public
space and corridors in the Building, to interrupt or temporarily suspend
Building services and facilities and to change the arrangement and location of
entrances or passageways, doors and doorways, corridors, elevators, stairs,
toilets, or other Interior Common Facilities, all without abatement of rent or
affecting any of Tenant's obligations hereunder, so long as the Premises are
reasonably accessible.
(g) To have and retain a paramount title to the Premises free and clear of
any act of Tenant purporting to burden or encumber them.
(h) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted herein.
(i) To approve the weight, size and location of safes and other heavy
equipment and articles in and about the Premises and the Building, and to
require all such items and furniture and similar items to be moved into and out
of the Building and Premises only at such times and in such manner as Landlord
shall direct in writing. Movements of Tenant's property into or out of the
Building and within the Building are entirely at the risk and responsibility of
Tenant and Landlord reserves the right to require permits before allowing any
such property to be moved into or out of the Building.
(j) To prohibit the placing of vending or dispensing machines of any kind
in or about the Premises without the prior written permission of Landlord.
(k) To have access for tenants of the Building to any mail chutes located
on the Premises according to rules of the United States Postal Service.
(l) To take all such reasonable measures as Landlord may deem advisable
for the security of the Building and its occupants, including without
limitation, the search of all persons entering or leaving the Building, the
evacuation of the Building for cause, suspected cause, or for drill purposes,
the temporary denial of access to the Building, and the closing of the Building
after regular working hours.
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Reservation of the rights set forth in this Section shall, however, impose no
obligation or duty upon Landlord to exercise said rights.
ARTICLE 16: QUIET ENJOYMENT
16.1 Landlord covenants that upon Tenant's paying the rentals and keeping and
performing all of the terms, covenants and conditions of this Lease, Landlord
will do nothing that will prevent Tenant from peaceably and quietly enjoying,
holding and occupying the Premises during the Lease Term. This covenant shall
not extend to any disturbance, act or condition brought about by any other
tenant in the Building and shall be subject to the rights of Landlord set forth
in this Lease. This Lease Agreement is subject to any Easements, Covenants and
Restrictions of record and to any terms of any ground lease for the property
upon which the Building is located.
ARTICLE 17: MAINTENANCE AND SANITATION
17.1 Subject to Articles 21 and 22 and Tenant's obligations under Sections 17.2
and 17.3, Landlord covenants to maintain the Building in good and tenantable
condition and repair. Tenant hereby waives all rights to make repairs at the
expense of Landlord. Landlord's maintenance and repair costs under this Section
17.1 will be deemed an Operating Expense. The foregoing notwithstanding,
Landlord shall not be liable to Tenant for failure to make repairs as required
herein unless Tenant has previously notified Landlord, in writing, of the need
for such repairs and Landlord has failed to commence said repairs within fifteen
(15) days following receipt of Tenant's written notification. Landlord shall
have no obligation to alter, remodel, improve, decorate or paint the Premises
except as set forth in Exhibit "B".
17.2 If Landlord would be required to perform any maintenance or make any
repairs under Section 17.1 because of: (1) modifications to the roof, walls,
foundation and floor of the Building from that set forth in Landlord's plans and
specifications which are required by Tenant's design for improvements,
alterations and additions; (b) installation of Tenant's improvements, fixtures
or equipment; (c) Tenant's or Tenant's employees' or customers' negligence or
wrongful act; or, (d) Tenant's failure to perform any agreement contained in
this Lease, Landlord may perform the maintenance or repairs or require Tenant to
do so. If Landlord performs the maintenance or repair arising under this Section
17.2, Tenant shall pay Landlord the cost thereof plus a reasonable amount for
Landlord's overhead upon receipt of a statement from Landlord. The cost incurred
by Landlord under this Section shall not be an Operating Expense for purposes of
Article 4.
17.3 To the extent caused by Tenant, Tenant covenants and agrees to:
(a) pay Landlord, Landlord's cost of maintenance and repair, including
additional janitorial costs, of any Non-Building Standard Improvements and
Non-Building Standard materials and finishes, as defined in Exhibit "B", special
leasehold improvements in excess of or in addition to Building Standard, as
defined in Exhibit "B".
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(b) pay Landlord, Landlord's cost of repair or replacement of all ceiling
and wall finishes (including painting) and floor or window coverings which
require repair or replacement during the Lease Term.
Landlord's costs under this Section will not be deemed an Operating Expense.
ARTICLE 18: UTILITIES AND JANITORIAL SERVICES
18.1 Landlord agrees to furnish to the Premises during normal business hours,
and subject to the rules and regulations of the Building, electricity suitable
for the intended use of the Premises, heat and air conditioning required in
Landlord's judgment for normal use and occupation of the Premises and janitorial
services for the Premises and Common Areas. Normal business hours for the
Building shall be from 8:00 am. to 6:00 p.m. on Mondays through Fridays, and
8:00 a.m. to 1:00 p.m. on Saturdays, except for national holidays. Services
shall not be provided Saturdays, Sundays and holidays except herein provided.
Landlord further agrees to furnish hot and cold water to those areas provided
for general use of all tenants in the Building. If Tenant is desirous of the use
of the Premises over and above normal business hours, Landlord agrees that
electricity, heating and air conditioning suited for the intended use of the
Premises will be available to the Premises. Tenant agrees to pay the additional
operating expense, if any, for these services, due to Tenant's use of the
Premises after normal business hours.
18.2 As used in the Article 17, "Excess Consumption" means the consumption of
electrical current (including current in excess of 120 volts), water, heat,
cooling or compressed air (if compressed air is furnished by Landlord) in excess
of that which would be provided to the Premises were the Premises to be: (i)
built out with Building Standard Improvements only; (ii) used as general office
space during normal business hours; and (iii) equipped only with word
processors, typewriters, desk calculators, dictation equipment and copying
machines with power requirements of 30 amperes or less. Tenant will not, without
the written consent of Landlord, use any apparatus or device in the Premises,
including but without limitation thereto, duplicating machines, electronic data
processing machines, punch card machines and machines using electrical current
in excess of 110 volts, which will in any way result in Excess Consumption (For
purposes of this Section, Excess Consumption is the unreasonable consumption of
electricity, water, heat, cooling or compressed air of a nature unrelated to the
use of the Premises as general office space.) nor connect, except through
existing electrical outlets, water pipes, ducts or airpipes (if any there be) in
the Premises, any apparatus, or device, for the purposes of using electric
current, water, heating, cooling or air. If Tenant shall require water, heating,
cooling air or electric current which will result in Excess Consumption, Tenant
shall first procure the consent of Landlord to the use thereof, and Landlord may
cause separate meters to be installed to measure Excess Consumption or establish
another basis for determining the amount of Excess Consumption. Tenant covenants
and agrees to pay for the cost of the Excess Consumption based on Landlord's
cost, plus any additional expense incurred in installing meters for keeping
account of the Excess Consumption, at the same time as payment of the Minimum
Monthly Rent is made. Tenant further agrees to pay Landlord the cost, if any, to
upgrade existing mechanical, electrical, plumbing and HVAC facilities, if
required to provide Excess Consumption, upon receipt of a
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statement therefor. Excess Consumption costs will not be an Operating Expense
for purposes of Article 4.
18.3 Other than for Landlord's negligence or willful misconduct, Landlord shall
not be liable in damages or otherwise in the event of any failure of
interruption of any utility or service supplied to the Premises or Building. In
no event shall such a failure entitle Tenant to terminate this Lease.
ARTICLE 19: ENTRY AND INSPECTION
19.1 Landlord and Landlord's agents shall have the right to enter into and upon
the Premises at all reasonable times with a minimum of a twenty-four (2) hour
notice, whether written or oral, to Tenant (where such entry will not
unreasonably disturb or interfere with Tenant's use of the Premises) for the
purpose of inspecting the same; performing Landlord's maintenance and repair
obligations under this Lease; maintaining or making repairs, alterations, or
additions to any other portion of the Building, including the erection and
maintenance of such scaffolding, canopy, fences and props as may be required and
posting notices of nonliability for alterations, additions or repairs. Landlord
and Landlord's agents shall further have the right to enter the Premises at all
reasonable times to show the Premises to prospective purchasers, mortgagees or
tenants. Tenant shall permit Landlord, at any time within one hundred fifty
(150) days prior to the expiration of the Lease Term, to place upon the Premises
any usual or ordinary "For Lease" signs.
19.2 If Landlord has provided notice as referenced in Section 19.1, or in the
event of an emergency and Tenant shall not be present to open and permit an
entry into said Premises, when for any reason an entry therein shall be
necessary or permissible, Landlord or Landlord's agents may use a master key to
enter, without rendering Landlord or such agents liable therefor, and without in
any manner affecting the obligations and covenants of this Lease. Landlord shall
be permitted to take any action under this Article without any abatement of rent
and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned, nor shall such action by Landlord
be deemed an actual or constructive eviction.
ARTICLE 20: ACCEPTANCE OF THE PREMISES, LIABILITY
INSURANCE AND INDEMNIFICATION OF LANDLORD
20.1 As used in this Article, "Claims" means any claims, suits, proceedings,
actions, causes of action, responsibility, liability, demands, judgments and
executions.
20.2 All merchandise, furniture, floor and wall covering and all personal
property and fixtures belonging to Tenant and all persons claiming by or through
Tenant which may be on the Premises shall be at Tenant's sole risk. Tenant
hereby waives all Claims against Landlord for loss, injury or damage to all
persons and property on the Premises or the Common Areas from theft, fire,
water, gas or otherwise, including sprinkler leakage or bursting pipes other
than loss, injury or damage caused by Landlord's negligence or willful
misconduct. Tenant accepts the
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Premises "as is" and Landlord makes no warranty as to the condition of the
Premises.
20.3 Tenant hereby agrees to indemnify and to hold Landlord and any Mortgagee of
Landlord harmless against all Claims arising from: Tenant's possession, use,
maintenance and repair of the Premises; any act or omission of Tenant or
Tenant's invitees, agents and employees; any default of Tenant under this Lease;
or other acts or omissions which result in personal injury, loss of life or
property damage sustained in and about the Premises.
20.4 Upon taking possession of the Premises and thereafter during the Lease
Term, the Tenant shall, at Tenant's sole cost and expense, maintain
comprehensive liability insurance, including, without limitation, premises
liability and contractual liability endorsements, against Claims for personal
injury, death, or property damage occurring in, upon, or about the Premises. The
limits of liability of such insurance shall not be less than One Million Dollars
($1,000,000) combined single limit or in such higher amounts as Landlord may
require. All such policies of insurance shall name Landlord and/or such other
party or parties as Landlord may require as additional insureds.
20.5 Tenant's insurance shall be maintained with an insurance company qualified
to do business in the state in which the Premises are located and having a
current A.M. Best manual rating of at least A-X or better. Tenant's insurance
policies will contain endorsements stating that the insurance will not be
canceled nor will the carrier fail to renew or materially change the policy
without first giving Landlord thirty (30) days written notice. Before entry into
the Premises and before expiration of any policy, Tenant shall provide Landlord
with evidence that the requirements of this Article have been met and that the
applicable premiums or renewal premiums have been paid.
20.6 During the entire Lease Term, Landlord shall maintain public liability
insurance against Claims for personal injury, death or property damage occurring
on the Common Areas. The limits of liability of such insurance shall be in such
amounts as Landlord shall determine. The cost of the public liability and
property damage insurance on the Common Areas shall be an Operating Cost under
Article 4 of this Lease.
20.7 Landlord shall not be responsible or liable to Tenant for any Claims for
loss or damage caused by the acts of omissions of any persons occupying any
space adjacent to or adjoining the Premises, except for Landlord's negligence or
willful misconduct.
ARTICLE 21: CASUALTY INSURANCE
21.1 Tenant shall maintain fire and extended coverage insurance with a business
interruption endorsement on merchandise, personal property, equipment and trade
fixtures owned or used by Tenant and other property which Tenant may remove on
the Expiration Date. Tenant shall not maintain insurance on any structural
portion of the Premises, roof, demising or interior walls or floors. In event of
violation of this obligation, Tenant agrees all proceeds of Tenant's insurance
policies, except proceeds related to Tenant's personal property or improvements
supplied by
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Tenant, will be held in trust for the benefit of Landlord.
21.2 Landlord shall maintain fire and full extended coverage insurance ("all
risk") including vandalism and malicious mischief, sprinkler leakage damage and
flood and boiler explosion endorsements throughout the Lease Term on the
Building and may name the holder of a first mortgage or deed of trust and any
ground lessor as additional insured. Landlord may elect to self-insure any
component comprising the Common Areas. At Landlord's option, the policy of
insurance may include a business interruption insurance endorsement for loss of
rents. The cost of the insurance obtained under this Section shall be an
Operating Cost under Article 4 of this Lease. If, however, during the Lease Term
premiums for fire and extended coverage insurance are or may be calculated by
rating the premises of individual tenants within the Building and it is
determined that the rate for the Premises, due to Tenant's special fixtures,
Non-Building Standard Improvements, business or otherwise, is in excess of the
rate attributable to the premises having the lowest rate, Tenant agrees to pay
Landlord the difference between the premium attributable to the Premises and
that premium which would be attributable to the Premises were the Premises rated
at the lowest rate. If the Building is rated as a whole and it is determined
that the premium, due to Tenant's special fixtures, Non-Building Standard
Improvements or business, is in excess of the premium which would have been
charged, but for Tenant's fixtures, improvements or business, Tenant agrees to
pay Landlord such excess. Tenant shall have no rights in said policy procured by
Landlord under this Section and shall not be entitled to be named as insured
thereunder.
21.3 Tenant hereby waives any right of recovery from Landlord, and Landlord's
agents, officers and employees, and Landlord hereby waives any right of recovery
from Tenant and Tenant's agents, officers or employees, for any loss or damage
(including consequential loss) resulting from any of the perils insured against
by either's fire and extended coverage policy. The parties shall give their
respective insurance carriers notice of this waiver and secure an endorsement
from each carrier to the effect that the waivers given under this Section shall
not adversely affect or impair the policies of insurance or prejudice the right
of the named insured on the policy to recover thereunder. A waiver given under
this Section shall apply only to losses occurring during the time that such an
endorsement is in effect.
ARTICLE 22: DAMAGE AND DESTRUCTION OF PREMISES
22.1 In the event of (a) fire or other casualty damage to the Premises or the
Building during the Lease Term which requires repairs to either the Premises or
the Building, or (b) the Premises or Building being declared unsafe or unfit for
occupancy by an authorized public authority for any reason other than Tenant's
act, use or occupation, which declaration requires repairs to either the
Premises or the Building, Landlord shall commence to make said repairs within
sixty (60) days from the date of the casualty. No such destruction (including
any destruction necessary in order to make repairs) shall annul or void this
Lease. The Minimum Monthly Rent shall be Proportionately reduced while such
repairs are being made, based upon the extent to which the making of such
repairs shall interfere with the business carried on by Tenant in the Premises
or interfere with Tenant's use and enjoyment of the Premises.
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22.2 Landlord's obligation to repair the Premises shall, however, be subject to
the following.
If:
(a) during the last three (3) years of the Lease Term the Premises or the
Building is damaged as a result of fire or any other insured casualty; or,
(b) the Premises are damaged to the extent of twenty-five percent (25%) of
replacement value; or,
(c) the Premises or the Building are damaged or destroyed as a result of a
casualty not insured against; or,
(d) fifty percent (50%) or more of the gross leasable floor area of the
Building shall be damaged or destroyed by fire or other cause,
Landlord shall have the right, to be exercised by notice in writing to Tenant
given within forty-five (45) days from said occurrence, to cancel and terminate
this Lease. Upon notice to Tenant, the Lease Term shall expire by lapse of time
upon the thirtieth day after such notice is given, and Tenant shall vacate the
Premises and surrender the same to Landlord. If Landlord elects to terminate
this Lease under this Section, all rents shall be prorated as of the date of
damage or destruction and Landlord shall be released from liability or
obligation to Tenant. If Landlord, however, elects to make said repairs, and
provided Landlord uses due diligence in making said repairs, this Lease shall
continue in full force and effect and the Minimum Monthly Rent shall be
proportionately reduced as provided in Section 22.1.
22.3 With respect to any destruction (including any destruction necessary in
order to make repairs) which Landlord is obligated to repair or may elect to
repair under the terms of this Article, Tenant waives any statutory or other
right Tenant may have to cancel this Lease as a result of such destruction and
no such destruction shall annul or void this Lease.
22.4 The provisions of this Article shall supersede the obligations of Landlord
to make repairs under Section 17.1 of the Lease. Landlord shall not be obligated
to make repairs to the extent that the cost thereof exceeds the insurance
proceeds or to the extent such repairs would exceed Building Standard as defined
in Exhibit "B".
22.5 Unless the Lease is terminated under this Article, upon substantial
completion of Landlord's restoration obligations, the Minimum Monthly Rent shall
be restored to the amounts which would have been in effect but for the damage or
destruction.
ARTICLE 23: EMINENT DOMAIN
23.1 As used in this Article, "Taking" means a taking of or damage to the
Premises or Building or any part thereof by exercise of the power of eminent
domain, condemnation or sale under the threat of or in lieu of eminent domain or
condemnation.
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23.2 If the whole of the Building or the whole of the Premises shall be acquired
by a Taking, or if the whole of the Automobile Parking Area is acquired by a
Taking then this Lease shall terminate as of the date the order of Taking is
issued.
23.3 If more than fifty percent (50%) of the gross leasable floor area of the
Building is acquired by a Taking, whether or not any portion of the Premises is
so taken, either Landlord or Tenant shall have the right to terminate this Lease
as of the date of such Taking by giving either party ninety (90) days written
notice of either party's intent to terminate this Lease.
23.4 If more than twenty-five percent (25%) of the Premises is acquired in a
Taking, either Landlord or Tenant may terminate this Lease upon notice to the
other within ninety (90) days prior to taking of possession. If less than
twenty-five percent (25%) of the Premises is acquired in a Taking, Landlord
shall promptly restore the Premises to a condition comparable to its condition
at the time of such condemnation less the portion acquired in the Taking, this
Lease shall continue in full force and effect with respect to that part not
acquired, and the Minimum Monthly Rent shall be reduced in the proportion that
the rental value of the Premises after the taking bears to the rental value
before the Taking.
23.5 Notwithstanding Section 23.2, if any part of the Automobile Parking Area
shall be acquired by a Taking, Landlord shall have the right to provide
substitute parking facilities and this Lease shall continue in full force and
effect unless a governmental entity forces the closing of the Building. If a
closing is required, this Lease shall terminate on the date of closing.
23.6 In the event of a Taking as hereinbefore provided, whether whole or
partial, the Tenant shall not be entitled to any part of the award, as damages
or otherwise for diminution in value of the leasehold, reversion or fee, and
Landlord is to receive the full amount of such award. Tenant hereby expressly
waives any right or claim to any part thereof Tenant shall have no claim against
Landlord for the value of the unexpired Lease Term if the Lease is terminated
under this Article. Although all damages in the event of any condemnation are to
belong to the Landlord, Tenant shall have the right to claim and recover from
the condemning authority, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account of
any damage to Tenant's business by reason of the condemnation and for or on
account of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture, trade fixtures and equipment.
23.7 If this Lease is terminated partially or in total under this Article all
rents shall be prorated as of the date of Taking including refunds for amounts
paid in advance by Tenant.
ARTICLE 24: ASSIGNMENT AND SUBLETTING
24.1 Tenant shall not transfer or assign this Lease, or any interest therein,
and shall not sublet the Premises or any part thereof, or any right or privilege
appurtenant thereto, including spaces in the Automobile Parking Area, without
Landlord's consent. Consent by Landlord to one assignment, subletting,
occupation or use by another person shall not be deemed to be a consent
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to any subsequent assignment, subletting, occupation or use by another person.
Neither this Lease nor any interest therein shall be assignable, as to the
interest of Tenant, by operation of law, without prior written consent of
Landlord. Any attempted transfer, assignment or subletting without the prior
written consent of Landlord shall be void. Landlord acknowledges that the Tenant
may initially be subletting a portion of its Premises for a temporary period of
time. Landlord agrees that a request from Tenant for subletting approval from
the Landlord shall not be unreasonably withheld.
If Tenant is a corporation, an unincorporated association or a partnership,
unless listed on a national stock exchange, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of fifty percent (50%) shall be deemed
an assignment of this Lease.
24.2 If Landlord consents to any assignment of this Lease or a subletting of all
or any part of the Premises, Tenant shall pay to Landlord, on the same dates
that payments are to be made by any assignee or subtenant under the assignment
or sublease document approved by Landlord, as Additional Rent, fifty percent
(50%) of any excess Minimum Monthly Rent, Additional Rent or other charges to be
paid by such assignee or subtenant to Tenant over the Minimum Monthly Rent,
Additional Rent or other charges reserved to Landlord under this Lease for that
part of the Premises assigned or subleased.
24.3 If Tenant, with Landlord's prior written approval, assigns this Lease or
sublets the Premises, and the assignee or sublessee maintains the liability
insurance coverage required by Section 20.3, Tenant shall be relieved of such
obligation. Tenant agrees t9 pay Landlord reasonable legal fees incurred in
connection with the processing of any documents necessary to give consent.
24.4 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies, or may at the
option of Landlord, operate as an assignment to Landlord of any or all such
subleases or subtenancies.
ARTICLE 25: SALE OF PREMISES BY LANDLORD
In the event of any sale of the Building or the property upon which the Building
is located or assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of all liability under any and all of
Landlord's covenants and obligations contained in or derived from this Lease or
arising out of any act, occurrence or omission occurring thereafter; and the
assignee or purchaser, at such sale or any subsequent sale of the Premises or
assignment of this Lease, shall be deemed, without any further agreement between
the parties and only such assignee or purchaser, to have assumed and agreed to
carry out any and all of the covenants and obligations of Landlord under this
Lease.
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ARTICLE 26: SUBORDINATION/ATTORNMENT
Tenant's interest under this Lease shall be subordinate to all terms of the lien
of any ground lease, first deed of trust or first mortgage (hereinafter
collectively referred to as "mortgage") now or hereafter placed on the
Landlord's interest in the Premises or on the land and buildings of which the
Premises are a part. If the Premises or the Building is sold pursuant to default
on the mortgage, or pursuant to a transfer in lieu of foreclosure, Tenant shall,
at the mortgagee's or purchaser's election, not disaffirm this Lease but shall
attorn to the mortgagee or purchaser. This Article shall be self-operative,
however, Tenant agrees to execute and deliver, if Landlord should so request,
such further instruments necessary to subordinate this Lease to a lien of any
mortgage and to affirm the attornment provisions set forth herein.
ARTICLE 27: RIGHT TO CURE
In the event of breach, default, or noncompliance hereunder by Landlord, Tenant
shall, before exercising any right or remedy available to it, give Landlord
written notice of the claimed breach, default, or noncompliance. If prior to its
giving such notice Tenant has been notified in writing (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the address of a lender which
has furnished financing that is secured by realty mortgage or deed of trust on
the Premises or the Building, concurrently with giving the aforesaid notice to
Landlord, Tenant shall also give notice by registered mail to such lender. For
the thirty (30) days following such notice (or such longer period of time as may
be reasonably required to cure a matter which, due to its nature, cannot
reasonably be remedied within thirty (30) days), Landlord shall have the right
to cure the breach, default, or noncompliance involved. If Landlord has failed
to cure a default within said period, any such lender shall have an additional
thirty (30) days within which to cure the same or, if such default cannot be
cured within that period, such additional time as may be necessary if within
such (30) day period said lender has commenced and is diligently pursuing the
actions or remedies necessary to cure the breach, default, or noncompliance
involved (including, but not limited to, commencement and prosecution of
proceedings to foreclose or otherwise exercise its rights under its mortgage or
other security instrument, if necessary to effect such cure), in which event
this Lease shall not be terminated by Tenant so long as such actions or remedies
are being diligently pursued by said lender.
ARTICLE 28: ESTOPPEL CERTIFICATES
Tenant agrees at any time and from time to time upon request by the Landlord, to
execute, acknowledge and deliver to Landlord a statement within five (5)
calendar days of demand in writing certifying (1) that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating such modifications), (b) the
dates to which the Minimum Monthly Rent and other charges have been paid in
advance, if any, (c) Tenant's acceptance and possession of the Premises, (d) the
commencement of the Lease Term, (e) the rent provided under the Lease, and (f)
that Landlord is not in default under this Lease (or if Tenant claims such
default, the nature thereof), (g) that Tenant claims no offsets against the
rent, and (h) such other information as shall be reasonably
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necessary to establish the status of the tenancy created by this Lease. It is
intended that any such statement delivered pursuant to this Article may be
relied upon by any prospective purchaser, mortgagee or assignee of any mortgagee
of the Premises or the Building. Tenant's failure to deliver such statement
within such time shall be conclusive upon Tenant that this Lease in full force
and effect without modification except as may be represented by Landlord; that
there are no incurred defaults in Landlord's performance; and that no rental has
been paid in advance unless otherwise herein specifically provided. A refusal by
Tenant to execute and deliver any such statement shall constitute an event of
default under this Lease. Tenant will have five (5) calendar days from written
notice of default to cure the same.
ARTICLE 29: DEFAULT AND CONDITIONAL LIMITATIONS
29.1 The following shall constitute a default under this Lease:
(a) if Tenant fails to pay any installment of the Minimum Monthly Rent or
Additional Rent herein provided or any other sum required by this Lease to be
paid to Landlord, or any part thereof, within ten (10) days of the due date or
in the manner provided; or
(b) if Tenant fails to perform any other covenants or conditions on its
part agreed to be performed and such failure to perform other covenants shall
continue for thirty (30) days after notice thereof from Landlord to Tenant; or
(c) if a petition or proceeding under the federal Bankruptcy Act or any
amendment thereto is filed or commenced by or against Tenant or any guarantor of
this Lease, and if against Tenant, said proceedings shall not be dismissed
within sixty (60) days following commencement thereof; or
(d) if Tenant or any guarantor of this Lease is adjudged by a court of
competent jurisdiction insolvent, makes an assignment for the benefit of its
creditors or enters into an arrangement with its creditors; or
(e) if a writ of attachment or execution is levied on the leasehold estate
hereby created and is not released or satisfied within sixty (60) days
thereafter; or
(f) if a receiver is appointed in any proceeding or action to which Tenant
is a party with authority to take possession or control of the Premises or the
business conducted thereon by Tenant or the property of any guarantor of this
Lease and such receiver is not discharged within a period of thirty (30) days
after his appointment; or
(g) Tenant abandons or vacates the Premises.
29.2 Upon a default of Tenant as defined in Section 29.1 Landlord, or Landlord's
agents and employees shall have the right and option to:
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(a) prosecute and maintain an action or actions, as often as Landlord
deems advisable, for collection of the Rents, other charges and damages as the
same accrue, without entering into possession and without terminating this
Lease. No judgment obtained shall constitute a merger or otherwise bar
prosecution of subsequent actions for Rents and other charges and damages as
they accrue.
(b) immediately or at any time thereafter reenter and take possession of
the Premises and remove Tenant, Tenant's agents, any successors, assignees,
subtenants, licensees, concessionaires, or invitees and any or all of their
property from the Premises. Reentry and removal may be effected by summary
proceedings or any other action or proceedings at law, by force or otherwise.
Landlord shall not be liable in any way in connection with any action taken
under this paragraph. No action taken, commenced or prosecuted by Landlord, no
execution on any judgment and no act or forbearance on the part of Landlord in
taking or accepting possession of the Premises shall be construed as an election
to terminate this Lease unless Landlord expressly exercises this option under
Section 29.2(c).
Upon taking possession of the Premises Landlord will use its best faith efforts,
without termination of this Lease to relet the Premises or any part thereof as
agent for Tenant for such rental terms and conditions (which may be for a term
extending beyond the Lease Term) as Landlord, in its sole discretion, may deem
advisable, with the right to make alterations and repairs to said Premises
required for reletting. The rents received by Landlord from such reletting shall
be applied first to the payment of any costs of reletting and second to the
payment of rent due and unpaid hereunder. The residue, if any, shall be held by
Landlord and applied in payment of future rent as the same may become due and
payable hereunder. If the rents received from such reletting during any month
are insufficient to reimburse Landlord for any costs of reletting or rent due
and payable, Tenant shall pay any deficiency to Landlord. Such deficiency shall
be calculated and paid monthly. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter, elect to terminate this Lease
for such previous breach.
(c) elect to terminate this Lease by written notice to Tenant. In event of
such termination, Tenant agrees to immediately surrender possession of the
Premises. If Tenant fails or refuses to surrender the Premises, Landlord may
take possession in accordance with Section 29.2(b). Should Landlord terminate
this Lease, Tenant shall have no further interest in this Lease or in the
Premises, and the Landlord may recover from Tenant all damages it may incur by
reason of Tenant's default, including (1) the cost of reletting the Premises,
and (2) the worth at the time of such termination of the excess, if any, of the
amount of rent and charges equivalent to rent reserved in this Lease for the
remainder of the Lease Term over the then reasonable rental value of the
Premises for the remainder of the Lease Term all of which amounts shall be
immediately due and payable at Landlord's election from Tenant to Landlord. In
determining the rent which would be payable by Tenant hereunder subsequent to
default, the monthly rent for the unexpired term shall be calculated on the
basis of the Minimum Monthly Rent and additional rent payable by Tenant at the
time of default plus any future increases which are determinable at the time of
calculation.
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(d) obtain the appointment of a receiver in any court of competent
jurisdiction, and the receiver may take possession of any personal property
belonging to the Tenant and used in the conduct of the business of the Tenant
being carried on in the Premises. Tenant agrees that the entry upon the Premises
or possession of said personal property by said receiver shall not constitute an
eviction of the Tenant from the Premises or any portion thereof, and the Tenant
hereby agrees to hold the Landlord safe and harmless from any claim of any
character by any person arising out of or in any way connected with the entry by
said receiver in taking possession of the Premises and/or said personal
property.
29.3 As used in this Article "costs or reletting" means any reasonable costs
necessary to take possession of the Premises and lease the Premises to another
tenant, including, but not limited to the following reasonable costs:
(a) legal costs and expenses of recovery of the Premises including court
costs and attorney's fees,
(b) brokerage costs for leasing,
(c) costs and expenses of alterations, repairs and improvements,
(d) indebtedness other than Minimum Monthly Rent due from Tenant to
Landlord under this Lease,
(e) costs of protecting the Premises,
(f) removal and storage of Tenant's property, and
(g) costs of providing security for the Premises, Tenant's property, or
both.
29.4 No act or conduct of the Landlord, whether consisting of reentry, taking
possession or reletting the Premises or obtaining appointment of a receiver or
accepting the keys to the Premises, or otherwise, prior to the expiration of the
Lease Term shall be deemed to be or constitute an acceptance of the surrender of
the Premises by the Landlord or an election to terminate this Lease unless
Landlord exercises its election under Section 29.2(c) of this Lease. Such
acceptance or election by Landlord shall only be effected, and must be
evidenced, by written acknowledgement of acceptance of surrender or notice of
election to terminate signed by Landlord.
29.5 Tenant agrees that in the event it is due to tender performance in
accordance with any term or condition of this Lease and it fails to render such
performance within ten (10) days after written notification thereof is given in
accordance with the notice provision hereof or immediately if required for
protection of the Premises, Landlord shall have the right, but not the
obligation, to render such performance and to charge all costs and expenses
incurred in connection therewith to Tenant; Provided, however, that if Tenant
has commenced within such ten (10) day period
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such action as is necessary to render such performance and in good faith
diligently carries it forward to completion, then Landlord shall not exercise
such right. This "grace period" shall not apply to the payment of money due from
Tenant to Landlord. All amounts so charged shall be considered Additional Rent
and shall be due and payable immediately to Landlord upon presentment of a
statement to Tenant indicating the amount and nature of such cost or expense.
29.6 No remedy herein conferred upon Landlord or Tenant shall be considered
exclusive of any other remedy, but the same 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. No delay or omission of Landlord or Tenant to
exercise any right or power arising from any default shall impair any such right
or power, or shall be construed to be a waiver of any such default or any
acquiescence therein.
ARTICLE 30: TENANT'S RECOURSE
Anything in this Lease to the contrary notwithstanding, Tenant agrees that it
shall look solely to the estate and property of Landlord in the land and
building comprising the Building, subject to prior rights of any mortgagee of
the Building or any part thereof, for the collection of any judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default or breach by Landlord under this Lease.
ARTICLE 31: FORCE MAJEURE
If either party hereto shall be delayed or prevented in any material fashion
from the performance of any act required hereunder by reason of acts of God,
strikes, lockouts, labor troubles, civil disorder, inability to procure
materials, restrictive governmental laws or regulations or other cause without
fault and beyond the control of the party obligated, performance of such act
shall be excused for the period of delay and then for a period of time
reasonably necessary to perform the act; provided, however, nothing in this
Article shall excuse Tenant from the prompt payment of any rental or other
charge required of Tenant hereunder except as may be expressly provided
elsewhere in this Lease.
ARTICLE 32: SURRENDER OF PREMISES
At the Expiration Date, Tenant shall surrender the Premises in good order and
condition, reasonable wear and tear and casualty damage excepted, and shall
deliver all keys to Landlord. Before surrendering the Premises, Tenant shall
remove all of its personal property and trade fixtures and such alterations or
additions to the Premises made by Tenant as may be specified for removal by
Landlord, and shall repair any damage caused by such property or the removal
thereof. If Tenant fails to remove its personal property and fixtures upon the
Expiration Date, the same shall be deemed abandoned and shall become the
property of Landlord.
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ARTICLE 33: HOLDING OVER
If Tenant shall hold over after the Expiration Date, or any extension thereof,
Tenant shall become a tenant of sufferance and pay rental of one and one-half
times the latest amount determined under Article 3 plus the Additional Rent and
Rent Tax under Article 4 and 6 respectively, which rental shall be payable in
advance on the first day of such holdover period and on the first day of each
month thereafter, upon all the terms, covenants and conditions herein specified.
ARTICLE 34: GENERAL PROVISIONS
34.1 This Lease shall be construed in accordance with the laws of the State of
Florida. Venue for resolution of any dispute arising under this Lease shall be
Collier County, Florida.
34.2 If Landlord or Tenant herein shall be more than one party, then the
obligations of such party or parties shall be joint and several.
34.3 This Lease shall not be construed against the party preparing it but shall
be construed as if all parties prepared this Lease.
34.4 If any term, covenant, condition or provision of this Lease is held by a
court of competent jurisdiction to be invalid, void or unenforceable the
remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
34.5 The various headings and numbers herein and the grouping of the provisions
of this Lease into separate articles and paragraphs are for the purpose of
convenience only and shall not be considered a part hereof.
34.6 Time is of the essence of this Lease.
34.7 In the event either party initiates legal proceedings to enforce any right
or obligation under this Lease or to obtain relief for the breach of any
covenant hereof, the party ultimately prevailing in such proceedings shall be
entitled to recover from the defaulting party the costs of such proceedings,
including reasonable attorneys' fees as determined by the court and not by a
jury. If Landlord is involuntarily made a party defendant to any litigation
concerning this Lease or the Premises by reason of any act or omission of
Tenant, Tenant shall indemnify and hold Landlord harmless from all liability by
reason thereof, including Landlord's reasonable costs and attorneys' fees.
34.8 This Lease, and any Exhibit attached hereto, set forth all the covenants,
warranties, representations, promises, agreements, conditions or undertakings,
either oral or written, between the Landlord and Tenant. Except as herein
otherwise provided, no subsequent alteration, amendment, change or addition to
this Lease shall be binding upon Landlord or Tenant unless reduced to writing
and signed by both parties.
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34.9 Subject to Article 24, the covenants herein contained shall apply to and
bind the heirs, successors, executors, administrators and assigns of all the
parties hereto; and all of the parties shall be jointly and severally liable
hereunder.
34.10 No covenant, term or condition of this Lease shall be waived except by
written waiver of Landlord, and the forbearance or indulgence by Landlord in any
regard whatsoever shall not constitute a waiver of the covenant, term or
condition to be performed by Tenant to which the same shall apply, and until
complete performance by Tenant of such covenant term or condition, Landlord
shall be entitled to invoke any remedy available under this Lease or by law
despite such forbearance or indulgence. The waiver by Landlord of any breach or
term, covenant or condition hereof shall apply to and be limited to the specific
instance involved and shall not be deemed to apply to any other instance or to
any subsequent breach of the same or any other term, covenant or condition
hereof. Acceptance of rent by Landlord during a period in which Tenant is in
default in any respect other than payment of rent shall not be deemed a waiver
of the other default.
34.11 The use of a singular term in this Lease shall include the plural and the
use of the masculine, feminine or neuter genders shall include all others.
34.12 This Lease may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
34.13 A facsimile (FAX) signature shall be deemed to be an original. Offer and
acceptance by facsimile is binding.
34.14 Any reference to indemnify in this Lease means that the indemnitor will
defend, indemnify and hold the indemnitee harmless against any claims, demands,
losses or liabilities asserted against, or incurred by, the indemnitee to any
third party because of the subject matter of the indemnity. The scope of any
indemnity includes any costs and expenses, including reasonable attorney fees
incurred in defending any indemnified claim, or in enforcing the indemnity or
both. Any express indemnities contained in this Lease survive the Lease Term.
ARTICLE 35: NOTICES
Wherever in this Lease it is required or permitted that notice or demand be
given or served by either party to or on the other, such notice or demand shall
be given or served and shall not be deemed to have been duly given or served
unless in writing and delivered personally or forwarded by certified mail,
return receipt requested, if to Landlord, at the address set forth on page one
of this Lease; and if to Tenant, at the address on page one or at the Premises,
as well as to Cummings and Lockwood, Post Office Box 413032, Naples, Florida
33941, attention: J. Dudley Goodlette, Esquire.
Either party may change such address by written notice by certified mail to the
other. Service
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<PAGE>
of any notice or demand shall be deemed completed forty-eight (48) hours after
deposit thereof in the United States Postal Service with property postage
affixed or, if delivered in person, upon receipt thereof
ARTICLE 36: BROKER'S COMMISSIONS
Tenant represents and warrants that there are no claims for brokerage
commissions or finder's fees in connection with this Lease (excepting
commissions or fees approved or authorized in writing by Landlord). Tenant
agrees to indemnify Landlord against and hold it harmless for any commission as
a result of Tenant's actions.
ARTICLE 37: WAIVER OF JURY TRIAL
The parties (to fullest extent permitted by law) waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties against the
other on any matters arising out of this Lease or the relationship of Landlord
and Tenant.
ARTICLE 38: NO RECORDATION
This Lease shall not be recorded, nor shall the existence of this Lease be
mentioned by Tenant in any recorded document unless Landlord does so for
purposes of limiting Landlord's liability for construction liens.
ARTICLE 39: FINANCIAL STATEMENTS
Landlord may request from time to time, but no more regularly than yearly, and
Tenant shall provide, financial statements of Tenant and guarantors of the
Lease, as applicable. Tenant represents and warrants that the financial
statements delivered to Landlord are true and accurate. Any material inaccuracy
in the financial statements shall constitute an Event of Default.
ARTICLE 40: OFFER TO LEASE; LENDER APPROVAL
The submission of this Lease or any other material by Landlord to Tenant for
examination shall not be deemed to constitute any offer by Landlord of a
reservation to Tenant or an option to lease and this Lease shall become
effective as a binding instrument only upon the execution and delivery thereof
by both Landlord and Tenant.
ARTICLE 41: RADON GAS DISCLOSURE
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Lease as of the day and
year first above written.
/s/ [ILLEGIBLE] 5/10/95 /s/ Terry P. Archer
- ------------------------------- --------------------------------------
Witness Date By: Terry P. Archer
----------------------------------
Title: Vice President
--------------------------------
"Landlord"
/s/ [ILLEGIBLE]
- ------------------------------- --------------------------------------
Witness Date Title: President
--------------------------------
"Tenant"
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<PAGE>
EXHIBIT "D"
Acceptance of Space/Key Receipt Form
Date: _________________
LANDLORD: ----------------------------------------------------------
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TENANT: ----------------------------------------------------------
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Landlord and Tenant are parties to the following described Lease covering
Premises at ________________________ of the ________________________ located at
______________________________________ Naples, Florida.
DATE OF LEASE: ____________________
COMMENCEMENT DATE: ____________________
TERMINATION DATE: ____________________
TOTAL NET RENTABLE AREA OF PREMISES: ____________________
The Tenant acknowledges that:
(1) The Lease is the entire agreement between Landlord and Tenant;
(2) The full rent due under the Lease begins as of the Commencement
Date;
(3) The Premises have been completed, accepted "as and occupied by
Tenant in accordance with the terms of the Lease; and
(4) Tenant has received _________ key(s) for the Premises.
Landlord and Tenant understand that mortgagees and future Owners may rely on
this form.
"Tenant" "Landlord"
By: By:
-------------------------------- -----------------------------------
Its: Its:
------------------------------- ----------------------------------
<PAGE>
[GRAPHIC OMITTED]
FOURTH FLOOR PLAN - INTEGRATED HEALTH SERVICES - OPTION 3
<PAGE>
Lease Addendum
This Lease Addendum is made and entered into this 1st day of May, 1995, by and
between WCN Communities, Inc., Landlord, and Integrated Health Services, Inc.,
Tenant, and is incorporated into that certain Office Lease Agreement of even
date herewith entered into by Landlord and Tenant wherein Landlord has leased to
Tenant, and Tenant has leased and accepted from Landlord, certain office space
located on the first floor of the office building at 8889 Pelican Bay Boulevard,
Naples, Florida 33963, which is outlined and crosshatched on Exhibit "A"
attached to and made a part of said Office Lease Agreement (the "Lease").
The following provision is added to the Lease in Article 3; Section 1:
Tenant's obligation to pay the Minimum Monthly Rent for the first 3 months
of the Lease Term is waived. Tenant's obligation to pay Minimum Monthly
rent shall commence on the first day of the fourth month of Tenant's Lease
Term
All other obligations of Tenant under this Lease shall be in full force and
effect during the entire term of this Lease.
In witness whereof the parties have duly executed this Lease Addendum as of the
day and year first above written.
Integrated Health Services, Inc. WCN Communities, Inc.
- ------------------------------------- --------------------------------------
By: By:
---------------------------------- -----------------------------------
Title: Title:
------------------------------- --------------------------------
"Tenant" "Landlord"
<PAGE>
EXHIBIT "B"
Building Standard Workletter
Building Standard Shell and Allowance
This Exhibit "B" sets forth the respective obligations of, and the procedures to
be followed by, Landlord and Tenant in the design and construction of those
improvements which will prepare the Premises for Tenant's use and occupancy
("Leasehold Improvements"), including the payment of design and construction
costs.
I. Definitions.
1.0 As used in the Lease and this Exhibit B:
1.0.1 The term "Building Standard Improvements" refers to those
improvements set forth in Section 3.4 of this Exhibit.
1.0.2 The term "Building Standard" refers to those brands, designs,
finishes or techniques selected by Landlord for construction of the Building
Standard Improvements.
1.0.3 The term "Non-Building Standard" means brands, designs,
finishes and techniques other than those selected by Landlord.
1.0.4 The term "Non-Building Standard Improvements" means
improvements to the Premises in addition to those improvements set forth in
Section 3.4 of this Exhibit.
1.0.5 The term "Rented Area" means the total area within the
Premises as measured from the interior surface of exterior glass, or exterior
walls and from the midpoint of demising walls or walls separating the Premises
from areas devoted to lobbies, corridors, hallways, elevator foyers and shafts,
restrooms, mail rooms, mechanical rooms and shafts, janitor closets and other
similar facilities.
II. General Procedures For Preparing Plans And Specifications.
2.0 Landlord's Space Planner will prepare a Space Plan for the Premises at
Landlord's expense. Unless a Space Plan for the Premises has already been
approved by Landlord and Tenant, Tenant agrees, within thirty (30) business days
of commencement of construction of the Building, to meet with Landlord's Space
Planner and to provide at the meeting criteria for preparation of a Space Plan.
Criteria includes:
2.0.1 Approximate location of all partitions, doors, electrical and
telephone outlets and switches. Special requirements for electrical and
telephone circuits.
2.0.2 Type and color of wall and floor covering.
<PAGE>
2.0.3 Details of all millwork, corridor entrances, water and drain supply
requirements and Non-Building Standard electrical outlets.
2.0.4 Information on Non-Building Standard Improvement HVAC requirements
(special heat generating equipment).
2.0.5 Weight and location of exceptionally heavy equipment.
2.0.6 Dimensions of all equipment to be built in.
2.0.7 Keying schedule.
2.0.8 Lighting arrangement.
Within five (5) business days of Tenant's receipt of the Space Plan, Tenant will
provide Landlord with Tenant's approval of the Space Plan or specific objections
thereto.
2.1 Upon approval of the Space Plan, Landlord agrees to provide, at
Landlord's sole expense:
2.1.1 Complete finished and detailed construction drawings and
specifications for Tenant's partition layout, reflected ceiling, telephone and
electrical outlets and switches, finish schedule and other work required for
Tenant's Leasehold Improvements.
2.1.2 Complete mechanical and electrical drawings and specifications
(for installation of air conditioning system and duct work, and heating and
electrical facilities) for the work required for Tenant's Leasehold
Improvements.
2.2 Tenant shall pay to Landlord any additional cost of construction
drawings and specifications incurred because of any Tenant requirements for
Non-Building Standard work or Improvements. All Non-Building Standard work or
Improvements desired by Tenant shall in Landlord's opinion, equal or exceed the
quality established by the Building Standard Improvements as listed herein.
2.3 All plans and specifications plus Landlord's price for construction of
Non-Building Standard work, shall be submitted to Tenant for review and for
Tenant's written approval which Tenant will issue within five days of receipt of
the plans, specifications and price. In addition, such plans are expressly
subject to Landlord's written approval, which Landlord covenants it will not
unreasonably withhold or delay.
2.4 Following approval by Tenant, any changes, modifications or
alterations of or to Tenant's drawings and specifications requested by Tenant
shall be subject to Landlord's approval. Any additional charges, expenses or
costs, including Landlord's architect's fees, incurred by Landlord in approving
said changes, modifications or alterations shall be paid by Tenant. No
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<PAGE>
changes, modifications or alterations of or to any approved drawings shall be
made without the written consent of the Landlord after written request therefor
by the Tenant.
2.5 Landlord, at its sole cost and expense, will cause said plans to be
filed with the appropriate governmental agencies, in such form as may be
required for construction and occupancy.
III. Landlord's Obligations To Construct And Pay For Improvements.
3.0 Section 3.3 contains a general description of the Building
construction, and limitations of same, which will be provided by Landlord at
Landlord's expense. Selection of structural systems, materials and finishes will
be by Landlord. A detailed description of Landlord's construction is set forth
in Landlord's plans and specifications for the Building which are available for
review by Tenant and Tenant's architect or engineer.
3.1 If the work described in Tenant's drawings and specifications requires
additions or changes to Landlord's plans and specifications or additions or
changes to Landlord's construction obligations under this Article III, Tenant
agrees to pay Landlord any increased cost resulting from the additions or
changes, including construction expenses and architectural and engineering
costs.
3.2 Landlord's construction and standard finishes are designed for normal
office use. Any reference to construction by Landlord to Code requirements shall
be deemed to mean Code requirements for normal office use.
3.3 Landlord shall provide a Shell Office Building to contain the Premises
as hereinafter set forth:
3.3.1 All structural wall, floor and roof support systems to support
office floor live loads including partitions, ceilings, etc., of seventy (70)
pounds per square foot.
3.3.2 All exterior glass, wall finishes or weather protection
systems.
3.3.3 Common toilet facilities, per Code, common lobbies, foyers,
stairs and elevators.
3.3.4 Automobile parking facilities including paving, lighting and
mechanical ventilation of parking structure, if applicable.
3.3.5 Central plant heating and air conditioning with main supply to
tenant suites, including air handling equipment. Distribution duct work is not
included.
3.3.6 Main electrical service to Building and distribution of
electrical power from main service to predetermined distribution points on each
floor.
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<PAGE>
3.3.7 Electrical grid system to feed lighting. Installation and
connection of light fixtures is not included.
3.3.8 Main fire sprinkler piping with heads established on a
predetermined pattern.
3.4 Landlord has established the components set forth in Paragraphs 3.4.1
through 3.4.10 as being those Leasehold Improvements considered the Building
Standards for Tenant finish, materials and equipment. Tenant has agreed to
accept the Leasehold Improvement Allowance provided for in Article 9.1 of the
Lease. Tenant's Leasehold Improvements which are substantially equivalent to the
Building Standard Improvements set forth in this Section 3.4 in terms of
quantity, function and cost, will be deemed to be Building Standard Improvements
for purposes of Articles 17, 18 and 21 of the Lease and Article II and Paragraph
5.3.4 of this Exhibit "B".
3.4.1 Flooring
a) Carpet: (specifications here)
b) Vinyl tile: (specifications here)
3.4.2 Ceiling
a) Acoustical Tile: (specifications here) tile with 24 x 24
(specifications here) grid. Installation of grid, including sway bracing and
hanger wires, is by tenant improvement contractor.
b) Lights: 24 x 24 bi-axial lamp fluorescent, 4" deep (9 cell)
parabolic fixtures with plug in connectors and air return slot.
c) Downlights: for accent only and in compliance with state
energy requirements. ("PL" fluorescent downlights with clear Alzak reflector).
d) Fire and Life Safety: smoke detectors, public address
system, annunciators, fire alarms, and energy management to connect to base
building system, utilizing the same manufacturers.
e) Sprinkler heads: rework existing system as required,
relocating sprinkler heads, and revising to semi-recessed type heads with white
escutcheon.
3.4.3 Air Distribution
a) Secondary distribution ducts from main duct loop, VAV
boxes, and distribution to perforated grilles at interior spaces, airbars at
walls.
b) VAV boxes with electric heat at perimeter zones.
c) Extension of controls to energy management system,
utilizing the same
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<PAGE>
manufacturer.
3.4.4 Walls
a) Steel studs at 24" o.c., 2-1/2", 25 gauge, with 1 layer of
5/8" drywall on each side, taped, sanded, and painted finish. Extend walls to 3"
above ceiling line, and brace diagonally to deck above at 48" p.c. minimum.
b) Full height demising or sound walls to be 4" steel studs,
20 gauge, at 24" o.c. Provide one layer of 5/8" type "X" drywall each side,
taped, sanded, painted and acoustical insulation in the cavity space.
c) Rubber Base: Burke products, 2-1/2" high, brown-black.
3.4.5 Doors and Hardware
a) Tenant space entry doors from corridor on multi-tenant
floor shall be 8'-10" high by 3'-0" wide (minimum) with maple veneer, plain
sliced, stained and/or painted.
b) Hardware, entry door: heavy duty lever type with mortise
locksets and deadbolts, brushed nickel silver finish to match base building.
Cylinder in locks to be compatible with base building keying system.
c) Interior doors to be solid core, stain grade, 3' wide x
8'-10" high with door hardware to be (specifications).
d) Doors, frames and hardware to be rated to meet state and
local codes.
3.4.6 Painting: All wall surfaces covered with flat latex finish
coat in colors selected by Tenant from Building Standard paint selection.
3.4.7 Electric Services: Electrical facilities sufficient for a
connected load of 2 watts at 208/170 volts (three phase) per square foot of
Rented Area within the Premises. Additionally, include 2 dedicated 110 vac. One
for copy machine, one for telephone board.
3.4.8 Duplex Electrical Outlets: Wall mounted duplex electrical
outlets (120 watts) with a minimum of one per 125 square feet of Rented Area
within the Premises.
3.4.9 Telephone Outlets: Provide for wall mounted telephone outlets
with a minimum amount of one outlet per 225 square feet of Rented Area within
the Premises.
3.4.10 Tenant I.D.: One (1) Tenant Identification sign at suite
entry per Landlord's Tenant sign criteria.
3.4.11 Other:
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<PAGE>
IV. Construction Of Tenant's Leasehold Improvements
4.0 Landlord agrees to construct Tenant's Leasehold Improvements at
Tenant's expense in accordance with the drawings and specifications prepared by
Landlord under Article II.
4.1 All mechanical, structural, electrical or plumbing modifications to
the Building required by Tenant shall be performed by Landlord's contractor or
contractors approved by Landlord.
4.2 For purposes of reconciling any amounts due from the Tenant to
Landlord under this Exhibit B, the Leasehold Improvement Allowance granted
Tenant under Section 9.1 of the Lease shall be deducted from the sum of (i)
architectural and engineering fees and any governmental or permitting fees
incurred by Landlord under Article II of this Exhibit B; (ii) architectural and
engineering fees and construction costs incurred by Landlord under Section 3.1
and 5.1 of this Exhibit; (iii) Landlord's contract price for construction of
Tenant's Leasehold Improvements under Section 4.0 of this Exhibit B (including
without limitation labor, materials, overhead, general conditions, sales tax,
bonds and permits and plan check fees; (iv) the cost of any other Tenant's work
(including preparation of drawings and specifications for Tenant's Leasehold
Improvements) done by Landlord for Tenant and (v) the cost of providing or
upgrading water, heating, cooling, air or electrical facilities for the
remainder of the Building should Tenant's Leasehold Improvements require Excess
Consumption (as defined in Section 18.2 of the Lease) from existing facilities,
but only to the extent necessary to compensate for Tenant's Excess Consumption.
Tenant agrees to pay Landlord any excess of the sum of (i) through (v) over the
Leasehold Improvement Allowance within ten (10) days after receipt of a
statement therefor from Landlord. If the Leasehold Improvement Allowance exceeds
the sum of (i) through (v), Landlord will apply such surplus to the last rental
payments due under the Lease. Any failure of Tenant to pay said costs when due
shall constitute a default under the terms of the Lease in like manner as the
failure to pay rental when due.
4.3 If the estimated total Leasehold Improvement Costs exceed the
Leasehold Improvement Allowance, Landlord may estimate the amount of any excess
amounts to be paid by Tenant under this Article IV and require Tenant to prepay
the estimated excess costs prior to performance of any work or authorization of
any service. Any failure of Tenant to pay said costs within twenty (20) days
after receipt of a written request therefor shall constitute a material default
by Tenant under the terms of the Lease.
V. Completion Of Tenant's Improvements
5.1 Landlord agrees to obtain any Certificate of Occupancy required by the
local building department or other governmental agency.
5.2 The term "Substantial Completion" as used in this Exhibit B or in the
Lease means that state of completion of the Premises which will allow Tenant to
begin Tenant's occupation of the Premises without material interference from
Landlord's contractor or material delay caused
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<PAGE>
by Landlord's failure to have completed Landlord's work under Section 3.4 of
this Exhibit.
5.3 Notwithstanding any time period established herein for this submission
and approval of Tenant's plans or for the construction of improvements, the
Lease Term and Tenant's obligation to pay rent shall commence as set forth in
Section 2.2 of the Lease; provided, however, if Commencement Date is determined
under Section 2.2 of the Lease by the date of Substantial Completion, said
Commencement Date will be accelerated one day for each day Substantial
Completion is delayed by reason of:
5.3.1 Tenant's failure to provide the space layout criteria required under
Section 2.0 of this Exhibit or to approve the Space Plan within the time period
set forth.
5.3.2 Tenant's changes in Space Plan or drawings and specifications after
initial approval.
5.3.3 The performance by a person, firm or corporation employed by Tenant
and the completion of said work by said person, firm or corporation including
delays to Landlord's contractor caused by Tenant's contractor.
5.3.4 It is Landlord's and Tenant's intention that Substantial Completion
shall be deemed to have occurred upon that date which would be the date of
Substantial Completion were the Premises to be constructed with the Building
Standards Improvements.
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<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
The Tenant shall observe the following Rules and Regulations (as amended,
modified or supplemented from time to time by the Landlord as provided in the
Lease):
1. The sidewalks, entries, corridors, passages, elevators and common staircases
shall not be obstructed or used by the Tenant, its agents, servants,
contractors, invitees or employees for any purpose other than ingress to and
egress from the Leased Premises. The Landlord reserves entire control of all
parts of the Building used for the common benefit of the Tenants and without
restricting the generality of the foregoing, the sidewalks, entries, corridors,
passages, not within the Leased Premises, washrooms, lavatories,
air-conditioning closets, fan rooms, janitor's closets, electrical closets and
other closets, stairs, elevator shafts, flues, stacks, pipe shafts and ducts,
and shall have the right to place such signs and appliances therein, as it may
deem advisable, provided that ingress to and egress from the Leased Premises are
not unduly impaired thereby.
2. The Landlord may require that all or any persons entering or leaving the
Building at any time other than normal Business Hours satisfactorily identify
themselves and register in books kept for the purpose, and may prevent any
person from entering the Leased Premises unless provided with a key thereto and
a pass or other authorization from the Tenant in a form satisfactory to the
Landlord, and may prevent any person removing any goods therefrom without
written authorization. Any person found in the Building at such times without
such keys or passes will be subject to the surveillance of the employees and
agents of the Landlord. The Landlord shall be under no responsibility for
failure to enforce this rule.
3. The Tenant shall not place or cause to be placed any additional locks or
other security devices upon any doors of the Leased Premises without the
approval of the Landlord and subject to any condition imposed by the Landlord.
Additional keys may be obtained from the Landlord at the cost of the Tenant.
4. Canvassing, soliciting and peddling in the Building are prohibited.
5. The Tenant shall not install or permit the installation or use of any machine
dispensing goods for sale in the Leased Premises or the Building or permit the
delivery of any food or beverage to the Leased Premises without the approval of
the Landlord or in contravention of any regulations fixed or to be fixed by the
Landlord. Only persons authorized by the Landlord shall be permitted to deliver,
or to use the elevators in the Building for the purpose of delivering food or
beverages to the Leased Premises.
6. Landlord shall have the right to prohibit any advertising by Tenant which, in
Landlord's reasonable opinion, tends to impair the reputation of the Building or
its desirability as a building for offices. Upon written notice from Landlord,
Tenant shall refrain from or discontinue such advertising.
<PAGE>
7. The Tenant, its agents, servants, contractors, invitees or employees shall
not bring in or take out, position, construct, install or move any safe,
business machine or other heavy office equipment or heavy merchandise liable to
overload, injure or destroy any part of the Building without first obtaining the
consent in writing of the Landlord. In giving such consent, the Landlord shall
have the right in its sole discretion, to prescribe the routes for moving such
heavy items into or out of the Building, the weight permitted, the position
thereof and the use and design of planks, skids or platforms to distribute the
weight thereof. All damage done to the Building by moving or using any such
heavy equipment or other office equipment or furniture shall be borne by the
Tenant and any works shall occur only between 6:00 P.M. and the following 8:00
A.M. or at any other time consented to by the Landlord, and persons employed to
move the same in and out of the Building must be acceptable to the Landlord.
Safes and other heavy office equipment may be moved through the halls and
corridors only upon steel bearing plates. No freight or bulky matter of any
description may be received into the Building or carried in the elevators,
except during hours approved by the Landlord.
8. Any hand trucks, carry alls or similar appliance used in the Building shall
be equipped with rubber tires, side guards and such other safeguards as the
Landlord may require.
9. The water closets and other water apparatus shall not be used for any purpose
other than those for which they are constructed, and no sweepings, rubbish,
rags, ashes or other substances shall be thrown therein. Any damage resulting by
misuse by the Tenant or its agents, servants or employees shall be borne by
Tenant.
10. The Tenant shall not mark, paint, drill into or in any way deface the walls,
ceilings, partitions, floors or any other parts of the Leased Premises or the
Building except with the prior written consent of the Landlord and as it may
direct.
11. The Tenant must observe strict care not to allow its doors or windows to
remain open so as to admit rain or so as to interfere with the heating or
air-conditioning of the Building. Any injury or damage caused to the Building or
its appointments, furnishings, heating, air-conditioning, or other appliances or
to any other Tenant or the premises occupied by any other Tenant, by reason of
doors or windows being left open so as to admit rain, or by interference with or
neglect of the heating, air-conditioning, or other appliances, or by reason of
any other misconduct or neglect upon the part of the Tenant or any other person
or servant subject to it, shall be made good by the Tenant in whose premises the
neglect, interference or misconduct occurred.
12. The Landlord will have the care of all heating and air-conditioning
appliances and give all information for the regulation of same.
13. The Tenant shall give the Landlord prompt notice of any accident to or any
defect in any plumbing, heating, air-conditioning, mechanical or electrical
appliance or any other part of the Building.
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<PAGE>
14. The Tenant shall not do or permit anything to be done in or upon the Leased
Premises or bring or keep anything herein which will in any way increase the
risk of fire, or obstruct or interfere with the rights of other Tenant's or
violate or conflict with the laws relating to fire or with the regulations of
the Fire Department, of the Health Department, or with any of the rules of the
applicable governing authority.
15. The Tenant shall not permit the use of any electrical apparatus likely to
cause an overloading of electrical circuits.
16. No inflammable oils or other inflammable, dangerous or explosive materials
shall be kept or permitted to be kept in the Leased Premises or the Building.
17. Nothing shall be placed on balconies or the outside of the window sills or
projections.
18. Landlord shall have the right to install separate utility meters to the
Premises if deemed appropriate by the Landlord.
19. The Tenant shall keep the Leased Premises in a good state of preservation
and cleanliness, and shall not suffer any accumulation of useless property or
rubbish therein. The Tenant will not place or allow to be placed in or on the
sidewalks, entries, corridors or common staircases any waste paper, dust,
garbage, refuse or anything whatever that would tend to make them unclean or
untidy.
20. The Tenant shall permit window cleaners to clean the windows of the Leased
Premises during Normal Business Hours.
21. Furniture, effects and supplies shall not be taken into or removed from the
Leased Premises, except at such time and in such manner as may be previously
approved by the Landlord.
22. No one shall use the Leased Premises for sleeping apartments or residential
purposes or for the storage of personal effects or articles other than those
required for business purposes.
23. The Tenant, its clerks or servant shall not make, commit or permit any
improper noises in the Building, nor shall they operate or permit to be operated
any musical or sound producing instrument or other devise inside or outside the
Leased Premises, which in the opinion of the Landlord is disturbing to the other
Tenants of the Building.
24. The Tenant, its clerks or servants shall not lounge about doors or corridors
or interfere in any way with other Tenants or those having business with them.
25. No animals or birds (except for seeing eye dogs) shall be brought into the
Building nor kept in or about the Leased Premises.
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<PAGE>
26. The windows, glass doors and the lights that reflect or admit light into the
corridors, common areas or other places in the Building shall not be covered or
obstructed by the Tenant and no awning shall be put up, with the written consent
of the Landlord. Nothing, whether books, packages, flower pots or any other
articles whatsoever shall be placed upon or hung from the window sills.
27. Any window covering installed by Tenant facing the interior surface of
exterior windows shall be subject to the prior approval of the Landlord as to
color and materials and the Tenant shall not hang and will remove any window
coverings which in the opinion of the Landlord do not conform to any uniform
scheme of window coverings established for the Building.
28. No bicycles or other similar vehicles shall be brought into or kept by
Tenant in or about the Premises or the Building.
29. The Landlord shall have the right to make such other and further reasonable
rules and regulations as in its judgement may from time to time be needful for
the safety, care, cleanliness and appearance of the Leased Premises and the
Building, and for the preservations of good order therein and the same shall be
kept and observed by the Tenant, its clerks and servants.
30. The foregoing Rules and Regulations, as from time to time amended, are not
necessarily of uniform application, but may be waived in whole or in part in
respect of other Tenants without affecting their enforceability with respect to
the Tenant and the Leased Premises, and may be waived in whole or in part with
respect to the Leased Premises without waiving them as to future application to
the Leased Premises, and the imposition of such Rules and Regulations shall not
create or imply any obligation of the Landlord to enforce them or create any
liability of the Landlord for their non-enforcement.
31. The Tenant agrees to the foregoing Rules and Regulations, which are hereby
made a part of the Lease, and each of them, and agrees that for such persistent
infractions of them, or any of them, as may be the opinion of the Landlord be
calculated to annoy or disturb the quiet enjoyment of any other Tenant, or
anyone under it, the Landlord may declare a forfeiture and cancellation of the
Lease and may demand possession of the Leased Premises upon one week's written
notice to the Tenant.
-4-
<PAGE>
EXHIBIT B
[GRAPHIC OMITTED]
FOURTH FLOOR
<PAGE>
Exhibit 10.3
[ROYAL MORTGAGE LETTERHEAD]
May 21, 1998
Mr. Klaus Landes
OHB
Lenbachplatz 1/111
80333 Munich
RE: Options granted by Shareholders
We are pleased to inform you that on April 30, 1997 the Shareholders of
Royal Mortgage Corporation (the "Company") approved the grant to you of a
non-qualified stock option to purchase Ten Thousand (10,000) shares (the
"Shares") of Common Stock, .001 par value per share, of the Company, at a price
of $2.25 per Share.
The option may be exercised in whole or in part at a minimum of 10% of the
Shares up to a maximum 100% of the Shares at any time prior to April 30, 2002.
Unless at the time of the exercise of this option a registration statement
under the Securities Act of 1933, as amended (the "Act"), is in effect as to
such Shares, any Shares purchased by you upon the exercise of this option, in
whole or in part, will be subject to restrictions on transfer of same and the
Company may require, as a condition of exercise of any option, that you certify
to the Company, in writing, that the shares received pursuant to the exercise of
any option are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Act and any applicable state securities laws. The Company shall not be
obligated to issue any Shares pursuant to this option if, in the opinion of
counsel to the Company, the Shares to be so issued are required to be registered
or otherwise qualified under the Act or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless and until such
Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at the time
of the exercise of this option a registration statement under the Act is in
effect as to such Shares (i) any Shares purchased by you upon exercise of this
option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain
<PAGE>
circumstances, restrict the number of shares which may be sold and the manner in
which shares may be sold); (iii) in the case of securities to which Rule 144 is
not applicable, compliance with Regulation A promulgated under the Act or some
other disclosure exemption will be required: (iv) certificates for Shares to be
issued to you hereunder shall bear a legend to the effect that the Shares have
not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares; and (vi) the Company has undertaken no obligation
to register the Shares or to include the Shares in any registration statement
which may be filed by it subsequent to the issuance of the Shares to you. In
addition, you understand and acknowledge that the Company has no obligation to
you to furnish information necessary to enable you to make sales under Rule 144.
This option (or installment thereof) is to be exercised by delivering to
the Company a written notice of exercise in the form attached hereto as Exhibit
A, specifying the number of Shares to be purchased, together with payment of the
purchase price of the Shares to be purchased. The purchase price is to be paid
in cash, by delivering shares of the Company's stock already owned by you and
having a fair market value on the date of exercise equal to the exercise price
of the option, or through your written election to have Shares withheld by the
Company from the Shares otherwise to be received with such withheld Shares
having a fair market value on the date of exercise equal to the exercise price
of the option.
Very truly yours,
ROYAL MORTGAGE CORPORATION
By /s/ Michael J. Pilgrim
--------------------------------
Michael J. Pilgrim
President
<PAGE>
EXHIBIT A
Royal Mortgage Corporation
1000 Ballpark Way, Suite 210
Arlington, TX 76011
Gentlemen:
Notice is hereby given of my election to purchase _____ shares of Common
Stock, $.001 par value per share (the "Shares"), of Royal Mortgage Corporation
at a price of $2.25 per Share, pursuant to the provisions of the option granted
to me on April 30, 1997. Enclosed in payment for the Shares is:
__ my check in the amount of $______.
__ ________ Shares having a total value of $________, such value being
based on the closing price(s) of the Shares on the date hereof.
__ Withhold _____ Shares having a total value of $________, such value
being based on the closing price(s) of the Shares on the date hereof,
from the Shares otherwise to be received.
The following information is supplied for use in issuing and registering
the Shares purchased hereby:
Number of Certificates
and Denominations
-----------------------------------
Name
-----------------------------------
Address
-----------------------------------
-----------------------------------
-----------------------------------
Social Security Number
-----------------------------------
Dated: ____________, 199_ Very truly yours,
-----------------------------------
<PAGE>
Exhibit 16.1
[LETTERHEAD OF WILLIAM C. SPORE & COMPANY, PC.]
U.S. Securities and Exchange Commission
Re: Royal Financial Corporation
Disclosure related to change in accountants
I have reviewed the "Changes in and Disagreements with Accountants" disclosure
as it relates to Royal Financial Corporation (RMC) and I am in agreement with
the disclosure. The reasons for the change were discussed with my Firm and I was
in agreement with and supported the change. There were no disagreements with my
Firm and the management of RMC.
/s/ William C. Spore
William C. Spore
Certified Public Accountant
February 2, 1999
